What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-13 · 49 added, 45 removed, 225 unchanged (29% of the section changed)

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The study was designed to evaluate the safety, tolerability, immunogenicity and preliminary efficacy of three doses of intravenous (IV) 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.

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 October 2024, the same published data for efzofitimod was featured in the Best of CHEST Journals session at the CHEST 2024 Annual Meeting.

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.

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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.

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 external collaboration efforts.

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

As of June 30, 2024, we had an accumulated deficit of $499.8 million and we expect to continue to incur net losses for the foreseeable future.

As of June 30, 2024, we had cash, cash equivalents, restricted cash and available-for-sale investments of $81.4 million.

As of September 30, 2024, we had an accumulated deficit of $517.1 million and we expect to continue to incur net losses for the foreseeable future.

As of September 30, 2024, we had cash, cash equivalents, restricted cash and available-for-sale investments of $68.9 million.

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.

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Sources of Cash

From our inception through June 30, 2024, 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.

From our inception through September 30, 2024, 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, after deducting underwriting discounts, commissions and offering expenses payable by us.

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.

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 six months ended June 30, 2024, we sold an aggregate of 12,448,319 shares of common stock at a weighted-average price of $1.77 per share for net proceeds of approximately $21.3 million under the Jefferies ATM Offering Program.

During the nine months ended September 30, 2024, we sold an aggregate of 12,463,407 shares of common stock at a weighted-average price of $1.77 per share for net proceeds of approximately $21.4 million under the Jefferies ATM Offering Program.

Kyorin Agreement Milestone Payments

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

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by (used in):

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Operating activities.

Net cash used in operating activities for the six months ended June 30, 2024 and 2023 was $42.8 million and $12.6 million, respectively.

The net cash used during the six months ended June 30, 2024 was primarily due to increased costs for the EFZO-FIT and EFZO-CONNECT studies and upfront payments for manufacturing efforts toward and preparation for a possible biologics license application (BLA) for efzofitimod.

The net cash used during the six months ended June 30, 2023 was lower primarily due to the receipt of a $10.0 million milestone from the Kyorin Agreement and lower clinical trial costs for the EFZO-FIT and EFZO-CONNECT studies.

Net cash used in operating activities for the nine months ended September 30, 2024 and 2023 was $56.0 million and $22.2 million, respectively.

The net cash used during the nine months ended September 30, 2024 was primarily due to increased costs for the EFZO-FIT and EFZO-CONNECT studies and upfront payments for manufacturing efforts toward and preparation for a possible biologics license application (BLA) for efzofitimod.

The net cash used during the nine months ended September 30, 2023 was lower primarily due to the receipt of a $10.0 million milestone from the Kyorin Agreement, lower clinical trial costs for the EFZO-FIT and EFZO-CONNECT studies and lower manufacturing costs for efzofitimod.

Investing activities.

Net cash provided by (used in) investing activities for the six months ended June 30, 2024 and 2023 was $5.4 million and $(42.3) million, respectively.

Net cash provided by (used in) investing activities for the nine months ended September 30, 2024 and 2023 was $23.3 million and $(37.9) million, respectively.

The fluctuation in net cash provided by or used in 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.

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Financing activities.

Net cash provided by financing activities for the six months ended June 30, 2024 and 2023 was $21.1 million and $57.5 million, respectively.

Net cash provided by financing activities for the six months ended June 30, 2024 consisted primarily of $21.3 million in net proceeds from the issuance of common stock through the Jefferies ATM Offering Program.

Net cash provided by financing activities for the six months ended June 30, 2023 consisted primarily of $48.1 million in net proceeds from the underwritten follow-on public offering and $9.5 million in net proceeds from the issuance of common stock through the Jefferies ATM Offering Program, net of offering costs.

Net cash provided by financing activities for the nine months ended September 30, 2024 and 2023 was $21.0 million and $60.2 million, respectively.

Net cash provided by financing activities for the nine months ended September 30, 2024 consisted primarily of $21.4 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, 2023 consisted primarily of $48.1 million in net proceeds from the underwritten follow-on public offering and $12.3 million in proceeds from the issuance of common stock through the Jefferies ATM Offering Program, net of offering costs.

Material Cash Requirements

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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.

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.

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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 June 30, 2024, our material cash requirements from known contractual and other obligations consisted primarily of (i) an operating lease for our corporate headquarters, and (ii) our master financing lease agreement for various research and development and informational technology equipment.

As of September 30, 2024, our material cash requirements from known contractual and other obligations consisted primarily of (i) an operating lease for our corporate headquarters, and (ii) our master financing lease agreement for various research and development and informational technology equipment.

Corporate Headquarters Facility Lease

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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 June 30, 2024, we received $5.3 million in allowance payments 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 June 30, 2024.

We received $5.3 million in allowance payments 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 September 30, 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.

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

Financing lease liabilities totaled $1.7 million as of June 30, 2024.

Additionally, as of June 30, 2024, we have $2.2 million in cash collateral for the financing lease, and this amount is included in restricted cash.

We did not have any off-balance sheet arrangements as of June 30, 2024.

Financing lease liabilities totaled $1.6 million as of September 30, 2024.

Additionally, as of September 30, 2024, we have $2.2 million in cash collateral for the financing lease, and this amount is included in restricted cash.

We did not have any off-balance sheet arrangements as of September 30, 2024.

Financial Operations Overview

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was incorporated in the State of Delaware in September 2005.

The unaudited interim condensed consolidated financial statements in this Quarterly Report include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma, as of June 30, 2024.

All intercompany transactions and balances are eliminated in consolidation.

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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.

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Results of Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30,

Comparison of the Three Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands):

Three Months Ended September 30,

Research and development expenses:

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Research and development expenses.

Research and development expenses were $14.0 million and $9.8 million for the three months ended June 30, 2024 and 2023, respectively.

Research and development expenses were $14.8 million and $10.3 million for the three months ended September 30, 2024 and 2023, respectively.

The increase of $4.5 million was primarily attributable to an increase of $3.5 million in efzofitimod expenses, which was primarily due to the advancement of the EFZO-FIT study in patient enrollment activity as well as increased manufacturing efforts for preparation toward a possible BLA for efzofitimod.

Preclinical development and other shared research and development expenses decreased by $0.4 million, and this decrease was primarily attributable to reduced discovery costs for our preclinical product candidates.

Preclinical development and other shared research and development expenses increased by $1.0 million.

The increase was because in September 2023, we determined that we were eligible to claim an employee retention benefit credit (ERC) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and submitted an application for such ERC which resulted in a reduction of personnel costs.

Non-cash expenses were relatively consistent at $0.3 million in each period.

General and administrative expenses.

General and administrative expenses were $3.3 million and $3.7 million for the three months ended June 30, 2024 and 2023, respectively.

The decrease of $0.4 million was attributable to reduced facilities costs as we fully transitioned into our corporate headquarters facility in March 2023 as well as reduced costs of insurance.

Non-cash expenses were relatively consistent at $0.6 million and $0.5 million for the three months ended June 30, 2024 and 2023, respectively.

General and administrative expenses were $3.3 million and $2.6 million for the three months ended September 30, 2024 and 2023, respectively.

The increase of $0.7 million was because in September 2023, we determined that we were eligible to claim an ERC under the CARES Act and submitted an application for such ERC which resulted in a reduction of personnel costs.

Non-cash expenses were relatively consistent at $0.5 million for each period.

Other income, net.

Other income, net was $1.0 million and $1.2 million for the three months ended June 30, 2024 and 2023, respectively.

Other income, net was $0.8 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively.

The change was primarily a result of lower cash balance as compared to the same period in the prior year.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in thousands):

Six Months Ended June 30,

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended September 30,

License and collaboration agreement revenues

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License and collaboration agreement revenues.

Revenues of $0.2 million for the six months ended June 30, 2024 consisted of drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study.

There were no activities that triggered revenues during the same period in the prior year.

Revenues of $0.2 million and $0.4 million for the nine months ended September 30, 2024 and 2023, respectively, 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 $27.3 million and $19.2 million for the six months ended June 30, 2024 and 2023, respectively.

Research and development expenses were $42.1 million and $29.5 million for the nine months ended September 30, 2024 and 2023, respectively.

The increase of 12.6 million was due primarily to an increase of $12.5 million in efzofitimod expenses, which was primarily due to the advancement of the EFZO-FIT study in patient enrollment activity as well as increased manufacturing efforts for preparation toward a possible BLA for efzofitimod.

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General and administrative expenses.

General and administrative expenses were $6.8 million and $7.1 million for each of the six months ended June 30, 2024 and 2023, respectively.

The decrease of $0.3 million was attributable to reduced facilities costs as we fully transitioned into our corporate headquarters facility in March 2023 as well as reduced costs of insurance.

General and administrative expenses were $10.2 million and $9.8 million for each of the nine months ended September 30, 2024 and 2023, respectively.

The increase of $0.4 million was attributable to higher personnel related costs as well as higher professional fees.

Non-cash expenses increased by $0.2 million primarily due to increased non-cash stock-based compensation expenses.

Other income, net.

Other income, net was relatively consistent at $2.2 million and $2.1 million for the six months ended June 30, 2024 and 2023, respectively.

Other income, net was relatively consistent at $3.0 million and $3.3 million for the nine months ended September 30, 2024 and 2023, respectively.

The change was primarily a result of lower cash balance as compared to the same period in the prior year.

Recent Accounting Pronouncements

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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 2. Management’s Discussion and Analysis