aTYR PHARMA INC Q1 FY2020 Earnings Call

Good afternoon, ladies and gentlemen. Welcome to the aTyr Pharma First Quarter 2020 Conference Call. At this time, all participants are in listen-only mode. As a reminder, this conference is being recorded for replay purposes. It is now my pleasure to hand the conference over to Ms. Jill Broadfoot, aTyr's Chief Financial Officer. Ms. Broadfoot, you may begin.

Thank you, and good afternoon, everyone. Thank you for joining us today to discuss aTyr's first quarter operating results and corporate update. We are joined today by Dr. Sanjay Shukla, our President and CEO. On the call, Sanjay will provide an update on our corporate strategy, including the clinical development of ATYR1923 and our research program in Neuropilin-2 or NRP2 and tRNA synthetase biology. I will then review the financial results and our current financial positioning before handing it back to Sanjay to open the call up for any questions. Before we begin, I would like to remind everyone that except for statements of historical fact, 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 statement disclaimer in the Company's press release issued this afternoon as well as the risk factors in the Company's SEC filings and 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, 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.

Good afternoon, everyone, and thank you for joining us for our first quarter 2020 results conference call. Before we begin, I would like to say on behalf of aTyr and our employees that we stand in support of all of our healthcare providers, essential personnel, partners, patients and community as we continue to work through the ongoing COVID-19 pandemic. We acted accordingly to implement a plan to ensure the safety of everyone involved with our clinical and research programs, while minimizing disruption to our business operation. We continue to abide by government directives and operate our business remotely in order to play our role in minimizing the spread of the virus to our employees and their families and ease the burden on our healthcare system. Now let's get started with our quarterly review and corporate update. During the first quarter of 2020 and subsequent period, aTyr progressed the development of our clinical program for ATYR1923 including entering into a major collaboration for expanded development and announcing a new trial in COVID-19 patients. We also advanced our pipeline of discovery programs and strengthened our balance sheet enabling us to further advance these programs towards important and potentially value-creating milestones. As we begin, I'll summarize the key highlights from the first quarter and subsequent period. We announced the Phase 2 trial of ATYR1923 in COVID-19 patients with severe respiratory complications following FDA acceptance of an investigational new drug application. We entered into a collaboration and license agreement with Kyorin Pharmaceutical for the development and commercialization of ATYR1923 for interstitial lung diseases or ILD in Japan for up to $175 million. We published two abstracts in the American Journal of Respiratory and Critical Care Medicine that will be presented at the upcoming American Thoracic Society International Conference. We announced the appointment of Dr. Arthur Mercurio, a leading cancer researcher at the University of Massachusetts Medical School, as the Scientific Advisor to the company and together we'll be presenting a poster at the upcoming American Association for Cancer Research Annual Meeting. We announced the award of a Hong Kong government grant to build a high-throughput platform for the development of bispecific antibodies, further building out our NRP2 antibody development program. We published a paper in the journal Cellular and Molecular Immunology highlighting the essential role that histidyl tRNA synthetase plays in the modulation of immune cell engagement in a broad range of disease states including ILDs. And finally, we've raised gross proceeds of approximately $20.7 million from a public offering of common stock. We've accomplished quite a great deal thus far in 2020 and we continue to make significant progress in the second quarter. Today, I will take some time to provide an update on our clinical program with our lead therapeutic candidate ATYR1923 including the status of both our Phase 1b/2a trial in pulmonary sarcoidosis as well as our Phase 2 trial in COVID-19 patients. I will also comment on our ongoing preclinical research and development efforts for our programs in NRP2 and tRNA synthetase biology. Jill will conclude with a review of our financial position. Let's begin with an update of our program for ATYR1923. While we advance ATYR1923 clinically, we continue to explore and validate the properties of the NRP2 signaling pathway and key attributes of ATYR1923 that make it a compelling candidate in immune-mediated diseases. We announced just last week the publication of two abstracts in the American Journal of Respiratory and Critical Care Medicine. The findings confirm the significant role of NRP2 in severe inflammatory diseases and further elucidate the mechanism of action of ATYR1923 and its ability to selectively bind to this unique target. In summary, these findings report that NRP2 is expressed and readily detectable within the granulomas of lung and skin samples of sarcoidosis patients. Through this research, we demonstrate that NRP2 expression can be detected on key immune cells that are known to play an important role in inflammation and granuloma formation. Additional research published demonstrates that ATYR1923 specifically and selectively binds NRP2 on the cell surface. These findings characterize the molecular basis of ATYR1923's immunomodulatory properties and indicate that the NRP2 signaling pathway could be a novel therapeutic target for immune-mediated diseases and highlight its potential to exert its effect on various immune cells. Now let's discuss our clinical program for ATYR1923. We will begin with an update on our Phase 1b/2a trial of ATYR1923 in patients with pulmonary sarcoidosis. As a reminder, this is a randomized double-blind placebo-controlled multiple ascending dose clinical trial in 36 pulmonary sarcoidosis patients. In December, we announced interim safety data from 50 enrolled sarcoidosis patients who had received a minimum of one dose of blinded study drug, which was observed to be generally safe and well tolerated with no drug-related serious adverse events. In addition, during the first quarter, our independent data and safety monitoring board completed its second safety review, allowing us to move from our 3 milligram per kilogram dose and test our 5 milligram per kilogram dose in cohort 3, the final group of patients in our study. We announced in March that due to the COVID-19 pandemic and its impact on clinical trial conduct, completion of enrollment and timing of our topline results from this Phase 1b/2a study would be delayed. At that time, we were enrolling patients in the aforementioned cohort 3 of our study. While some of our investigational sites have remained active, many sites had to pause. Recruitment rates for cohort 3 have slowed and some patients in cohort 2 have missed doses, which in some cases has led to their study discontinuation. We are currently evaluating strategies to ensure the trial meets the required number of evaluable patients, including potentially recruiting more than 36 patients in our study. I'm happy to report that we are starting to see reopening plans at all of our sites with some sites putting institutional procedures in place to prepare to open enrollment at the end of May or early June. We're working closely with each site to understand their full restart plans so as to incorporate an overall strategy for the completion of the study, while minimizing patient and provider safety risks. As we announced back in January, we continue to progress our global development strategy for ATYR1923 by entering into a collaboration and license agreement with Kyorin Pharmaceutical Company for the development and commercialization of ATYR1923 in ILDs in Japan. The initial development activities for commencing clinical work in Japan, including dialogue with the relevant regulatory agency, the Pharmaceuticals and Medical Devices Agency, are underway and remain very much on track. Now let's turn to our Phase 2 trial of ATYR1923 in COVID-19 patients. As we determine the best course of action for our ATYR1923 trial in pulmonary sarcoidosis, in light of the pandemic, we looked to our own science to see how we may be able to contribute to the immediate need for effective treatments for COVID-19. We learned early in this crisis that the inflammatory lung injury related to COVID-19 has shared some remarkable similarities to those observed in interstitial lung disease. Many COVID-19 patients with severe disease experienced serious, sometimes fatal respiratory complications caused by an excessive inflammatory response in the lung primarily driven by T cells. ATYR1923 has been shown preclinically to down-regulate T-cell responses thereby dampening inflammatory cytokine and chemokine signaling, both of which have been implicated in these severe COVID-19 cases. In addition to these anti-inflammatory properties, ATYR1923 has also been shown to improve lung function in animal models of immune-mediated acute lung injury. By targeting aberrant immune responses, we believe that ATYR1923's mechanism of action has substantial overlap with this disease pathology and presents a compelling opportunity to potentially treat this subset of COVID-19 patients. We announced in March that we had approached the FDA regarding testing ATYR1923 in COVID-19. In April, we announced that the FDA had accepted our IND application for a Phase 2 randomized double-blind placebo-controlled study of ATYR1923 in COVID-19 patients with severe respiratory complications. The trial will include 30 hospitalized COVID-19 positive patients with severe respiratory complications who do not require mechanical ventilation. Patients enrolled in the trial will be assigned to one of three cohorts of 10 patients each. Patients will receive a single dose of either one or three milligrams per kilogram of ATYR1923 or placebo to be administered in the hospital. Patients will be followed for 60 days post treatment and we plan to enroll at up to 10 centers in the U.S. While the primary endpoint of the study is to assess the safety and tolerability of a single dose of ATYR1923 in this acute setting, we will also focus on a number of key clinical outcome measures, including but not limited to fever, hypoxia and inflammatory biomarkers. We have identified and are engaged in start-up activities with target sites throughout the U.S., including some of the same sites that are part of our pulmonary sarcoidosis trial. We expect the first site to be ready to enroll and potentially dose our first patient within the coming weeks. The initiation of this trial is an important milestone for our ATYR1923 clinical program. aTyr has an opportunity to fundamentally address this public health crisis with a novel therapy specifically designed to address aberrant immune response and inflammation in the lung. We plan to provide further updates as the trial progresses. Now let's turn to our research program in NRP2 as we continue to invest in our pipeline opportunities, including disease areas outside of ILDs. Our in-house Research and Discovery Program and academic collaborations continue to yield published data validating NRP2 biology and the potential therapeutic application of NRP2 antibodies for a variety of disease settings including cancer and inflammatory disorders. We are pleased to be working in collaboration with Dr. Arthur Mercurio, one of our key scientific advisors, and his lab at the University of Massachusetts Medical School. There is a growing body of evidence indicating that the expression of NRP2 is enriched in breast cancer stem cells and that NRP2 signaling is critical for breast cancer stem cell function and resistance development. This provides strong rationale for targeting NRP2 as a therapeutic target. Through our collaboration with Dr. Mercurio, we explore the use of one of our NRP2 antibodies in triple-negative breast cancer models. Results from this collaboration are included in an abstract that was accepted by the American Association for Cancer Research for a poster at its upcoming annual meeting in June. Finally, we look to continue to leverage our broad portfolio of tRNA synthetase intellectual property through internal discovery programs and external collaboration. Through our research collaboration with CSL Behring, a leading global biotherapeutics company, we seek to identify up to four new IND candidates from our portfolio of tRNA synthetase IP. We have extended some of our research plans to account for a slight delay in completing the first stage of the program, primarily due to the disruption from the COVID-19 pandemic. Both parties have agreed that funding for this collaboration will continue, and are committed to achieving the milestones of the program. We plan on providing an update on this collaboration later in the year. Overall, we are pleased with the progress we have made to date in 2020. We see signs that our pulmonary sarcoidosis trial will be restarting cohort 3 enrollments shortly. With the announcement of the trial in COVID-19 patients, we are now investigating ATYR1923 in two clinical settings. And we expect to report data from the COVID-19 trial later this year. We also look forward to initiating clinical work for ATYR1923 in Japan through our current Kyorin partnership. Our research and discovery programs continue to generate published data that validate our science both from our work internally and through established external partnerships. With that I'd like to turn it over to our Chief Financial Officer, Jill Broadfoot to review our financial results.

Thank you, Sanjay. Total revenues were $8.1 million for the three months ended March 31, 2020, consisting primarily of licensing revenue from the Kyorin Agreement. Research and development expenses were $3.6 million and $3.3 million for the three months ended March 31, 2020 and 2019, respectively. The increase in research and development expenses was due primarily to the progression of our ATYR1923 Phase 1b/2a clinical trial in pulmonary sarcoidosis patients which was initiated in December 2018. General and administrative expenses were consistent between quarters at $2.6 million and $2.5 million for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, aTyr had $49.8 million in cash, cash equivalents and investments, which is consistent with prior guidance. Now I'd like to turn the call back over to Sanjay before we open it up to Q&A.

Thanks, Jill. Before opening the call for questions, I want to reiterate our commitment to our clinical and research programs in this difficult time. We aim to potentially help address the global public health crisis by investigating ATYR1923 in a subset of COVID-19 patients. ATYR1923 is not a repurposed therapy as it has been rigorously designed and developed to target aberrant immune responses in the lung. We continue to focus on our mission to develop new medicines for underserved populations. Our strong scientific rationale for ATYR1923 not only in pulmonary sarcoidosis but also in COVID-19 exemplifies this key corporate principle. We appreciate your interest and continued support and look forward to providing updates in the future. At this time Jill and I will be happy to take your questions.

Your first question comes from the line of Hartaj Singh of Oppenheimer. Your line is open.

Great. Thank you. Thanks for taking my questions and happy to hear everyone is safe and also all the progress. Sanjay, I know these times are not easy on any of us. So just a couple of separate questions. One is on the COVID-19 project. For the patients that you'll be putting on dose across the three different arms, will they be on background standard of care? I know that one of the things that we're reading is that various hospitals sometimes have different ways of treating COVID-19 patients, especially as they progress from severe to critical. How will you sort of handle that? And then what kind of background medication like remdesivir or anything else will be allowed? That's number one. And then number two, I know that the safety part of ATYR1923 has some good data — what exactly will you be looking for in that 60 days post dosing to have a good feeling that you can move the project forward? I just have a couple follow-up questions on pulmonary sarcoidosis after that.

Sure, Hartaj. Yes, good questions. So first of all, your question was about background therapy. Remdesivir is now used in these patients. We don't have a lot of data around which subset of patients will be prioritized nor do we at this point see remdesivir distributed quite broadly at a number of hospitals. So I think that's still being sorted but of course that will be a therapy that will be allowed as it is now considered standard of care. When you talk about some of the other therapies that are being tried in these patients, we really see our drug positioned a little bit upstream from some of the monoclonal antibodies targeting IL-6, TNF or GM-CSF which are being a bit more reserved for the most severe patients — patients that are quite often on a ventilator or very severely sick. So we're targeting those patients that don't necessarily require those therapies. We'd like to actually tone down the immune system before the patients really go into that florid cytokine storm. The other thing is there are still some trials where they're looking at hydroxychloroquine but we don't really see our protocol interfering too much with that protocol as we also see some of those protocols winding down at a number of centers. So that's the first question around what concomitant medications would be important. I think remdesivir might be the only one that for our protocol would be allowed. Your second question was really about the endpoints. The FDA wants us to really make sure that it's safe in these patients. We've established to a certain degree some safety and tolerability data in pulmonary sarcoidosis patients, and that's encouraging. We want to continue to see that in these patients and we expect we will. For activity, fever and hypoxia — two very clinical outcomes — came rising to the top when you talk to the experts. They really think our drug can perhaps shorten the duration of fever and lead to a quicker normalization in hypoxia in these patients. When you look at the inflammatory biomarkers, many of these patients come in with a number of inflammatory cytokines that are elevated. We're going to be able to follow these in particular in the first five to seven days of the admission into the hospital. We hope to be able to see a down-regulation there as we see fairly consistently in our animal models. So our expectation is between those clinical endpoints and those inflammatory biomarkers, these would be perhaps the most important signs of activity for our drug. There are other things in our protocol that we're looking at, and I'll outline that really once we dose a patient. But they are things that include ordinal scales around disease severity. There's a WHO Ordinal Scale that's being used quite a bit in a number of these trials. We're looking into that and then there's other things for example time to recovery, avoidance of mechanical ventilation — things of that nature. These will be the exploratory endpoints.

Great. Sanjay, another question I have is these are pretty sick patients, so in theory if either the low dose or the high dose arm shows benefit fairly quickly, is there some procedure by which you can move very quickly into a larger trial? I know authorities have allowed some trials to progress rapidly with small early signs of activity. Is there any such setup with your trial whereby if you see good effects early on you can progress to a larger trial quickly?

Absolutely. I mean these are unprecedented times and even from a regulatory point of view you see things moving very, very quickly. What we're going to do — and what we were asked to do on our trial — is to have an independent DSMB quickly look at risk-benefit. So even with 30 patients, we're going to be monitoring these patients very closely. You see a number of trials progress rather quickly with small signs of activity. I think that's because this is such an unprecedented public health crisis. So we will have the opportunity to very quickly evaluate risk-benefit even before we get to 30 patients; an independent group will look at that. Absolutely, I think if there are signs of activity we would work closely with the regulators, hear what they have to say, and the impression that we get right now is if patients are improving, even in small numbers, we've seen examples over the last six to eight weeks of very quick acceleration into advancing these trials.

Great. That's very helpful. And then just going to the pulmonary sarcoidosis trial — we’re hearing from a lot of companies that there have been slowdowns in clinical trials and the FDA has put guidance in terms of handling these interruptions. Could you walk us through how you think the missing data for the patients who discontinued could be made up? Does that mean recruiting brand new patients to make that up? You mentioned you might recruit a larger number of patients. Also, what are the critical rate-limiting steps that could keep the Phase 1/2 from finishing before the end of the year? Anything beyond complete lockdown — any other rate-limiters you see? Any thoughts there, and thank you for answering all the questions.

Sure. Yes. So I think overall compared to maybe oncology trials, we've done pretty well. I think some of that had to do with where we were. We had just kicked off cohort 3 so we were able to pause and we're hopeful to get most of those patients back in screening and re-recruited once the sites go live. We had a healthy queue of patients and our expectation was we were going to finish enrollment towards the end of March. So once you restart, we're hopeful that we can move quickly to completing that cohort and completing the study. Regarding patients who've missed doses, the FDA has issued guidance saying they understand that there will potentially be some gaps in the data, but because we've had significant interest in enrolling cohort 3, our thought is we may be able to replenish a couple of those patients whose data might not be robust enough for evaluation. So there could be a handful of patients — maybe two or three — that we would consider replenishing into that cohort. We have the ability in our protocol to do this, and it's something that a number of sites we're speaking to have the opportunity to accommodate. So I would not be surprised if we over-enroll here and some of those patients could then be directed and randomized into our cohort 2 population, thereby giving us a valuable population of 36 patients as we originally intended. What could be rate-limiting aside from the overall macro environment with COVID-19? It's really how quickly we can get restarted and get those patients because as I said, finalizing that cohort we were on track to basically wrap up over the course of March. If we restart in June, hopefully it can go back to that same rate of screening, recruitment and enrollment, but there's always going to be that potential rate limiter as this is something that's hard to predict. The first step is to get everything open; very happy that a lot of the sites have already messaged to us that there's an expectation in late May, early June to get back started and enrolling patients. I think that's a great first step. The second thing is completing that enrollment. Once we complete that enrollment, we'll have a better idea if we can hit the timelines you described. We'll provide more succinct guidance on when those topline results will come out from the pulmonary sarcoidosis study.

Your next question comes from the line of Zegbeh Jallah from ROTH Capital Partners. Your line is open.

Thanks for taking my question. Sanjay, just a quick one with regards to how many sites are you hoping to have for the COVID-19 study? And then can you start with a single site and then expand? Or do you want to get a couple of sites up and running first?

Sure. Thanks for the question. So we've written the protocol currently for up to 10 centers. Honestly, I think our biggest challenge is not going over that — there has been significant interest to participate in our study. We want, of course, to enroll 30 patients and do it smartly. There's no shortage of interest for the number of sites. Our view is we'll get started right away and open up sites as they come online — as they get IRB approval and as we get site initiations going — we'll go ahead and get started. It's helped that we were already in many of these hospitals with our pulmonary sarcoidosis trial. It's helped that these are pulmonologists who really understand the potential utility of our drug. I think they look at our drug as not repurposed but as something that has clearly demonstrated anti-inflammatory effects in animal models. All of these things have accelerated and kept us moving at a fast pace of getting sites activated. I think the biggest challenge will be trying to get under that number; some sites might get left out depending on how quickly they can actually get started. I would stay tuned for a site to get activated and enroll a patient and then we'll update the site list on clinicaltrials.gov as more sites get activated. But we could also very quickly see — and we hope to see — enrollment move at a quick pace where we may not get to some of those sites that want to participate. It's really up to them with their local approvals and IRB approvals at this point more than anything.

Great. This is great. And then just a quick follow-up here: are sites being activated faster than they were pre-COVID, just because of the seriousness of this or things being accelerated?

If you compare it to, say, pulmonary sarcoidosis, yes, I think everything is moving faster. In a typical clinical trial you might say, 'I'd like to get an IRB approval' and they put you on the schedule for the next month's IRB meeting. These hospital IRBs are now meeting several times a week as requests come in; they may create emergency meetings. So depending on the scale of the crisis at their hospital, we're finding that these sites are moving faster. Right now it's a very difficult time and things are moving at light speed.

I am showing no further questions at this time. I would now like to turn the conference back to Dr. Sanjay Shukla.

Great. Well, thank you everyone for joining and for the good questions. Obviously, it's been a very productive start to the year for us. The pace at which things are moving is really quite amazing. We want to stress that we want to keep everyone safe. I hope your families and everyone stays safe in this current crisis. We look forward to getting back to you in the near future. Thanks everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.