Lyell Immunopharma, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Lyell is a preclinical T-cell therapy company; it had no products approved for sale and no product-sales revenue. Amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $2.6 million (2021); $3.1 million (2020) | $5.1 million (2021); $4.4 million (2020) |
| Research and development expense | $46.4 million; $97.2 million | $88.0 million; $122.7 million |
| General and administrative expense | $19.1 million; $9.6 million | $35.9 million; $18.4 million |
| Net loss | $62.6 million; $100.7 million | $117.6 million; $129.9 million |
| Net loss per common share, basic and diluted | $1.47; $8.18 | $3.91; $11.14 |
| Cash used in operating activities | $67.5 million for the six months, versus $112.5 million in 2020 |
Revenue was primarily recognized under the GSK collaboration and license agreement. Gross margin and product margins are not meaningful because the company had no product sales. Management reported cash, cash equivalents and marketable securities of $974.8 million at June 30, 2021, including $564.4 million of cash and cash equivalents and approximately $410.3 million of marketable securities. The company had no debt outstanding. Total liabilities were $207.9 million; stockholders’ equity was $1,022.0 million.
Changes versus the prior comparable period
- Q2 net loss narrowed by $38.1 million year over year; six-month net loss narrowed by $12.3 million. R&D expense fell substantially, mainly because 2020 included the $63.6 million PACT upfront payment and $7.5 million of Immulus acquired in-process R&D expense.
- Those comparisons were partly offset by higher success-payment expense, personnel, facilities and technology costs. G&A increased, including higher stock-based compensation and public-company costs.
- Cash and marketable securities increased following the June IPO. Lyell issued 25 million shares at $17 per share and reported net proceeds of approximately $391.8 million; preferred stock converted into common stock at the IPO closing.
Outlook, commentary and notable risks
- Management estimated existing cash, cash equivalents and marketable securities would fund working capital and capital needs into 2025, while also anticipating substantially higher expenses and operating losses as development advances. The company expects it will need additional capital in the future.
- All programs were in preclinical development, with no human testing reported. Management anticipated four IND submissions by the end of 2022. It said the LyFE manufacturing center had achieved operational readiness and completed engineering runs at scale; cGMP qualification was anticipated by year-end 2021.
- In April 2021, GSK exercised its license option for the NY-ESO-1 TCR Gen-R program and assumed responsibility for future development and commercialization. Potential future milestones and royalties remain contingent; none were included in the transaction price as of June 30.
- Lyell’s arbitration seeking, among other relief, rescission of its agreements with PACT and recovery of consideration paid remained pending, with a hearing scheduled for March 2022.
- Fred Hutch and Stanford success-payment obligations are tied to future stock-price measurement dates and may be paid in cash or publicly traded shares. The filing reports individual estimated fair values of $24.9 million and $25.8 million, respectively; the balance sheet lists $25.0 million of current success-payment liabilities. These amounts are not reconciled in the supplied filing text.
- Management said COVID-19 had not delayed discovery and development activities to date, but warned that the pandemic and variants could affect future trials, suppliers, collaborators and timelines. Other key risks include early-stage clinical and regulatory uncertainty, cell-therapy manufacturing and supply challenges, competition, and the need for future financing.
Investor verification priorities
- Confirm the reconciliation and classification of the success-payment fair values and recorded liabilities, and monitor valuation changes and potential cash or share settlement.
- Track progress toward IND submissions, clinical-trial initiation and cGMP qualification of the LyFE facility; these were forward-looking targets, not completed clinical milestones.
- Review operating cash use and investment in property and equipment ($43.6 million in the first half), and reassess management’s stated runway into 2025 as spending increases.
- Monitor the PACT arbitration, GSK program progress and any resulting contingent milestone or royalty income.
- Assess dilution from equity compensation and future financing; the filing reported 42.2 million options outstanding at June 30, 2021.