aTyr Pharma, Inc.(ATYR) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and related disclosures Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and detailed notes for the periods presented Condensed Consolidated Balance Sheets Total assets increased to $55.1 million by March 2021, driven by investments, with equity rising to $49.5 million | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total assets | $55,128 | $38,726 | +$16,402 | | Cash and cash equivalents | $12,587 | $16,952 | -$4,365 | | Available-for-sale investments | $38,050 | $14,737 | +$23,313 | | Total current liabilities | $4,451 | $5,864 | -$1,413 | | Total stockholders' equity | $49,532 | $31,484 | +$18,048 | Condensed Consolidated Statements of Operations The company reported a $7.2 million net loss in Q1 2021, a shift from net income, due to absent collaboration revenue and increased R&D | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Change (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | License and collaboration agreement revenues | $0 | $8,065 | -$8,065 | | Research and development expenses | $4,516 | $3,616 | +$900 | | General and administrative expenses | $2,686 | $2,590 | +$96 | | Consolidated net income (loss) | $(7,155) | $1,752 | -$8,907 | | Basic, net income (loss) per share | $(0.51) | $0.25 | -$0.76 | | Shares used in computing basic net income (loss) per share | 14,103,783 | 6,881,791 | +7,221,992 | Condensed Consolidated Statements of Comprehensive Income (Loss) The company reported a $7.2 million comprehensive loss in Q1 2021, reflecting net loss and unrealized investment losses | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Change (in thousands) | | :---------------------------------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | | Consolidated net income (loss) | $(7,155) | $1,752 | -$8,907 | | Change in unrealized loss on available-for-sale investments, net of tax | $(14) | $(13) | -$1 | | Comprehensive income (loss) | $(7,169) | $1,739 | -$8,908 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $49.5 million by March 2021, primarily due to $24.8 million from stock issuances | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Total Stockholders' Equity | $49,532 | $31,484 | +$18,048 | | Common Stock Shares Outstanding | 16,011,385 | 11,018,954 | +4,992,431 | | Additional Paid-In Capital | $395,422 | $370,210 | +$25,212 | | Accumulated Deficit | $(345,679) | $(338,528) | -$7,151 | - Issuance of common stock from at-the-market offerings, net of offering costs, contributed $9.6 million in proceeds[19] - Issuance of common stock from committed purchase agreement, net of offering costs, contributed $15.2 million in proceeds[19] Condensed Consolidated Statements of Cash Flows Net cash and equivalents decreased by $4.4 million in Q1 2021, driven by investing and a shift to cash used in operations | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Change (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Net cash provided by (used in) operating activities | $(5,827) | $2,058 | -$7,885 | | Net cash provided by (used in) investing activities | $(23,395) | $11,406 | -$34,801 | | Net cash provided by financing activities | $24,857 | $16,779 | +$8,078 | | Net change in cash and cash equivalents | $(4,365) | $30,243 | -$34,608 | | Cash and cash equivalents at end of period | $12,587 | $39,453 | -$26,866 | Notes to Condensed Consolidated Financial Statements The notes provide essential context to financial statements, detailing accounting policies, agreements, and equity activities 1. Organization, Business, Basis of Presentation and Summary of Significant Accounting Policies This section details the company's business, accounting policies, and the impact of COVID-19 on operations - The company is focused on the discovery and development of innovative medicines based on novel biological pathways, specifically extracellular functionality and signaling pathways of tRNA synthetases[24] - The company incurred a condensed consolidated net loss of $7.2 million for the three months ended March 31, 2021, and had an accumulated deficit of $345.7 million as of March 31, 2021[28] - Existing cash, cash equivalents, and available-for-sale investments of $50.6 million as of March 31, 2021, are believed to be sufficient for at least one year from the 10-Q filing date[28] - The COVID-19 pandemic has delayed enrollment in the Phase 1b/2a clinical trial for pulmonary sarcoidosis, led to patient discontinuations, temporary facility closures, travel restrictions, and R&D delays[27] - The company adopted ASU No. 2019-12, Income Taxes (Topic 740), on January 1, 2021, which did not have a material effect on its financial position or results of operations[40] 2. Fair Value Measurements This section details the company's financial assets measured at fair value, categorized by valuation inputs | Asset Category | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Cash equivalents (Level 1) | $11,958 | $13,708 | | Available-for-sale investments (Level 2): | | | | Asset-backed securities | $1,008 | $2,219 | | Commercial paper | $18,183 | $5,494 | | Corporate debt securities | $18,859 | $7,024 | | Total available-for-sale investments | $38,050 | $14,737 | | Total assets measured at fair value | $50,008 | $28,445 | - As of March 31, 2021, 15 out of 25 available-for-sale investments were in gross unrealized loss positions, with all having maturity dates of less than two years[47] 3. License, Collaboration and Other Agreements This section outlines key license and collaboration agreements, including revenue recognition and grants - In January 2020, the company entered into a collaboration and license agreement with Kyorin for ATYR1923 in Japan, receiving an $8.0 million upfront payment and a $2.0 million milestone payment in January 2021[48][50] | Revenue Type | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | License and collaboration agreement revenues | $0 | $7,900 | - Pangu BioPharma, a subsidiary, received a grant of approximately $750,000 with HKUST for a two-year project to build a high-throughput platform for bi-specific antibodies, with aTyr contributing 50% of the project cost[53] 4. Debt, Commitments and Contingencies This section details the company's lease obligations and other contractual commitments | Lease Payments | Amount (in thousands) | | :------------------------------------ | :----------------------------- | | 2021 | $776 | | 2022 | $1,062 | | 2023 | $404 | | Less: Amount representing interest | $(207) | | Present value of lease payments | $2,035 | | Less: Current portion of operating lease liability | $(890) | | Long-term operating lease liability, net of current portion | $1,145 | - As of March 31, 2021, the weighted-average remaining lease term was 2.2 years and the weighted-average discount rate was 9.6%[55] 5. Stockholders' Equity This section details changes in stockholders' equity, including capital raising activities and stock-based compensation - Sold 1,988,254 shares of common stock for net proceeds of $9.6 million under the ATM Offering Program with Wainwright, which terminated in March 2021[56] - Sold 3,000,000 shares of common stock for net proceeds of $15.2 million under a Purchase Agreement with Aspire Capital[60] - Entered into a new $25.0 million ATM Offering Program with JonesTrading in March 2021, with no shares issued during the quarter[57][58] | Metric | March 31, 2021 (in thousands) | March 31, 2020 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Stock-based compensation expense | $360 | $423 | -$63 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operations, strategic focus, clinical programs, liquidity, and capital Overview aTyr Pharma focuses on novel biotherapeutics, with lead candidate ATYR1923 for inflammatory lung diseases and ATYR2810 for oncology - aTyr Pharma is a biotherapeutics company focused on the discovery and development of innovative medicines based on novel biological pathways, specifically the extracellular functionality and signaling pathways of tRNA synthetases and their extracellular targets like neuropilin-2 (NRP2)[67] - Lead clinical product candidate, ATYR1923, is a selective modulator of NRP2 being developed for severe inflammatory lung diseases (ILD), including pulmonary sarcoidosis, and showed positive safety data in a Phase 2 study for COVID-19 related severe respiratory complications[68][69] - ATYR2810, a fully humanized monoclonal antibody targeting NRP2, is in preclinical development for aggressive cancers[71] - New discovery programs for Alanyl-tRNA synthetase (AARS) and Aspartyl-tRNA synthetase (DARS) in immunology, fibrosis, and cancer were announced in February 2021[73] - The COVID-19 pandemic has delayed enrollment in the Phase 1b/2a clinical trial for pulmonary sarcoidosis, led to patient discontinuations, temporary facility closures, travel restrictions, and R&D delays[74] Liquidity and Capital Resources The company has an accumulated deficit of $345.7 million, with $50.6 million in cash, relying on equity sales for funding - Accumulated deficit of $345.7 million as of March 31, 2021, with expected continued net losses[75] - Cash, cash equivalents, and available-for-sale investments totaled $50.6 million as of March 31, 2021, sufficient for at least one year of anticipated cash requirements[75] - Primary funding sources include equity securities sales, convertible debt, venture debt, term loans, and license/collaboration agreement revenues[76] | Cash Flow Activity | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Net cash provided by (used in) operating activities | $(5,827) | $2,058 | | Net cash provided by (used in) investing activities | $(23,395) | $11,406 | | Net cash provided by financing activities | $24,857 | $16,779 | - Future funding requirements are uncertain and depend on clinical trial progress, regulatory approvals, manufacturing, and commercialization efforts, with plans to seek additional capital through equity, grants, collaborations, or debt[85][86] Financial Operations Overview Financial operations show no Q1 2021 collaboration revenue, increased R&D, and consistent G&A expenses - No license and collaboration agreement revenue was recognized for the three months ended March 31, 2021, compared to $7.9 million in the prior year, following the upfront payment and milestone from the Kyorin agreement[92][100] | Expense Category | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Research and development | $4,516 | $3,616 | +$900 | | General and administrative | $2,686 | $2,590 | +$96 | - The increase in R&D expenses was primarily due to $0.4 million higher manufacturing-related costs for ATYR1923 and $0.4 million for ATYR2810 R&D[101] - Critical accounting policies and estimates have not materially changed from those disclosed in the 2020 Annual Report[99] Results of Operations Q1 2021 saw no collaboration revenue, increased R&D, stable G&A, and improved other income due to debt repayment | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Increase / (Decrease) (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | License and collaboration agreement revenues | $0 | $8,065 | $(8,065) | | Research and development expenses | $4,516 | $3,616 | $900 | | General and administrative expenses | $2,686 | $2,590 | $96 | | Other income (expense), net | $47 | $(107) | $(154) | - The increase in R&D expenses was primarily due to $0.4 million higher manufacturing related costs for ATYR1923 and $0.4 million of research and development expenses related to ATYR2810[101] - The change in other income (expense), net, was primarily a result of term loans which were paid in full in November 2020[102] Recent Accounting Pronouncements The company refers to Note 1 for details on recently issued accounting pronouncements - Refer to Note 1 for details on recent accounting pronouncements[103] Off-Balance Sheet Arrangements The company did not have any off-balance sheet arrangements during the periods presented - The company did not have any off-balance sheet arrangements during the periods presented[104] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section indicates no material quantitative or qualitative disclosures about market risk - The company has no material quantitative or qualitative disclosures about market risk[105] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no significant changes in internal control - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of March 31, 2021[107] - No significant changes in internal control over financial reporting occurred during the three months ended March 31, 2021[108] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings The company is not a party to any material legal proceedings that would adversely affect its operations - The company is not a party to any material legal proceedings at this time[109] Item 1A. Risk Factors This section outlines significant investment risks, including financial condition, product development, and IP Summary of Risks Associated with Our Business Investing involves substantial risks, including capital needs, ongoing losses, clinical trial failures, and COVID-19 impacts - Key risks include the need for additional capital, significant ongoing losses, potential delays or failures in clinical trials, challenges in commercializing novel therapeutic approaches, undesirable side effects, reliance on third-party collaborations, intellectual property protection issues, and the adverse effects of the COVID-19 pandemic[112] Risks related to our financial condition and need for additional capital The company needs substantial additional capital, faces ongoing losses, and future equity financing will dilute shareholders - The company needs to raise additional capital or enter strategic partnerships to fund operations, as current cash ($50.6 million as of March 31, 2021) is sufficient for only about one year[113] - Failure to obtain timely funding could lead to curtailment, delay, or discontinuation of research/development programs or commercialization efforts[115] - The company has incurred net losses since its 2005 inception, including a $7.2 million net loss for Q1 2021, and has an accumulated deficit of $345.7 million as of March 31, 2021[120] - The company expects to continue incurring significant expenses and operating losses for the foreseeable future, as it has not generated any revenue from product sales[122][124] Risks related to the discovery, development and regulation of our product candidates Clinical trials face risks of delays, failures, and patient enrollment challenges, with novel approaches being unproven and potential side effects - Clinical trials are expensive, time-consuming, often delayed, and uncertain, with risks of failure at any stage, potentially preventing or delaying regulatory approval[126] - Patient enrollment in clinical trials, especially for rare diseases like pulmonary sarcoidosis, is challenging and can be further impacted by factors like the COVID-19 pandemic, leading to delays or discontinuations[138][139] - The company's novel therapeutic approaches based on extracellular tRNA synthetase and NRP2 biology are unproven, posing challenges in defining indications, obtaining regulatory approval, and ensuring safety and efficacy[141][142] - Undesirable side effects or safety issues, such as antibody development or infusion-related reactions, could delay or prevent regulatory approval or limit commercialization[148][149] - The FDA may not accept data from clinical trials conducted outside the United States, potentially delaying development plans[146] Risks related to our reliance on third parties Reliance on third-party collaborators, CDMOs, and CROs introduces risks of non-performance, supply disruptions, and loss of control - The company's revenue depends on collaborators' performance (e.g., Kyorin for ATYR1923 in Japan), over which it has limited control, and agreements can be terminated[171][173] - Reliance on third-party CDMOs and CROs for manufacturing and clinical testing introduces risks such as inability to negotiate favorable terms, reduced control, termination of agreements, and disruptions to operations[174][176][179] - Manufacturing biologics is complex and susceptible to product loss, contamination, and equipment failure, and processes may not be adaptable across different product candidates[157] - Sharing trade secrets with third parties increases the risk of disclosure or misappropriation, potentially impairing competitive position[183][184] Risks related to our intellectual property Success depends on robust, yet uncertain, patent and IP protection, facing risks of infringement claims and trade secret disclosure - Obtaining and maintaining patent protection is expensive, time-consuming, and uncertain, with risks that patent applications may not issue, or issued patents may be challenged, narrowed, or invalidated[185][187] - The limited lifespan of patents means protection may expire before or shortly after product commercialization, potentially leading to competition from generics or biosimilars[198] - Reliance on trade secrets for non-patentable know-how carries risks of disclosure, misappropriation, or independent discovery by competitors[189][190] - The company faces potential claims of infringement from third parties, which could lead to costly litigation, substantial damages, or the need to obtain licenses on unfavorable terms or at all[194][197] - Changes in patent law, such as the Leahy-Smith America Invents Act and recent Supreme Court rulings, could diminish the value of patents and increase uncertainties and costs[214][215][216] Risks related to our business operations Limited resources, COVID-19 impacts, personnel retention, international operations, and compliance risks affect business - Limited resources may lead to foregoing more profitable strategies or product candidates, impacting business success[219][220] - The COVID-19 pandemic continues to cause significant disruptions, including delays in clinical trials, supply chain issues, and challenges in raising capital[221][222][223][224][225][226][227] - Future success is highly dependent on attracting and retaining key employees, consultants, and advisors in a competitive industry with a shortage of skilled personnel[228][229] - International operations (e.g., Hong Kong subsidiary, international clinical trials) expose the company to risks like differing regulatory requirements, reduced intellectual property protection, and economic instability[232][233] - The company is exposed to risks of fraud or misconduct by employees, investigators, consultants, and partners, including non-compliance with regulatory standards and healthcare fraud/abuse laws[234] - Product liability claims, even if successfully defended, could result in substantial costs, reputational harm, and delays in regulatory approvals or commercialization[235][237][238] - Non-compliance with stringent and evolving data privacy and security laws (e.g., GDPR, CCPA) could lead to government enforcement actions, fines, and material adverse impacts on the business[239][240][241][243][244][245] Risks related to the commercialization of our product candidates Commercialization faces risks from lack of infrastructure, manufacturing, intense competition, and uncertain market acceptance/reimbursement - The company lacks sales, marketing, and distribution infrastructure and faces risks in building its own or relying on third parties, potentially leading to high costs, delays, or lower profitability[249][250] - The company has not secured commercial manufacturing capabilities and relies on third-party CDMOs, posing risks to full-scale production, process validation, and supply continuity[251][252][253] - The biotechnology and pharmaceutical industries are intensely competitive, with larger competitors possessing greater resources, potentially developing more effective or cheaper therapies, or achieving earlier market penetration[254][255] - Commercial success depends on market acceptance by physicians, patients, and third-party payors, which is uncertain and requires significant resources for education[256][257] - Obtaining adequate insurance coverage and reimbursement is crucial but uncertain, with significant delays and varying policies among payors[258] - International sales are subject to governmental price controls and cost-containment initiatives, potentially leading to lower revenues and profits[259][260] - Heightened governmental scrutiny on pharmaceutical pricing and healthcare reform measures (e.g., ACA, executive orders) create pricing pressures and uncertainty for future product commercialization[261][262][263] Risks related to the ownership of our common stock Common stock price is volatile, influenced by clinical results and dilution from equity sales, with no dividends planned - The market price of common stock is highly volatile, influenced by factors such as clinical trial results, regulatory decisions, competition, and macroeconomic conditions[264][265][266] - Executive officers, directors, and 5% holders collectively own approximately 29.1% of voting stock, enabling them to exert significant control over company matters[267] - Future sales and issuances of equity securities (e.g., remaining $4.8 million under Aspire Capital Purchase Agreement, $25.0 million ATM Offering Program) will dilute existing stockholders and could depress the stock price[268][269][270][271][272][273] - The company has substantial net operating losses (NOLs) that may be subject to limitations (e.g., Section 382 of the Code, state tax limits) in offsetting future taxable income, potentially increasing future tax liability[274][275][276] - The company does not intend to pay cash dividends on common stock, meaning stockholder returns will be limited to stock appreciation[277][277][278] General Risk Factors General risks include environmental compliance, cyber-attacks, public company costs, anti-corruption, and litigation exposure - Non-compliance with environmental, health, and safety laws could lead to fines, penalties, or significant costs[285][286] - System failures, cyber-attacks, and security breaches (including data loss, unauthorized access) pose significant risks to proprietary and sensitive information, potentially causing operational disruptions, reputational harm, and increased costs[287][288][289][290][291][292][294][295][296] - Operating as a public company incurs significant legal, accounting, and compliance costs, requiring substantial management time[297] - The company is subject to anti-corruption laws (e.g., FCPA), and non-compliance could result in criminal/civil penalties and reputational harm[293] - The stock price can be affected by securities analysts' research and reports, and the company is exposed to the risk of securities class action litigation[298][299] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported - No unregistered sales of equity securities or use of proceeds were reported[301] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities were reported[302] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[303] Item 5. Other Information No other information was reported - No other information was reported[304] Item 6. Exhibits This section lists exhibits filed with the 10-Q report, including organizational documents and certifications - The exhibits include restated certificates of incorporation, amended bylaws, specimen common stock certificates, warrants, employment agreements, sales agreements, equity incentive plans, code of business conduct and ethics, and certifications (e.g., Rule 13a-14(a), 18 U.S.C. Section 1350)[306][307] SIGNATURES The report is formally signed by the company's President, CEO, and Chief Financial Officer - The report was signed by Sanjay S. Shukla, M.D., M.S., President and Chief Executive Officer, and Jill M. Broadfoot, Chief Financial Officer, on May 14, 2021[310][311]