aTyr Pharma, Inc. — Q1 2017 Form 10-Q
Business context and reporting period. Unaudited results for the three months ended March 31, 2017; balance-sheet comparisons are with December 31, 2016. aTyr is a clinical-stage biotechnology company developing medicines based on Physiocrine biology. Its programs include Resolaris, in clinical development for rare genetic myopathies; Stalaris, a preclinical pulmonary-disease program; and preclinical Project ORCA. The company reported no product revenue.
Key financial metrics
Amounts in millions, except per-share data and where noted.
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $9.204 | $12.000 |
| General and administrative expense | $4.007 | $4.115 |
| Total operating expenses | $13.211 | $16.115 |
| Net loss | $(13.405) | $(16.087) |
| Net loss per share, basic and diluted | $(0.56) | $(0.68) |
| Net cash used in operating activities | $(13.912) | $(12.491) |
| Cash and cash equivalents | $28.900 | $38.388 at Dec. 31, 2016 |
| Available-for-sale investments | $33.034 short-term; none long-term | $33.759 short-term and $4.002 long-term |
| Total assets | $65.735 | $80.524 at Dec. 31, 2016 |
| Term-loan principal outstanding | $10.0 | Funded in Nov. 2016 |
Cash, cash equivalents and available-for-sale investments totaled approximately $61.9 million at quarter-end. Stockholders’ equity was $50.706 million, and accumulated deficit was $229.384 million. The loan’s carrying amount was approximately $9.6 million, net of issuance costs, split between current and long-term portions. No gross margin is applicable because the company had no product sales.
Changes versus the prior comparable period
- Net loss narrowed by $2.7 million, while operating expenses declined by $2.9 million.
- R&D expense fell $2.8 million, primarily due to $4.1 million lower Resolaris manufacturing costs, partly offset by $1.5 million higher Stalaris manufacturing and nonclinical development costs. G&A expense was broadly unchanged.
- Other expense was $0.194 million versus other income of $0.028 million in Q1 2016, mainly reflecting greater interest expense on debt.
- Operating cash use increased by $1.4 million year over year. Cash and cash equivalents declined $9.5 million during the quarter; investment maturities exceeded purchases, generating $4.4 million of net investing cash inflow.
- Short-term investments declined modestly from year-end and the $4.0 million long-term investment balance was reclassified or matured; all investments held at March 31 had stated maturities under one year.
Outlook, risks and notable items
- Management expects continued losses and significant spending on research, clinical development, manufacturing, intellectual property and operations. It expects no product-sales revenue for at least several years, if ever.
- Management said existing cash, cash equivalents and investments were expected to fund anticipated cash requirements for at least one year from the filing date. Additional capital will be needed to advance development and could require equity or debt financing, collaborations or licensing; financing may be unavailable or dilutive or require surrendering rights.
- The $20 million term-loan facility had $10 million funded, with two further $5 million tranches subject to milestones and deadlines. It bears interest at prime plus 4.10%, includes an 8.75% final payment on funded amounts, and is secured by substantially all assets other than intellectual property. The filing describes covenant and default risks.
- Key development risks include the uncertain safety and efficacy of a novel therapeutic class, limited rare-disease patient pools, clinical-trial and regulatory uncertainty, and reliance on third-party manufacturers. Resolaris had previously faced a partial clinical hold on doses above 3.0 mg/kg; the hold was lifted in December 2016. The filing also reports infusion-related reactions and low levels of anti-Resolaris antibodies in some trial subjects.
- Resolaris had FDA fast-track designations for FSHD and LGMD2B, and orphan-drug designations for FSHD and LGMD in the U.S. and EU. These designations do not guarantee approval or expedited development.
- The facility lease was extended in January 2017 to May 2019. A subsequent April 2017 amendment added 7,411 square feet through May 2019, with an additional $0.7 million commitment.
- The company reported no material legal proceedings and no off-balance-sheet arrangements. Disclosure controls were assessed as effective; no material change in internal control was reported.
Important facts for investors to verify
- Whether clinical data and development plans for Resolaris support further trials, and whether any safety, immunogenicity or infusion-reaction concerns emerge.
- Actual cash burn and runway relative to management’s stated estimate, including the timing and terms of any additional financing or partnerships.
- Whether the remaining loan tranches can be drawn after satisfying milestone conditions, and the effects of loan interest, fees, covenants and repayment obligations.
- Progress and costs for Stalaris and Project ORCA, including manufacturing readiness and the allocation of R&D spending among programs.
- Potential effects of the Stalaris and Resolaris trademark disputes, and whether product naming changes or related costs are required.