Lyell Immunopharma, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Lyell is a clinical-stage cell-therapy company with no products approved for sale; revenue is not product revenue.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0.003m | $2.8m | $36.3m | $7.8m |
| Research and development | $41.6m | $31.4m | $121.2m | $119.4m |
| General and administrative | $26.1m | $21.2m | $91.0m | $57.2m |
| Net loss | $70.3m | $48.9m | $174.7m | $166.5m |
| Net loss per share | $0.28 | $0.20 | $0.71 | $1.66 |
| Operating cash used | Not stated for quarter | Not stated for quarter | $129.3m | $93.0m |
As of September 30, cash and cash equivalents were $116.3m and marketable securities were $634.3m, totaling $750.7m. Total assets were $977.3m; total liabilities were $157.2m. The company had no debt outstanding. It reported an accumulated deficit of $759.1m. A conventional operating margin is not meaningful given minimal quarterly revenue and continuing development-stage losses.
For the nine months, investing activities used $58.2m, including $19.7m for property and equipment; financing activities provided $9.8m. Cash, cash equivalents and restricted cash declined $177.7m. Marketable securities had $10.0m of gross unrealized losses at quarter-end; the company said it did not intend or expect to need to sell them before recovery of amortized cost.
Changes, unusual items and material developments
- Q3 net loss increased $21.4m year over year, principally as operating expenses rose and the company recorded a $5.0m investment impairment. Nine-month net loss increased $8.2m.
- Nine-month revenue included a $35.3m cumulative catch-up adjustment under the GSK agreement after estimated costs fell when the parties agreed to conclude research on an undisclosed hematological cancer target. The adjustment reduced nine-month net loss by $35.3m and loss per share by $0.14; it was not evidence of product sales.
- On October 24, GSK gave notice that it would terminate the agreement effective December 24, 2022. Lyell discontinued work on the related LYL132 and LYL331 programs and expected to recognize the remaining $48.4m of deferred revenue in Q4 2022. Lyell said it would receive no future payments under the agreement.
- In October, Lyell settled its dispute with PACT, receiving Series D preferred shares that brought its ownership to approximately 80% of PACT on a fully diluted basis. Lyell anticipated a Q4 legal settlement gain, subject to valuation; the filing does not provide a clear value for that gain.
- Lyell recorded a $5.0m impairment of another strategic investment, determining its fair value was negligible. Stock-based compensation was $63.6m for the first nine months, up from $41.0m.
Outlook, risks and contingencies
- Management said available cash, cash equivalents and marketable securities were expected to fund operations at least 12 months from issuance of the statements; its operating-plan estimate was that they would meet working-capital and capital needs into 2026. The company expects continuing losses and may need additional capital.
- LYL797 and LYL845 were in Phase 1 development; LYL119 was preclinical. LYL845’s IND was cleared in October 2022, with initial data expected in 2024. LYL797 enrollment was slower than anticipated; initial data were expected in the first half of 2024. Lyell expected to submit an IND for LYL119 in the first half of 2024.
- An at-the-market offering program permits up to $200m of common-stock sales; no shares had been sold under it as of the filing. Future equity financing could dilute shareholders.
- Potential Fred Hutch and Stanford success payments are payable in cash or, at Lyell’s discretion, publicly traded shares. No payments had been triggered as of quarter-end; the agreements allow aggregate payments up to $400m if specified share-price thresholds are reached. The recorded success-payment liability was $11.7m.
- Material risks include clinical and regulatory uncertainty, patient enrollment delays, complex cell-therapy manufacturing and supply needs, reliance on third parties, and possible COVID-19-related disruption. Lyell also noted inflation, interest-rate and geopolitical uncertainty. Operating lease liabilities totaled $67.5m.
Important facts for investors to verify
- Whether the GSK termination and expected Q4 recognition of $48.4m deferred revenue occurred as described, and what revenue sources remain afterward.
- The accounting and valuation of the PACT settlement, including any recognized gain and the resulting ownership and control implications.
- Cash burn, investment liquidity and whether the stated runway into 2026 remains supportable as clinical and manufacturing spending progresses.
- LYL797 enrollment and clinical-data timing, LYL845 trial progress, and the expected LYL119 IND timeline.
- Potential dilution from the $200m ATM program, equity compensation and any success payments; also monitor progress against the $400m maximum potential success-payment exposure.