What changed in this filing

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Item 1. Financial Statements

2021-05-14 compared with 2020-11-13 · 127 added, 197 removed, 260 unchanged (55% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

10 unchanged sentences

Accrued expenses

Contract liability

Current portion of operating lease liability

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

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 September 30, 2020 (unaudited) and December 31, 2019, respectively

Class X Convertible Preferred Stock issued and outstanding shares – 0 as of March 31, 2021 (unaudited) and December 31, 2020, respectively

Common stock, $0.001 par value per share;

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

21,425,000 authorized shares as of

March 31, 2021 and December 31, 2020, respectively;

issued and outstanding shares – 16,011,385 (unaudited) and 11,018,954 as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

9 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

License revenues

Three Months Ended March 31,

License and collaboration agreement revenues

Total revenues

3 unchanged sentences

Total operating expenses

Loss from operations

Total other expense, net

Consolidated net loss

Income (loss) from operations

Total other income (expense), net

Consolidated net income (loss)

Net loss attributable to noncontrolling interest in Pangu BioPharma Limited

Net loss attributable to aTyr Pharma, Inc.

Net loss per share, basic and diluted

Shares used in computing net loss per share, basic and diluted

Net income (loss) attributable to aTyr Pharma, Inc.

Basic, net income (loss) per share

Shares used in computing basic net income (loss) per share

Diluted net income (loss) per share

Shares used in computing diluted net income (loss) per share

See accompanying notes.

aTyr Pharma, Inc.

Condensed Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Consolidated net loss

Other comprehensive gain (loss):

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

Comprehensive loss

Three Months Ended March 31,

Consolidated net income (loss)

Other comprehensive loss:

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

Comprehensive income (loss)

Comprehensive loss attributable to noncontrolling interest Pangu BioPharma Limited

Comprehensive loss attributable to aTyr Pharma, Inc.

Comprehensive income (loss) attributable to aTyr Pharma, Inc.

common stockholders

2 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

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

(in thousands)

Three Months Ended March 31,2021 (unaudited)

Preferred Stock

3 unchanged sentences

Balance as of December 31, 2020

Conversion of preferred stock to common stock

Issuance of common stock upon release of restricted stock units

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

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

Issuance of common stock from committed purchase agreement, net of offering costs

Stock-based compensation

Net unrealized loss on investments, net of tax

Net income (loss)

Balance as of March 31, 2021

Issuance of common stock upon release of restricted stock units

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 gain on investments, net of tax

Balance as of June 30, 2020

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)

Three Months Ended March 31,2020 (unaudited)

Preferred Stock

4 unchanged sentences

Conversion of preferred stock to common stock

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 March 31, 2019

Issuance of common stock upon release of restricted stock units

Issuance of common stock pursuant to employee stock purchase plan

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

Stock-based compensation

Net unrealized gain on investments, net of tax

Balance as of June 30, 2019

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

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

Stock-based compensation

Net unrealized loss on investments, net of tax

Balance as of September 30, 2019

Net income (loss)

Balance as of March 31, 2020

See accompanying notes.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Cash flows from operating activities:

Consolidated net loss

Adjustments to reconcile net loss to net cash used in operating activities:

Consolidated net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

1 unchanged sentence

Debt discount accretion and non-cash interest expense

Accretion of discount of available-for-sale investment securities

Amortization (accretion) of premium (discount) of available-for-sale investment securities

Amortization of right-of-use assets

Loss (gain) on disposal of property and equipment

Loss on disposal of property and equipment

Changes in operating assets and liabilities:

4 unchanged sentences

Operating lease liability

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

3 unchanged sentences

Proceeds from sale of property and equipment

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock through employee stock purchase plan

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

Proceeds from issuance of common stock through registered direct offering, net of offering costs

Proceeds from issuance of common stock through underwritten follow-on offering, net of offering costs

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

Proceeds from issuance of common stock from committed purchase agreement, net of offering costs

Proceeds from issuance of common stock from underwritten follow-on offering, net of offering costs

Repayments on borrowings

22 unchanged sentences

Risks and Uncertainties

The global pandemic resulting from the disease known as COVID-19, caused by a novel strain of coronavirus, SARS-CoV-2, has caused national and global economic and financial market disruptions.

The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will continue to cause significant disruptions to the global economy, as well as businesses and capital markets around the world.

The impact of the COVID-19 pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

Impacts to our business have included the delay in enrollment of our Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis and the discontinuation of some patients in that trial, temporary closures of portions of our facilities and those of our licensees and collaborators, disruptions or restrictions on our employee's ability to travel and delays in certain research and development activities.

Other potential impacts to our business include, but are not limited to, disruptions to or delays in other clinical trials, third-party manufacturing supply and other operations, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, interruptions or delays in the operations of the U.S.

Food and Drug Administration or other regulatory authorities, and our ability to raise capital and conduct business development activities.

Other potential impacts to our business include, but are not limited to disruptions to or delays in other clinical trials, third-party manufacturing supply and other operations, inflation, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, interruptions or delays in the operations of the FDA or other regulatory authorities, and our ability to raise capital and conduct business development activities.

Liquidity and Financial Condition

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 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.

We have incurred net losses in each year since our inception in 2005, including a condensed consolidated net loss of $7.2 million for the three months ended March 31, 2021.

As of March 31, 2021, we had an accumulated deficit of $345.7 million.

We believe that our existing cash, cash equivalents and available-for-sale investments of $50.6 million as of March 31, 2021 will be sufficient to meet our anticipated cash requirements 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.

If we obtain 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 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.

The amount and timing of our future funding requirements will depend on many factors, including 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 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.

Use of Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP.

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

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

The preparation of our 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 condensed consolidated financial statements and accompanying notes.

The most significant estimates in our condensed consolidated financial statements relate to the fair value of equity issuances and awards, 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.

Though the impact of the COVID-19 pandemic to our business and operating results presents additional uncertainty, we continue to use the best information available to us in our critical accounting estimates.

Reclassifications

9 unchanged sentences

Our right-of-use assets consist of an operating lease for our facility headquarters.

We have a noncancelable operating lease that included certain tenant improvement allowances and is subject to base lease payments, which escalate over the term of the lease, additional charges for common area maintenance and other costs.

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

We have a noncancelable operating lease that includes certain tenant improvement allowances and is subject to base lease payments, which escalate over the term of the lease, additional charges for common area maintenance and other costs.

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

8 unchanged sentences

and (v) recognition of revenue when (or as) we satisfy each performance obligation.

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 contr act.

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 selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

4 unchanged sentences

For example, if a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents and adjusted for the weighted average number of common shares outstanding that are subject to repurchase.

Diluted net loss per share is calculated by dividing the net loss by the weighted average number of common stock equivalents outstanding for the period determined using the treasury-stock method.

Dilutive common stock equivalents are comprised of convertible preferred stock, warrants for common stock, options and restricted stock units outstanding under our stock option plan and estimated shares to be purchased under our employee stock purchase plan.

For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding, as the assumed exercise or settlement of stock options, restricted stock units, and warrants, or the conversion of preferred stock are anti-dilutive.

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

Three and Nine Months Ended September 30,

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

Basic and Diluted Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.

Diluted Net Income (Loss) Per Share

For the three months ended March 31, 2021, common stock from the following would have had an anti-dilutive effect on net loss per share (in common share equivalents):

Common stock warrants

1 unchanged sentence

Employee stock purchase plan

For the three months ended March 31, 2020, we had net income available to common stockholders.

As a result, we computed diluted net income per share using the weighted average number of common shares and dilutive common equivalent shares outstanding during the period.

Dilutive common equivalent shares outstanding included 3,006 shares of restricted stock units.

For the three months ended March 31, 2020, the calculation excluded the following common equivalent shares because the effect on diluted earnings per share was anti-dilutive:

Common stock warrants

Common stock options and restricted stock units

Employee stock purchase plan

Recent Accounting Pronouncements

2 unchanged sentences

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

Topic 326 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for small reporting companies.

We are currently evaluating the impact of Topic 326 and do not expect the adoption of this guidance will have a material impact on our condensed consolidated financial position or results of operations.

Topic 326 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies.

We expect the adoption of the amendments in Topic 326 to not have a material effect in our condensed consolidated financial position or results of operations when such amendment is adopted.

In December 2019, the FASB issued ASU No.

2 unchanged sentences

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

Topic 740 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

An entity that elects early adoption must adopt all the amendments in the same period.

We are currently evaluating the impact of Topic 740 and do not expect the adoption of this guidance will have a material impact on our condensed consolidated financial position or results of operations.

Topic 740 is effective for fiscal years beginning after December 15, 2020 which we adopted on January 1, 2021.

The adoption did not have an effect on our condensed consolidated financial position or results of operations.

Fair Value Measurements

The carrying amounts of cash equivalents, prepaid and other assets, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.

Based on the borrowing rates currently available to us for loans with similar terms, which is considered a Level 2 input, we believe that the carrying value of our long-term debt approximates their fair value.

Investment securities are recorded at fair value.

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.

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 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 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:

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:

Observable inputs such as quoted prices in active markets.

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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 corporate debt securities and commercial paper.

We have no financial liabilities measured at fair value on a recurring basis.

None of our non-financial assets and liabilities is recorded at fair value on a non-recurring basis.

None of our non-financial assets and liabilities are recorded at fair value on a non-recurring basis.

No transfers between levels have occurred during the periods presented.

4 unchanged sentences

for Identical

As of September 30, 2020

As of March 31, 2021

Cash equivalents

3 unchanged sentences

Corporate debt securities

United States Treasury

Total available-for-sale investments

12 unchanged sentences

Total assets measured at fair value

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

September 30, 2020

As of March 31, 2021 and December 31, 2020, available-for-sale investments are detailed as follows (in thousands):

March 31, 2021

Contractual Maturity

Available-for-sale investments:

Asset-backed securities

Within 1 year

Commercial paper

Within 1 year

Corporate debt securities

United States Treasury

December 31, 2020

Contractual Maturity

Available-for-sale investments:

Asset-backed securities

Within 1 year

Commercial paper

Within 1 year

Corporate debt securities

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.

Within 1 year

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

Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, and our intent and ability to hold the investment until recovery of its amortized cost basis.

We intend, and have the ability, to hold our investments in unrealized loss positions, if any, until their amortized cost basis has been recovered.

License and Other Agreements

In March 2019, we entered into a research collaboration and option agreement with CSL Behring (CSL) for the development of product candidates derived from up to four tRNA synthetases from our preclinical pipeline (CSL Agreement).

Under the terms of the CSL Agreement, CSL will fund all research and development activities related to the development of the applicable product candidates for the duration of the collaboration.

CSL reimburses us for all research and development activities.

The research and development activities will be performed in six phases by both parties.

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 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.

We assessed our research collaboration with CSL in accordance with Topic 606 and concluded that CSL is a customer.

We identified the following performance obligations under the CSL Agreement:

1) research services;

and 2) participation in the Joint Steering Committee.

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

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 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-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 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.

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.

We intend, and have the ability, to hold our investments in unrealized loss positions until their amortized cost basis has been recovered.

As of March 31, 2021, all of our available-for-sale investments had a variety of effective maturity dates of less than two years.

As of March 31, 2021, 15 out of 25 of the available-for-sale investments were in gross unrealized loss positions.

License, Collaboration and Other Agreements

Kyorin Pharmaceutical Co., Ltd.

In January 2020, we entered into a license agreement with Kyorin Pharmaceutical Co., Ltd.

(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 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.

Under the terms of the Kyorin Agreement, Kyorin will fund all research, development, regulatory, marketing and commercialization activities in Japan.

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

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

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

Under the terms of the Kyorin Agreement, Kyorin 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 ATYR1923 (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, is a placebo-controlled study to evaluate the safety, pharmacokinetics and immunogenicity of ATYR1923.

Results from this study are intended to enable Kyorin to initiate clinical trials in ILD in Japan.

We received an $8.0 million upfront payment in January 2020 and a $2.0 milestone payment in January 2021 upon completion of enrollment in the Phase 1 clinical trial, and we are eligible to receive up to an additional $165.0 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.

Following the first anniversary of the effective date of the Kyorin Agreement, Kyorin has the right to terminate the agreement for any reason upon 90 days advance written notice.

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 .

We assessed our research collaboration with Kyorin in accordance with Topic 606 and concluded that Kyorin is a customer.

We assessed our license and collaboration with Kyorin in accordance with Topic 606 and concluded that Kyorin is a customer.

We identified the following performance obligations under the Kyorin Agreement:

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

1) the license of ATYR1923 for ILD in Japan;

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

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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 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.

In December 2020, Kyorin completed the last subject visit in its Phase 1 clinical trial of ATYR1923.

This achievement triggered a $2.0

million milestone payment which we recognized as license and collaboration revenue in December 2020.

W e received the $ 2.0 million from Kyorin in January 2021.

For the three months ended March 31, 2021, there were no activities that triggered additional license and collaboration agreement revenue.

For the three months ended March 31, 2020, we recognized $7.9 million as license and collaboration agreement revenue for the upfront payment received.

Both the 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.

We will apply constraint to these amounts until we have received notification from Kyorin that the milestone has been achieved.

We will apply constraint to these amounts until the milestone is probable of being achieved.

The royalties are dependent on future sales by Kyorin which are at the full discretion of Kyorin.

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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 was effective April 1, 2020.

The research grant agreement between Pangu BioPharma, HKUST and the Government of the Hong Kong Special Administration Region became 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.

Expenses for the three months ended March 31, 2021 and 2020 were $0.2 million and $0, respectively.

Debt, Commitments and Contingencies

In November 2016, we entered into a loan and security agreement and subsequently entered amendments (collectively, the Loan Agreement), for term loans with Silicon Valley Bank (SVB) and Solar Capital Ltd.

(Solar, and together with SVB, the Lenders), to borrow up to $20.0 million issuable in three separate tranches (the Term Loans), $10.0 million of which was funded in November 2016, $5.0 million of which was funded in June 2017 and $5.0 million of which was funded in December 2017.

Under the Loan Agreement, we are obligated to make interest only payments through June 1, 2018, followed by consecutive equal monthly payments of principal and interest in arrears through the maturity date of November 18, 2020.

Accordingly, we started paying the Term Loans in June 2018.

The Term Loans bear interest at the prime rate, as reported in The Wall Street Journal on the last date of the month preceding the month in which interest will accrue, plus 4.10%.

A final payment equal to 8.75% of the funded amounts is payable when the Term Loans become due or upon the prepayment of the respective outstanding balance.

We have the option to prepay the outstanding balance of the loan in full, subject to a prepayment fee ranging from 1.0% to 3.0% depending upon when the prepayment occurs, including any non-usage fees.

The obligations under the Term Loans are secured by liens on our tangible personal property and we agreed to not encumber any of our intellectual property.

The Term Loans include a material adverse change clause, which enables the Lenders to require immediate repayment of the outstanding debt.

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 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.

In connection with the first tranche, we issued warrants to the Lenders to purchase an aggregate of 3,415 shares of our common stock with an exercise price of $43.93 per share.

In connection with the second tranche, we issued warrants to the Lenders to purchase an aggregate of 1,489 shares of our common stock with an exercise price of $50.37 per share.

In connection with the third tranche, we issued warrants to each of SVB and Solar to purchase an aggregate of 1,443 shares of our common stock with an exercise price of $51.98 per share.

The warrants are immediately exercisable and have a maximum contractual term of seven years.

The aggregate fair value of the warrants was determined to be $0.5 million using the Black-Scholes option pricing model and was recorded as a debt discount which is being accreted to interest expense over the life of Term Loans.

Facility Leases

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):

Future minimum payments under the non-cancelable facility lease and reconciliation to the operating lease liability as of March 31, 2021 were as follows (in thousands):

Operating Lease

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Current portion of operating lease liability

Long-term operating lease liability

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%.

Long-term operating lease liability, net of current portion

For each of the three months ended March 31, 2021 and 2020, we recorded an operating lease expense of $0.2 million.

As of March 31, 2021, the weighted-average remaining lease term was 2.2 years and the weighted-average discount rate was 9.6%.

Stockholders’ Equity

1 unchanged sentence

In May 2019, we entered into a sales agreement with H.C.

Wainwright & Co., LLC (Wainwright) with respect to an at-the-market offering (ATM Offering Program) under which we may offer and sell shares of our common stock having an aggregate offering price of up to $10.0 million.

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 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.

Wainwright & Co., LLC (Wainwright) with respect to an at-the-market offering (ATM Offering Program) under which we could offer and sell shares of our common stock having an aggregate offering price of up to $10.0 million.

In November 2020, we amended our sales agreement with Wainwright to increase the amount of the ATM Offering Program up to $20.0 million.

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

In March 2021, the ATM Offering Program with Wainwright automatically terminated upon the issuance and sale of all of the shares of common stock having an aggregate offering price of $20.0 million.

For the three months ended March 31, 2021, we sold an aggregate of 1,988,254 shares of common stock at an average price of $4.99 per share for net proceeds of $9.6 million under the ATM Offering Program.

In March 2021, we entered into a Capital on Demand TM Sales Agreement with JonesTrading Institutional Services LLC (JonesTrading) for a new ATM Offering Program, pursuant to which we can sell from time to time, at our option, up to an aggregate of $25.0 million of shares of our common stock through JonesTrading, as sales agent or principal.

JonesTrading is entitled to a

commission at a fixed rate equal of up to 3 % of the gross proceeds.

For the three months ended March 31, 2021, we did not issue any shares under this ATM Offering Program.

Underwritten Follow-On Public Offering

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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.

For the three months ended March 31, 2021, we sold an aggregate of 3,000,000 shares of common stock at an average price of $5.09 per share for net proceeds of $15.2 million under this Purchase Agreement.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance is as follows:

September 30, 2020

Common stock reserved for future issuance was as follows:

March 31, 2021

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 nine months ended September 30, 2020:

Equity Incentive Plans

The following table summarizes our stock option activity under all equity incentive plans for the three months ended March 31, 2021:

Stock Options

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Canceled/forfeited/expired

Outstanding as of September 30, 2020

Outstanding as of March 31, 2021

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,

Expected term (in years)

2 unchanged sentences

104.0% – 104.8%

100.7% – 101.0

102.2% – 109.7

97.2% – 101.0

Expected dividend yield

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

The following table summarizes our restricted stock unit activity under all equity incentive plans for the three months ended March 31, 2021:

Number of Outstanding

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Balance as of December 31, 2020

Balance as of September 30, 2020

Balance as of March 31, 2021

Stock-based Compensation

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,

The allocation of stock-based compensation for all options, 2015 Employee Stock Purchase Plan and restricted stock units is as follows (in thousands):

Research and development

1 unchanged sentence

Total stock-based compensation expense

Subsequent Events

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