Lyell Immunopharma, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Lyell is a clinical-stage T-cell therapy company with no products approved for sale; revenue to date is primarily from its collaboration with GSK.
Financial results and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $35.7 million | $2.6 million | $36.3 million | $5.1 million |
| Research and development | $43.7 million | $46.4 million | $79.5 million | $88.0 million |
| General and administrative | $30.5 million | $19.1 million | $64.9 million | $35.9 million |
| Operating loss | $37.3 million | $62.7 million | $105.8 million | $118.1 million |
| Net loss | $36.3 million | $62.6 million | $104.5 million | $117.6 million |
| Net loss per share | $0.15 | $1.47 | $0.43 | $3.91 |
- Q2 revenue included a $35.3 million cumulative catch-up adjustment under the GSK agreement after the parties agreed to conclude research on an undisclosed hematological cancer target. The estimate change reduced projected costs to complete and increased recognized revenue; it reduced Q2 and first-half net loss by $35.3 million, or $0.14 per share. Revenue and loss comparisons are therefore materially affected by this non-recurring estimate change.
- At June 30, cash and cash equivalents were $205.7 million and marketable securities totaled $581.3 million, or approximately $787.0 million combined. Total assets were $1.02 billion, total liabilities $153.6 million, and stockholders’ equity $868.0 million. The company reported no debt outstanding.
- For the first half, operating cash use was $92.2 million, investing cash use $1.1 million, and financing cash inflow $5.0 million. Cash, cash equivalents and restricted cash declined $88.3 million to $206.0 million. Operating cash use increased from $67.5 million in the prior-year period, in part reflecting a $36.3 million decrease in deferred revenue.
- Accumulated deficit was $688.8 million. Unrealized losses on marketable securities were $6.7 million for the first half and contributed to comprehensive loss of $111.2 million.
Changes and operating developments
- First-half R&D expense declined $8.4 million year over year, mainly due to lower non-cash expense associated with Fred Hutch and Stanford success-payment liabilities; facility and technology costs increased as Lyell expanded R&D and manufacturing infrastructure.
- First-half G&A expense increased $28.9 million, reflecting higher stock-based compensation, arbitration-related outside services, and public-company costs.
- Lyell reported LYL797 and LYL132 in Phase 1 clinical development; LYL845 and LYL331 were in preclinical development. Management expected initial LYL797 data in 2023 and said it was on track to submit an IND for LYL845 in the second half of 2022. GSK planned an IND submission for LYL331 in late 2022 to early 2023.
Outlook, risks and unusual items
- Management expected existing cash, cash equivalents and marketable securities to fund operations into 2025 under its current operating plan, while the financial-statement liquidity note separately stated resources were adequate for at least 12 months from issuance. Lyell expects continued losses and anticipates needing additional capital to complete development; no formal financial-results guidance was provided.
- On August 4, 2022, after quarter-end, Lyell established an at-the-market program allowing sales of up to $200 million of common stock, subject to market conditions and company direction. No shares had been sold under the program as of the filing. Sales could dilute existing shareholders.
- GSK paused enrollment in its study of first-generation letetresgene autoleucel in NSCLC after preliminary clinical activity was below expectations. GSK was evaluating the data; Lyell said this created uncertainty for further development of related next-generation NY-ESO-1 programs, including LYL132 and LYL331.
- Lyell was pursuing arbitration against PACT seeking, among other relief, rescission of agreements and recovery of consideration paid; hearings occurred in March and April 2022, with an outcome expected in Q3 2022. The company had impaired its $36.4 million PACT investment in 2021.
- Potential Fred Hutch and Stanford success payments are each capped at $200 million, payable in cash or, at Lyell’s discretion, publicly traded shares if specified share-price thresholds are reached. No payments had been triggered as of June 30, 2022; the recorded combined liability was $9.2 million.
- Key risks include clinical and regulatory failure or delay, complex cell-therapy manufacturing and supply, patient enrollment, dependence on collaborators and vendors, possible COVID-19 effects, and the need for future financing. Management reported disclosure controls effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Investor verification points
- Confirm the assumptions behind the $35.3 million GSK revenue catch-up, including the revised cost-to-complete estimate and remaining deferred revenue.
- Track cash burn, investment balances and management’s runway assumptions against development spending and any ATM sales or other financing.
- Check clinical progress and data for LYL797 and LYL132, the LYL845 IND timetable, and GSK’s decisions on NY-ESO-1 programs following its NSCLC study update.
- Review the PACT arbitration outcome and any resulting financial or operational effects.
- Monitor dilution exposure from stock compensation, outstanding options and potential ATM issuance, as well as the valuation and trigger conditions for success-payment liabilities.