Lyell Immunopharma, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter ended September 30, 2021; comparisons are with the three and nine months ended September 30, 2020 unless noted. Amounts below are in millions of dollars except per-share data.
Business context and reporting period
Lyell is a preclinical T-cell reprogramming company developing cell therapies for solid tumors. It had no products approved for sale and had not tested product candidates in humans; reported revenue came primarily from its GSK collaboration, not product sales. The company completed its IPO in June 2021, raising $391.8 million net, and preferred shares converted to common stock.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $2.8 | $1.1 | $7.8 | $5.4 |
| Research and development expense | $31.4 | $24.5 | $119.4 | $147.2 |
| General and administrative expense | $21.2 | $13.6 | $57.2 | $32.0 |
| Loss from operations | $(49.2) | $(36.8) | $(167.2) | $(172.4) |
| Net loss | $(48.9) | $(35.7) | $(166.5) | $(165.6) |
| Net loss per common share, basic and diluted | $(0.20) | $(2.57) | $(1.66) | $(13.40) |
| Cash used in operating activities | Not presented by quarter | $(93.1) | $(134.1) |
At September 30, 2021, cash and cash equivalents were $393.5 million, marketable securities were $542.9 million, and cash, cash equivalents and marketable securities totaled $936.4 million. Total assets were $1,198.3 million and total liabilities were $211.9 million. The company reported no debt outstanding. Capital expenditures for property and equipment were $55.2 million over the first nine months. Gross margin is not meaningful to the reported business, which had no product sales.
Material changes versus comparable periods
- Q3 net loss increased by $13.2 million year over year, as operating expenses rose faster than collaboration revenue. Q3 R&D expense increased $6.9 million and G&A increased $7.7 million.
- Nine-month net loss was broadly similar year over year. R&D expense declined $27.7 million, principally because 2020 included the $63.6 million PACT payment and $7.5 million of acquired in-process R&D for Immulus. This was partly offset by higher personnel, facilities, and success-payment expenses.
- Nine-month G&A expense increased $25.2 million, including higher personnel and stock-based compensation and costs of operating as a public company.
- Operating cash use decreased to $93.1 million from $134.1 million. Financing cash flow included $391.8 million of IPO proceeds. The company’s common shares outstanding rose substantially following the IPO and preferred-stock conversion.
Outlook, commentary, risks and unusual items
- Management expected existing cash, cash equivalents and marketable securities to fund working capital and capital expenditure needs into 2025, based on its current operating plan. It anticipated substantially increasing expenses and operating losses, and stated it would need additional capital in the future; future financing may not be available on acceptable terms.
- Management targeted four IND submissions by the end of 2022 and expected the LyFE manufacturing facility to be cGMP-qualified by the end of 2021. The facility had reached operational readiness and completed engineering runs; these were forward-looking expectations, not reported regulatory approvals or clinical results.
- All candidates remained preclinical. Key risks include clinical and regulatory failure or delay, manufacturing scale-up and supply challenges, reliance on third parties, competition, and possible COVID-19 effects on development timelines. The company said it had not experienced COVID-related delays in discovery or preclinical work to date.
- GSK exercised its option on the NY-ESO-1 TCR program in April 2021 and assumed responsibility for future development and commercialization at its own cost. Potential milestone and royalty amounts remain contingent; none of the possible future milestone consideration was included in the reported transaction price.
- Fair value remeasurement of success-payment obligations to Fred Hutch and Stanford contributed $19.3 million of R&D expense over the first nine months. The agreements may require payments of up to $200 million each, payable in cash or, at the company’s discretion, publicly traded shares. Their reported fair values were $21.7 million for Fred Hutch and $23.1 million for Stanford at September 30, 2021.
- The company had filed for arbitration seeking rescission of its PACT agreements and recovery of consideration paid; a hearing was scheduled for March 2022. The filing described the matter as not material to operations.
- Dr. Rick Klausner resigned as Executive Chairman and ceased employment effective October 1, 2021; he remained Board Chair while on medical leave, with an anticipated return in early 2022.
Most important facts for investors to verify
- Whether cash runway into 2025 remains supported by actual spending, development plans, and manufacturing investment.
- Progress and timing for IND submissions, clinical-trial starts, and cGMP qualification of the LyFE facility.
- Future R&D and G&A spending, including stock-based compensation and the volatility of success-payment valuations.
- Outcome and potential recovery from the PACT arbitration, and any material changes to collaboration arrangements with GSK.
- The success-payment disclosures: the filing reports fair values of $21.7 million and $23.1 million for the two agreements, while the balance sheet lists $25.1 million of current success-payment liabilities; investors should consult the complete statements and notes to confirm classification and reconciliation.