Lyell Immunopharma, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Lyell is a clinical-stage cell therapy company with no products approved for sale. Its lead candidates, LYL797 and LYL845, are in Phase 1 trials; LYL119 and a second-generation TIL candidate are in preclinical development. Unless stated otherwise, financial amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $25,000 | $3,000 | $117,000 | $36.3 million |
| Research and development expense | $43.8 million | $41.6 million | $136.0 million | $121.2 million |
| General and administrative expense | $15.5 million | $26.1 million | $53.8 million | $91.0 million |
| Operating loss | $59.0 million | $66.4 million | $187.5 million | $172.3 million |
| Net loss | $50.9 million | $70.3 million | $181.7 million | $174.7 million |
| Net loss per share, basic and diluted | $0.20 | $0.28 | $0.73 | $0.71 |
Gross margins are not meaningful: the company has no product sales and revenue was immaterial in 2023. The prior-year nine-month revenue included a $35.3 million estimate adjustment under the GSK collaboration; GSK terminated the agreement effective December 2022, and Lyell does not expect further revenue from it.
- Cash and investments: $598.2 million in cash, cash equivalents and marketable securities at September 30, 2023, compared with $710.3 million at December 31, 2022. Total assets were $795.0 million; stockholders’ equity was $697.6 million.
- Cash flow: Operating activities used $123.1 million in the first nine months, versus $129.3 million in 2022. Investing activities provided $284.7 million, largely reflecting net sales and maturities of marketable securities; financing activities provided $1.0 million. Cash, cash equivalents and restricted cash ended the period at $286.5 million.
- Debt and liquidity: No debt was outstanding. Current liabilities were $35.1 million and current assets were $586.9 million. Management said available cash, cash equivalents and marketable securities were adequate for at least 12 months from issuance of the statements; based on its current operating plan, it expected resources to fund operations into 2027.
- Other items: Nine-month impairment of other investments was $12.9 million, including full impairments of two investments; the 2022 comparable period included $5.0 million. Stock-based compensation was $38.6 million for the first nine months, down from $63.6 million. Operating lease liabilities totaled $64.6 million.
Changes versus prior comparable periods
- Nine-month revenue fell by $36.2 million, primarily because the GSK collaboration ended and the prior-year period included the $35.3 million revenue adjustment.
- Nine-month R&D expense rose $14.8 million, reflecting personnel, clinical-trial and research costs. G&A expense fell $37.1 million, largely due to lower stock-based compensation and outside services.
- Nine-month net loss increased by $7.0 million despite lower operating expenses, reflecting the absence of prior-year collaboration revenue and higher investment impairments; increased interest income partly offset these effects.
- Q3 net loss improved by $19.4 million year over year, mainly due to lower G&A expense, higher interest income and no Q3 investment impairment, compared with a $5.0 million impairment in Q3 2022.
Outlook, commentary and risks
- Management expects continued operating losses and substantial R&D spending; it does not expect product revenue for a number of years, if ever. The company may need additional capital to complete clinical development, and future financing could dilute shareholders or be unavailable on acceptable terms.
- Initial LYL797 clinical and translational data from at least 20 patients were expected in the first half of 2024. Initial LYL845 clinical data were expected in 2024. An IND submission for LYL119 was expected in the first half of 2024. These are forward-looking expectations, not reported results.
- On November 6, 2023, after quarter-end, Lyell commenced a workforce reduction of approximately 25%, prioritizing clinical-stage programs and core research platforms. It estimated $6–$7 million in related charges, primarily in Q4 2023, substantially all expected to be cash expenditures.
- Key risks include clinical and regulatory uncertainty, patient enrollment, cell-therapy manufacturing and supply-chain complexity, reliance on third parties, competition, intellectual-property protection, and the possibility that costs or timelines differ from expectations. The company also disclosed potential success payments to Fred Hutch and Stanford, up to $400 million in aggregate if specified share-price thresholds are met; no payments had been triggered as of September 30, 2023.
- Management reported disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023. The filing also notes a previously identified material weakness in internal control over financial reporting and says future weaknesses cannot be ruled out.
Important facts for investors to verify
- Whether LYL797 and LYL845 clinical enrollment, safety and data timing remain on track, and whether subsequent results support continued development.
- Whether the workforce reduction delivers the expected cost savings without impairing clinical execution or retention of key personnel; verify actual restructuring costs against the $6–$7 million estimate.
- Whether the stated runway into 2027 remains realistic after restructuring, trial and manufacturing costs, and any changes in the operating plan.
- Whether additional impairments, financing needs, or share issuance under the available $200 million at-the-market program affect liquidity or shareholder dilution.
- Any changes to collaboration obligations, lease commitments, success-payment valuations, or internal-control disclosures.