aTyr Pharma, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. Financial statements are unaudited. aTyr is a pre-revenue clinical-stage biotechnology company developing medicines for severe rare diseases; Resolaris is its lead candidate.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Product revenue | None | None |
| Research and development expense | $6.593 million | $4.388 million |
| General and administrative expense | $2.329 million | $1.542 million |
| Total operating expense | $8.922 million | $5.930 million |
| Net loss | $9.071 million | $6.093 million |
| Net loss per share, basic and diluted | $9.39 | $7.87 |
| Net cash used in operating activities | $6.286 million | $6.345 million |
Gross margin is not applicable because the company had no product sales. R&D expense rose about 50%, primarily from a $1.4 million TSRI-related stock issuance, higher compensation and clinical/manufacturing activity; completion of the Phase 1 Resolaris trial partly offset the increases. G&A rose about 51%, reflecting personnel, intellectual property work and preparation for public-company operations.
At March 31, cash and cash equivalents were $54.512 million, versus $13.899 million at year-end; current assets were $55.169 million and total assets $59.905 million. Current liabilities were $11.545 million. Commercial bank debt was $7.645 million principal, reported net of discount at $7.603 million, including $3.190 million classified as current. The company also had a $2.0 million convertible note outstanding at quarter-end; it repaid the note and $0.5 million accrued interest in May. Accumulated deficit was $119.222 million and stockholders’ deficit was $98.006 million. Redeemable convertible preferred stock had a $171.898 million liquidation preference.
Cash from financing was $45.072 million, chiefly $46.299 million net proceeds received in Q1 from the Series E financing, offset by debt repayments and IPO costs. The remaining $30.0 million of the $76.3 million Series E proceeds arrived in April. Cash from investing was $1.827 million, mainly investment maturities.
Material changes and subsequent events
- Q1 net loss increased $2.978 million year over year as operating expenses expanded.
- On May 12, 2015, aTyr completed its IPO, selling 6.164 million shares at $14 per share. The filing reports estimated net proceeds of approximately $76.9 million; the preferred stock converted to common stock in connection with the IPO, and the convertible note was repaid.
- On June 16, 2015, aTyr entered a manufacturing services agreement with FUJIFILM Diosynth to optimize and scale up the Resolaris process and manufacture clinical-trial drug substance. Payments are tied to development and production milestones; no costs had been incurred under the agreement as of March 31.
- Cash and cash equivalents plus the Series E financing and IPO proceeds were expected by management to fund anticipated requirements for at least 12 months. The company nevertheless expects to need substantial additional capital to advance development and potentially commercialize products.
Outlook, risks and other items
- Management expects increasing operating expenses and losses as it advances Resolaris trials, pursues other research programs, develops manufacturing and supports public-company operations. No product-sales revenue is expected for years, if ever; the filing provides no quantified earnings or revenue guidance.
- The ongoing multinational Phase 1b/2 Resolaris trial in adult patients with FSHD was expected to yield initial results in Q4 2015 or early 2016, subject to regulatory interactions and enrollment.
- The FDA had removed a full clinical hold but the U.S. Resolaris IND remained on partial hold for doses above 3.0 mg/kg pending additional nonclinical information. The company intended to respond in the second half of 2015; the filing does not assure the hold would be lifted.
- Risks include uncertain safety and efficacy for this novel therapeutic approach, limited rare-disease patient pools, potential immunogenicity, reliance on contract manufacturers, and clinical supply/manufacturing delays. One Resolaris drug-substance campaign had failed specifications; replacement manufacturing was underway, and no out-of-specification material was administered to subjects.
- Under the amended TSRI research agreement, aTyr issued 119,840 common shares valued at $1.4 million and recorded the amount as R&D expense. TSRI may receive royalties and milestone payments under applicable licenses. The filing also notes research funding and charitable donations involving a laboratory of a board member.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at the reasonable-assurance level as of March 31, 2015.
Important facts for investors to verify
- Actual cash runway and spending following receipt of the Series E proceeds, completion of the IPO, and repayment of the landlord note.
- Resolaris trial enrollment, timing and results, and FDA disposition of the partial clinical hold and required nonclinical response.
- Replacement and scale-up manufacturing performance, including whether the new Fujifilm work supports planned clinical supply needs.
- Future funding requirements, dilution risk and the terms of any financing, collaboration or licensing arrangements.
- TSRI license milestones, royalties and other obligations, as well as the implications of the disclosed board-member research relationship.