aTyr Pharma, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. Amounts are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Business context
aTyr is a clinical-stage biotechnology company developing treatments for severe rare diseases. It had no product-sales revenue and was focused principally on Resolaris, including trials in facioscapulohumeral muscular dystrophy (FSHD) and other rare myopathies. It also selected iMod.Fc as a second development candidate for potential rare pulmonary diseases.
Financial performance and liquidity
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $12.0 | $6.6 |
| General and administrative expense | $4.1 | $2.3 |
| Operating loss | $(16.1) | $(8.9) |
| Net loss | $(16.1) | $(9.1) |
| Net loss per share, basic and diluted | $(0.68) | $(9.39) |
| Operating cash flow | $(12.5) | $(6.3) |
Gross margin is not applicable because the company reported no product revenue. The year-over-year per-share comparison is affected by the substantial increase in weighted-average shares following the 2015 IPO: 23.6 million in Q1 2016 versus 966,322 in Q1 2015.
- Cash and investments: $111.6 million at March 31, comprising $54.1 million cash and cash equivalents, $31.9 million short-term investments and $25.6 million long-term investments. Management said these resources were expected to fund anticipated cash needs through at least the next 12 months.
- Cash flows: Cash increased $1.1 million during the quarter. Investing activities provided $14.4 million, mainly reflecting $24.7 million of investment maturities, partly offset by $10.0 million of investment purchases and $0.3 million of capital expenditures. Financing used $0.8 million, principally for bank-debt repayments.
- Debt and liquidity: Commercial bank debt was approximately $4.3 million net of discount, with $3.4 million classified as current. The fixed-rate SVB loan matures in June 2017, is secured by company assets other than intellectual property, and had no remaining borrowing availability. Current assets were $87.6 million and current liabilities $13.2 million.
- Balance sheet: Total assets were $115.1 million, down from $129.7 million at year-end 2015; stockholders’ equity was $100.4 million. Accumulated deficit was $174.2 million.
Material changes versus Q1 2015
- Research and development expense rose $5.4 million, primarily from Resolaris manufacturing and clinical/nonclinical development costs and increased R&D compensation. The comparison was partly offset by a $1.4 million one-time noncash intellectual-property expense recorded in Q1 2015.
- General and administrative expense increased $1.8 million, mainly due to higher personnel costs and public-company expenses.
- Operating cash use nearly doubled, consistent with higher operating expenses. Q1 2015 financing cash flow included $46.3 million of preferred-stock proceeds; Q1 2016 had no comparable financing proceeds.
- Other income/expense improved to $28,000 of income from $149,000 of expense, primarily reflecting interest income on investments.
Outlook, risks and unusual items
- Management expects significant expenses and operating losses to continue and increase as clinical development, research, manufacturing and public-company costs grow. It expects no product-sales revenue for the foreseeable future and says additional capital will be required to complete later-stage trials and pursue approvals and commercialization.
- In March 2016, the company reported results from three Resolaris dose-escalation cohorts in its exploratory adult FSHD trial and said the observed safety, tolerability, immunogenicity and activity profile supported further development. The filing does not provide a numerical efficacy result or specific financial guidance.
- The FDA partial clinical hold on Resolaris doses above 3.0 mg/kg remained unresolved. The agency had requested more information regarding unexplained deaths in high-dose rodent studies; management was finalizing a response plan. The company said it did not expect the hold to materially affect current trials because they were not intended to exceed 3.0 mg/kg.
- Three patients in the FSHD and long-term extension studies experienced generalized infusion-related reactions and discontinued dosing. Some patients had elevated anti-drug antibody signals. The company introduced measures to reduce infusion concentration and rate, but cannot assure they will prevent further reactions or antibodies.
- Key risks include clinical and regulatory uncertainty, limited rare-disease patient pools, manufacturing and third-party dependence, need for additional financing and potential dilution. The company reported no material legal proceedings and no material changes in contractual obligations outside the ordinary course.
- Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of March 31, 2016; no material change in internal control over financial reporting was reported.
Investor facts to verify
- Whether and when the FDA partial clinical hold will be lifted, and any resulting effect on trial doses, timelines or costs.
- Full clinical-trial data for Resolaris, including efficacy measures, adverse events, infusion reactions and anti-drug antibodies.
- Actual cash burn and whether the stated 12-month-plus funding horizon remains adequate as development spending increases.
- Progress in Resolaris manufacturing scale-up and validation, and the company’s ability to secure supply for later-stage trials.
- Future financing needs, potential dilution and the terms or availability of any new funding.