aTyr Pharma, Inc.
Q1 2019 Earnings Call Transcript

Published: 14 May 2019

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the aTyr Pharma's First Quarter 2019 Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. As a reminder to our audience, this conference is being recorded for replay purposes. It is now my pleasure to hand the conference over to Jill Broadfoot, aTyr's Chief Financial Officer. Ms. Broadfoot, you may begin.

[Jill Broadfoot:]

Thank you, Olivia, and good afternoon, everyone. Thank you for joining us today to discuss aTyr's first quarter 2019 operating results and corporate update. We are joined today by Dr. Sanjay Shukla, our President and CEO. Sanjay will provide an update on our corporate strategy and the clinical development of ATYR1923. I will then review the financial results before handing it back to Sanjay to open it up for the question-and-answer session. Before we begin, I would like to remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Please see the forward-looking statements disclaimer on the company's earnings press release issued after the close of market today as well as the risk factors in the company's SEC filings included in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made and as facts and circumstances underlying these forward-looking statements may change. Except as required by law, aTyr Pharma disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances. I will now turn the call over to Sanjay.

[Sanjay Shukla:]

Thank you, Jill. Good afternoon everyone and thank you for joining our first quarter results conference call. While it is only been a short time since our last quarterly conference call, today we are going to provide a number of important updates on several initiatives including our ongoing ATYR1923 clinical trial, recent data presentations and collaborations and our efforts to further leverage our understanding of the role of Neuropilin-2. Beginning with our clinical trial, during the first quarter, we remained acutely focused on advancing our lead therapeutic candidate ATYR1923 through clinical development for the potential treatment of pulmonary sarcoidosis. In December, we announced the initiation of a Phase 1b/2a study, the first study of 1923 in sarcoidosis patients. The study is a multiple ascending dose placebo-controlled first-in-patient study of 1923 that has been designed to evaluate the safety, tolerability, steroid sparing effect, immunogenicity and PK of multiple doses of 1923 as well as to evaluate established clinical endpoints and potential biomarkers to assess preliminary efficacy. 36 patients will be enrolled into three staggered multiple dose cohorts at doses of 1, 3 and 5 milligrams per kilogram. And randomized two to one to receive either 1923 or placebo. These are the top three doses that we evaluated in our single ascending dose Phase I study, and we believe each of these doses have therapeutic potential based on our translational efficacy data. The initiation of this trial was a significant milestone for our company and one that we were able to achieve during the fourth quarter as planned. We are running this trial in collaboration with the foundation for sarcoidosis research and its clinical studies network. And as expected, they are providing crucial assistance with trial site activation and patient recruitment. We believe that my modulating the activity of key immune cells involved in this disease, 1923 has the potential to downregulate inflammation in pulmonary sarcoidosis patients, thereby preventing further clinical morbidity and progression of disease. The trial continues to progress and we remain on track to report data during the fourth quarter. If successful with this trial, we may have the opportunity to potentially address others serious inflammatory lung diseases that have no known cure. Also during the quarter, we presented data at a number of important medical conferences that give us increased conviction in the underlying mechanism of action of 1923. We previously discussed presentations at the Keystone Symposia 2019 Conference on myeloid cells in February and at 2019 American Association for Cancer Research Annual Meeting in April. Those presentations further advanced our understanding of 1923 in NRP-2 biology in the regulation of immune response. In addition, we recently announced that we will be presenting a poster at the American Thoracic Society 2019 International Conference, which is being held May 19th through 22nd in Dallas, Texas. The poster will describe comprehensive pre-clinical findings from a study of 1923 in murine models in a broad range of interstitial lung diseases including pulmonary sarcoidosis, chronic hypersensitivity pneumonitis, sclerodermatous chronic graft versus host disease and rheumatoid arthritis associated interstitial lung disease. 1923 treatments significantly decreased both skin and lung fibrosis in the sclerodermatous chronic graft versus host disease model. And it also reduces lung protein levels of several fibrosis-related cytokines or chemokine in the highly inflammatory experimental chronic hypersensitivity pneumonitis and sarcoidosis models. These data highlight 1923’s unique mechanism of action and demonstrate activity in a broad range of inflammatory interstitial lung disease models. This body of evidence supports our overall clinical strategy in an area where we estimate the addressable market to be in the $2 billion to $3 billion range based on sales of leading antifibrotics for IPF. We have previously demonstrated the 1923 impacts the NRP-2 receptor an observation that we highlighted at ACR in April, 1923 inhibits aspects of macrophage function and we know macrophage mediate the immune microenvironment in granulomas. Sarcoidosis is manifested by the presence of granulomas in affected organs. Therefore, by addressing this key inflammatory pathology, we believe 1923 is well positioned to demonstrate beneficial activity in our Phase 1b/2a clinical trial in pulmonary sarcoidosis patients. To further our understanding of the emerging role of NRP-2 in modulating immune responses across a broad range of disease states, we recently hosted an inaugural NRP-2 summit that brought together leading researchers from across the United States and Europe to discuss the most recent discoveries relating to the development of therapeutics directed to NRP-2 receptor. This is an accelerating area of biology that we believe can yield a novel class of high impact therapeutics. Notable participants at this summit included Dr. Craig Vander Kooi from the University of Kentucky, an expert on the structure of NRP-2 receptor. Dr. Diane Bielenberg from Boston Children's Hospital, who leads efforts exploring the role of NRP-2 pathway in inflammatory diseases, and Dr. Kausttubh Datta from the University of Nebraska Medical School as well as Dr. Arthur Mercurio from the University of Massachusetts. Both experts focusing on the role of NRP-2 as it relates to cancer biology. Let's take a moment to briefly talk about NRP-2. NRP-2 is a pleiotropic receptor consisting of five sub-domains that has been found on the surface of immune cells. NRP-2 binds the multiple ligands and modulates signaling pathways such as semaphorins, VEGF and integrins. These important immune pathways are implicated in inflammatory disorders as well as in various cancers, which potentially provide attractive clinical development targets. The NRP-2 summit provided an initial opportunity for these thought leaders in the field of NRP-2 biology to meet with us and each other. We look forward to possibly hosting additional summits in the future and are actively collaborating with many of these attendees who advanced NRP-2 biology as it relates to the development of new pipeline opportunities and eventual therapies. We look forward to providing further updates on our progress as these programs mature and we believe we are well positioned to be the leader in the emerging field of NRP-2 biology. Turning now to our collaborations. In March, we announced the research collaboration with CSL Behring to accelerate development of therapeutic candidates emerging from our tRNA synthetases pipeline. The collaboration covers up to four candidates and gives us the potential to earn up to $4.25 million per candidate that is advanced or $17 million of total potential option fees. CSL is a global biotherapeutics leader and we believe this collaboration is an important validation of our technology. CSL is funding all research and development activities related to the development of the applicable product candidates for the duration of the collaboration. In early April, we had a kickoff meeting at CSL’s offices in Bern, Switzerland. The first phase of research work has commenced on both sides and is progressing in line with the research plan. The collaboration is governed by our joint research committee, which met for the first time last week and we will meet regularly to ensure the program objectives stay on track. One corporate update before turning the call over to Jill. Subsequent to the end of the quarter, we announced $5 million registered direct investment in the company led by Federated Kaufmann. Federated conducted due diligence for approximately three quarters prior to making their investment. We viewed this investment as yet another validation of our science and technology and we are grateful for their support. In summary, we enter 2019 with significant momentum, having entered the clinic with our lead program, ATYR1923, while at the same time continuing to build upon the body of evidence suggesting that our novel NRP-2 based pipeline represents a potential new class of drug to treat serious diseases of inflammation and potentially cancer. We also continue to execute on our strategy of pursuing corporate and academic collaboration that can further expand our pipeline and significantly accelerate the development of new therapeutics. In parallel, our clinical development plan for 1923 can serve as a template for additional therapies that we discover and develop independently. I believe we have a unique opportunity here to help significant and underserved patient populations while creating long-term value for our shareholders. With that, I'd like to turn it over to our Chief Financial Officer, Jill Broadfoot, to review our financial results.

[Jill Broadfoot:]

Thank you, Sanjay. Our results for the quarter are in line with our expectations. Research and development expenses were $3.3 million for the three months ending March 31, 2019 compared to $6.2 million for the comparable period in 2018. General and administrative expenses were $2.5 million for the three months ending March 31, 2019 compared to $4.1 million for the comparable period in 2018. The decreases for both research and development and general and administrative expenses were primarily related to our corporate restructuring announced in May 2018, where we announced our focused development efforts on the clinical advancement of 1923 along with related reductions in headcount and other cost saving measures. As of March 31, 2019, we had $43 million in cash, cash equivalents and investments compared to $49.5 million as of December 31, 2018. As Sanjay mentioned, subsequent to the end of the quarter, we also raised an additional $5 million through a registered direct offering led by Federated Kaufmann. For the first quarter, our cash burn net of debt and equity was $5.6 million consistent with our guidance also our long-term debt decreased from $16 million to $14.2 million as of March 31, 2019. Looking forward to the remainder of 2019, we believe our cash burn will continue to stay steady with an anticipated burn of approximately $23 million to $25 million net of debt and equity. Now, I'd like to turn the call back over to Sanjay before we open it up to Q&A.

[Sanjay Shukla:]

Thanks, Jill. We look forward to keeping you up to date on our ongoing proof of concept Phase 1b/2a trial of ATYR1923, which if positive will usher in a new era for our company. We appreciate your interest and continued support. At this time, Jill and I will be happy to take your questions.

[Operator:]

[Operator Instructions] First question coming from the line of Joel Beatty with Citi. Your line is now open.

[Joel Beatty:]

Hi, team. Thanks for taking the questions. The first one is in the Phase 1b/2a trial of 1923. Could you discuss any type of updates and characterizing the enrollment so far? Or what amount of data we might be able to see in the fourth quarter of this year?

[Sanjay Shukla:]

Yeah, thanks for the question Joel. Right now, we are proceeding in our trial as expected with regard to recruitment and enrollment. I will be and I’ve said previously providing an update on that mid-year. So I think we're still in line to do that. I think at that mid-year time point we’ll also be able to better characterize what they expect to see at the end of the year. So I would just say stay tuned certainly by the next time. We have an earnings call. There'll be a more robust operational updates around those questions that you ask. I think when you think about the end of the year, it's going to be dependent on really how many patients we see in that sort of mid-year timeframe. Certainly, safety is going to be top of mind here. And depending on the enrollment of the trial, we'll be able to maybe look at some trends of efficacy perhaps in that first cohort. So what I'd ask you is just stay tuned. I think we're very close to giving that update in that mid-year timeframe. But I think the important thing here is we're still on track to get some data out and get some interim readouts from this trial at the end of this year.

[Joel Beatty:]

Okay, that makes sense. Then maybe thinking ahead to – could you maybe characterize what point in time from the trial you see collecting enough data to reach a decision point about the next steps for 1923 and what type of data you're hoping to see at that time to help give confidence for moving ahead?

[Sanjay Shukla:]

Sure. So, obviously, we've set this trial up with three cohort arms, 36 patients total. Our view is we believe that even the first dose we should start to see some signals of activity. And this is based on our translational data where a lot of the efficacy that we saw in those animal models project to be a dose range at somewhere between 0.3 and 1 milligrams in humans. As we're starting with that 1 milligram dose, we expect to see some activity right away. Of course, we'd like to see it in a dose dependent manner and increase once we get into 3 milligrams. So I think what I'd like to see is in particular in those first two cohorts, patients doing better, patients reducing their steroid burden. I think that would give us – start to give us a lot more confidence about this drug in this drug's activity. Of course, then we also have the 5 milligram cohort to sort of take it to the top end of the range. So I think the important thing here is to go sort of step-wise, ensure that we have good safety and then start to really unmask any sort of benefits that we see at 1 milligram. If we see that, you would want to expect to see a little bit better at 3 milligrams. I think that's the way that the team is thinking about it.

[Joel Beatty:]

Very good. And then I guess the NRP-2 summit meeting that you held recently, it sounds interesting. Could you tell us about were there any takeaways from that meeting that provide opportunities or insights for aTyr?

[Sanjay Shukla:]

Yeah, I mean, I think it was a fantastic opportunity for us. It was very rare to pull together experts like this. They all came in here to San Diego and we had extremely productive discussions. I think they were guided towards how can we create near-term value and near-term opportunities for us at aTyr. What's clear about this receptor in particular because it has several sub-domains, it provides attractive targets to potentially create agonist or antagonist therapies too. You can imagine that many companies now are looking at validated receptors and what they can do on both sides of the fence. In some instances, you want the immune system to be turned down. In other side examples – for example, in cancer, you want to activate the immune system. What's clear is we're partnered with really the best and the brightest and I think it's unique that we've been able to circle this validated receptor with some real deliverables that we hope to generate new pipeline opportunities very, very quickly.

[Joel Beatty:]

Great. And then maybe one last question, if I could, on the aTyr partnership with CSL Behring announced recently. Could you maybe discuss what you hope to see from that? And what you'll be focusing on with that partnership going forward?

[Sanjay Shukla:]

Yeah, thanks for that question. That's a good point here that this is a research collaboration and I think the manner in which, first of all, we built 1923 by establishing a receptor, creating receptor assays, moving to now functional effects with macrophages. These are the sorts of things you need to do, biotech companies need to do when you try to validate really, really a research target. And then you move into, of course, animal efficacy experiments. We're taking that sort of template on how we logically and carefully built 1923 to a therapeutic candidate. We want to now do that four times over with CSL’s backing. And CSL with a focus a little bit more on immunology, hematology, neurology and some of the buckets that they're paying attention to now. We think we have some opportunities with four of these tRNA synthetases candidates to do the same thing. That's where the milestone payments kick in. If we were able to sort of move those assets and create that value by, for example, identifying the receptor first and creating receptor assays, that's where you'll start to generate milestone payments. I think it's a nice collaboration for us in the sense that we're not burning any of our resources towards this. CSL is funding these efforts. And we'll be rewarded as we start to basically reach those research milestones that we've demonstrated we can do before with another synthetases. In this case, we'll be looking to do it with 20% of our IP portfolio.

[Joel Beatty:]

Very good, thanks for the update.

[Sanjay Shukla:]

Great.

[Operator:]

And at this time, I'm showing no further questions. I would like to turn the conference call back over to Mr. Sanjay Shukla for closing remarks.

[Sanjay Shukla:]

Great, thank you. Obviously, we've had an update not too long ago, so expecting a lot more questions, of course, at the next earnings call that we have here. I'd like to thank everybody for joining this call. We look forward to providing a larger update, as I said, at our next quarterly update in August. Thanks again.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.