aTyr Pharma, Inc.
Q1 2018 Earnings Call Transcript

Published: 14 May 2018

[Operator:]

Good morning, ladies and gentlemen, and welcome to the aTyr Pharma First Quarter 2018 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. [Operator Instructions] 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 Mark Johnson, Senior Director of Investor Relations. Sir, you may begin.

[Mark Johnson:]

Thank you, Krisal. Good morning, everyone, and thank you for joining us today to discuss aTyr’s First Quarter 2018 Operating Results and Corporate Updates. We are joined today by Dr. Sanjay Shukla, our President and CEO; and Dr. David King, our Chief Scientific Officer. Sanjay will provide some comments on our announcement today regarding our program prioritization and corporate restructuring. David will provide an update on our research activities, highlighting the identification of the receptor for ATYR1923, or 1923, and its potential impact on our clinical development program. Finally, Sanjay will review the financial results before opening it up to 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 in response to questions on this conference call are forward-looking statements under the Safe Harbor provisions 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 statement disclaimer on the company’s earnings press release issued before the open of market today as well as the risk factors and Company’s SEC filings that 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.

[Dr. Sanjay Shukla:]

Thank you, Mark, and good morning, everyone. The company initiated development on panel of human antibodies from our immuno-oncology ORCA program last year towards the filing of an IND. This development was based on our early pre-clinical studies which were conducted with mouse monoclonal antibodies and whose results were represented at the ASCO-SITC symposium and the American Academy for Cancer Research earlier this year. Unfortunately, new pre-clinical data observed over the last month did not show sufficient levels of efficacy to justify further development of our panel of human antibodies. Therefore, this time, the company will no longer be proceeding with IND-enabling activities for the ORCA program, including GMP manufacturing. Our research team will be conducting additional research study as we re-evaluate the program to better understand these recent filings. However, let me be clear. Given the institution efficacy, we recently observed for the panel of antibodies in our program, we will be pausing the further development for such antibodies. We do not plan to further advance ORCA unless we are able to generate data, and we believe will be robust in the highly competitive immuno-oncology space. As a management team, we carefully evaluated the resources we would need to advance our programs towards meaningful patient data. Based on our evaluation, we have prioritized our 1923 program. And the company has implemented a corporate restructuring of focus on its further clinical development. This corporate restructuring will result in an immediate workforce reduction of approximately 30% as well as additional anticipated cost-saving measures. The decision to reduce headcount was extremely difficult, and I want to sincerely thank all of our impacted employees and their families for all of their outstanding efforts and commitment to aTyr. Looking ahead to the second half of the year, we expect our cash burn from operations to significantly decrease as a result of this restructuring and our program prioritization, providing us an extended cash runway. Our goal will be to prioritize a clinical development of our 1923 program and achieve significant clinical milestones with are currently available financial resources. Today, we believe that the 1923 program gives us our best chance to create shareholder value and our most immediate opportunity to make a meaningful impact on the lives of patients. I’m pleased to now provide an update on this program and share with you are excited around its potential. As a reminder, our 1923 therapeutic candidate is focused on the development of an engineered Resokine protein as a potential therapy for the treatment of immune-mediated diseases. I’m happy to report that we have completed enrollment in our Phase I healthy volunteer study dosing all the way up to the highest dose cohort of 5 milligrams per kilogram. We look forward to providing top-line results from this trial later this quarter. We recently presented our research on the immunomodulatory function of the Resokine iMod domain from 1923 at the American Academy for Immunology Annual Meeting in Austin, Texas, on May 6th. The takeaway message from these published studies was that Resokine may function as a circulating immune set-point modulator through action by its immunomodulatory domain. Our 1923 program fuses this domain of Resokine to the Fc region of a human antibody. We hope to see in our Phase I results confirmation of our pre-clinical data that this improves the pharmacokinetic profile of the candidate and supports once-a-month dosing. In parallel to our ongoing Phase I study, we are expanding our knowledge of the potential for 1923 by conducting studies in several additional preclinical models to further elucidate its potential clinical utility. This information provides us optionality in selecting the best indications for future clinical trials for 1923. Our goal is to generate data from a patient trial for our 1923 therapeutic candidate with our extended cash runway as a result of our restructuring and program prioritization. Over the next several months, we plan to convene with expert clinicians and key opinion leaders to assist us in designing this trial in the best indication. Our team will evaluate three key areas for 1923

[Dr. David King:]

Thank you, Sanjay. It'll be my pleasure. We are excited to share our identification of NRP-2 with the receptor for our 1923 therapeutic candidate. Today we’ll provide an overview of how we identifies this receptor, what it is and what we have learned about, and how it may impact our clinical development of 1923. We conducted screens on over 4,500 human membrane proteins in collaboration with Retrogenix. Retrogenix is a U.K. biotechnology company that has a human cell microarray system to display the majority of human transmembrane proteins in the format well suited for screening and discovery of novel protein-protein interactions. The screens resulted in the identification of Neuropilin-2, or NRP-2, as a specific binding partner for 1923. Binding was confirmed using notable techniques, including surface plasmon resonance, or SPR, with a soluble form of NRP-2, binding to cells expressing NRP-2 by flow cytometry and microscopy and enzyme-linked immunosorbent assays, ELISAs. So what is Neuropilin-2 or NRP-2? NRP-2 is a pleiotropic cells surface receptor that was originally identified based on its role in exon guidance during neuronal development and subsequently shown to be important in the development of lymphatic system. Recently, to merge the NRP-2 also plays an important role in the adult’s immune system. NRP-2 combined multiple like-ends in co-receptors to influence these multiple-functional roles, including interaction with type 3 semaphorins and plexins to impact neural development and also forms of a vascular endothelial growth factor, especially VEGF-C, which is in both infogenesis. So it has a well-established role in development of the neuralin lymphatic systems, and recent data suggest it has an emerging role in the adult’s immune system. Our team is collaborating with establish groups working on these pathways, and we’re excited to learn more about NRP-2 and how it may play a role in certain [Indiscernible] and how it interact with other known receptors. We will continue to research the ways in which NRP-2 utilize its common mechanisms, including VEGF-C and semaphorin 3F to regulate diverse pathways. Recent evidence suggest that there are high levels of NRP-2 expressions found on multiple immune cell types, which may play important roles in migration of immune cells, antigen presentation, phagocytosis and cell-cell interactions. The role of Neuropilin-2 in the immune system has been described in several recent publications, including from the group of [Schellenberg] from the University of Technology in Dresden, Germany, and [indiscernible] from the University of Nebraska Medical Center, both in 2017. This suggests to Neuropilin-2 may be an important regulator of immune response in a number of different settings with potential for therapeutic intervention. We have aTyr, the company evaluating the role of the NRP-2 interaction with 1923 in the control of immune responses and designing optimal therapeutic approaches to modulate this newly discovered pathway in a number of diseases with high unmet medical need. The discovery as a receptor for 1923 represents a significant achievement and advancement in our understanding this program in [Indiscernible] biology. We are just now beginning to illustrate the potential therapeutic implications of this discovery and its impact on our translational science. We look forward to providing you further updates on our research of NRP-2 and 1923. Sanjay will now take you through our financial results. Sanjay?

[Dr. Sanjay Shukla:]

Thanks, David. Identifying and understanding the receptor NRP-2 is an exciting and important development for our 1923 program, and I want to thank you and your team for your hard work. Now our financials. Research and development expenses were $6.2 million and $9.2 million for the quarters ended March 31, 2018 and 2017, respectively. The decrease was due primarily to a $1.9 million decrease related to the completion of ATYR1940 clinical studies and the decrease of $1.1 million related to lower product manufacturing costs. General and administrative expenses were $4.1 million and $4.0 million for the quarters ended March 31, 2018 and 2017, respectively. As of March 31, 2018, the company had $74.1 million in cash, cash equivalents and investments. As a result of today’s restructuring announcement, we anticipate cash burn from operations to be significantly less in the second half of 2018. In 2017, our annual cash burn from operations was approximately $43 million, and we're now projecting our cash burn from operations to be $10 million to $12 million less in 2018. We're committed to developing 1923 and understanding the importance of its receptor, NRP-2. Today we announced some very difficult choices that management had to make. As CEO of aTyr, I want to ensure our culture is one of following to science and learning from our data. We have learned much about this new area of biology, and our call today reflects this. Looking ahead, we are encouraged by the opportunity to build a successful company over time, but it starts with effectively translating our science in the clinic. Our goal will be to create shareholder value with our current team and resources. To summarize our path forward, during the remainder of 2018, we expect to achieve the following milestones

[Operator:]

Thank you. [Operator instructions] And our first question comes from Matt Luchini from BMO Capital. Your line is open.

[Matt Luchini:]

Hi, good morning. Thanks for taking the questions. So I guess maybe first on ORCA, if you could provide a little bit more color on what was seen, or rather not seen, in between [Indiscernible] and today. And then, I guess, looking really at 1923, it seems like there is - you’ve talked a little bit about that the data next month has been the next most near-term milestone. But looking at NRP-2, could you just give a little bit more color on and specificity on why or how you think that this is going to be particularly important from an indication selection perspective? I think that will be useful to understand. Thanks.

[Dr. Sanjay Shukla:]

Sure, Matt. Good questions. So first on ORCA. Obviously, we were involved in a number of preclinical testing, and recently over the last month, we learned of this new data with our human antibodies. So we've been really evaluating our plans since then. It's not that we didn’t see efficacy with the ORCA, just wasn’t sufficient enough for us to justify the necessary investment to complete in this very competitive IO market. So I think what we previously saw was data with mouse monoclonal antibodies. At this step, we saw additional data that at this point have us now focusing on 1923. With your next question around NRP-2, I’ll answer a little bit, Dave might chime in here too. But I think fundamentally understanding the receptor and how this receptor works upstream to regulate the immune system is really going to be fundamental to that indication selection process. David noticed -- mentioned there is a number of references, recent publications around NRP-2. So that’s accelerating biology around that receptor and we’re intersecting with that at this point. So I think that’s really exciting. It’s known do some things in neural and lymphatic development, but as David mentioned, there is number of investigations now looking at the immune system. So I think this is going to be really important for us to understand this receptor really, really well. We’ll be doing so over the coming months. And I think that’s going to really tightly help us with our translational story so we can really de-risk, the clinical trial, the next clinical trial as much as possible. I don’t know if there’s anything else you want to add David?

[Dr. David King:]

Yes, I would just say, I think it makes a big difference to our translational efforts. It gives us a lot more of a molecular understanding of what’s going on, on the pathway. So that really aids both our mechanistic studies and our translations in clinic.

[Operator:]

And our next question comes from Katherine Xu from William Blair. Your line is open.

[Katherine Xu:]

I’m just wondering with the [series] recent reduction in workforce, can you advise us how many people that is and what function? That’ll be very helpful. And with regards to the Phase I study of 1923, what kind of PD markers are looking at in that study? I mean, also with the discovery of NRP-2, does that mean -- what kind of impacts will it have in the initial indications we talked about before, such as [algae]?

[Dr. Sanjay Shukla:]

So first question was around the reduction. It’s 19 individuals that were impacted. This is really across the organization at all levels, but I would say primarily was in our CMC and manufacturing group and research teams. I would say that that probably forms the majority of that. We believe we have a really good team now that take forward 23, and you appoint to 23 that next near-term turn here is around a clinical trial. Our first answer to the NRP-2 part. NRP-2 and what we know about its biology, and what we’re learning very quickly about its biology, is it does still fit into a thesis around impacting T-cell-mediated in particular interstitial lung disease. It actually has a number of other applications that we’re learning very quickly about specifically around its role in infogenesis that David mentioned. So I think it’s important for us to consume as much information about NRP-2 as quickly as possible because it’s kind of burgeoning space in itself. So we think we still have the right thesis there to attack in interstitial lung disease. What’s going to be important and what you highlight is, our next studies going to have to have some crisp PD readouts, and those can include things from an assay point of view and they can also be from a point of view of something clinical changing, something bending there in the disease. I think with our knowledge with NRP-2, we're going to be better positioned to do both of those things. It's going to occur in the coming months now. But I think our indication selection process is really going to be tied now to our quick understanding of NRP-2, and I think we would want to see something that we can assay. And what I would like to see from a clinical point of view is something change and something we show activity in these patients. I think that's what's going to be important when I say a clinically meaningful data point coming out of this next trial.

[Katherine Xu:]

Thank you.

[Operator:]

Thank you. And our next question comes from Ted Tenthoff from Piper Jaffray. Your line is open.

[Ted Tenthoff:]

Great. Thank you very much for the update. And I wanted to get a sense for the magnitude of cost savings or if you can provide a little bit more clarity on cash runway? Thank you.

[Dr. Sanjay Shukla:]

Sure, Ted. Thanks for the question. So as I mentioned, in 2018, our burn was about $43 million. We anticipate possibly $10 million to $12 million less this year. This does not include some of the debt service that we have. We have ventured debt of possibly $20 million - of $20 million. So this is really not factored into those savings. We believe that we've now created runway to adequately plan for a meaningful Phase II trial for 23 with an important clinical readout. So I think that's really the important takeaway here. And so we now have sort of clear-through runway, if you will, to put in 23 to give it its best chance of success. And I think our knowledge of NRP-2 is really the element that has been the most exciting because, as David mentioned, we now have a real molecular understanding. So I think that's the near-term thing we're focused on. But over the long term, I think we've been able to now really create sufficient runway for us to take this to a meaningful clinical catalyst.

[Ted Tenthoff:]

That's helpful. And how quickly do you think you could start a Phase II study? And when would you anticipate reported data on 1923? Would that be next year or into 2020?

[Dr. Sanjay Shukla:]

Yeah. So I think we have a goal. We'd like to be in the clinic later this year, towards the end of the year. I think with our knowledge now in the receptor, that’s really going to accelerate our thinking, but I'm not sure if we’ll accelerate that goal because we want to make sure that we have the right indication fit. So I think that's still very much our goal and then 2019 becomes the time period where we really run the bulk of the trial. Now an indication could be something that you have a readout of sooner or later. That really depends on the design of the trial. And as I said, that's going to be, I think, our most near-term objective at this point. Pick the indication, get the design right, I think we now have enough time. I think what you could see is, I'm not guiding to this, but late 2019 we want to be in a position to really talk about some of that clinical data, maybe early 2020, but it really depends on that design. So those are just placeholders I think, but now we had adequate time to really do something meaningful.

[Operator:]

And our next question comes from Cory Kasimov from JPMorgan. Your line is open.

[Carmen Ng:]

Hi. This is Carmen on for Cory. Thanks for taking the question. So no to harp on this, but do you see role in future for harnessing the Resokine pathway in the development of cancer therapeutics? And do you work on the ORCA program or any other potential target to identify [Indiscernible] evaluation?

[Dr. Sanjay Shukla:]

Sure, Carmen. I’m happy to answer that. The ORCA program, obviously right now we’re -- we’ve messaged that we are intended to really prioritize 23. At this point what we want to do, we’re not going to guide towards the future there, but we are going to look at something mechanistically and I think it still has some potential there. Near term, though, I think we’re really focused on 23 and we prioritize that program. With regard to your question about utility of the pathway itself. I mean, obviously this is a new area of biology, so we’ll continue to learn more about it and its clinical utility. Even NRP-2 has some hints there where you see real intersection between autoimmunity, cancer. I mean, there is an access here that we’re playing within this access. So I do think that there is an opportunity to look at some things, but we very much so, I think, are encouraged by the potential to what we’re learning and accelerating our knowledge with 23. So we really prioritize our resources accordingly.

[Operator:]

And our next question comes from Joel Beatty from Citi. Your line is open.

[Joel Beatty:]

So for 23, could you discuss what the key steps are between now and selecting the indication for Phase 2 and finalizing the trial design?

[Dr. Sanjay Shukla:]

Sure, Joel. Happy to do that. I think, first and foremost, it’s really around evaluating everything we understand about now Neuropilin-2, and that’s really as I think accelerated things from a molecular and translational understanding, as Dave mentioned. We’ll be completing some of our translational data package. Previously I’ve mentioned that we have run a number of new kind of animal models over the first half of this year and that was going to sort of aid our planning. We’ll be able to take both of those insights, those important research insights, sit down with the scientific, the physicians community, because they have to be educated just as we’re learning very quickly around what we know around Resokine biology. Once we do those three things, I think then you get into designing, picking the indication and designing the trial. So those three things are going to be our most near-term objectives so that we can name an indication and get in a trial with the goal of getting into that trial towards the end of this year.

[Joel Beatty:]

And then the question on NRP-2. Have you looked to HARS report and -- believe 1923 is based on and assessed whether NRP-2 as a target of HARS?

[Dr. Sanjay Shukla:]

So we are looking into that. I mean, specifically 1923 binds in NRP-2, it’s something that we are also looking at, the interaction with HARS and other tRNA synthetases. But as David mentioned, it’s a specific receptor to 23. I think that information is really what we’re focused on. With regards to other areas of Resokine biology, sure, we’ll sort of layer that knowledge into this. But I think the important thing here is, now that we have this understanding around how NRP-2 - 1923 binds with NRP-2, this is really I think the key point that we’re now wanting to interrogate so that we can downstream really focus on that PDS so that people wants and PD markers that you want in the next trial.

[Operator:]

Thank you. And that does end our question-and-answer session for today. I would like to turn the call back to Dr. Sanjay Shukla for his final remarks.

[Dr. Sanjay Shukla:]

Thank you. Thanks very much for your time and attention today. We look forward to providing updates as our science and programs advance. Thank you.

[Operator:]

And with that, ladies and gentlemen, we thank you for participating in today’s conference. This concludes the program. You may all disconnect. Everyone, have a wonderful day.