What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-11-09 · 121 added, 446 removed, 306 unchanged (65% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

8 unchanged sentences

Financing lease, right-of-use assets

Liabilities and Stockholders’

Liabilities and Stockholders’ Equity

Current liabilities:

7 unchanged sentences

Commitments and contingencies (Note 4)

Stockholders’

Stockholders’ equity:

Preferred stock, $ 0.001 par value per share;

5,000,000 undesignated authorized shares as of September 30, 2023 (unaudited) and December 31, 2022;

no shares issued or outstanding as of September 30, 2023 (unaudited) and December 31, 2022

5,000,000 undesignated authorized shares as of March 31, 2024 (unaudited) and December 31, 2023;

no shares issued or outstanding as of March 31, 2024 (unaudited) and December 31, 2023

Common stock, $ 0.001 par value per share;

170,000,000 and 85,000,000 authorized shares as of September 30, 2023 (unaudited) and December 31, 2022, respectively;

issued and outstanding shares –

58,560,061 as of September 30, 2023 (unaudited) and 29,498,488 as of December 31, 2022

170,000,000 authorized shares as of March 31, 2024 (unaudited) and December 31, 2023;

issued and outstanding shares – 68,354,033 as of March 31, 2024 (unaudited) and 63,286,404 as of December 31, 2023

Additional paid-in capital

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Total aTyr Pharma, Inc.

stockholders’

stockholders’ equity

Noncontrolling interest in Pangu BioPharma Limited

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes.

2 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

License and collaboration agr eement revenues

Three Months Ended March 31,

License and collaboration agreement revenues

Total revenues

6 unchanged sentences

Consolidated net loss

Net loss attributable to noncontrolling interest in Pangu BioPharma Limited

Net (gain) loss attributable to noncontrolling interest in Pangu BioPharma Limited

Net loss attributable to aTyr Pharma, Inc.

5 unchanged sentences

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Consolidated net loss

Other comprehensive loss:

Change in unrealized (loss) gain on available-for-sale investments, net of tax

Change in unrealized gain (loss) on available-for-sale investments, net of tax

Comprehensive loss

Comprehensive loss attributable to noncontrolling interest in Pangu BioPharma Limited

Comprehensive (gain) loss attributable to noncontrolling interest in Pangu BioPharma Limited

Comprehensive loss attributable to aTyr Pharma, Inc.

2 unchanged sentences

aTyr Pharma, Inc.

Condensed Consolidated Statements of Stockholders’

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

Three and Nine Months Ended September 30, 2023 (unaudited)

Three months ended March 31, 2024 (unaudited)

Comprehensive

Noncontrolling

Stockholders’

Balance as of December 31, 2023

1 unchanged sentence

Issuance of common stock from at-the-market offerings, net of offering costs

Issuance of common stock from underwritten follow-on public offering, net of offering costs

Stock-based compensation

Net unrealized gain on investments, net of tax

Balance as of March 31, 2023

Issuance of common stock pursuant to employee stock purchase plan

Issuance of common stock upon release of restricted stock units

Issuance of common stock from at-the-market offerings, net of offering costs

Stock-based compensation

Net unrealized loss on investments, net of tax

Balance as of June 30, 2023

Issuance of common stock from at-the-market offerings, net of offering costs

Stock-based compensation

Net unrealized gain on investments, net of tax

Balance as of September 30, 2023

Three and Nine Months Ended September 30, 2022 (unaudited)

Net gain (loss)

Balance as of March 31, 2024

Three Months Ended March 31, 2023 (unaudited)

Comprehensive

Noncontrolling

Stockholders’

Balance as of December 31, 2022

Issuance of common stock upon release of restricted stock units

Issuance of common stock upon exercise of stock options

Issuance of common stock from at-the-market offerings, net of offering costs

Stock-based compensation

Net unrealized loss on investments, net of tax

Balance as of March 31, 2022

Issuance of common stock pursuant to employee stock purchase plan

Issuance of common stock from at-the-market offerings, net of offering costs

Stock-based compensation

Net unrealized loss on investments, net of tax

Balance as of June 30, 2022

Issuance of common stock from at-the-market offerings, net of offering costs

Issuance of common stock from underwritten follow-on public offering, net of offering costs

Stock-based compensation

Net unrealized gain on investments, net of tax

Balance as of September 30, 2022

Balance as of March 31, 2023

See accompanying notes.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Cash flows from operating activities:

5 unchanged sentences

Amortization of right-of-use assets

Gain on disposal of property and equipment

Changes in operating assets and liabilities:

8 unchanged sentences

Maturities of available-for-sale investment securities

Proceeds from sale of property and equipment

Net cash (used in) provided by investing activities

Net cash used in by investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock through option exercises

Proceeds from issuance of common stock through employee stock purchase plan

Proceeds from issuance of common stock from at-the-market offerings, net of offering costs

17 unchanged sentences

Organization and Business

aTyr Pharma, Inc.

(we, us, and our) was incorporated in the State of Delaware on September 8, 2005.

We were incorporated in the state of Delaware on September 8, 2005.

We are a clinical stage biotechnology company leveraging evolutionary intelligence to translate tRNA synthetase biology into new therapies for fibrosis and inflammation.

tRNA synthetases are ancient, essential proteins that have evolved novel domains that regulate diverse pathways extracellularly in humans.

Our discovery platform is focused on unlocking hidden therapeutic intervention points by uncovering signaling pathways driven by our proprietary library of domains derived from all 20 tRNA synthetases.

Principles of Consolidation

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GAAP can be condensed or omitted.

In our opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position and our results of operations and cash flows for periods presented.

In our opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position and our results of operations and cash flows for periods presented.

These statements do not include all disclosures required by U.S.

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Risks and Uncertainties

Global economic and business activities continue to face widespread macroeconomic uncertainties, including related to the ongoing Ukraine-Russia conflict, the conflict in the Middle East, l abor shortages, inflation and monetary supply shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets and recession risks, which has resulted in further volatility in the U.S.

Global economic and business activities continue to face widespread macroeconomic uncertainties, including global geopolitical tension, armed conflicts, potential future health pandemics, labor shortages, inflation and monetary supply shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets and recession risks, which has resulted in further volatility in the U.S.

and global financial markets and which has led to and may continue to lead to, additional disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally.

3 unchanged sentences

Liquidity and Financial Condition

We have incurred net losses in each year since our inception in 2005, including a consolidated net loss o f $ 11.3 million and $ 35.6 million for the three and nine months ended September 30, 2023, respectively.

As of September 30, 2023, we had an accumulated deficit of $ 453.3 million.

We believe that our existing cash, cash equivalents, restricted cash and available-for-sale investments of $ 105.6 million as of September 30, 2023 will be sufficient to meet our material cash requirements from known contractual and other obligat ions for a period of at least one year from the filing date of this Quarterly Report on Form 10-Q.

We have incurred net losses and negative cash flows from operations since our inception in 2005, including a consolidated net loss of $ 15.5 million for the three months ended March 31, 2024.

As of March 31, 2024, we had an accumulated deficit of $ 483.5 million.

We believe that our existing cash, cash equivalents, restricted cash and available-for-sale investments of $ 87.7 million as of March 31, 2024 will be sufficient to meet our material cash requirements from known contractual and other obligations for a period of at least one year from the filing date of this Quarterly Report on Form 10-Q.

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years at a minimum.

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We anticipate that we will seek to fund our operations through equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and when we are closer to commercialization of our product candidates potentially through debt financings.

However, we may be unable to raise additional capital or enter into such arrangements when needed on favorable terms or at all.

Our failure to

raise capital or enter into such arrangements when needed would have a negative impact on our financial condition and ability to develop our product candidates.

we may be unable to raise additional capital or enter into such arrangements when needed on favorable terms or at all.

Our failure to raise capital or enter into such arrangements when needed would have a negative impact on our financial condition and ability to develop our product candidates.

Restricted Cash

As of September 30, 2023, restricted cash was approximately $ 3.5 million, which was held as a security deposit in conjunction with our new facility lease and financing leases as discussed further below in Note 4 –

Commitments and Contingencies.

As of March 31, 2024, restricted cash was approximately $ 3.2 million, which was held as a security deposit in conjunction with our new facility lease and financing leases as discussed further in Note 4 - Commitments and Contingencies.

Employee Retention Credit

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The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

As a result of the foregoing legislation, we determined that we are eligible to claim an ERC benefit equal to 50 % of qualified wages that we paid to our employees between March 17, 2020 and December 31, 2020, and 70 % of the qualified wages that we paid to our employees between January 1, 2021 and September 30, 2021.

Qualified wages are limited to $ 10,000 per employee for March 17, 2020 through December 31, 2020, and $ 10,000 per employee per calendar quarter from January 1, 2021 through September 30, 2021.

Our credit was primarily derived from qualified wages during January 1, 2021 through September 30, 2021.

To determine eligibility for January 1, 2021 through September 30, 2021, we compared gross receipts for each calendar quarter in 2021 to the corresponding calendar quarter in 2019 and determined that we had met the requirement for a decline in gross receipts.

As a result of the foregoing legislation, we determined that we are eligible to claim an ERC benefit on qualified wages that we paid to our employees between March 2020 and September 2021.

Our credit was primarily derived from qualified wages during January 2021 through September 2021 based on gross receipts for each calendar quarter in 2021 compared to the corresponding calendar quarter in 2019.

We determined that we had met the requirement for a decline in gross receipts.

Accounting Standards Codification (ASC) Topic 105, Generally Accepted Accounting Principles describes the decision-making framework when no guidance exists in U.S.

4 unchanged sentences

Under an IAS 20 analogy, a business entity would recognize the credit on a systematic basis over the periods in which the entity recognizes the payroll expenses for which the ERC is intended to compensate when there is reasonable assurance that the entity will comply with any conditions attached to the ERC and the ERC will be received.

During the three months ended September 30, 2023, we amended certain payroll tax filings and applied for a refund of $ 1.2 million of ERC benefits.

The refund was recorded within the other receivables in our unaudited condensed consolidated balance sheet at September 30, 2023, and as a $ 0.8 million reduction of research and development expenses and a $ 0.4 million reduction of general and administrative expenses in our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023 .

During the year ended December 31, 2023, we amended certain payroll tax filings and applied for a refund of $ 1.2 million of ERC benefits.

The refund was recorded within the other receivables in our consolidated balance sheets, and as a $ 0.8 million reduction of research and development expenses and a $ 0.4 million reduction of general and administrative expenses in our consolidated statements of operations for the year ended December 31, 2023.

Allowance of Credit Losses

For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings.

For available-for-sale securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors.

1 unchanged sentence

The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account.

Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive income (loss) on the unaudited condensed statements of operations and comprehensive loss.

Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive income (loss) on the unaudited condensed consolidated statements of operations and comprehensive loss.

We elected the practical expedient to exclude the applicable accrued interest from both the fair value and amortized costs basis of our available-for-sale securities for purposes of identifying and measuring an impairment.

4 unchanged sentences

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure for these items in our unaudited condensed consolidated financial statements and accompanying notes.

The most significant estimates in our unaudited condensed consolidated financial statements relate to clinical trial

and research and development expenses.

The most significant estimates in our unaudited condensed consolidated financial statements relate to clinical trial and research and development expenses.

Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ materially from these estimates and assumptions.

Accrued Expenses

Accrued expenses include salaries, wages, benefits costs, consulting fees, legal and research and development costs.

We have entered into contractual arrangements related to our clinical studies with clinical research organizations (CROs) and contracted development and manufacturing organizations (CDMOs) and recognize expense based on work completed and efforts expended pursuant to our contractual arrangements.

We make estimates of our accrued CRO costs as of each balance sheet date based on facts and circumstances known at the time and include total trial management costs, sites activated, patients enrolled and number of patient visits.

We estimate the time period over which services will be performed and the level of effort to be expended in each period.

There may be instances in which payments made to our service providers including CROs and CDMOs, will temporarily exceed the level of services provided and result in a prepayment of the expense.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense balance accordingly.

Historically, our estimated accrued liabilities have materially approximated actual expenses incurred.

We determine if an arrangement is a lease at inception.

3 unchanged sentences

Rent expense for operating leases is recognized on a straight-line basis over the lease term and is included in operating expenses in our unaudited condensed consolidated statements of operations.

For financing leases, interest expense and amortization of the ROU is included in operating expenses in our unaudited condensed consolidated statements of operations and variable lease payments are recorded as incurred.

If a lease is modified, the modified contract is evaluated to determine whether it is or contains a lease.

1 unchanged sentence

A lease modification that results in a separate contract will be accounted for in the same manner as a new lease.

For a modification that is not a separate contract, we reassess the lease classification using the modified terms and conditions and the facts and circumstances as of the effective date of the modification and recognize the amount of the remeasurement of the lease liability for the modified lease as an adjustment to the corresponding lease ROU asset.

Our ROU assets consist of operating leases and financing leases.

Operating leases include a lease for our new corporate headquarters and laboratory space.

Our prior corporate headquarters lease expired in May 2023.

Financing leases include leases for various research and development and information technology equipment.

We do not separate lease and non-lease components of our long-term leases.

Our ROU assets consist of non-cancelable operating leases and financing leases.

Non-cancelable operating leases consist of leases for our corporate headquarters and additional laboratory space.

Financing leases consist of leases for various research and development and information technology equipment.

We do not separate lease and non-lease components for our long-term leases.

Revenue Recognition

20 unchanged sentences

Potentially dilutive securities not considered for the calculation of diluted net loss per share are as follows (in common stock equivalents):

Nine Months Ended September 30,

Common stock warrants

2 unchanged sentences

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments –

Credit Losses (Topic 326), to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

To achieve this objective, the amendments in Topic 326 replace the incurred loss impairment methodology in current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

We adopted Topic 326 on January 1, 2023.

The adoption did not have a material impact on our unaudited condensed consolidated financial statements.

In December 2023, the FASB, issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction.

The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively.

The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the disclosure requirements related to the new standard.

Fair Value Measurements

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Investment securities are recorded at fair value, defined as the exit price in the principal market in which we would transact, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Level 2 securities are valued using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data, or discounted cash flow techniques and include our investments in commercial paper, corporate debt securities, municipal bonds and U.S.

government agencies securities.

7 unchanged sentences

for Identical

As of September 30, 2023

As of March 31, 2024

Cash equivalents

2 unchanged sentences

Corporate debt securities

treasury bill

government agencies

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Corporate debt securities

Municipal bonds

government agencies

Total available-for-sale investments

Total assets measured at fair value

As of September 30, 2023 and December 31, 2022, available-for-sale investments are detailed as follows (in thousands):

September 30, 2023

As of March 31, 2024 and December 31, 2023, available-for-sale investments are detailed as follows (in thousands):

March 31, 2024

Contractual Maturity

3 unchanged sentences

Corporate debt securities

treasury bill

Within 1 year

Within 2 years

government agencies

Within 1 year

December 31, 2023

4 unchanged sentences

Corporate debt securities

Municipal bonds

Within 2 years

government agencies

Within 1 year

3 unchanged sentences

When evaluating an investment for impairment, we review factors such as the severity of the impairment, changes in underlying credit ratings, our intent to sell or the likelihood that we would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made.

We recorded no allowance for credit losses in the unaudited condensed consolidated statement of operations and comprehensive loss during the nine months ended September 30, 2023.

As of September 30, 2023, all available-for-sale investments had a variety of effective maturity dates of less than two years .

As of September 30, 2023, $ 82.6 million of our short-term investments had maturities less than one year and $ 9.7 million had maturities greater than one year.

As of September 30, 2023, 28 out of 29 available-for-sale investments were in a gross unrealized loss position of which one available-for-sale investment with a market value of $ 2.0 million were at such position for greater than 12 months .

As of September 30, 2023 and December 31, 2022, accrued interest receivable on available-for-sale securities for each of the period-ended was $ 0.2 mil lion.

We recorded no allowance for credit losses in the unaudited condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2024.

As of March 31, 2024, all available-for-sale investments had a variety of effective maturity dates of less than two years .

As of March 31, 2024, $ 76.7 million of our short-term investments had maturities less than one year and $ 1.0 million had maturities greater than one year.

As of March 31, 2024, 24 out of 28 available-for-sale investments were in a gross unrealized loss position of which one available-for-sale investment with a market value of $ 2.0 million was in such position for greater than 12 months.

As of March 31, 2024 and December 31, 2023, accrued interest receivable on available-for-sale securities for each of the period-ended was $ 0.3 million.

License, Collaboration and Other Agreements

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Under the Kyorin Agreement, Kyorin received an exclusive right to develop and commercialize efzofitimod in Japan for all forms of ILD, and is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan.

In September 2020, Kyorin began dosing patients in a Phase 1 clinical trial of efzofitimod (known as KRP-R120 in Japan) and completed the last subject visit in December 2020.

The Phase 1 clinical trial, which was conducted and funded by Kyorin, was a placebo-controlled clinical trial to evaluate the safety, pharmacokinetics (PK) and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers.

In 2020, Kyorin conducted and funded a Phase 1 clinical trial of efzofitimod (known as KRP-R120 in Japan).

The Phase 1 clinical trial was a placebo-controlled clinical trial to evaluate the safety, pharmacokinetics (PK) and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers.

Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events, and PK findings were consistent with previous studies of efzofitimod.

Kyorin is also participating in the EFZO-FIT study as the local sponsor in Japan.

Kyorin is also participating in the EFZO-FIT TM study as the local sponsor in Japan.

In February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study which triggered a $ 10.0 million milestone payment to us.

To date, the Kyorin Agreement has generated $ 20.0 million in upfront and milestone payments to us and we are eligible to receive up to an additional $ 155.0 million in the aggregate upon the achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.

To date, the Kyorin Agreement has generated $ 20.0 million in upfront and milestone payments to us and we are eligible to receive up to an additional $ 155.0 million in the aggregate upon achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.

Either party may terminate the Kyorin Agreement in the event that the other party breaches the agreement and fails to cure the breach, becomes insolvent or challenges certain of the intellectual property rights licensed under the agreement.

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We identified the following performance obligations under the Kyorin Agreement:

i) the license of efzofitimod for ILD in Japan;

and ii) free clinical trial material for Kyorin’s Phase 1 clinical trial.

1) the license of efzofitimod for ILD in Japan;

and 2) free clinical trial material for Kyorin’s Phase 1 clinical trial.

Kyorin is participating in the EFZO-FIT study and received approval from the Pharmaceuticals and Medical Devices Agency (PMDA) to commence the EFZO-FIT study in Japan in December 2022.

Additionally, in February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study which triggered a $ 10.0 million milestone payment to us.

Additionally, i n February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study which triggered a $ 10.0 million milestone payment to us.

We recognized this $ 10.0 million milestone payment as revenue during the year ended December 2022, as we determined the milestone became probable of achievement as of December 31, 2022, with Kyorin having scheduled site visits for patient screenings by that time.

We received this $ 10.0 million milestone payment during the three months ended March 31, 2023.

During the three months and nine months ended September 30, 2023, we recognized $ 0.4 million in collaboration revenue from Kyorin for drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study.

For the three months and nine months ended September 30, 2022, there were no activities that triggered additional license and collaboration agreement revenue under the Kyorin Agreement.

We received this $ 10.0 million milestone payment in February 2023.

For the three months ended March 31, 2024 and 2023, we recognized $ 0.2 million and $ 0 in collaboration revenue from Kyorin for drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study.

The remaining milestones and royalty payments under the Kyorin Agreement are variable consideration.

Since milestone payments are binary in nature, we will use the “most-likely”

method to evaluate whether the milestones should be included as revenue.

Since milestone payments are binary in nature, we will use the “most-likely” method to evaluate whether the milestones should be included as revenue.

We will constrain these amounts until the milestone is probable of being achieved.

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Operating Leases

New Corporate Headquarters Facility Lease

In May 2022, we entered into a lease (Lease) with San Diego Creekside, LLC (Landlord), as lessor, pursuant to which we agreed to lease from Landlord approximately 23,696 rentable square feet (subject to increase pursuant to the terms of the Lease) of office and laboratory space.

The term of the lease (the Lease Term) commenced on March 20, 2023 (the Lease Commencement Date) and will continue for 124 months.

We have an option to extend the Lease Term for five years .

Base rent during such extension period would be at the fair market rent for the premises.

Under the terms of the Lease, the base rent during the first 12 months of the Lease Term will be $ 5.75 per square foot of rentable area per month, subject to certain upward adjustments of approximately 3.0 % annually.

As of September 30, 2023, we have incurred $ 5.6 million in tenant improvement costs, and these costs are included in property and equipment, net on our unaudited condensed consolidated balance sheets.

We are entitled to an allowance of up to $ 5.5 million for tenant improvements of which as of September 30, 2023, we received $ 5.0 millio n from the Landlord.

The Lease also includes an option to utilize an additional allowance of up to $ 0.6 million, which, if used by us, would be repaid by us as additional monthly base rent, amortized at eight percent ( 8.0 %) per annum during the Lease Term.

We provided a $ 0.7 million security deposit in the form of a letter of credit which is included in restricted cash on our unaudited condensed consolidated balance sheet as of September 30, 2023.

During the second quarter of 2023, additional common area amenities were completed by the Landlord which provided us with access to approximately 1,500 additional rentable square feet.

As a result, our base rent increased for this additional rentable square feet at the same monthly base rent per rentable square foot as contemplated in the Lease.

Previous Corporate Headquarters Facility Lease

Our operating lease for our previous corporate headquarters was subject to base lease payments, additional charges for common area maintenance and other costs and it expired in May 2023.

Future minimum payments under the facility leases and reconciliation to the operating lease liability as of September 30, 2023 were as follows (in thousands):

Corporate Headquarters Facility Lease

In May 2022, we entered into a lease (the Lease) with San Diego Creekside, LLC (Landlord), as lessor, pursuant to which we agreed to lease from Landlord approximately 23,696 rentable square feet (subject to increase pursuant to the terms of the Lease) of office and laboratory space.

The term of the lease (the Lease Term) commenced on March 20, 2023 (the Lease Commencement Date) and will continue for 124 months from the Lease Commencement Date.

We also have one option to extend the Lease Term for five

Base rent during such extension period would be at the fair market rent for the Premises (as that term is defined in the Lease).

Under the terms of the Lease, the base rent during the first 12 months of the Lease Term was $ 5.75 per square foot of rentable area per month, and the base rent following the first 12 months of the Lease Term is subject to certain upward adjustments of approximately 3.0 % annually.

As of March 31, 2024, we received a $ 5.3 million allowance for tenant improvements, which represents the full allowance to which we were entitled under the Lease.

We provided a $ 0.7 million security deposit in the form of a letter of credit which is included in restricted cash as of March 31, 2024.

During the second quarter of 2023, additional common area amenities were completed by the Landlord which provided us with access to an estimated 1,500 additional rentable square feet.

In April 2024, we finalized an amendment to the Lease (the Lease Amendment), effective June 2023.

The additional rentable square feet was adjusted to 1,170 square feet for a total of 24,866 rentable square feet and our base rent increased for this additional rentable square feet at the same monthly base rent per rentable square foot as contemplated in the Lease.

Future minimum payments under the facility leases and reconciliation to the operating lease liability as of March 31, 2024 were as follows (in thousands):

Operating Leases

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Current portion of operating lease liability

Tenant improvement allowance not yet received

Long-term operating lease liability, net of current portion

For each of the three months ended September 30, 2023 and 2022, we recorded an operating lease exp ense of $ 0.3 million.

For the nine months ended September 30, 2023 and 2022, we recorded an operating lease expense of $ 1.4 million and $ 0.8 million, respectively.

As of September 30, 2023, the weighted-average remaining lease term was 9.6 years and the weighted-average discount rate was 8.8 %.

For each of the three months ended March 31, 2024 and 2023, we recorded an operating lease expense of $ 0.3 million and $ 0.7 million, respectively.

As of March 31, 2024, the weighted-average remaining lease term was 9.3 years and the weighted average discount rate was 8.8 %.

Financing Leases

In April 2022, we entered into a master financing lease agreement to lease various research and development and information technology equipment over 48-month terms.

Future minimum payments under the financing lease and reconciliation to the financing lease liability as of September 30, 2023 were as follows (in thousands):

In April 2022, we entered into a master financing lease agreement to lease various research and development and information technology equipment over a 48-month term.

Future minimum payments under the financing lease and reconciliation to the financing lease liability as of March 31, 2024 were as follows (in thousands):

Financing Leases

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Long-term financing lease liability, net of current portion

As of September 30, 2023, the weighted-average remaining lease term was 3.2 years and the weighted-average discount rate was 8.3 %.

We provided a $ 2.7 million deposit to be held as collateral for the leased equipment, and this deposit is included in restricted cash on our unaudited condensed consolidated balance sheet as of September 30, 2023.

Stockholders’

As of March 31, 2024, the weighted-average remaining lease term was 2.8 years and the weighted-average discount rate was 8.3 %.

As of March 31, 2024, we have a $ 2.5 million deposit held as collateral for the leased equipment, and this deposit is included in restricted cash.

Stockholders’ Equity

Underwritten Follow-On Public Offerings

In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’

option to purchase additional shares, at a price to the public of $ 2.25 per share.

In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’ option to purchase additional shares, at a price to the public of $ 2.25 per share.

The total net proceeds from the offering were approximately $ 48.1 million, after deducting underwriting discounts, commissions and offering expenses payable by us.

At the Market Offering Programs

In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies) implementing an “at-the-market”

offering program (the Jefferies ATM Offering Program), pursuant to which we may offer and sell, from time to time and at our option, up to an aggregate of $ 65.0 million of shares of our common stock through Jefferies, acting as sales agent.

Jefferies is entitled to a fixed

commission rate of up to 3.0 % of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program.

During 2022, we sold an aggregate of 1,421,627 shares of common stock at a weighted-average price of $ 3.09 per share for net proceeds of approximately $ 4.0 million under the Jefferies ATM Offering Program.

During the nine months ended September 30, 2023, we sold an aggregate of 5,846,099 shares of common stock at a weighted-average price of $ 2.19 per share for net proceeds of approxim ately $ 12.3 million unde r the Jefferies ATM Offering Program.

In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies) implementing an “at-the-market” offering program (the Jefferies ATM Offering Program), pursuant to which we may offer and sell, from time to time and at our option, up to an aggregate of $ 65.0 million of shares of our common stock through Jefferies, acting as sales agent.

Jefferies is entitled to a fixed commission rate of up to 3.0 % of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program.

During the year ended December 31, 2023, we sold an aggregate of 10,530,795 shares of common stock at a weighted-average price of $ 1.82 per share for net proceeds of approximately $ 18.4 million under the Jefferies ATM Offering Program.

During the three months ended March 31, 2024, we sold an aggregate of 5,045,518 shares of common stock at a weighted-average price of $ 1.79 per share for net proceeds of approximately $ 8.6 million under the Jefferies ATM Offering Program of which $ 0.8 million was included in other receivables as of March 31, 2024.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance was as follows:

September 30, 2023

March 31, 2024

Common stock warrants

3 unchanged sentences

Shares available under the employee stock purchase plan

The following table summarizes our stock option activity under all equity incentive plans for the nine months ended September 30, 2023:

The following table summarizes our stock option activity under all equity incentive plans for the three months ended March 31, 2024:

Stock Options

2 unchanged sentences

Canceled/forfeited/expired

Outstanding as of September 30, 2023

Outstanding as of March 31, 2024

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Expected term (in years)

5.98 –

5.51 –

5.98 –

Risk-free interest rate

2.7 % –

3.58 % –

1.7 % –

3.8 % – 4.0 %

Expected volatility

84.5 % –

81.5 % –

84.5 % –

80.3 % – 80.5 %

Expected dividend yield

The following table summarizes our restricted stock unit activity under all equity incentive plans for the nine months ended September 30, 2023:

The following table summarizes our restricted stock unit activity under all equity incentive plans for the three months ended March 31, 2024:

Number of Outstanding

2 unchanged sentences

Balance as of December 31, 2023

Balance as of September 30, 2023

Balance as of March 31, 2024

Stock-based Compensation

The allocation of stock-based compensation for all options and restricted stock units and stock issued pursuant to our employee stock purchase plan is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Research and development

1 unchanged sentence

Total stock-based compensation expense

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q (Quarterly Report), our audited consolidated financial statements and accompanying notes thereto for the fiscal year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC), on March 14, 2023 (2022 Annual Report).

This Quarterly Report contains “forward-looking statements”

within the meaning of Section 27A of the Securities Act of 1933, as amended, (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

Such forward looking statements, which represent our intent, belief or current expectations, involve risks and uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,”

“will,”

“expect,”

“anticipate,”

“estimate,”

“intend,”

“plan,”

“predict,”

“potential,”

“believe,”

“should”

and similar expressions.

Factors that could cause or contribute to differences in results include, but are not limited to those set forth under the heading “Risk Factors”

in Part II, Item 1A, and elsewhere in this Quarterly Report.

Except as required by law we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect actual outcomes.

We are a clinical stage biotechnology company leveraging evolutionary intelligence to translate tRNA synthetase biology into new therapies for fibrosis and inflammation.

tRNA synthetases are ancient, essential proteins that have evolved novel domains that regulate diverse pathways extracellularly in humans.

Our discovery platform is focused on unlocking hidden therapeutic intervention points by uncovering signaling pathways driven by its proprietary library of domains derived from all 20 tRNA synthetases.

Efzofitimod is a first-in-class biologic immunomodulator in clinical development for the treatment of interstitial lung disease (ILD), a group of immune-mediated disorders that can cause inflammation and fibrosis, or scarring, of the lungs.

Efzofitimod is a tRNA synthetase derived therapy that selectively modulates activated myeloid cells through neuropilin-2 (NRP2) to resolve inflammation without immune suppression and potentially prevent the progression of fibrosis.

ILDs are predominantly immune-mediated disorders that are characterized by chronic inflammation, which can lead to progressive fibrosis of the lung.

There are limited treatment options for ILD and there remains a high unmet medical need.

Sarcoidosis and systemic sclerosis (SSc, also known as scleroderma)-associated ILD (SSc-ILD) are two major forms of ILD.

During 2022, the U.S.

Food and Drug Administration (FDA) granted efzofitimod orphan drug designations for the treatment of sarcoidosis and for the treatment of SSc, and Fast Track designations for the treatment of pulmonary sarcoidosis and for the treatment of SSc-ILD.

The European Commission (EC) granted efzofitimod an orphan drug designation for the treatment of sarcoidosis in January 2023 and for the treatment of SSc in June 2023, based on the opinion of the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP).

In September 2021, we announced positive results and clinical proof-of-concept from a double-blind, placebo-controlled Phase 1b/2a clinical trial in 37 patients with pulmonary sarcoidosis.

The study was designed to evaluate the safety, tolerability, immunogenicity and preliminary efficacy of three doses of efzofitimod, 1.0, 3.0 and 5.0 mg/kg, in the context of a forced steroid taper.

Efzofitimod was safe and well-tolerated at all doses administered with no serious drug-related adverse events or signal of immunogenicity.

Additionally, the study demonstrated consistent dose response for efzofitimod on key efficacy endpoints and improvements compared to placebo, including measures of steroid reduction, lung function, pulmonary sarcoidosis symptom measures and inflammatory biomarkers.

These data were subsequently presented at the American Thoracic Society (ATS) International Conference and published in the peer-reviewed journal CHEST during 2022.

In February 2022, we met with the FDA in an end-of-Phase 2 meeting to discuss our plans for subsequent clinical development and path to registration for efzofitimod for pulmonary sarcoidosis.

Subsequently, we initiated a global pivotal Phase 3 randomized, double-blind, placebo-controlled clinical trial to evaluate the efficacy and safety of efzofitimod in patients with pulmonary sarcoidosis (the EFZO-FIT study).

The EFZO-FIT study is a 52-week study consisting of three parallel cohorts randomized equally to either 3.0 mg/kg or 5.0 mg/kg of efzofitimod or placebo dosed intravenously once a month for a total of 12 doses.

The study is currently enrolling and intends to enroll 264 subjects with pulmonary sarcoidosis at multiple centers in the United States, Europe, Brazil, and Japan.

The trial design incorporates a forced steroid taper.

The primary endpoint of the study is steroid reduction.

Secondary endpoints include measures of lung function and sarcoidosis symptoms.

In September 2022, we dosed the first patient in this study.

Based on current enrollment projections, we expect to complete enrollment in the study early in the second quarter of 2024.

Based on the results of the Phase 1b/2a clinical trial, we believe efzofitimod has potential applications in the treatment of other ILDs, such as chronic hypersensitivity pneumonitis (CHP) and connective tissue disease related ILD (CTD-ILD), including SSc-ILD and rheumatoid arthritis-associated ILD.

As such, we designed a focused Phase 2 proof-of-concept study of efzofitimod (the EFZO-CONNECT study) in patients with SSc-ILD.

The EFZO-CONNECT study is a randomized, double-blind placebo-controlled proof-of-concept study to evaluate the efficacy, safety and tolerability of efzofitimod in patients with SSc-ILD.

This is a 28-week study with three parallel cohorts randomized 2:2:1 to either 270 mg or 450 mg of efzofitimod or placebo dosed intravenously monthly for a total of six doses.

The study intends to enroll 25 patients at multiple centers in the United States.

The primary objective of the study is to evaluate the efficacy of multiple doses of intravenous efzofitimod on pulmonary, cutaneous and systemic manifestations in patients with SSc-ILD.

Secondary objectives will include safety and tolerability.

The study was initiated in the third quarter of 2023, and in October 2023, we dosed the first patient in this study.

In January 2020, we entered into a collaboration and license agreement (Kyorin Agreement) with Kyorin Pharmaceutical Co., Ltd.

(Kyorin) for the development and commercialization of efzofitimod for the treatment of ILD in Japan.

In September 2020, Kyorin began dosing patients in a Phase 1 clinical trial of efzofitimod (known as KRP-R120 in Japan) and completed the last subject visit in December 2020.

Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events, and PK findings were consistent with previous studies of efzofitimod.

Kyorin is also participating in the EFZO-FIT study as the local sponsor in Japan.

In February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study which triggered a $10.0 million milestone payment to us.

To date, the Kyorin Agreement has generated $20.0 million in upfront and milestone payments to us and we are eligible to receive up to an additional $155.0 million in the aggregate upon the achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.

Discovery Pipeline

Extracellular tRNA synthetase biology represents a novel set of potential physiological modulators and therapeutic targets.

Using efzofitimod as a model, we have developed a process to advance novel tRNA synthetase domains from a concept to therapeutic candidate.

This process leverages our early discovery work as well as current scientific understanding of tRNA synthetase evolution, protein structure, gene splicing and tissue-specific regulation to identify potentially active protein domains.

Screening approaches are employed to identify target cells and extracellular receptors for these tRNA synthetase-derived proteins.

These cellular systems can then be used in mechanism-of-action studies to elucidate the role these proteins play in cellular responses and their potential therapeutic utility.

We are working to identify new tRNA synthetase based drug candidates through our internal discovery efforts and industry and academic collaborations, including our collaboration with Dualsystems Biotech AG (Dualsystems).

Dualsystems has agreed to utilize their proprietary receptor screening technology and research expertise to attempt to identify and validate new target receptors for tRNA synthetases.

Through our internal research efforts, the Dualsystems collaboration and other industry and academic collaborators, we intend to continue to advance our product development efforts within our tRNA synthetase biology platform.

Impact of Geopolitical and Macroeconomic Conditions

Global economic and business activities continue to face widespread macroeconomic uncertainties, including related to the ongoing Ukraine-Russia conflict, the conflict in the Middle East, labor shortages, inflation and monetary supply shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets and recession risks, which has resulted in further volatility in the U.S.

and global financial markets and which has led to, and may continue to lead to, additional disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally.

The ultimate long-term impact of these evolving geopolitical and macroeconomic conditions on our business is uncertain, although we continue to actively monitor the impact of these factors on our results of operations, financial condition and cash flows.

The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on

future developments, which are uncertain and cannot be predicted;

however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Employee Retention Credit

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law providing numerous tax incentives and other stimulus measures, including an employee retention credit (ERC), which is a refundable tax credit against certain employment taxes.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

During the three months ended September 30, 2023, we amended certain payroll tax filings and applied for a refund of $1.2 million of ERC benefits.

The refund was recorded within the other receivables in our unaudited condensed consolidated balance sheet at September 30, 2023, and as a $0.8 million reduction of research and development expenses and a $0.4 million reduction of general and administrative expenses in our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023.

Liquidity and Capital Resources

We have incurred losses and negative cash flows from operations since our inception.

As of September 30, 2023, we had an accumulated deficit of $453.3 million and we expect to continue to incur net losses for the foreseeable future.

As of September 30, 2023, we had cash, cash equivalents, restricted cash and available-for-sale investments of $105.6 million.

During the quarter ended March 31, 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’

option to purchase additional shares, at a price to the public of $2.25 per share.

The total net proceeds from the offering were approximately $48.1 million, after deducting underwriting discounts, commissions and offering expenses payable by us.

We also received a $10.0 million milestone payment from the Kyorin Agreement during the quarter ended March 31, 2023.

In addition, during the nine months ended September 30, 2023, we sold an aggregate of 5,846,099 shares of common stock at a weighted-average price of $2.19 per share for net proceeds of approximately $12.3 million under the Jefferies ATM Offering Program as described below.

We believe that our current cash, cash equivalents, restricted cash and available-for-sale investments will be sufficient to meet our material cash requirements from known contractual and other obligations for a period of at least one year from the date of this Quarterly Report.

We believe we will meet longer-term material cash requirements from known contractual and other obligations through a combination of cash, cash equivalents, restricted cash and available-for-sale investments.

In addition to the factors discussed under “Material Cash Requirements,”

our ability to fund our longer-term operating needs will depend on our ability to raise additional funding through equity or debt offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and other factors, including those discussed in Part II, Item 1A.

“Risk Factors –

We will need to raise additional capital or enter into strategic partnering relationships to fund our operations.”

Sources of Cash

From our inception through September 30, 2023, we have financed our operations primarily through the sale of equity securities and convertible debt, venture debt, term loans and through license and collaboration agreement revenues.

Public Offerings

In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’

option to purchase additional shares, at a price to the public of $2.25 per share.

The total net proceeds from the offering were approximately $48.1 million, before deducting underwriting discounts, commissions and offering expenses payable by us.

At-the-Market Offering Programs

In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies) implementing an “at-the-market”

offering program (the Jefferies ATM Offering Program), pursuant to which we may offer and sell, from time to time and at our option, up to an aggregate of $65.0 million of shares of our common stock through Jefferies, acting as sales agent.

Jefferies is entitled to a fixed commission rate of up to 3.0% of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program.

During 2022, we sold an aggregate of 1,421,627 shares of common stock at a weighted-average price of $3.09 per share for net proceeds of approximately $4.0 million under the Jefferies ATM Offering Program.

During the nine months ended September 30, 2023, we sold an aggregate of 5,846,099 shares of common stock at a weighted-average price of $2.19 per share for net proceeds of approximately $12.3 million under the Jefferies ATM Offering Program.

Kyorin Agreement Milestone Payments

On February 6, 2023, we announced that our partner Kyorin dosed the first patient in Japan in the EFZO-FIT study, which triggered a $10.0 million milestone payment by Kyorin to us pursuant to the Kyorin Agreement.

We recorded this $10.0 million

milestone as revenue in the year ended December 31, 2022 and received the cash in February 2023.

Kyorin is our partner for the development and commercialization of efzofitimod for ILD in Japan.

Under the Kyorin Agreement, we have generated $20.0 million in upfront and milestone payments to date and are eligible to receive up to an additional $155.0 million in the aggregate upon the achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.

Kyorin has the exclusive rights to develop and commercialize efzofitimod in Japan for all forms of ILD.

The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):

Nine Months Ended September 30,

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net change in cash, cash equivalents and restricted cash

Operating activities.

Net cash used in operating activities for the nine months ended September 30, 2023 and 2022 was $22.2 million and $31.5 million, respectively.

The net cash used in operating activities in each of these periods primarily consisted of cash used to support our EFZO-FIT and EFZO-CONNECT studies and research and development expenses.

The fluctuation in net cash used in operating activities resulted primarily from our receipt of the $10.0 million Kyorin milestone payment during the nine months ended September 30, 2023.

No milestone payments were received during the nine months ended September 30, 2022.

Investing activities.

Net cash (used in) provided by investing activities for the nine months ended September 30, 2023 and 2022 was $(37.9) million and $45.2 million, respectively.

The fluctuation in net cash (used in) provided by investing activities resulted primarily from the timing differences in investment purchases, sales and maturities, and the fluctuation of our portfolio mix between cash equivalents and investment holdings.

The average term to maturity in our investment portfolio is less than two years.

Net cash used in investing activities for the nine months ended September 30, 2023 included $4.1 million of tenant improvement costs for our new corporate headquarters facility pursuant to a lease agreement we entered into in May 2022.

Financing activities.

Net cash provided by financing activities for the nine months ended September 30, 2023 and 2022 was $60.2 million and $4.5 million, respectively.

Net cash provided by financing activities for the nine months ended September 30, 2023 consisted primarily of $48.1 million in net proceeds from our underwritten follow-on public offering and $12.3 million in net proceeds from the issuance of common stock through the Jefferies ATM Offering Program.

Net cash provided by financing activities for the nine months ended September 30, 2022 consisted primarily of $4.6 million in net proceeds from the issuance of common stock through a prior at-the-market offering program that we terminated in April 2022.

Material Cash Requirements

To date, we have not generated any revenues from product sales.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance efzofitimod in clinical development, manufacturing and technology transfer activities, continue our research and development activities with respect to other potential therapies based on tRNA synthetase biology and seek marketing approval for product candidates that we may develop.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

We currently have no sales or marketing capabilities and would need to expand our organization to support these activities.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

Our future capital requirements are difficult to forecast and will depend on many factors, including:

the type, number, scope progress, expansions, results, costs and timing of, our clinical trials and preclinical studies for our product candidates or other potential product candidates or indications which we are pursuing or may choose to pursue in the future, including changes in our clinical research organizations (CROs);

the costs, timing and outcome of regulatory review of our product candidates;

potential delays of our planned clinical trials of efzofitimod;

any resulting cost increases as a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, the conflict in the Middle East, outbreaks of contagious diseases (such as the COVID-19 pandemic),

liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets ;

the number and characteristics of product candidates that we pursue;

the scope, progress, results and costs of preclinical development, and clinical trials for other product candidates;

the manufacturing of preclinical study and clinical trial materials, including technology transfers to additional contract development and manufacturing organizations (CDMO), and any delays in the manufacturing of study drug as a result of the geopolitical and macroeconomic conditions , including the ongoing Ukraine-Russia conflict, the conflict in the Middle East, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets ;

our ability to maintain existing and enter into new collaboration and licensing arrangements and the timing of any payments we may receive under such arrangements;

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and when we are closer to commercialization of our product candidates potentially through debt financings.

To the extent we raise additional capital through the sale of equity, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.

If we raise additional funds through collaborations, strategic partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, our other technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us.

The incurrence of additional indebtedness would increase our fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

We may be unable to raise additional funds on acceptable terms or at all.

If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive.

If we are unable to raise additional funds, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

As of September 30, 2023, our material cash requirements from known contractual and other obligations consisted primarily of (i) the Lease (as defined below), and (ii) our master financing lease agreement that we entered into in April 2022 for various research and development and information technology equipment.

New Corporate Headquarters Facility Lease

The term of the lease (the Lease Term) commenced on March 20, 2023 (the Lease Commencement Date) and will continue for 124 months.

We have an option to extend the Lease Term for five years.

Base rent during such extension period would be at the fair market rent for the premises.

Under the terms of the Lease, the base rent during the first 12 months of the Lease Term will be $5.75 per square foot of rentable area per month, subject to certain upward adjustments of approximately 3.0% annually.

As of September 30, 2023, we have incurred $5.6 million in tenant improvement costs, and these costs are included in property and equipment, net on our unaudited condensed consolidated balance sheet.

We are entitled to an allowance of up to $5.5 million for tenant improvements of which as of September 30, 2023, we received $5.0 million from the Landlord.

The Lease also includes an option to utilize an additional allowance of up to $0.6 million, which, if used by us, would be repaid by us as additional monthly base rent, amortized at eight percent (8.0%) per annum during the Lease Term.

We provided a $0.7 million security deposit in the form of a letter of credit which is included in restricted cash on our unaudited condensed consolidated sheet as of September 30, 2023.

In June 2023, additional common area amenities were completed by the Landlord which provided us with access to approximately 1,500 additional rentable square feet.

As a result, our base rent increased for this additional rentable square feet at the same monthly base rent per rentable square foot as contemplated in the Lease.

Financing Lease

In April 2022, we entered into a financing lease to lease various research and development and information technology equipment over a 48-month term.

Financing lease liabilities total $1.9 million as of September 30, 2023.

Additionally, we provided $2.7 million in cash collateral for the financing lease, and this amount is included in restricted cash on our unaudited condensed consolidated sheet as of September 30, 2023.

We did not have any off-balance sheet arrangements as of September 30, 2023.

Financial Operations Overview

Organization and Business;

Principles of Consolidation

We conduct substantially all of our activities through aTyr Pharma, Inc., a Delaware corporation, at our facility in San Diego, California.

aTyr Pharma, Inc.

was incorporated in the State of Delaware in September 2005.

The unaudited condensed consolidated financial statements in this Quarterly Report include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma, as of September 30, 2023.

All intercompany transactions and balances are eliminated in consolidation.

Revenue Recognition

In January 2020, we entered into the Kyorin Agreement with Kyorin for the development and commercialization of efzofitimod for the treatment of ILD in Japan.

Under the Kyorin Agreement, Kyorin received an exclusive right to develop and commercialize efzofitimod in Japan for all forms of ILD, and Kyorin is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan.

The Phase 1 clinical trial, which was conducted and funded by Kyorin, was a placebo-controlled clinical trial to evaluate the safety, PK and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers.

Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events and PK findings were consistent with previous studies of efzofitimod.

Kyorin is also participating in the EFZO-FIT study as the local sponsor in Japan.

In February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study.

This achievement triggered a $10.0 million milestone payment by Kyorin to us pursuant to the Kyorin Agreement.

During the three months ended September 30, 2023, we recognized $0.4 million in collaboration revenue from Kyorin for drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study.

Research and Development Expenses

To date, our research and development expenses have related primarily to the development of, and clinical trials for, our product candidates, and to research efforts for potential therapeutics based on tRNA synthetase biology and NRP2 biology.

These expenses consist primarily of:

salaries and employee-related expenses, including stock-based compensation and benefits for personnel in research and product development functions;

costs associated with conducting our preclinical, development and regulatory activities, including fees paid to third-party professional consultants, service providers and our scientific, therapeutic and clinical advisory board;

costs to acquire, develop and manufacture preclinical study and clinical trial materials;

costs incurred under clinical trial agreements with CROs and investigative sites;

costs for laboratory supplies;

allocated facilities, depreciation and other allocable expenses.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We expect that the levels of our research and development expenses will continue to increase in future years and will consist primarily of costs related to our clinical development and manufacturing of efzofitimod for patients with pulmonary sarcoidosis and SSc-ILD, and other potential therapeutics based on tRNA synthetase biology.

At this time, due to the inherently unpredictable nature of preclinical and clinical development and given the early stage of our programs, we are unable to estimate with any certainty the costs we will incur or the timelines we will require in the continued development of our product candidates.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates.

Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations.

We anticipate that we will make determinations

as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential.

In addition, we cannot forecast which programs or product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, corporate development and administrative support functions, including stock-based compensation expenses and benefits.

Other significant general and administrative expenses include accounting, legal services, expenses associated with applying for and maintaining patents, cost of insurance, cost of various consultants, occupancy costs, information technology costs and depreciation.

Critical Accounting Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements, as well as the reported expenses during the reporting periods.

We monitor and analyze these items for changes in facts and circumstances, and material changes in these estimates could occur in the future.

We base our estimates on our historical experience and on various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Changes in estimates are reflected in reported results for the period in which they become known.

Actual results may differ materially from these estimates under different assumptions or conditions.

We discuss our accounting policies and assumptions that involve a higher degree of judgment and complexity within Note 2 to our audited consolidated financial statements in our 2022 Annual Report.

There have been no material changes to our critical accounting policies and estimates as disclosed in our 2022 Annual Report.

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended September 30,

License and collaboration agreement revenues

Research and development expenses

General and administrative expenses

Other income (expense), net

License and collaboration agreement revenues.

Revenues of $0.4 million for the three months ended September 30, 2023 consisted of drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study.

Research and development expenses.

Research and development expenses were $10.3 million and $9.9 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $0.5 million was due primarily to an increase of $1.1 million in manufacturing costs due to the timing of the associated manufacturing activities conducted and an increase of $0.6 million in clinical trial costs for the EFZO-FIT and EFZO-CONNECT studies offset by a reduction of $0.6 million in earlier stage discovery research and development costs and a reduction of $0.7 million in personnel related expenses.

The reduction in personnel related expenses was primarily due to the recognition of the ERC benefit made available under the CARES Act as discussed under Item 1.

Financial Statements, Note 1 - “Organization, Business, Basis of Presentation and Summary of Significant Accounting Policies.”

General and administrative expenses.

General and administrative expenses were $2.6 million and $3.6 million for the three months ended September 30, 2023 and 2022 respectively.

The decrease of $1.0 million was due primarily to a decrease of $0.7 million in personnel related expenses.

The reduction in personnel related expenses was primarily due to the recognition of the ERC benefit made available under the CARES Act as discussed under Item 1.

Financial Statements, Note 1 - “Organization, Business, Basis of Presentation and Summary of Significant Accounting Policies.”

Other income (expense), net.

Other income (expense), net was $1.2 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively.

The increase was primarily a result of higher cash, cash equivalents, restricted cash and available-for-sale investments balances during the three months ended September 30, 2023 as compared to the same period in the prior year and increased interest rates.

Comparison of the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022 (in thousands):

Nine Months Ended September 30,

License and collaboration agreement revenues

Research and development expenses

General and administrative expenses

Other income (expense), net

License and collaboration agreement revenues.

Revenues of $0.4 million for the nine months ended September 30, 2023 consisted of product material sold to Kyorin for the Japan portion of the EFZO-FIT study.

Research and development expenses.

Research and development expenses were $29.5 million and $27.9 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $1.6 million was due primarily to an increase of $5.0 million in clinical trial costs for the EFZO-FIT and EFZO-CONNECT studies offset by reductions of $2.0 million in earlier stage discovery research and development costs, $0.8 million in manufacturing costs due to the timing of the associated manufacturing activities conducted, and $0.4 million in personnel related expenses.

The reduction in personnel related expenses was primarily due to the recognition of the ERC benefit made available under the CARES Act as discussed under Item 1.

Financial Statements, Note 1 - “Organization, Business, Basis of Presentation and Summary of Significant Accounting Policies.”

General and administrative expenses.

General and administrative expenses were $9.8 million and $10.6 million for the nine months ended September 30, 2023 and 2022, respectively.

The decrease of $0.8 million was due primarily to a decrease of $0.8 million in personnel related expense.

The reduction in personnel related expenses was primarily due to the recognition of the ERC benefit made available under the CARES Act as discussed under Item 1.

Financial Statements, Note 1 - “Organization, Business, Basis of Presentation and Summary of Significant Accounting Policies.”

Other income (expense), net.

Other income (expense), net was $3.3 million and $0.6 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase was primarily a result of higher cash, cash equivalents, restricted cash and available-for-sale investments balances during the nine months ended September 30, 2023 as compared to the same period in the prior year and increased interest rates.

Recent Accounting Pronouncements

For discussion of recently issued accounting pronouncements, refer to Note 1 –

Recent Accounting Pronouncements in Part I, Item 1, Notes to Condensed Consolidated Financial Statements (Unaudited) –

included elsewhere in this Quarterly Report.

Quantitative and Qualitati ve Disclosures About Market Risk

Not applicable.

Subsequent Events

From April 1, 2024 through April 30, 2024, we sold an aggregate of 656,907 shares of common stock at a weighted-average price of $ 1.76 through the Jefferies ATM Offering Program for net proceeds of $ 1.1 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements