What changed in this filing

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Item 1. Financial Statements

2020-11-13 compared with 2020-08-13 · 88 added, 86 removed, 369 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

13 unchanged sentences

Term loans, net of issuance costs and discount (Note 4)

Grant fund liability

Total current liabilities

4 unchanged sentences

5,000,000 undesignated authorized shares;

Class X Convertible Preferred Stock issued and outstanding shares – 0 and 1,643,961 as of June 30, 2020 (unaudited) and December 31, 2019, respectively

Class X Convertible Preferred Stock issued and outstanding shares – 0 and 1,643,961 as of September 30, 2020 (unaudited) and December 31, 2019, respectively

Common stock, $0.001 par value per share;

21,425,000 and 10,714,286 authorized shares as of June 30, 2020 and December 31, 2019, respectively;

issued and outstanding shares – 9,383,425 and 3,891,787 as of June 30, 2020 (unaudited) and December 31, 2019, respectively

21,425,000 and 10,714,286 authorized shares as of September 30, 2020 and December 31, 2019, respectively;

issued and outstanding shares – 9,990,962 and 3,891,787 as of September 30, 2020 (unaudited) and December 31, 2019, respectively

Additional paid-in capital

9 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

License revenues

15 unchanged sentences

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Consolidated net loss

9 unchanged sentences

(in thousands, except share data)

Three and Six Months Ended June 30, 2020 (unaudited)

Three and Nine Months Ended September 30, 2020 (unaudited)

Preferred Stock

16 unchanged sentences

Balance as of June 30, 2020

Three and Six Months Ended June 30, 2019 (unaudited)

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, 2020

Three and Nine Months Ended September 30, 2019 (unaudited)

Preferred Stock

10 unchanged sentences

Issuance of common stock pursuant to employee stock purchase plan

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

Issuance of common stock f rom at the market offerings, net of offering costs

Issuance of common stock from registered direct offering, net of offering costs

2 unchanged sentences

Balance as of June 30, 2019

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 September 30, 2019

See accompanying notes.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

13 unchanged sentences

Operating lease liability

Grant funding liability

Net cash used in operating activities

4 unchanged sentences

Proceeds from sale of property and equipment

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

15 unchanged sentences

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

We are focused on the discovery and development of innovative medicines based on novel immunological pathways.

We are focused on the discovery and development of innovative medicines based on novel biological pathways.

Principles of Consolidation

16 unchanged sentences

Other than the net income generated in the three months ended March 31, 2020, we have incurred losses and negative cash flows from operations since our inception.

As of June 30, 2020, we had an accumulated deficit of $327.0 million and we expect to continue to incur net losses for the foreseeable future.

We believe that our existing cash, cash equivalents and available-for-sale investments, of $41.4 million as of June 30, 2020, will be sufficient to meet our anticipated cash requirements for a period of one year from the filing date of this Quarterly Report.

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.

If we obt ain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Accordingly, we will need to raise substantial additional capital to f und our operations.

The amount and timing of our future funding requirements will depend on many factors, including, but not limited to, the pace and results of our preclinical and clinical development efforts and the timing and nature of the regulatory ap proval process for our product candidates.

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.

As a result of the COVID-19 pandemic and actions taken to slow its s pread, the global credit and financial markets have experienced extreme volatility and disruptions, includ ing diminished liquidity and credit availability, declines in consumer confidence, declines i n economic growth, increases in unemployment rates and un certainty about economic stability.

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

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

As of September 30, 2020, we had an accumulated deficit of $333.6 million and we expect to continue to incur net losses for the foreseeable future.

We believe that our existing cash, cash equivalents and available-for-sale investments, of $36.1 million as of September 30, 2020, will be sufficient to meet our anticipated cash requirements for a period of one year from the filing date of this Quarterly Report.

We do not expect to generate any revenues from product sales unless and u ntil 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.

If we obtain regulatory approval for any of our product candidates, we expect to i ncur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

Accordingly, we will need to raise substantial additional capital to fund our operations.

The amount and timing of our future funding requireme nts will depend on many factors, including, but not limited to, the pace and results of our preclinical and clinical development efforts and the timing and nature of the regulatory approval process for our product candidates.

We anticipate that we will see k 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 m ay be unable to raise additional capital or enter into such arrangements when needed on favorable terms or at all.

As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme v olatility and disruptions, includ ing diminished liquidity and credit availability, declines in consumer confidence, declines i n economic growth, increases in unemployment rates and uncertainty about economic stability.

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

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

Use of Estimates

28 unchanged sentences

As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified

in the contract.

We use key assumptions to determine the stand-alone sellin g price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

in the contr act.

We use key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

We recognize revenue in one of two ways, over time or at a point in time.

9 unchanged sentences

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

Three and Six Months Ended June 30,

Three and Nine Months Ended September 30,

Class X Preferred Stock (if-converted to common stock)

20 unchanged sentences

Investment securities are recorded at fair value.

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair v alue on either a recurring or nonrecurring basis.

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosur e for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As such, fair v alue is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptio ns, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Observable inputs such as quoted prices in active markets.

12 unchanged sentences

for Identical

As of June 30, 2020

As of September 30, 2020

Cash equivalents

18 unchanged sentences

Total assets measured at fair value

As of June 30, 20 20 and December 31, 20 19 , available-for-sale investments are detailed as follows (in thousands):

June 30, 2020

As of September 30, 2020 and December 31, 2019, available-for-sale investments are detailed as follows (in thousands):

September 30, 2020

Available-for-sale investments:

8 unchanged sentences

Corporate debt securities

As of June 30, 2020, all of our available-for-sale investments have a variety of effective maturity dates of less than one year.

As of June 30, 2020, four out of seventeen of the available-for-sale investments are in gross unrealized loss positions.

As of September 30, 2020, all of our available-for-sale investments have a variety of effective maturity dates of less than one year and are in gross unrealized gain positions.

At each reporting date, we perform an evaluation of impairment to determine if any unrealized losses are other-than-temporary.

7 unchanged sentences

The first phase totaling $0.6 million was funded in May 2019 and future phases will be funded on a quarterly basis.

In June 2020, the CSL Agreement was amended to extend the work on the first phase of the research program through September 30, 2020.

As a result of the extension, CSL is obligated to provide $0.2 million of additional funding for research and development activities.

In June 2020, we recorded a receivable and related contract liability related to the amendment.

As of June 30, 2020, $0.2 million receivable is included in other receivables.

In addition, CSL will pay a total of up to $4.25 million per synthetase program ($17.0 million if all four synthetase programs advance) in option fees based on achievement of research milestones and CSL’s determination to continue development.

As of June 30, 2020, no research milestone has been met.

Moreover, aTyr will grant CSL an option to negotiate licenses for worldwide rights to each investigational new drug (IND) candidate that emerges from this research collaboration.

Specific license terms will be negotiated during an exclusivity period following the exercise of each program option.

In June 2020, the CSL Agreement was amended to extend the work on the first phase of the research program through September 30, 2020 and provided $0.2 million of additional funding for research and development activities.

CSL has the right to terminate the CSL Agreement in its entirety or with respect to one or more synthetases upon 45 days notice.

Following completion of a research phase, CSL has 30 days from the receipt of the final study report to notify us of their intent to progress to the next stage or terminate the research for one or more synthetases.

Either party has the right to terminate the agreement upon material breach of obligation or insolvency.

4 unchanged sentences

We concluded that the performance obligations are interrelated and do not have a standalone basis.

right to terminate the research collaboration upon 45 days notice, which is considered to be the legally enforceable contract term.

Therefore, during the first phase of research services, we have a 45 day p erformance obligation and all research services beyond the initial 45 days performance obligation are considered a material right.

In addition, each phase of research services represents a separate customer option since CSL must provide written notice of i ts intent to advance to the next phase .

CSL has the right to terminate the research collaboration upon 45 days notice, which is considered to be the legally enforceable contract term.

Therefore, during the first phase of research services, we have a 45 day performance obligation and all research services beyond the initial 45 days performance obligation are considered a material right.

In addition, each phase of research services represents a separate customer option since CSL must provide written notice of its intent to advance to the next phase.

Under the CSL Agreement, CSL is obligated to pay us for the costs incurred by us under the research programs.

The payment of $0.6 million for the first phase of the research program received in May 2019 as well as the $0.2 million related to the amendment in June 2020 were considered fixed consideration and we will recognize revenue on the payment for the research service performance obligation as the services are performed.

We are utilizing a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize.

We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counterparty.

We are utilizing a cost-based inp ut method to measure proportional performance and to calculate the corresponding amount of revenue to recognize.

We believe this is the best measure of progress because other measures do not reflect how we transfer the performance obligation to our counter party.

In applying the cost-based input methods of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation.

These costs consist primarily of third-party contract costs and internal full-time equivalent effort.

These costs consist primarily of third-party contract costs and internal full-ti me equivalent effort.

A cost-based input method of revenue recognition requires us to make estimates of costs to complete the performance obligations.

The cumulative effect of revisions to estimated costs to complete the performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

The cumulative effect of revisions to estimated costs to complete the performance obligations will be rec orded in the period in which changes are identified and amounts can be reasonably estimated.

A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

The option fees based on research milestones under the CSL Agreement are variable consideration.

Because they are binary in nature, we will use the “most-likely” method to evaluate whether the milestones should be included.

However, the milestones are only payable upon CSL’s decision to proceed to the next research phase for any program, and are therefore subject to CSL’s sole discretion.

Accordingly, the milestones are fully constrained and we will not recognize revenue related to these amounts until we have received notification from CSL that they would like to proceed with the next phase of a research program.

For each of the three months ended June 30, 2020 and 2019, we recognized $0.1 million as license revenue under the CSL Agreement.

For the six months ended June 30, 2020 and 2019, we recognized $0.3 million and $0.1 million, respectively, as license revenue under the CSL Agreement.

For the three months ended September 30, 2020 and 2019, we recognized $0.1 million and $0.2 million, respectively, as license revenue under the CSL Agreement.

For the nine months ended September 30, 2020 and 2019, we recognized $0.4 million and $0.3 million, respectively, as license revenue under the CSL Agreement.

Kyorin Pharmaceutical Co., Ltd.

1 unchanged sentence

(Kyorin) for the development and commercialization of ATYR1923 for interstitial lung diseases (ILDs) in Japan.

Under the collaboration and license agreement with Kyorin (Kyorin Agreement), Kyorin received an exclusive right to develop and commercialize ATYR1923 in Japan fo r all forms of ILDs.

Under the collaboration and license agreement with Kyorin (Kyorin Agreement), Kyorin received an exclusive right to develop and commercialize ATYR1923 in Japan for all forms of ILDs.

We received an $8.0 million upfront payment and we are eligible to receive an additional $167.0 million in the aggregate upon achievement of certain development, regulatory and sales milestones, as well as tiered royalties ranging from the mid-single digits to mid-teens on net sales in Japan.

4 unchanged sentences

We identified the following performance obligations under the Kyorin Agreement:

1) the license of ATYR1923 for ILDs in Japan;

1) th e license of ATYR1923 for ILDs in Japan;

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

2 unchanged sentences

We determined that the relative standalone selling price was $0.1 million for the free clinical trial material delivered to Kyorin in June 2020, using the “expected cost plus a margin” approach.

For the three months and six months ended June 30, 2020, we recognized $0.1 million and $8.0 million as license revenue under the Kyorin Agreement.

For the three months ended September 30, 2020, there were no activities that triggered additional license or milestone revenue.

For the nine months ended September 30, 2020, we recognized $8.0 million as license revenue for the upfront payment.

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

4 unchanged sentences

Hong Kong University of Science and Technology

In March 2020, our subsidiary, Pangu BioPharma, together with the Hong Kong University of Science and Technology (HKUST) was awarded a grant of approximately $750,000 to build a high-throughput platform for the development of bi-specific

The two-year project is being funded by the Hong Kong Government’s Innovation and Technology Commi ssion (ITC) under the Partnership Research Program (PRP).

The two-year project is being funded by the Hong Kong Government’s Innovation and Technology Commission (ITC) under the Partnership Research Program (PRP).

The PRP aims to support research and development projects undertaken by companies in collaboration with local universities and public research institutions.

The grant will fund approximately 50% of the total estimated project cost, with aTyr contributing the remaining 50%.

The research grant agreement between Pangu BioPharma, HKUST and the Government of the Hong Kong Special Administration Region is effective April 1, 2020.

We determined that the grant with ITC falls under the contributions guidance under Subtopic 958-605, Not-for-Profit Entities-Revenue Recognition , which is outside the scope of Topic 606, as ITC is not receiving reciprocal value for its contributions.

All contributions received from the grant agreement are recorded as a contra-expense as opposed to revenue on the condensed consolidated statement of operations.

Contra-expense for the three and six months ended June 30, 2020 were immaterial.

The research grant agreement between Pangu BioPharma, HKUST and the Government of the Hong Kong Special Administration Region was effective April 1, 2020.

All the contributions provided by the ITC are paid to HKUST and we record expenses under this grant award when incurred.

Expenses for each of the three and nine months ended September 30, 2020 were 0.1 million.

Debt, Commitments and Contingencies

9 unchanged sentences

The material adverse change clause covers a material impairment in the perfection or priority of the Lenders’ lien in the underlying collateral or in the value of such collateral, material adverse change in business operations or condition or material impairment of our prospects for repayment of any portion of the remaining debt obligation.

As of June 30, 2020, the carrying value of our Term Loans consisted of $3.3 million principal outstanding less the debt issuance costs of $36,000 and the accretion of the final maturity payment of $1.8 million.

We intend to pay our Term Loans in full, including the final maturity payment by the fourth quarter of 2020.

As of September 30, 2020, the carrying value of our Term Loans consisted of $1.3 million principal outstanding less the debt issuance costs of $7,500 and the accretion of the final maturity payment of $1.8 million.

The debt issuance costs have been recorded as a debt discount which are being accreted to interest expense over the life of the Term Loans.

5 unchanged sentences

Facility Leases

Future minimum payments under the non-cancelable facility lease and reconciliation to the operating lease liability as of June 30, 2020 were as follows (in thousands):

Future minimum payments under the non-cancelable facility lease and reconciliation to the operating lease liability as of September 30, 2020 were as follows (in thousands):

Operating Lease

3 unchanged sentences

Long-term operating lease liability

For each of the three months ended June 30, 2020 and 2019 , we recorded an operating lease cost of $0.2 million.

For each of the six months ended June 30, 2020 and 2019, we recorded an operating lease cost of $0.

As of June 30, 2020, the weighted-average remaining lease term was 2.9 years and the weighted-aver age discount rate was 9.6%.

For each of the three months ended September 30, 2020 and 2019, we recorded an operating lease cost of $0.2 million.

For each of the nine months ended September 30, 2020 and 2019, we recorded an operating lease cost of $0.7 million.

As of September 30, 2020, the weighted-average remaining lease term was 2.7 years and the weighted-average discount rate was 9.6%.

Stockholders’ Equity

3 unchanged sentences

Wainwright is entitled to a commission at a fixed rate equal to 3% of the gross proceeds.

During 2019, we sold an aggregate of 611,687 shares of common stock at an average price of $5.43 per share for gross proceeds of $3.3 million under the ATM Offering Program.

During the six months ended June 30, 2020, we sold an aggregate of 23,148 shares of common stock at an average price of $4.49 per share for gross proceeds of $0.1 million under the ATM Offering Program.

During 2019, we sold an aggregate of 611,687 shares of common stock at an average price of $5.43 per share for gross proceeds of $3.3

million under the ATM Offering Program.

During the nine months ended September 30, 2020, we sold an aggregate of 630,685 shares of common stock at an average price of $4.00 per share for gross proceeds of $2.5 million under the ATM Offering Program.

Underwritten Follow-On Public Offering

2 unchanged sentences

The total gross proceeds from the underwritten follow-on public offering, including the underwriters’ option to purchase additional shares, was approximately $20.7 million, before deducting underwriting discounts, commissions and offering expenses payable by us.

Purchase Agreement

In September 2020 , we entered into a common stock purchase agreement (Purchase Agreement) with Aspire Capital Fund, LLC (Aspire Capital), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock at our request from time to time during the 30 month term of the Purchase Agreement.

Concurrently with entering into the Purchase Agreement, we also entered into a registration rights agreement with Aspire Capital, in which we agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended, for the resale of the shares of our common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.

As of September 30, 2020, we had not sold any shares of common stock to Aspire Capital under this Purchase Agreement.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance is as follows:

June 30, 2020

September 30, 2020

Common stock warrants

2 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 six months ended June 30, 2020:

The following table summarizes our stock option activity under all equity incentive plans for the nine months ended September 30, 2020:

Stock Options

2 unchanged sentences

Canceled/forfeited/expired

Outstanding as of June 30, 2020

Outstanding as of September 30, 2020

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Expected term (in years)

6 unchanged sentences

Expected dividend yield

The following table summarizes our restricted stock unit activity under all equity incentive plans for the six months ended June 30, 2020:

The following table summarizes our restricted stock unit activity under all equity incentive plans for the nine months ended September 30, 2020:

Number of Outstanding

2 unchanged sentences

Balance as of December 31, 2019

Balance as of June 30, 2020

Balance as of September 30, 2020

Stock-based Compensation

The allocation of stock-based compensation for all options, including performance options with a market condition, employee stock purchase plan and restricted stock units is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

2 unchanged sentences

Subsequent Events

Through August 12, 2020, we sold an aggregate of 228,194 shares of common stock at a weighted average price of $4.11 per share through our ATM Offering Program for gross proceeds of $0.9 million.

Through November 12, 2020, we sold an aggregate of 194,496 shares of common stock at a weighted average price of $3.44 per share through our ATM Offering Program for gross proceeds of $0.7 million.

On November 3, 2020 we paid our Term Loans in full, including the final maturity payment.

On November 13, 2020, we entered into an amendment to our sales agreement with Wainwright to increase the amount of the ATM Offering Program from $10.0 million to $20.0 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