aTyr Pharma, Inc.(ATYR) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets and cash flows, for the periods ended June 30, 2020, and 2019 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $21,632 | $9,210 | | Total current assets | $43,840 | $31,925 | | Total Assets | $47,562 | $36,188 | | Current Liabilities | | | | Term loans, net | $4,976 | $8,737 | | Total current liabilities | $9,799 | $12,923 | | Total Stockholders' Equity | $35,938 | $21,026 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $189 | $94 | $8,254 | $94 | | Research and development | $4,361 | $3,314 | $7,977 | $6,659 | | General and administrative | $2,146 | $2,421 | $4,736 | $4,953 | | Consolidated net loss | $(6,447) | $(5,848) | $(4,695) | $(11,985) | | Net loss per share | $(0.69) | $(1.80) | $(0.58) | $(4.23) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,345) | $(10,844) | | Net cash provided by (used in) investing activities | $1,957 | $(1,064) | | Net cash provided by financing activities | $14,810 | $3,453 | | Net change in cash and cash equivalents | $12,422 | $(8,455) | Notes to Condensed Consolidated Financial Statements This section details accounting policies, liquidity, COVID-19 risks, revenue recognition, debt obligations, and equity transactions - The company believes its existing cash, cash equivalents, and available-for-sale investments of $41.4 million as of June 30, 2020, are sufficient to meet anticipated cash requirements for at least one year from the filing date[30] - The COVID-19 pandemic has impacted the business by delaying enrollment in the Phase 1b/2a clinical trial for pulmonary sarcoidosis and causing disruptions to employee travel and R&D activities[29] - In January 2020, the company entered a license agreement with Kyorin for ATYR1923 in Japan, receiving an $8.0 million upfront payment. For the six months ended June 30, 2020, the company recognized $8.0 million in license revenue from this agreement[59][61] - In February 2020, the company completed an underwritten follow-on public offering, raising total gross proceeds of approximately $20.7 million[74] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses business overview, financial performance, liquidity, ATYR1923 clinical development, revenue, R&D, and capital resources Overview aTyr is a biotherapeutics company focused on ATYR1923 for inflammatory lung diseases, with ongoing clinical trials and key collaborations - The company's primary focus is on ATYR1923, a clinical-stage product candidate for inflammatory lung diseases that downregulates immune responses by binding to the NRP2 receptor[84] - ATYR1923 is being evaluated in two clinical trials: a Phase 1b/2a trial in patients with pulmonary sarcoidosis and a Phase 2 trial in COVID-19 patients with severe respiratory complications[85][86] - In January 2020, aTyr entered into a license agreement with Kyorin for the development and commercialization of ATYR1923 in Japan, receiving an $8.0 million upfront payment and eligibility for up to $167.0 million in milestones plus royalties[87] Results of Operations This section compares financial results, highlighting increased revenue from the Kyorin agreement and higher R&D expenses due to clinical trials Comparison of Results for the Six Months Ended June 30 (in thousands) | Account | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Revenues | $8,254 | $94 | $8,160 | | Research and development expenses | $7,977 | $6,659 | $1,318 | | General and administrative expenses | $4,736 | $4,953 | $(217) | - The $8.16 million increase in revenue for the first six months of 2020 was driven by $8.0 million from the Kyorin Agreement and $0.3 million from the CSL Agreement[115] - The $1.3 million increase in R&D expenses for the six-month period was primarily due to the progression of the ATYR1923 Phase 1b/2a trial in pulmonary sarcoidosis and the Phase 2 trial in COVID-19 patients[116] Liquidity and Capital Resources This section discusses liquidity, capital resources, historical losses, current cash sufficiency, and recent financing activities - As of June 30, 2020, the company had $41.4 million in cash, cash equivalents, and available-for-sale investments, which is believed to be sufficient to fund operations for at least one year[119] - Net cash used in operating activities decreased to $4.3 million in the first six months of 2020 from $10.8 million in the same period of 2019, primarily due to the upfront payment from Kyorin[126] - Net cash provided by financing activities was $14.8 million for the first six months of 2020, mainly from an $18.8 million net proceed from a follow-on offering, offset by a $4.0 million loan repayment[128] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses exposure to market risks, specifically interest rate and foreign currency exchange risks, neither considered material - The company is exposed to interest rate risk through its investment portfolio and variable-rate term loans, but a 100 basis point change in rates would not have a material effect on results[135][138] - Foreign currency exchange risk exists due to expenses denominated in Pounds Sterling, Euro, Hong Kong dollar, and Australian dollar, but a 10% movement in exchange rates is not expected to be material[139] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the quarter[142] - No significant changes in internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, such controls were identified during the three months ended June 30, 2020[143] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - As of the reporting date, the company is not a party to any material legal proceedings[145] Item 1A. Risk Factors This section provides a comprehensive overview of risks, including capital needs, ATYR1923 success, clinical development, third-party reliance, IP, and COVID-19 impact Risks related to financial condition and need for additional capital This subsection highlights historical losses, critical need for additional capital, funding uncertainty, and risks from existing debt - The company will need to raise additional capital to fund operations, as existing cash of $41.4 million is projected to be sufficient for only about one year[147] - The company has outstanding term loans secured by substantially all of its assets (excluding intellectual property), and a default could lead to the liquidation of collateral[153] - The company has incurred significant losses since inception, with an accumulated deficit of $327.0 million as of June 30, 2020, and expects to continue incurring losses[157] Risks related to discovery, development, and regulation This section details substantial risks in drug development, including clinical trial delays, novel therapeutic approach, patient enrollment, and regulatory uncertainty - The company may encounter substantial delays in clinical trials, such as the COVID-19-related delays in the ATYR1923 Phase 1b/2a trial in pulmonary sarcoidosis[164][169] - The company's focus on extracellular tRNA synthetase and NRP2 biology represents a novel therapeutic approach, which carries risks as no drugs have been developed based on this approach[180] - Patient enrollment is a critical challenge, particularly for rare diseases like pulmonary sarcoidosis, and has been further complicated by the COVID-19 pandemic, which may cause patients to drop out or avoid participation[175][176] Risks related to reliance on third parties This section highlights high dependence on third parties for collaborations, manufacturing, and clinical trials, introducing risks of delays and non-performance - The company depends on collaborations with Kyorin and CSL, which are subject to performance risks and potential termination, which could impact future revenue and development[217][219] - The company relies entirely on third-party CDMOs for manufacturing and lacks long-term commercial supply agreements, creating risks of supply disruption, delays, and increased costs[223][226] - Reliance on third-party CROs for clinical trials means a loss of direct control, and any failure by CROs to comply with regulations or protocols could compromise trial data and delay approvals[227][228] Risks related to intellectual property This section details risks in obtaining, maintaining, and defending intellectual property, including patent uncertainty, trade secret protection, and infringement claims - The company's success depends on its ability to obtain and maintain patent protection for its technology and product candidates, a process that is expensive, time-consuming, and uncertain[232][233] - The company could face costly litigation if third parties claim that its products infringe on their patents, which could block commercialization or require substantial damage payments[243][246] - In addition to patents, the company relies on trade secrets, which are difficult to protect and may be misappropriated or disclosed, particularly when shared with third-party collaborators[238] Risks related to business operations This section covers key operational risks, including COVID-19 impact, personnel retention, international operations, product liability, and cybersecurity - The COVID-19 pandemic has adversely affected business operations, including delaying the Phase 1b/2a pulmonary sarcoidosis trial and creating enrollment challenges for the new COVID-19 trial[271][274][275] - The company is highly dependent on retaining its principal executive team and other qualified scientific and technical personnel in a competitive industry[281] - The use of product candidates in clinical trials exposes the company to the risk of product liability claims, which could result in substantial liability and reputational harm[289] Risks related to commercialization This subsection discusses significant commercialization challenges, including sales infrastructure, intense competition, market acceptance, and reimbursement uncertainty - The company currently has no sales, marketing, or distribution infrastructure and must either build these capabilities or enter into agreements with third parties, both of which carry significant risks[306] - The company faces intense competition from major pharmaceutical and biotech companies that have substantially greater financial, technical, and marketing resources[312][313] - Commercial success is highly dependent on obtaining adequate insurance coverage and reimbursement from third-party payors like CMS and private insurers, which is uncertain and subject to downward pricing pressure[316][319] Risks related to ownership of common stock This section outlines risks for stockholders, including stock price volatility, ownership concentration, potential dilution, and delisting risk - The market price of the company's common stock has been and is likely to continue to be highly volatile due to factors such as clinical trial results, regulatory decisions, and market conditions[321] - As of August 7, 2020, executive officers, directors, and 5% stockholders owned approximately 38.4% of voting stock, giving them significant influence over stockholder-approved matters[326] - The company faces a risk of its common stock being delisted from the Nasdaq Capital Market if it fails to maintain continued listing requirements, such as the $1.00 minimum bid price[336][339] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None[352] Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - None[353] Item 5. Other Information No other information to report for the period - None[355] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications - Lists exhibits filed with the report, including the Restated Certificate of Incorporation, Bylaws, CEO and CFO certifications (Sections 302 and 906), and XBRL interactive data files[358][359]