What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-03-15 compared with 2021-03-24 · 106 added, 105 removed, 124 unchanged (63% of the section changed)

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

You should read the following discussion and analysis together with “Item 6.

Selected Financial Data” and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (Annual Report).

You should read the following discussion and analysis together with and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (Annual Report).

The following discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A.

Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Part I, Item 1A.

Risk Factors.”

2 unchanged sentences

Built on more than a decade of foundational science on extracellular tRNA synthetase biology and its effect on immune responses, we have built a global intellectual property estate directed to a potential pipeline of protein compositions derived from 20 tRNA synthetase genes and their extracellular targets, such as neuropilin-2 (NRP2).

Our lead clinical product candidate, ATYR1923, a is a selective modulator of NRP2 that downregulates both the innate and adaptive immune responses in uncontrolled inflammatory disease states.

We are developing ATYR1923 as a potential disease-modifying therapy for patients with severe inflammatory lung diseases with high unmet medical need.

This includes interstitial lung diseases (ILD), a group of rare immune-mediated disorders that cause progressive fibrosis of the lung, and severe respiratory complications caused by COVID-19.

We selected pulmonary sarcoidosis as our first ILD indication and recently 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.

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).

In response to the COVID-19 pandemic, we conducted a Phase 2 study in patients with COVID-19 related severe respiratory complications.

The study was designed to evaluate the safety and preliminary efficacy of ATYR1923 as compared to placebo through the assessment of key clinical outcome measures.

In early 2021, we reported positive data which showed that the trial met its primary endpoint of safety, demonstrating that a single, intravenous (IV) dose of ATYR1923 was generally safe and well-tolerated in both the 1.0 and 3.0 mg/kg treatment groups, with no drug-related serious adverse events.

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

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

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 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 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.

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.

In conjunction with our clinical development of ATYR1923, we have in parallel been advancing our discovery pipeline of NRP2 antibodies and tRNA synthetases.

In November 2020, we declared our lead Investigational New Drug ( IND ) candidate in oncology from our NRP2 antibody program, ATYR2810.

ATYR2810 is a fully humanized monoclonal antibody that specifically and functionally blocks the interaction between NRP2 and one of its primary ligands, vascular endothelial growth factor (VE GF).

ATYR2810 is in preclinical development for the potential treatment of certain aggressive cancers where NRP2 is implicated.

NRP2 is highly expressed on certain tumors and increased NRP2 expression is associated with worse outcomes in many cancers, such as overall survival, metastasis and resistance to targeted therapies.

Our lead therapeutic candidate, efzofitimod (the non-proprietary name for ATYR1923), is a fusion protein comprised of the immunomodulatory domain of histidyl-tRNA synthetase fused to the fragment crystallizable (Fc) region of a human antibody, and serves as a selective modulator of NRP2 that downregulates innate and adaptive immune response in inflammatory disease states.

We are developing efzofitimod as a potential disease-modifying therapy for patients with fibrotic lung diseases with high unmet medical need.

This includes interstitial lung diseases (ILD), a group of rare immune-mediated disorders that cause progressive fibrosis of the lung.

In December 2018, we designed a Phase 1b/2a multiple-ascending dose, double-blind, placebo-controlled clinical trial in patients with pulmonary sarcoidosis, a major form of ILD, to evaluate the safety, tolerability, immunogenicity and steroid-sparing effect of efzofitimod, and conduct other exploratory assessments of efficacy, such as lung function.

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

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

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

Based on the results of this study, we met with the U.S.

Food and Drug Administration (FDA) in February 2022 and presented these data and our plans for subsequent clinical development and path to registration for efzofitimod for the treatment of pulmonary sarcoidosis.

As a result of the meeting, we intend to initiate a planned registrational trial of efzofitimod in the third quarter of 2022.

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

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

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

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

In September 2020,

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

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

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

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 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.

In January 2022, the FDA granted efzofitimod an orphan drug designation for the treatment of sarcoidosis.

In parallel with our clinical development of efzofitimod, we have been advancing our discovery pipeline of NRP2 antibodies and tRNA synthetases.

In November 2020, we announced ATYR2810 as our lead Investigational New Drug (IND) candidate in oncology from our NRP2 antibody program.

ATYR2810 is a fully humanized monoclonal antibody that is designed to specifically and functionally block the interaction between NRP2 and vascular endothelial growth factor (VEGF).

NRP2 is a pleiotropic cell surface receptor that is highly expressed on certain tumors and increased NRP2 expression is associated with worse outcomes in many cancers, such as overall survival, metastasis and resistance to targeted therapies.

The role of NRP2 and VEGF signaling in the tumor microenvironment and its importance in the progression of certain aggressive cancers is becoming increasingly validated.

ATYR2810 is in preclinical development for the potential treatment of certain aggressive cancers where NRP2 is implicated, and we plan to initiate a Phase 1 clinical trial in the second half of 2022.

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 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 is expected to fund approximately 50% of the total estimated project cost, and we expect to contribute the remaining 50%.

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

The term of the project was initially for two years and in December 2021, due to complications arising from the ongoing COVID-19 pandemic, was extended for an additional six months with no additional costs.

In May 2021, we announced that Pangu and HKUST achieved certain milestones for the first year of the project.

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

These programs will investigate the functionality of selected fragments of Alanyl-tRNA synthetase (AARS) and Aspartyl-tRNA synthetase (DARS) in immunology, fibrosis and cancer.

We are also advancing our preclinical pipeline of NRP2 targeting candidates through internal research efforts, industry and academic collaborations.

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.

We are also advancing our preclinical pipeline of tRNA synthetases and NRP2 targeting candidates through internal research efforts, industry and academic collaborations.

The impacts of the ongoing COVID-19 pandemic on our business have included the delay in enrollment of our now completed 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 employees’ 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 FDA or other regulatory authorities, and our ability to raise capital and conduct business development activities.

Liquidity and Capital Resources

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.

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

As of December 31, 2021, we had an accumulated deficit of $372.3 million and we expect to continue to incur net losses for the foreseeable future.

As of December 31, 2021, we had cash, cash equivalents and available-for-sale investments of $107.9 million.

Subsequent to December 31, 2020, we received $2.0 million related to the Kyorin Agreement, approximately $9.9 million in gross proceeds from our at-the-market offering (ATM Offering Program) with H.C.

Wainwright (Wainwright), before deducting commissions and offering expenses payable by us and approximately $15.3 million in gross proceeds from our purchase agreement (Purchase Agreement) with Aspire Capital Fund, LLC (Aspire Capital).

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 Annual Report.

Sources of Liquidity

From our inception through December 31, 2020, we have financed our operations primarily through the sale of equity securities and convertible debt and through venture debt and term loans and through license and collaboration agreement revenues.

Debt Financing

We were previously a party to a loan and security agreement, as amended (Loan Agreement) with Silicon Valley Bank (SVB) and Solar Capital Ltd.

(Solar Capital) (together with SVB, the Lenders), pursuant to which we could borrow up to $20.0 million, issuable in three tranches (the Term Loans), all of which we previously drew on.

In November 2020, we fully repaid all Term Loans and made a final payment equal to 8.75% of the funded amounts.

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

Under the ATM

Offering Program with Wainwright, as of December 31, 2020, we had sold an aggregate of 1,657,075 shares of common stock at an average price of $4.07 per common share for net proceeds of $6.8 million.

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

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

In addition to the factors discussed under “Material Cash Requirements,” our ability to fund our longer-term operating needs will depend on our ability to raise additional funding through equity or debt offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and other factors, including those discussed in Part I.

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

Sources of Cash

From our inception through December 31, 2021, our primary sources of cash have been the sale of equity securities, convertible debt, venture debt, term loans and revenues generated through license and collaboration agreement.

Public Offerings

In September 2021, we completed an underwritten follow-on public offering of 10,781,250 shares of our common stock, including the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $8.00 per share.

The total net proceeds from the offering were approximately $80.6 million, after deducting underwriting discounts, commissions and offering expenses payable by us.

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.

In March 2020, the underwriters fully exercised their over-allotment option for the issuance of an additional 635,294 shares of common stock.

The total gross proceeds from the underwritten follow-on public offering, including from the exercise of the over-allotment option, was approximately $20.7 million, before deducting underwriting discounts, commissions and offering expenses payable by us.

Additionally, in September 2020 , we entered into the Purchase Agreement with 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, registering the sale of the shares of our common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.

As of December 31, 2020, we had not sold any shares of common stock to Aspire Capital under this Purchase Agreement.

The total net proceeds from the offering were approximately $18.8 million, after deducting underwriting discounts, commissions and offering expenses payable by us.

At-the-Market Offering Programs

In March 2021, we entered into a Capital on Demand TM Sales Agreement with JonesTrading Institutional Services LLC (JonesTrading) to create 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 $25.0 million.

JonesTrading is entitled to a commission at a commission rate up to 3% of the gross proceeds.

For the year ended December 31, 2021, we sold an aggregate of 986,267 shares of common stock at an average price of $4.75 per share for net proceeds of $4.4 million under the JonesTrading ATM Offering Program.

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 was entitled to a commission at a fixed commission 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 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.

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.

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.

For the year ended December 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.

Kyorin Agreement Milestone Payments

HKUST Grant Agreement

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

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

9 unchanged sentences

The primary differences between net cash used in operating activities and our net loss in the year ended December 31, 2021 related to non-cash charges including:

$0.6 million for depreciation, $1.5 million for stock-based compensation, $0.7 million for accretion of right-of-use asset and a $2.3 million increase in our net operating assets and liabilities.

$0.5 million for depreciation, $1.6 million for stock-based compensation, $0.8 million for amortization of right-of-use asset, and a $2.6 million increase in our net operating assets and liabilities.

The primary differences between net cash used in operating activities and our net loss in the year ended December 31, 2020 related to non-cash charges including:

$0.6 million for depreciation, $1.8 million for stock-based compensation, $0.7 million for debt discount accretion and non-cash interest expense, $0.7 million for accretion of right-of-use asset and a $0.2 million decrease in our net operating assets and liabilities.

$0.6 million for depreciation, $1.5 million for stock-based compensation, $0.7 million for amortization of right-of-use asset and a $2.3 million increase in our net operating assets and liabilities.

The primary differences between net cash used in operating activities and our net loss in the year ended December 31, 2019 related to non-cash charges including:

$0.7 million for depreciation and amortization, $3.4 million for stock-based compensation, $1.0 million for debt discount accretion and non-cash interest expense, and a $1.4 million increase in our net operating assets and liabilities.

$0.6 million for depreciation, $1.8 million for stock-based compensation, $0.7 million for debt discount accretion and non-cash interest expense, $0.7 million for amortization of right-of-use asset and a $0.2 million decrease in our net operating assets and liabilities.

Investing activities.

Net cash provided by investing activities for the year ended December 31, 2020 consisted primarily of $7.0 million of net maturities of investment securities.

Net cash provided by investing activities for the year ended December 31, 2019 consisted primarily of $5.0 million of net maturities of investment securities.

Net cash provided in investing activities for the year ended December 31, 2018 consisted of $37.8 million of net maturities of investment securities offset in part by $0.6 million of property and equipment purchases.

Net cash provided by (used in) investing activities for the years ended December 31, 2021, 2020 and 2019 was $(91.6) million, $6.9 million and $4.9 million, respectively.

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

The average term to maturity in our investment portfolio as of December 31, 2021 was less than two years.

Financing activities.

Net cash provided by financing activities for the year ended December 31, 2020 was $16.1 million and consisted primarily of $18.8 million in proceeds from an underwritten follow-on public offering in February 2020 net of offering costs, and $6.4 million proceeds from the ATM Offering Program, net of issuance costs, offset in part by $9.1 million of principal payments and final payment on the Term Loans.

Net cash provided by financing activities for the year ended December 31, 2021 was $110.0 million and consisted primarily of $80.6 million in proceeds from an underwritten follow-on public offering, net of offering costs, $15.2 million in proceeds from the issuance of common stock through the Purchase Agreement, net of offering costs and $14.1 million proceeds from the ATM Offering Program, net of issuance costs.

Net cash provided by financing activities for the year ended December 31, 2020 was $16.1 million and consisted primarily of $18.8 million in proceeds from an underwritten follow-on public offering, net of offering costs, and $6.4 million proceeds from the ATM Offering Program, net of issuance costs, offset in part by $9.1 million of principal payments and final payment on the term loans.

Net cash provided by financing activities for the year ended December 31, 2019 was $1.3 million and consisted primarily of $4.4 million in proceeds from the ATM Offering Program, net of issuance costs, and $4.9 million in proceeds from a registered direct offering, net of issuance costs, offset in part by $8.0 million of principal payments on the term loans.

Net cash used by financing activities during the year ended December 31, 2018 was $4.2 million and consisted primarily of $4.7 million of principal payments on the Term Loans, partially offset by $0.4 million of net proceeds from the ATM Offering Program, net of issuance costs.

Funding Requirements

Material Cash Requirements

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

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance ATYR1923 in clinical development, 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 efzofitimod in clinical development, including manufacturing and technology transfer activities for efzofitimod , 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.

4 unchanged sentences

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

delays of our current and planned clinical trials of ATYR1923 and any resulting cost increases as a result of the COVID-19 outbreak;

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

delays of our planned clinical trials of efzofitimod and ATYR2810;

any resulting cost increases as a result of the ongoing COVID-19 pandemic;

the number and characteristics of product candidates that we pursue;

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

the manufacturing of preclinical study and clinical trial materials;

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;

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

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

6 unchanged sentences

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, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.

As a result of the ongoing 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 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.

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

Contractual Obligations and Commitments

We enter into contracts in the normal course of business with clinical trial sites and clinical supply manufacturing organizations and with vendors for preclinical safety and research studies, research supplies and other services and products purposes.

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.

Term Loans were fully repaid in November 2020, including the final payment equal to 8.75% of the funded amounts.

We have a non-cancelable facility lease that is subject to base lease payments, which escalate over the term of the lease, additional charges for common area maintenance and other costs.

As of December 31, 2021, our material cash requirements from known contractual and other obligations consisted primarily of a non-cancelable facility lease that is subject to base lease payments, which escalate over the term of the lease, additional charges for common area maintenance and other costs.

In July 2018, we entered into a lease amendment that reduced the space we lease from 24,494 square feet to 20,508 square feet and extended the lease term to May 2023.

With the lease amendment, we do not have an option to extend the lease.

As of December 31, 2020, the aggregate present value of the lease payments was $2.2 million.

As of December 31, 2021, the aggregate present value of the lease payments was $1.4 million of which $1.0 million will be incurred in 2022 and $0.4 million will be incurred in 2023.

Financial Operations Overview

7 unchanged sentences

Revenue Recognition

In January 2020, we entered into a collaboration and license agreement with Kyorin for the development and commercialization of ATYR1923 for ILD in Japan.

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

In January 2020, we entered into a collaboration and license agreement with Kyorin for the development and commercialization of efzofitimod for ILD in Japan.

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

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

In September 2020, Kyorin began dosing of its Phase 1 trial of ATYR1923 (known as KRP-R120 in Japan) and completed the last subject visit in December 2020.

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

This achievement triggered a $2.0 million milestone payment, which we received in January 2021.

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.

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

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

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.

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 .

For the year ended December 31, 2020, we recognized $10.0 million as license and collaboration agreement revenue under the Kyorin Agreement.

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

In February 2021, the CSL Agreement was terminated.

For the years ended December 31, 2020 and 2019, we recognized $0.5 million and $0.4 million, respectively, as license and collaboration agreement revenue under the CSL Agreement.

For the year ended December 31, 2021, there were no activities that triggered additional license and collaboration agreement revenue while we recognized $10.0 million as license and collaboration agreement revenue for the year ended December 31, 2020 under the Kyorin Agreement.

Research and Development Expenses

To date, our research and development expenses have related primarily to the development of, and clinical trials for, our product candidates, and to research efforts targeting the potential therapeutic application of other tRNA synthetase-based immuno-modulators and, more recently research efforts related to NRP2 biology.

To date, our research and development expenses have been related primarily to the development of, and clinical trials for, our product candidates, and to research efforts targeting the potential therapeutic application of other tRNA synthetase-based immunomodulators and, more recently research efforts related to NRP2 biology.

These expenses consist primarily of:

6 unchanged sentences

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 continue to increase in future years and will consist primarily of costs related to our clinical development and manufacturing of efzofitimod for patients with pulmonary sarcoidosis, including the costs associated with technology transfer to an additional CDMO of efzofitimod , our preclinical development, planned clinical 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.

For instance, as a result of the ongoing COVID-19 pandemic, many clinical trial sites in our completed 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.

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.

5 unchanged sentences

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

Other Expense, Net

In November 2016, we entered into a Loan Agreement with the Lenders for 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.

Other expense, net consists primarily of interest income earned on cash, cash equivalents and available-for-sale investments and interest expense on the Term Loans which were fully repaid in November 2020.

Critical Accounting Policies and Significant Judgments and Estimates

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

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

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts

of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported expenses during the reporting periods.

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

2 unchanged sentences

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 ongoing 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 appearing elsewhere in this Annual Report.

10 unchanged sentences

We currently rely on third parties for the clinical development of our product candidates and the manufacture of our product candidates to support our ongoing and future clinical trials.

We pay these third parties, including consultants, CROs, manufacturers and other service providers, pursuant to contractual arrangements, which may include provisions for time and materials-based payments, project-based fees and milestone payments.

We pay these third parties, including consultants, CROs, CDMOs and other service providers, pursuant to contractual arrangements, which may include provisions for time and materials-based payments, project-based fees and milestone payments.

We base our accrual for these expenses on our estimates of the services received and efforts expended pursuant to our contractual arrangements.

13 unchanged sentences

General and administrative expenses

Other expense, net

Other income (expense), net

License and collaboration agreement revenues.

Revenues were $10.5 million and $0.4 million for the years ended December 31, 2020 and 2019, respectively.

The increase was due primarily to $10.0 million from license and collaboration agreement earned under the Kyorin Agreement.

Revenues of $10.5 million for the year ended December 31, 2020 consisted primarily of $10.0 million from license and collaboration agreement earned under the Kyorin Agreement.

Research and development expenses.

Research and development expenses were $23.3 million and $17.3 million for the years ended December 31, 2021 and 2020, respectively.

The increase was due primarily to the progression of our ATYR1923 Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis and our ATYR1923 Phase 2 clinical trial in COVID-19 patients with severe respiratory complication.

Both clinical trials completed enrollment as of December 31, 2020.

The increase of $6.0 million was due primarily to an increase of $6.2 million in product development and manufacturing costs for efzofitimod and ATYR2810, an increase of $1.8 million research development for efzofitimod, ATYR2810 and our discovery programs and an increase of $1.1 million in compensation related expenses.

The increase was offset by a decrease of $3.1 million in clinical trial expenses due to the completion of the Phase 1b/2a sarcoidosis clinical trial in September 2021 and the COVID-19 clinical trial in December 2020.

General and administrative expenses.

General and administrative expenses were consistent between periods at $9.1 million and $9.4 million for the years ended December 31, 2020 and 2019, respectively.

General and administrative expenses were $10.8 million and $9.1 million for the years ended December 31, 2021 and 2020, respectively.

The increase of $1.7 million was due primarily to a $1.2 million increase in compensation related expenses, a $0.2 million increase in insurance costs, a $0.2 million increase in professional fees and $0.1 million increase in taxes and licenses.

Other income (expense), net.

Other expense was $ 0.3 million and $ 0.8 million for the years ended December 31, 2020 and 2019 , respectively.

5 million decrease was primarily a result of lower principal balances on the Term Loans with our Lenders which we started repaying in June 2018.

The Term Loans were paid in full in November 2020.

Other income (expense) was $0.2 million and $(0.3) million for years ended December 31, 2021 and 2020, respectively.

The change was primarily a result of a reduction in interest expense due to the repayment of our term loans in November 2020.

Recent Accounting Pronouncements

For discussion of recently issued accounting pronouncements, refer to the Section titled “Recent Accounting Pronouncements” within Note 2 of our consolidated financial statements included in this Annual Report.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

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-K

Item 7. Management’s Discussion and Analysis