Lyell Immunopharma, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance-sheet comparisons are with December 31, 2021. Lyell is an early-stage T-cell therapy company with no products approved for sale. Its revenue is primarily collaboration-related, not product sales.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 / prior balance |
|---|---|---|
| Revenue | $0.6 million | $2.4 million |
| Research and development expense | $35.8 million | $41.5 million |
| General and administrative expense | $34.4 million | $16.8 million |
| Net loss | $68.1 million | $55.0 million |
| Operating cash used | $47.9 million | $33.6 million |
| Cash, cash equivalents and marketable securities | $838.0 million | $898.3 million |
| Total assets | $1,072.1 million | $1,127.4 million |
| Total liabilities | $190.9 million | $197.6 million |
Gross margin is not meaningful for this development-stage company, which reported no product sales. Lyell had no debt outstanding. Cash, cash equivalents and marketable securities comprised approximately $222.6 million of cash and cash equivalents and $615.4 million of marketable securities. Accumulated deficit was $652.5 million at quarter-end.
Material changes versus the prior comparable period
- Revenue declined $1.9 million, primarily because of lower research and development activity under the GSK agreement. Revenue recognized under that agreement was $0.6 million versus $2.4 million.
- R&D expense decreased $5.7 million. A $13.8 million period-over-period reduction in success-payment expense more than offset higher facilities, personnel and research costs. The 2022 success-payment fair-value change reduced reported expense; it is not equivalent to operating cash generation.
- G&A expense increased $17.6 million, driven mainly by a $10.4 million increase in stock-based compensation, higher outside services and corporate costs, including arbitration costs, and public-company expenses.
- Net loss increased $13.1 million. Comprehensive loss was $73.1 million, including a $5.0 million unrealized loss on marketable securities, compared with comprehensive loss of $55.1 million in Q1 2021.
- Operating cash use increased $14.3 million. Investing activities used $26.1 million, including $9.7 million for property and equipment and net purchases of marketable securities; financing provided $2.6 million from option exercises.
Outlook, development and notable items
- Management said available cash, cash equivalents and marketable securities should fund operations for at least 12 months after issuance of the financial statements and, based on its current operating plan, meet working-capital and capital needs into 2025. These are estimates, and the filing says additional capital will be needed to complete clinical development.
- Management expects substantial future expenses and operating losses as research, clinical development and manufacturing capabilities expand. Additional financing may dilute shareholders, add fixed obligations, or require the company to grant rights to its technology or programs.
- LYL797 Phase 1 screening had begun; initial data were expected in 2023. Lyell said it was on track to submit an IND for LYL845 in the second half of 2022. LYL132 was in Phase 1 development following FDA clearance in January 2022; LYL331 was expected to submit an IND in late 2022 to early 2023.
- Lyell’s main risks include clinical and regulatory uncertainty, patient enrollment, cell-therapy manufacturing and supply, reliance on third parties and GSK, intellectual-property challenges, and possible COVID-19-related disruption. The company reported no COVID-19 delays in discovery activities to date but warned that trial enrollment and tumor-sample supply could be affected.
- Lyell’s arbitration with PACT Pharma sought rescission of agreements and recovery of consideration paid. Hearings took place in March and April 2022; an outcome was expected in Q3 2022. The company said the matter was not material to operations.
- Potential success payments to Fred Hutch and Stanford can total up to $400 million in aggregate if specified share-price thresholds are reached. The recorded success-payment liability was $5.6 million at March 31, 2022; payment may be made in cash or, at Lyell’s discretion, publicly traded shares.
- The company reported disclosure controls and procedures were effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Cash burn and whether management’s stated runway into 2025 remains consistent with actual spending and development plans.
- Clinical-trial progress, safety, enrollment and data timing for LYL797 and LYL132, and IND milestones for LYL845 and LYL331.
- GSK program activity and the conditions, timing and likelihood of any future milestone or royalty revenue; these contingent amounts were not included in the reported transaction price.
- The outcome and any financial recovery or other consequences of the PACT arbitration.
- Potential dilution or cash impact from stock compensation, future financing and success-payment obligations.
- Whether manufacturing, supply-chain, regulatory or pandemic-related issues affect trial timelines or access to patient tumor samples.