aTyr Pharma, Inc. — Q3 2016 Form 10-Q
Reporting period: Three and nine months ended September 30, 2016. The unaudited statements are presented in U.S. dollars; financial amounts below are in millions unless stated otherwise.
Business context
aTyr is a clinical-stage biotherapeutics company developing treatments for severe rare diseases. Its lead candidate, Resolaris, was being studied in rare myopathies with an immune component; iMod.Fc was an earlier-stage candidate for rare pulmonary diseases. The company reported no product revenue and had not reached profitability.
Financial performance and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $10.4 | $7.7 | $33.7 | $21.8 |
| General and administrative expense | $3.5 | $3.6 | $11.7 | $9.3 |
| Total operating expense | $13.9 | $11.3 | $45.4 | $31.1 |
| Net loss | $13.8 | $11.3 | $45.3 | $31.5 |
| Net loss per share, basic and diluted | $0.58 | $0.48 | $1.91 | $2.38 |
- Gross margin and operating margin are not meaningful because the company reported no revenue.
- For the first nine months, operating cash use was $41.2 million, versus $27.0 million a year earlier. Investing activities provided $24.9 million, largely reflecting investment maturities; financing used $2.5 million, primarily for bank-loan repayments. Cash and cash equivalents declined $18.7 million to $34.3 million.
- At September 30, cash, cash equivalents and available-for-sale investments totaled $80.9 million. Current assets were $73.6 million and current liabilities $11.9 million. Total assets were $85.9 million, versus $129.7 million at December 31, 2015; stockholders’ equity was $74.0 million, versus $115.1 million. Accumulated deficit was $203.4 million.
- Commercial bank debt was $2.655 million, all classified as current at quarter-end; no long-term bank debt was reported. The SVB facility was collateralized by company assets other than intellectual property, had fixed interest rates, and had no remaining availability.
- Management said existing cash and investments were expected to fund anticipated requirements through at least the next 12 months. The filing also says substantial additional funding will be needed to complete later-stage trials and pursue commercialization.
Changes versus prior periods
- Third-quarter net loss increased $2.5 million year over year. R&D expense rose $2.7 million, mainly from Resolaris manufacturing and development, clinical and nonclinical work, and iMod.Fc manufacturing development. G&A declined $0.1 million.
- Nine-month net loss increased $13.8 million year over year. R&D rose $11.9 million, driven mainly by Resolaris manufacturing and development, increased R&D staffing, other preclinical work, and iMod.Fc manufacturing. G&A rose $2.4 million, primarily from personnel costs.
- Other income improved year over year in both comparisons, principally because lower debt balances reduced interest expense.
- The prior-year nine-month period included substantial preferred-stock and IPO financing proceeds; there were no comparable equity-issuance proceeds in the 2016 period. Common shares outstanding were 23,718,529 at September 30, 2016.
Outlook, developments and risks
- In October 2016, the FDA granted Resolaris fast track designation for FSHD. The filing cautions that the designation does not guarantee faster development, review, or approval.
- The company described four ongoing Resolaris studies: early-onset FSHD, adult FSHD or LGMD2B, and two long-term safety-extension studies. It planned continued Resolaris development and iMod.Fc research, but did not provide specific financial guidance or trial-completion dates.
- The FDA partial clinical hold on Resolaris doses above 3.0 mg/kg remained unresolved. The company said it was finalizing an action plan to provide additional information; it did not expect the hold to affect current trials because they were not planned to use higher doses. The filing discusses unexplained rodent deaths in high-dose studies as part of the FDA’s concern.
- In earlier Resolaris studies, some participants developed anti-drug antibodies and three experienced generalized infusion-related reactions and discontinued dosing. The company described measures intended to reduce these events, but their effectiveness was uncertain.
- Manufacturing and development commitments included approximately $2.0 million to Fujifilm for Resolaris and $1.6 million to an iMod.Fc contract manufacturer over the next 12 months. The facility lease was due to expire in May 2017, with an extension option.
- Funding risks include continuing losses, reliance on external capital, possible dilution or restrictive financing terms, and the possibility that development programs may be delayed, reduced, or stopped. The company had a shelf registration statement for up to $150 million and a Cowen sales agreement permitting up to $35 million of common-stock sales, subject to registration requirements; no such sales were reported in the period.
- The filing reported no material legal proceedings and no off-balance-sheet arrangements. It disclosed a trademark dispute allegation from Alexion concerning the Resolaris name; a resolution was not provided in this filing.
Most important facts for investors to verify
- Whether the FDA’s partial clinical hold is lifted, and what additional data or dose limits apply.
- Updated clinical safety, immunogenicity, and activity results for Resolaris, including infusion reactions and anti-drug antibodies.
- Actual cash burn and runway relative to management’s estimate, and the timing, terms, and dilution impact of any further financing.
- Progress, cost, and reliability of Resolaris and iMod.Fc manufacturing, including the stated near-term commitments.
- Whether fast track designation translates into any change in development or review timelines, and how the Resolaris trademark matter is resolved.