aTyr Pharma, Inc.(ATYR) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company reported a consolidated net loss of $12.2 million for Q1 2022, increasing from $7.2 million in Q1 2021, driven by higher operating expenses, with cash and investments at $98.7 million and an accumulated deficit of $384.4 million Condensed Consolidated Balance Sheets As of March 31, 2022, total assets decreased to $104.8 million from $115.5 million, primarily due to reduced available-for-sale investments, while total stockholders' equity declined to $98.4 million reflecting the net loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $8,324 | $2,336 | | Available-for-sale investments | $90,342 | $105,575 | | Total Assets | $104,776 | $115,537 | | Liabilities & Equity | | | | Total current liabilities | $6,269 | $6,013 | | Total stockholders' equity | $98,374 | $109,126 | | Total Liabilities and Stockholders' Equity | $104,776 | $115,537 | Condensed Consolidated Statements of Operations For Q1 2022, the company reported a net loss of $12.2 million, or ($0.44) per share, compared to $7.2 million in Q1 2021, primarily due to a significant rise in operating expenses, especially research and development Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | | :--- | :--- | :--- | | Research and development | $8,896 | $4,516 | | General and administrative | $3,482 | $2,686 | | Total operating expenses | $12,378 | $7,202 | | Loss from operations | ($12,378) | ($7,202) | | Net loss attributable to aTyr Pharma, Inc. | ($12,153) | ($7,151) | | Net loss per share, basic and diluted | ($0.44) | ($0.51) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $10.1 million for Q1 2022, offset by $14.6 million from investing activities and $1.5 million from financing, resulting in a $6.0 million net increase in cash and equivalents to $8.3 million Cash Flow Summary (in thousands) | Activity | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($10,119) | ($5,827) | | Net cash provided by (used in) investing activities | $14,626 | ($23,395) | | Net cash provided by financing activities | $1,481 | $24,857 | | Net change in cash and cash equivalents | $5,988 | ($4,365) | | Cash and cash equivalents at end of period | $8,324 | $12,587 | Notes to Condensed Consolidated Financial Statements The notes detail the company's biotherapeutics business, confirming $98.7 million in cash is sufficient for at least one year, outlining potential $165.0 million Kyorin milestones, and describing recent financing activities including an ATM offering program - The company believes its existing cash, cash equivalents, and available-for-sale investments of $98.7 million as of March 31, 2022, are sufficient to meet material cash requirements for at least one year from the filing date[25] - Under the Kyorin Agreement for efzofitimod in Japan, aTyr is eligible for up to an additional $165.0 million in development, regulatory, and sales milestones, plus tiered royalties[46][49] - In Q1 2022, the company sold 260,455 shares for net proceeds of approximately $1.5 million under its Prior ATM Offering Program[55] - In April 2022, a new ATM Offering Program was established with Jefferies for up to $65.0 million[62] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on efzofitimod and ATYR2810, with efzofitimod's registrational trial planned for Q3 2022, noting increased R&D and G&A expenses in Q1 2022, and confirming a $98.7 million cash position sufficient for at least one year Overview aTyr Pharma focuses on its tRNA synthetase biology platform, advancing efzofitimod for fibrotic lung diseases with a registrational trial planned for Q3 2022, and ATYR2810 for oncology with a Phase 1 trial in H2 2022, while efzofitimod received orphan drug designation for sarcoidosis and systemic sclerosis - The company's primary focus is efzofitimod, a clinical-stage product candidate for fibrotic lung diseases, with a registrational trial planned to initiate in Q3 2022 following positive Phase 1b/2a results[67] - ATYR2810, an IND candidate for oncology from the NRP2 antibody program, is in preclinical development, with a Phase 1 clinical trial planned for the second half of 2022[70] - The FDA granted efzofitimod orphan drug designation for the treatment of sarcoidosis in January 2022 and for systemic sclerosis in April 2022[69] Liquidity and Capital Resources As of March 31, 2022, the company held $98.7 million in cash and investments, expected to fund operations for at least one year, with financing primarily from equity sales including an $80.6 million follow-on offering and a new $65.0 million ATM program - As of March 31, 2022, the company had cash, cash equivalents and available-for-sale investments of $98.7 million, sufficient to meet material cash requirements for at least one year[74] - In September 2021, a follow-on public offering generated net proceeds of approximately $80.6 million[76] - In April 2022, the company established a new at-the-market (ATM) offering program with Jefferies for up to $65.0 million, after terminating a prior ATM program under which it raised $1.5 million in Q1 2022[78][79] Results of Operations In Q1 2022, R&D expenses increased by $4.4 million to $8.9 million due to higher manufacturing and preclinical development, while G&A expenses rose by $0.8 million to $3.5 million from increased compensation and professional fees Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | Increase/(Decrease) | | :--- | :--- | :--- | :--- | | Research and development | $8,896 | $4,516 | $4,380 | | General and administrative | $3,482 | $2,686 | $796 | - The $4.4 million increase in R&D expenses was mainly due to a $3.2 million rise in product development and manufacturing costs for efzofitimod and ATYR2810, and a $0.7 million increase in preclinical development[102] - The $0.8 million increase in G&A expenses was primarily due to a $0.5 million increase in compensation-related expenses and a $0.3 million increase in professional fees[103] Quantitative and Qualitative Disclosures About Market Risk The company states that this item is not applicable - Not Applicable[106] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the quarter[108] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[109] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings and does not expect any current claims in the ordinary course of business to have a material adverse effect - The company is not a party to any material legal proceedings at this time[111] Risk Factors The company outlines significant risks including its history of losses, need for capital, challenges in developing novel product candidates, reliance on third parties, intellectual property issues, and potential adverse effects from the COVID-19 pandemic and competition Risks Related to Financial Condition and Need for Capital The company has a history of significant losses, with an accumulated deficit of $384.4 million, and will require substantial additional capital to fund operations and clinical trials, which may lead to dilution and may never result in profitability - The company will need to raise additional capital to fund operations, and its cash of $98.7 million is projected to be sufficient for at least one year, but this may change[114] - The company is a pre-commercial entity with a history of significant losses, including a $12.2 million net loss for Q1 2022 and an accumulated deficit of $384.4 million as of March 31, 2022[119] Risks Related to Discovery, Development, and Regulation The company's novel product candidates face inherent risks including potential clinical trial delays, failure to demonstrate safety and efficacy, patient enrollment difficulties, manufacturing challenges for biologics, and regulatory hurdles due to the novel therapeutic approach - The company's product candidates represent a novel therapeutic approach, and there is a risk they may not result in commercially viable drugs due to unforeseen challenges in development, regulatory approval, and manufacturing[141] - There is a risk of substantial delays in clinical trials due to issues like patient enrollment for rare diseases, regulatory holds, and operational issues, some of which were previously caused by the COVID-19 pandemic[126][137] - Manufacturing biologics like efzofitimod is complex and susceptible to contamination, equipment failure, and other issues, and the company relies on CDMOs and is currently transferring its manufacturing process to an additional CDMO, which carries risk[154][159] Risks Related to Reliance on Third Parties The company's success is highly dependent on third parties, including its collaboration with Kyorin for efzofitimod in Japan, and reliance on CDMOs for manufacturing and CROs for clinical trials, where unsatisfactory performance could significantly delay development - The company depends on its collaboration with Kyorin for the development and commercialization of efzofitimod in Japan, with future milestone and royalty payments contingent on Kyorin's success[172] - The company relies on third-party CDMOs for all manufacturing and does not have its own internal manufacturing capabilities, currently relying on a single CDMO for ATYR2810 and transferring the process for efzofitimod to a second CDMO[177][180] - The company relies on third-party CROs and clinical investigators to conduct its clinical trials, which reduces direct control over performance and compliance with regulations like Good Clinical Practices (GCPs)[182] Risks Related to Intellectual Property The company's success depends on obtaining and maintaining patent protection for its novel technologies, facing risks that patents may not issue, be challenged, or be insufficient, alongside the potential for third-party infringement claims and adverse changes in patent law - The company's success depends on obtaining and maintaining patent protection for its product candidates, but the patenting process is uncertain and expensive, and issued patents may be challenged or invalidated[187][189] - The company may face claims that its products infringe on the patent rights of third parties, which could lead to costly litigation and potentially block commercialization[195] - The company relies on license agreements for certain intellectual property and could lose these rights if it fails to comply with its obligations under these agreements[203] Risks Related to Business Operations The company faces operational risks including adverse effects from the COVID-19 pandemic, dependence on retaining key personnel in a competitive industry, and exposure to stringent data privacy laws and cybersecurity threats that could lead to penalties and disruption - The business has been and could continue to be adversely affected by the COVID-19 pandemic, which has caused delays in clinical trials and may disrupt supply chains and employee resources[222][223] - The company is highly dependent on its principal executive team and key scientific personnel, and faces intense competition for skilled employees in the biotechnology industry[230][231] - The company is subject to complex data privacy and security laws (e.g., HIPAA, GDPR, CCPA) and faces risks from cyber-attacks, where a security breach could result in significant fines, litigation, and reputational harm[241][293] Risks Related to Commercialization Commercialization risks include the need to build sales infrastructure or rely on third parties, intense competition, and the uncertainty of market acceptance and adequate reimbursement from third-party payors subject to pricing pressure and healthcare reform - The company currently lacks sales, marketing, and distribution infrastructure and will need to build these capabilities or partner with third parties to commercialize any approved products[251] - The biotechnology industry is intensely competitive, and competitors may develop more effective or less costly therapies, or achieve regulatory approval sooner[256][257] - Commercial success depends on obtaining adequate coverage and reimbursement from third-party payors like CMS and private insurers, which is uncertain and subject to significant pricing pressure and healthcare cost-containment initiatives[260][263] Risks Related to Common Stock Ownership The company's stock price is expected to remain highly volatile, with significant insider control, and future equity sales will cause dilution, while the company does not intend to pay dividends and its NOLs are subject to limitations - The market price of the common stock has been highly volatile, with a closing price range between $2.17 and $12.48 per share from January 2020 to May 2022[268][269] - As of May 4, 2022, executive officers, directors, and 5% holders owned approximately 42.1% of the voting stock, allowing them to exert significant influence over corporate matters[270] - Future sales of equity through existing agreements (Aspire Capital, Jefferies ATM) and potential future offerings will cause dilution to existing stockholders and could depress the stock price[272][275][278] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None[305] Other Information The company reports no other information for this item - None[308] Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance documents, material contracts, and certifications by the CEO and CFO - The exhibits include the company's 2022 Inducement Plan, forms of stock option agreements, and certifications from the Principal Executive Officer and Principal Financial Officer[311][312]