What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-11 compared with 2021-05-14 · 66 added, 46 removed, 155 unchanged (42% of the section changed)

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We selected pulmonary sarcoidosis as our first ILD indication and completed enrollment in a Phase 1b/2a multi-center clinical trial.

The study has been designed to evaluate the safety, tolerability, steroid-sparing effect and immunogenicity of multiple doses of ATYR1923 and to evaluate established clinical endpoints and certain biomarkers to assess

preliminary clinical activity of ATYR1923.

In July 2021, we announced completion of the last patient visit and expect to report data in mid-September 2021.

The results of this study will guide future development of ATYR1923 in pulmonary sarcoidosis and provide insight for the potential of ATYR1923 in other ILD such as chronic hypersensitivity pneumonitis (CHP) and connective tissue disease related ILD (CTD-ILD).

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The study also showed a signal of activity in the 3.0 mg/kg cohort.

In addition, p atients treated with ATYR1923 demonstrated a trend of overall improvement in key biomarkers analyzed compared to placebo.

In addition, patients treated with ATYR1923 demonstrated a trend of overall improvement in key biomarkers analyzed compared to placebo.

We plan on leveraging data from our ATYR1923 Phase 2 clinical trial in COVID-19 patients with severe respiratory complications for our mechanistic understanding of ATYR1923 and for its application in ILD.

Future development plans in COVID-19 are being assessed in light of the evolving pan demic and therapeutics landscap e and availability of non-dilutive financing.

Future development plans in COVID-19 are being assessed in light of the evolving pandemic and therapeutics landscape and availability of non-dilutive financing.

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

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The Phase 1 clinical trial, which was conducted and funded by Kyorin, is a placebo-controlled clinical trial to evaluate the safety, pharmacokinetics (PK) and immunogenicity of ATYR1923 in 32 healthy Japanese male volunteers.

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

ATYR1923 was observed to be generally safe and well-tolerated with no drug-related serious adverse events and PK findings were consistent with previous studies of ATYR1923.

We received an $8.0 million upfront payment in January 2020 and a $2.0 million milestone payment in January 2021 upon completion of enrollment in the Phase 1 clinical trial, and 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.

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In March 2020, our subsidiary, Pangu BioPharma Limited (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 antibodies.

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

The two-year project was funded by the Hong Kong government’s Innovation and Technology Commission 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 is expected to fund approximately 50% of the total estimated project cost, and we expect to contribute the remaining 50%.

The grant was funded approximately 50% of the total estimated project cost, and we contributed the remaining 50%.

In February 2021, we announced two new discovery programs from our tRNA synthetase platform.

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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.

Impacts to our business have included delayed 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, 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.

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

As of March 31, 2021, we had an accumulated deficit of $345.7 million and we expect to continue to incur net losses for the foreseeable future.

As of March 31, 2021, we had cash, cash equivalents and available-for-sale investments of $50.6 million.

As of June 30, 2021, we had an accumulated deficit of $356.1 million and we expect to continue to incur net losses for the foreseeable future.

As of June 30, 2021, we had cash, cash equivalents and available-for-sale investments of $44.1 million.

We believe that our current cash, cash equivalents and available-for-sale investments, will be sufficient to meet our anticipated cash requirements for a period of at least one year from the date of this Quarterly Report on Form 10-Q.

Sources of Liquidity

From our inception through March 31, 2021, 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 June 30, 2021, 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.

Sales of Equity Securities

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

Wainwright & Co., LLC (Wainwright) for an 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 to $20.0 million.

Wainwright & Co., LLC (Wainwright) for 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 to $20.0 million.

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

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

In March 2021, the ATM Offering with Wainwright automatically terminated upon the issuance an d sale of all of the s hares having an aggregate offering price of $20.0 million .

Under the ATM Offering Program with Wainwright, during 2020, we sold an aggregate of 1,657,075 shares of common stock at an average price of $4.07 per share for net proceeds of $6.4 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.

Prior to the termination of the sales agreement with Wainwright , in 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.

In February 2020, we completed an underwritten follow-on public offering of 4,235,294 shares of our common stock at a price to the public of $4.25 per share.

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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, registering the sale of the shares of our common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.

For the three months 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.

For the six months ended June 30, 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.

In March 2021, we entered into a Capital on Demand TM Sales Agreement with JonesTrading Institutional Services LLC (JonesTrading) to create an ATM Offering Program under which we may offer and sell shares of our common stock having an aggregate offering price of up to $25.0 million.

JonesTrading is entitled to a commission at a commission rate 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.

For the six months ended June 30, 2021, we sold an aggregate of 293,830 shares of common stock at an average price of $4.72 per share for net proceeds of $1.3 million under the ATM Offering Program.

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,

Net cash provided by (used in):

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Operating activities.

Net cash used in operating activities for the three months ended March 31, 2021 was related to our net loss of $7.2 million, adjusted for non-cash stock-based compensation expense of $0.4 million and net cash inflows from the changes in our operating assets and liabilities of $0.6 million.

Net cash provided by operating activities for the three months ended March 31, 2020 was primarily related to the receipt of an $8.0 million upfront payment associated with the Kyorin Agreement resulting in net income of $1.8 million plus cash outflows from the changes in our operating assets and liabilities of $0.6 million and adjusted for non-cash stock-based compensation expense of $0.4 million.

Net cash used in operating activities for the six months ended June 30, 2021 was primarily related to our net loss of $17.5 million, adjusted for non-cash stock-based compensation expense of $0.8 million and net cash inflows from the changes in our operating assets and liabilities of $2.5 million.

Net cash provided by operating activities for the six months ended June 30, 2020 was primarily related to our net loss of $4.7 million, adjusted for non-cash stock-based compensation expense of $0.8 million and net cash outflows from the changes in our operating assets and liabilities of $1.4 million.

Investing activities.

Net cash provided by (used in) investing activities for the three months ended March 31, 2021 and 2020 was $(23.4) million and $11.4 million, respectively.

Net cash provided by (used in) investing activities for the six months ended June 30, 2021 and 2020 was $(27.4) million and $2.0 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 three months ended March 31, 2021 consisted primarily of $9.6 million proceeds from the issuance of common stock through the ATM Offering Program, net of offering costs and $15.2 million proceeds from issuance of common stock through the Purchase Agreement, net of offering costs.

Net cash provided by financing activities for the three months ended March 31, 2020 consisted primarily of $18.8 million proceeds from the issuance of common stock through the underwritten follow-on public financing in February 2020, net of offering costs, which was partially offset by $2.0 million of repayments on our term loans.

Net cash provided by financing activities for the six months ended June 30, 2021 consisted primarily of $10.9 million proceeds from the issuance of common stock through the ATM Offering Program, net of offering costs and $15.2 million proceeds from the issuance of common stock through the Purchase Agreement, net of offering costs.

Net cash provided by financing activities for the six months ended June 30, 2020 consisted primarily of $18.8 million in proceeds from the issuance of common stock through an underwritten follow-on public offering in February 2020, net of offering costs, offset by a $4.0 million repayment on our term loans.

Funding Requirements

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

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance ATYR1923 in clinical development, including manufacturing activities for ATYR1923, continue IND-enabling studies and manufacturing activities for ATYR2810, continue our research and development activities with respect to other potential therapies based on tRNA synthetase biology and NPR2 biology, and seek marketing approval for product candidates that we may develop.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance ATYR1923 in clinical development, including manufacturing and technology transfer activities for ATYR1923, continue IND-enabling studies and manufacturing activities for ATYR2810, continue our research and development activities with respect to other potential therapies based on tRNA synthetase biology and NPR2 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.

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

the manufacturing of preclinical study and clinical trial materials;

the manufacturing of preclinical study and clinical trial materials, including technology transfers to additional contract development and manufacturing organizations (CDMO);

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

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

To the extent we raise additional capital

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

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

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

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We may be unable to raise additional funds on acceptable 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 volatility and disruptions, includ ing severely diminished liquidity and credit availability, declines in consumer confidence, declines i n economic growth, increases in unemployment rates , inflation, and uncertainty about economic stability.

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

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

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These contracts generally provide for termination after a notice period, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.

Our contractual obligations have not materially changed outside the ordinary course of our business during the three months ended March 31, 2021, as compared to those disclosed in our 2020 Annual Report.

Our contractual obligations have not materially changed outside the ordinary course of our business during the three months and six months ended June 30, 2021, as compared to those disclosed in our 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Financial Operations Overview

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was incorporated in the State of Delaware in September 2005.

The condensed consolidated financial statements include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma as of March 31, 2021.

The condensed consolidated financial statements include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma as of June 30, 2021.

All intercompany transactions and balances are eliminated in consolidation.

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The Phase 1 trial, which was conducted and funded by Kyorin, is a placebo-controlled study to evaluate the safety, PK and immunogenicity of ATYR1923 in 32 healthy Japanese male volunteers.

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

ATYR1923 was observed to be generally safe and well-tolerated with no drug-related serious adverse events and PK findings were consistent with previous studies of ATYR1923.

We received an $8.0 million upfront payment and a $2.0 milestone payment and we are eligible to receive 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.

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We 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.

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.

For the six months ended June 30, 2021, there were no activities that triggered additional license and collaboration agreement revenue.

Following the first anniversary of the effective date of the Kyorin Agreement, Kyorin had 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 .

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

We expect that the levels of our research and development expenses will increase in the current year and potentially future years and will consist primarily of costs related to our clinical development and manufacturing of ATYR1923 for patients with pulmonary sarcoidosis, our preclinical development and manufacturing of ATYR2810 and other potential therapeutics based on tRNA synthetase biology and NRP2 biology.

We expect that the levels of our research and development expenses will increase in the current year and potentially future years and will consist primarily of costs related to our clinical development and manufacturing of ATYR1923 for patients with pulmonary sarcoidosis, including the costs associated with technology transfer to an additional CDMO of ATY1923, our preclinical development and manufacturing of ATYR2810 and other potential therapeutics based on tRNA synthetase biology and NRP2 biology.

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

In particular, as a result of the COVID-19 pandemic, many clinical trial sites in our ongoing Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis temporarily suspended dosing of previously-enrolled patients and/or enrollment of new patients and some patients discontinued from the trial.

If continued dosing of enrolled patients is delayed for an extended period of time, our Phase 1b/2a clinical trial could be further delayed or otherwise adversely affected.

In particular, as a result of the COVID-19 pandemic, many clinical trial sites in our Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis temporarily suspended dosing of previously-enrolled patients and/or enrollment of new patients and some patients discontinued from the trial which delayed completion of this clinical trial.

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

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

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.

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.

We discuss our accounting policies and assumptions that involve a higher degree of judgment and complexity within Note 2 to our audited consolidated financial statements in our 2020 Annual Report.

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Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,

License and collaboration agreement revenues

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License and collaboration agreement revenues.

Revenues for the three months ended March 31, 2020 consisted primarily of $7.9 million of license revenue under the Kyorin Agreement.

Revenues for the three months ended June 30, 2020 consisted primarily from a collaboration agreement that was completed as of December 31, 2020.

Research and development expenses.

Research and development expenses were $4.5 million and $3.6 million for the three months ended March 31, 2021 and 2020, respectively.

The increase of $0.9 million was due primarily to $0.4 million higher manufacturing related costs for ATYR1923 and $0.4 million of research and development expenses related to ATYR2810 and $0.1 million expenses related to the research program between Pangu BioPharma, HKUST and the Government of the Hong Kong Special Administration Region.

Research and development expenses were $7.7 million and $4.4 million for the three months ended June 30, 2021 and 2020, respectively.

The increase of $3.3 million was due primarily to a $3.5 million increase in manufacturing costs for ATYR1923 and a $0.8 million increase in research and development expenses related to ATYR1923 and ATYR2810 programs.

The increase was offset by a $1.0 million decrease in clinical trials costs.

General and administrative expenses.

General and administrative expenses were consistent between periods at $2.7 million and $2.6 million for the three months ended March 31, 2021 and 2020, respectively.

General and administrative expenses were $2.7 million and $2.1 million for the three months ended June 30, 2021 and 2020, respectively.

The increase of $0.6 million was due primarily to a $0.4 million increase in payroll related expenses and a $0.2 million increase in professional fees.

Other income (expense), net.

Other income (expense), net was $47,000 and $(0.1) million for the three months ended March 31, 2021 and 2020, respectively.

The change was primarily a result of term loans which were paid in full in November 2020.

Other income (expense), net was $0.1 million and $(0.1) million for the three months ended June 30, 2021 and 2020, respectively.

The change was primarily a result of repayment of our term loans in November 2020.

Comparison of the Six Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30,

License and collaboration agreement revenues

Research and development expenses

General and administrative expenses

Other income (expense), net

License and collaboration agreement revenues.

Revenues for the six months ended June 30, 2020 consisted primarily of $8.0 million of license revenue under the Kyorin Agreement.

Research and development expenses.

Research and development expenses were $12.2 million and $8.0 million for the six months ended June 30, 2021 and 2020, respectively.

The increase of $4.2 million was due primarily to a $3.8 million increase in manufacturing costs for ATYR1923, a $1.3 million increase in research and development expenses related to ATYR1923 and ATYR2810 programs.

The increase was offset by a $1.0 million decrease on clinical trials costs.

General and administrative expenses.

General and administrative expenses were $5.5 million and $4.7 million for the six months ended June 30, 2021 and 2020, respectively.

The increase of $0.7 million was due primarily to a $0.5 million increase in payroll related expenses and a $0.2 million increase in professional fees.

Other income (expense), net.

Other income (expense), net was $0.1 million and $(0.2) million for the six months ended June 30, 2021 and 2020, respectively.

The change was primarily a result of repayment of our term loans in November 2020.

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