aTyr Pharma, Inc. — Q2 2016 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2016. The company is a clinical-stage biotechnology business developing medicines for severe rare diseases; it reported no product revenue.
Financial performance and liquidity
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Research and development expense | $11.3 million | $7.5 million | $23.3 million | $14.1 million |
| General and administrative expense | $4.1 million | $3.4 million | $8.2 million | $5.7 million |
| Net loss | $15.4 million | $11.1 million | $31.5 million | $20.2 million |
| Net loss per share, basic and diluted | $0.65 | $0.74 | $1.33 | $2.53 |
There are no meaningful operating margins to report because the company had no product sales. Other income was $50,000 in Q2 2016 and $78,000 for the first half, versus expenses of $182,000 and $331,000 in the comparable 2015 periods, respectively.
- Cash and investments: $96.6 million at June 30, comprising $43.2 million cash and cash equivalents and $53.4 million available-for-sale investments. Total cash and investments were $125.3 million at December 31, 2015.
- Cash flows, first half: $26.5 million used in operations, $18.2 million provided by investing activities, and $1.6 million used in financing activities. Cash declined by $9.8 million to $43.2 million. Operating cash use was higher than the $17.5 million used in the first half of 2015.
- Debt: Silicon Valley Bank debt was approximately $3.5 million at June 30, all classified as current; no credit remained available under the facility. The loan bears fixed interest and has a final payment due in 2017.
- Balance sheet: Total assets were $100.5 million, versus $129.7 million at year-end 2015; stockholders’ equity was $86.6 million, versus $115.1 million.
Changes versus prior periods
- First-half net loss increased by $11.3 million year over year, as R&D spending rose $9.2 million and G&A rose $2.5 million.
- Management attributed higher R&D costs mainly to Resolaris manufacturing for future trials, increased clinical and nonclinical development, and higher research staffing. First-half 2015 included a one-time $1.4 million noncash expense for technology acquired from The Scripps Research Institute (TSRI), partially offsetting the year-over-year increase.
- Cash and investments declined by $28.7 million from December 31, 2015. The 2015 comparative financing period included IPO and preferred-stock proceeds; the first half of 2016 had no comparable equity financing proceeds.
Outlook, management commentary and key risks
- Management said existing cash, cash equivalents and investments were expected to fund anticipated requirements for at least 12 months from June 30, 2016. It also expects continued losses and rising expenses and says substantial additional capital will be needed to complete clinical development and potentially commercialize products.
- The company is advancing Resolaris in rare myopathy trials and developing iMod.Fc for potential rare pulmonary indications. In March 2016, it reported results from three dose-escalation cohorts in adults with FSHD and said the observed profile supported continued development; the filing does not provide detailed efficacy results in the supplied text.
- The FDA partial clinical hold on Resolaris remained unresolved for doses above 3.0 mg/kg, pending additional nonclinical information. Management said it did not expect this to affect current trials because those trials were not intended to exceed 3.0 mg/kg, but acknowledged possible delay and approval risks.
- Resolaris trials had reported low-level anti-drug antibodies and three generalized infusion-related reactions associated with discontinued dosing. The company introduced measures including reduced concentration and infusion rate, but cannot assure they will prevent further reactions or antibody formation.
- Clinical development, manufacturing, regulatory approval, patient recruitment and financing are material uncertainties. The company relies on outside manufacturers and research/clinical service providers. Its investment portfolio was primarily high-quality marketable debt securities; management reported no material interest-rate sensitivity from a 100-basis-point increase.
- The June 2016 Form S-3 shelf registration covers up to $150 million of securities. A Cowen sales agreement permits up to $35 million of common-stock sales, with $20 million then covered by the sales prospectus. No proceeds from these arrangements were reported for the first half of 2016.
- A subsequent event: on August 4, 2016, the company entered an iMod.Fc manufacturing agreement for a low-seven-figure total payment, subject to cancellation rights.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at the reasonable-assurance level; no material change in internal control was reported.
Most important facts for investors to verify
- Clinical progress and complete data for Resolaris, including the status and FDA requirements for lifting the partial clinical hold.
- Cash runway against actual operating burn, planned trial and manufacturing costs, and the need and terms of additional financing.
- Whether infusion reactions and anti-drug antibodies persist despite the revised administration procedures.
- Resolaris and iMod.Fc manufacturing milestones, costs, supply reliability, and the implications of the August 2016 manufacturing agreement.
- Potential dilution and available financing capacity under the shelf registration and Cowen sales agreement.