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Item 2. Management’s Discussion and Analysis

2022-05-10 compared with 2021-11-12 · 108 added, 131 removed, 95 unchanged (72% of the section changed)

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

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q, the consolidated financial statements and accompanying notes thereto for the fiscal year ended December 31, 2020 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC), on March 24, 2021 (2020 Annual Report).

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act).

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q (Quarterly Report), our audited consolidated financial statements and accompanying notes thereto for the fiscal year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC), on March 15, 2022 (2021 Annual Report).

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

Such forward looking statements, which represent our intent, belief or current expectations, involve risks and uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions.

Factors that could cause or contribute to differences in results include, but are not limited to those set forth under “Risk Factors” under Item 1A of Part II below, and elsewhere in this Quarterly Report on Form 10-Q.

Except as required by law we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect actual outcomes.

We are a biotherapeutics company engaged in the discovery and development of innovative medicines based on novel biological pathways.

Factors that could cause or contribute to differences in results include, but are not limited to those set forth under “Risk Factors” under Part II, Item 1A, and elsewhere in this Quarterly Report.

Except as required by law we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect actual outcomes.

We are a biotherapeutics company engaged in the discovery and development of innovative medicines based on our proprietary tRNA synthetase biology platform.

We have concentrated our research and development efforts on a newly discovered area of biology, the extracellular functionality and signaling pathways of tRNA synthetases.

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 fusion protein comprised of the immuno-modulatory domain of histidyl-tRNA synthetase fused to the FC region of a human antibody, is a selective modulator of NRP2 that downregulates innate and adaptive immune response in 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 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, steroid-sparing effect and immunogenicity of ATYR1923 and to evaluate established clinical endpoints and certain biomarkers to assess preliminary clinical activity of ATYR1923.

Our primary focus is efzofitimod, a clinical-stage product candidate which binds to the NRP2 extracellular target and is designed to downregulate immune engagement in fibrotic lung disease.

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 disease (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.

ATYR1923 was safe and well-tolerated at all doses with no drug-related serious adverse events or signal of immunogenicity.

Additionally, the study demonstrated consistent dose response for ATYR1923 on key efficacy endpoints and improvements compared to placebo, including measures of steroid reduction, lung function, sarcoidosis symptom measures and inflammatory biomarkers.

Based on the results of this study, we plan to meet with the U.S.

Food and Drug Administration (FDA) to present these data and our plans for subsequent clinical development and path to registration for ATYR1923 for pulmonary sarcoidosis, and we expect to initiate a registrational trial next year.

Based on the results of this study, we believe in 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 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, p atients 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 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.

(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, was a placebo-controlled clinical trial to evaluate the safety, pharmacokinetics (PK) and immunogenicity of ATYR1923 in 32 healthy Japanese male volunteers.

ATYR1923 was observed to be generally 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.

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 (VEGF).

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.

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 ILD, 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.

Efzofitimod 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 following completion of the last subject visit in December 2020 in Kyorin’s 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 and in April 2022, for the treatment of systemic sclerosis (also known as scleroderma).

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

ATYR2810 is 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 selectively 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.

VEGF is a validated mediator of tumor growth and plays a role in immune evasion in the tumor microenvironment.

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 submit an IND application and initiate a Phase 1 clinical trial in 2022.

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

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 and 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 delayed 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 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 planned 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.

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

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

As of September 30, 2021, we had an accumulated deficit of $363.7 million and we expect to continue to incur net losses for the foreseeable future.

As of September 30, 2021, we had cash, cash equivalents and available-for-sale investments of $116.4 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 September 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

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

As of March 31, 2022, we had an accumulated deficit of $384.4 million and we expect to continue to incur net losses for the foreseeable future.

As of March 31, 2022, we had cash, cash equivalents and available-for-sale investments of $98.7 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 Quarterly 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 II, Item 1A.

“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 March 31, 2022, we have financed our operations primarily through the sale of equity securities and convertible debt, venture debt, term loans and through license and collaboration agreement revenues.

Public Offerings

In 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.

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

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 nine months ended September 30, 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.

Additionally, 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 nine months ended September 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.

At-the-Market Offering Programs

In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies) implementing an “at-the-market” offering program (ATM Offering Program), pursuant to which we may offer and sell, from time to time and at our option, up to an aggregate of $65.0 million of shares of our common stock through Jefferies, acting as sales agent.

Jefferies is entitled to a fixed commission rate of up to 3.0% of the gross sales proceeds of shares sold under the ATM Offering Program.

In March 2021, we entered into a Capital on Demand TM Sales Agreement with JonesTrading Institutional Services LLC (JonesTrading) for an at-the-market offering program (Prior ATM Offering Program), pursuant to which we were entitled to 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 was entitled to a commission at a fixed rate equal of up to 3.0% of the gross proceeds.

During 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 Prior ATM Offering Program.

For the three months ended March 31, 2022, we sold an aggregate of 260,455 shares of common stock at an average price of $6.07 per share for net proceeds of $1.5 million under the Prior ATM Offering Program.

On April 22, 2022, we terminated the Prior ATM Offering Program.

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

During 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.

During the three months ended March 31, 2022, there were no issuances or sales under the Purchase Agreement.

Kyorin Agreement Milestone Payments

We received an $8.0 million upfront payment in January 2020 and a $2.0 million milestone payment in January 2021 following completion of the last subject visit in Kyorin’s 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.

During the three months ended March 31, 2022, there were no activities that triggered additional license and collaboration agreement revenue under the Kyorin Agreement.

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%.

During the three months ended March 31, 2022, we did not receive any further grants from the ITC or otherwise.

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

Nine Months Ended September 30,

Net cash provided by (used in):

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Operating activities.

Net cash used in operating activities for the nine months ended September 30, 2021 and 2020 was $25.0 million and $9.9 million, respectively.

Net cash used in operating activities for the three months ended March 31, 2022 and 2021 was $10.1 million and $5.8 million, respectively.

The fluctuation in net cash used in operating activities resulted primarily from our net loss adjusted for non-cash stock-based compensation expense and net cash inflows or outflows from the changes in our operating assets and liabilities.

Investing activities.

Net cash provided by (used in) investing activities for the nine months ended September 30, 2021 and 2020 was $( 42.2 ) million and $ 3.7 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.

Net cash provided by (used in) investing activities for the three months ended March 31 , 2022 and 2021 was $ 14.6 million and $ (23.4) million, respectively.

The fluctuation in net cash provided by ( 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 is less than two years.

Financing activities.

Net cash provided by financing activities for the nine months ended September 30, 2021 consisted primarily of $80.6 million in proceeds from the issuance of common stock in 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 in proceeds from the issuance of common stock through the ATM Offering Programs, net of offering costs.

Net cash provided by financing activities for the nine months ended September 30, 2020 consisted primarily of $18.8 million in proceeds from the issuance of common stock in an underwritten follow-on public offering in February 2020, net of offering costs and $2.4 million in proceeds from the issuance of common stock through the Wainwright ATM Offering Program, net of offering costs, offset by a $6.0 million repayment on our term loans.

Funding Requirements

Net cash provided by financing activities for the three months ended March 31, 2022 consisted primarily of $1.5 million in proceeds from the issuance of common stock through the Prior ATM Offering Program, net of offering costs.

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 Prior 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.

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, 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.

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.

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

delays of our planned clinical trials of ATYR1923 and ATYR2810;

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

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;

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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.

license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

The incurrence of additional indebtedness would increase our fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

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 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 i n 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.

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.

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

As of March 31, 2022, 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 March 31, 2022, the aggregate present value of the lease payments was $1.1 million of which $1.0 million will be incurred in 2022 and $0.1 million will be incurred in 2023.

O ur material cash requirements from known contractual obligations have not otherwise changed materially since our Annual Report on Form 10-K for the year ended December 31, 2021.

We did not have any off-balance sheet arrangements as of March 31, 2022.

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 September 30, 2021.

The condensed consolidated financial statements in this Quarterly Report include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma as of March 31, 2022.

All intercompany transactions and balances are eliminated in consolidation.

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.

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 January 2020, we entered into the Kyorin 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, and Kyorin is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan.

In September 2020, Kyorin began dosing of its Phase 1 trial of efzofitimod 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, was a placebo-controlled study to evaluate the safety, PK and immunogenicity of ATYR1923 in 32 healthy Japanese male volunteers.

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.

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

Efzofitimod 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.

The $8.0 million upfront payment received from Kyorin is non-refundable and non-creditable and is considered fixed consideration.

We determined that the relative stand-alone selling price was $7.9 million when the license was delivered to Kyorin in January 2020.

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.

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

This achievement triggered a $2.0 million milestone payment which we recognized as license and collaboration revenue in December 2020.

We received the $2.0 million from Kyorin in January 2021.

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

Kyorin has the right to terminate the agreement for any reason upon 90 days advance written notice.

In addition, 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 each of the three months ended March 31, 2022 and 2021, there were no activities that triggered additional license and collaboration agreement revenue under the Kyorin Agreement.

Research and Development Expenses

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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, including the costs associated with technology transfer to an additional CDMO of ATYR1923, our preclinical development, planned clinical 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.

For instance, as a result of the COVID-19 pandemic, many clinical trial sites in our ATYR1923 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 the results of this clinical trial.

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.

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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 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 in our 2021 Annual Report.

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Results of Operations

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

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

Three Months Ended September 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 three months ended September 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 $5.1 million and $4.6 million for the three months ended September 30, 2021 and 2020, respectively.

The increase was due primarily to a $0.5 increase in product development and manufacturing costs for ATYR1923, ATYR2810 and our discovery programs.

General and administrative expenses.

General and administrative expenses were $2.6 million and $2.0 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $0.5 million was due primarily to a $0.4 million increase in compensation related expenses, and a $0.1 million increase in professional fees.

Other income (expense), net.

Other income (expense), net was $59,000 and $(88,000) for the three months ended September 30, 2021 and 2020, respectively.

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

Comparison of the Nine Months Ended September 30, 2021 and 2020

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

Nine Months Ended September 30,

License and collaboration agreement revenues

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Research and development expenses

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Other income (expense), net

License and collaboration agreement revenues.

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

Research and development expenses.

Research and development expenses were $17.3 million and $12.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase was due primarily to a $4.7 million increase in product development and manufacturing costs for ATYR1923, ATYR2810 and our discovery programs.

Research and development expenses were $8.9 million and $4.5 million for the three months ended March 31, 2022 and 2021, respectively.

The increase of $4.4 million was due primarily to an increase of $3.2 million in product development and manufacturing costs for efzofitimod and ATYR2810, an increase of $0.7 million in preclinical development for ATYR2810 and our discovery programs and an increase of $0.7 million in compensation related expenses.

The increase was offset by a decrease of $0.2 million in clinical trial expenses due to the completion of the Phase 1b/2a sarcoidosis clinical trial.

General and administrative expenses.

General and administrative expenses were $8.1 million and $6.8 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $1.3 million was due primarily to a $1.0 million increase in compensation related expenses, and a $0.3 million increase in professional fees.

Other income (expense), net.

Other income (expense), net was $0.2 million and $(0.3) million for the nine months ended September 30, 2021 and 2020, respectively.

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

General and administrative expenses were $3.5 million and $2.7 million for the three months ended March 31, 2022 and 2021 respectively.

The increase of $0.8 million was due primarily to an increase of $0.5 million in compensation related expenses and an increase of $0.3 million in professional fees.

Other income, net.

Other income, net was $0.2 million and $47,000 for the three months ended March 31, 2022 and 2021, respectively.

The change was primarily a result of higher cash, cash equivalents and available-for-sale investments balances at March 31, 2022 as compared to the same period in the prior year, which resulted from an underwritten follow-on offering in September 2021.

Recent Accounting Pronouncements

For discussion of recently issued accounting pronouncements, refer to Item 1 of Part I, Notes to Condensed Consolidated Financial Statements (Unaudited) – Note 1 – Recent Accounting Pronouncements.

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.

For discussion of recently issued accounting pronouncements, refer to Part I, Item 1, Notes to Condensed Consolidated Financial Statements (Unaudited) – Note 1 – Recent Accounting Pronouncements of this Quarterly Report.

Quantitative and Qualitative Disclosures About Market Risk

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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