aTyr Pharma, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015; filed November 10, 2015. Financial statements are unaudited. aTyr is a clinical-stage biotechnology company developing Physiocrine-based therapies for severe rare diseases. It had no product revenue.
Financial performance and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $7.7 million | $4.4 million | $21.8 million | $12.4 million |
| General and administrative expense | $3.6 million | $1.8 million | $9.3 million | $5.1 million |
| Net loss | $11.3 million | $6.6 million | $31.5 million | $18.3 million |
| Net loss per share, basic and diluted | $0.48 | $8.02 | $2.38 | $22.73 |
There are no meaningful revenue or profit margins to report. Per-share losses are not directly comparable across periods: the company completed its IPO and converted preferred stock into common stock in 2015, substantially increasing weighted-average shares; the company also effected a reverse stock split, which is reflected retrospectively.
- Cash and investments: $136.8 million at September 30, 2015, comprising $60.1 million cash and equivalents and $76.8 million short- and long-term investments. Current assets were $111.4 million and current liabilities $8.8 million.
- Cash flows, nine months: $27.0 million used in operations, $75.9 million used in investing, and $149.0 million provided by financing; cash increased $46.2 million to $60.1 million.
- Debt: Commercial bank debt was $6.0 million net of debt discount ($3.3 million current and $2.6 million long-term). The $2.0 million landlord convertible note, plus $0.5 million accrued interest, was repaid in May 2015. The SVB loan is fixed-rate, secured by company assets other than intellectual property, and matures in 2017; no borrowing availability remained.
- Capital raised: May IPO generated approximately $75.9 million net proceeds. The March Series E preferred-stock financing generated approximately $75.6 million net proceeds. Preferred shares converted into common stock upon the IPO.
Material changes versus prior comparable periods
- Q3 net loss increased $4.7 million year over year; nine-month net loss increased $13.2 million. Higher Resolaris manufacturing and clinical-development costs and increased research and administrative headcount were principal drivers.
- Nine-month R&D expense also included $1.4 million of common stock issued to The Scripps Research Institute (TSRI) under an amended research and option agreement. Public-company costs and stock-based compensation also increased.
- Other expense decreased year over year, principally because of lower interest expense, investment income, and the end of fair-value remeasurement of preferred-stock warrants after their IPO-related reclassification to equity.
- Available-for-sale investments increased substantially following the financings. The company reported $85,000 of gross unrealized losses and determined these were not other-than-temporary.
Outlook, developments and key risks
- Management expected cash and investments on hand to fund anticipated requirements for at least 12 months from September 30, 2015. It nevertheless anticipated needing substantial additional capital to advance development and potentially commercialize candidates; timing and amount depend on trial progress, regulatory requirements, manufacturing needs and other factors.
- Resolaris was being studied in adult FSHD and LGMD2B, and a trial in early-onset FSHD had recently begun. Management expected initial results from the adult FSHD trial in Q1 2016, subject to regulatory interactions and enrollment.
- The FDA partial clinical hold restricted U.S. Resolaris evaluation above 3.0 mg/kg pending additional nonclinical information. After a September response, the FDA requested further information in October 2015. Management said it was preparing an action plan and did not expect the hold to affect its then-current FSHD timeline, which did not include doses above 3.0 mg/kg.
- A manufacturing campaign for Resolaris bulk drug substance did not meet specifications; the manufacturer began a replacement campaign. The filing says no nonconforming material was administered to patients. The company also engaged FUJIFILM Diosynth for process development and manufacturing, with initial work potentially costing a mid-seven-figure total.
- Key risks include uncertain clinical efficacy and safety, rare-disease enrollment challenges, novel and uncertain regulatory pathways and endpoints, manufacturing scale-up and supply, dependence on third parties, and the need for future financing. The company reported no material legal proceedings.
- Other notable items: Alexion alleged that the Resolaris name could be confused with its Soliris mark; aTyr was assessing the claim. October 2015 option grants and accelerated vesting for certain existing options were disclosed as subsequent events.
Important facts for investors to verify
- Whether the FDA partial hold is lifted, what additional evidence is required, and whether trial doses or timelines change.
- Enrollment, safety, immunogenicity and efficacy data from the Resolaris FSHD, LGMD2B and early-onset FSHD trials, including the anticipated Q1 2016 update.
- Replacement manufacturing results, process validation, supply adequacy and the costs and timing of scale-up.
- Actual cash burn and remaining runway relative to management’s 12-month estimate, alongside milestones that could require additional financing.
- Potential dilution and share supply following the IPO, lock-up expiration and equity-plan awards; also confirm the status of the Resolaris trademark dispute.