aTYR PHARMA INC Q4 FY2020 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the aTyr Pharma Fourth Quarter and Full Year 2020 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 this conference is being recorded for replay purposes. It is now my pleasure to hand the conference call over to Ashlee Dunston, aTyr's Director of Investor Relations and Corporate Communications. Ms. Dunston, you may begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today to discuss aTyr's fourth quarter and full year 2020 operating results and corporate update. We are joined today by Dr. Sanjay Shukla, our President and CEO; and Ms. Jill Broadfoot, our CFO. On the call, Sanjay will provide an update on our corporate strategy, including our clinical program for ATYR1923, preclinical program for ATYR2810 and our research programs in neuropilin-2 or NRP2 and tRNA synthetase biology. Jill will 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 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 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.

Thank you, Ashlee. Good afternoon, everyone, and thank you for joining us for our fourth quarter and full year 2020 results conference call. Amidst the backdrop of the COVID-19 pandemic, 2020 was a highly productive period for aTyr, which included significant clinical research and discovery advancements that we expect to yield value for the company throughout 2021. We've remained focused on our clinical program for our lead therapeutic candidate, ATYR1923 or 1923, and we have advanced and expanded this program a great deal in the past year. We're tracking towards a readout for our proof-of-concept study for our lead interstitial lung disease or ILD indication, pulmonary sarcoidosis in the third quarter of this year. We anticipate these readouts having recently gained key mechanistic insights regarding 1923's anti-inflammatory effects in patients from biomarker data obtained from a study we completed in patients with COVID-19. We advanced our preclinical program in cancer for our lead anti-NRP2 antibody, ATYR2810 or 2810, and we initiated discovery programs for two tRNA synthetases. We're highly encouraged by our progress and look forward to building upon our clinical and preclinical programs and discovery pipeline from our novel biology platform as we move forward this year. Since we last spoke in November, we achieved several clinical milestones for our lead therapeutic candidate 1923. We completed enrollment in our Phase 1b/2a trial of 1923 in patients with pulmonary sarcoidosis and we expect to report data from this proof-of-concept study in the third quarter. We released positive results from our Phase 2 trial of 1923 in COVID-19 patients with severe respiratory complications. The study met its primary safety endpoint in moderate to severe hospitalized COVID-19 patients and demonstrated a signal of activity through clinical improvement in the 3-milligram per kilogram cohort compared to placebo. We also reported positive biomarker data from our study in COVID-19. Patients treated with 1923 demonstrated a trend of overall improvement in key biomarkers analyzed compared to placebo. 1923 reduced several inflammatory cytokines and chemokines, including those that are implicated in sarcoidosis and other ILD, which is consistent with findings from our animal models. The data provides the first in-patient mechanistic proof-of-concept for 1923. Kyorin Pharmaceutical, our partner for the development and commercialization of 1923 for ILD in Japan, completed the last subject visit for its Phase 1 trial of 1923 in healthy Japanese volunteers, which triggered a milestone payment for aTyr. In addition, let me review recent highlights from our research and discovery programs. We presented preclinical findings in a poster at the Keystone Symposia entitled Tumor Metabolism and Microenvironment. That conference poster demonstrated that NRP2 is expressed on key immune suppressive cells, further validating NRP2 as a potential regulator of solid tumor progression. We presented a poster at the Society for Laboratory Automation and Screening International Conference and Exhibition, or SLAS, describing our novel approach to identify receptor targets for two extracellular tRNA synthetase fragments, Alanyl-tRNA synthetase, or AARS, and Aspartyl-tRNA synthetase, or DARS, further validating the company's biology platform. We announced two tRNA synthetase discovery programs from our pipeline to investigate the functionality of selected fragments of AARS and DARS in cancer, fibrosis and inflammation, with the programs initially focusing on natural killer or NK cell biology. We recently appointed leading cancer researcher Dr. Judith Varner, Professor in the Departments of Pathology and Medicine at the Moores Cancer Center at the University of California San Diego, as a scientific advisor to the company. Her research on myeloid cell biology and tumor macrophage signal transduction will help support the development of our NRP2 antibody programs. And finally, we have two upcoming posters from our preclinical program for our anti-NRP2 antibody 2810 accepted for presentation at the upcoming American Association for Cancer Research or AACR annual meeting. So we're very pleased with what we've accomplished in the past year, and we're already off to a great start thus far in 2021. Today, I will provide an update on our clinical program with our lead therapeutic candidate, 1923; our preclinical program, 2810; and 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 our clinical program. We are developing 1923 as a potential treatment for severe inflammatory lung diseases. 1923 is a potential first-in-class immunomodulator that downregulates aberrant immune responses in inflammatory disease states. 1923 has been shown preclinically to downregulate inflammatory cytokine and chemokine signaling and reduce inflammation and fibrosis. NRP2 is upregulated on key immune cells known to play a role in inflammation and is particularly enriched in inflamed lung tissue. We believe 1923 binds selectively to NRP2 and therefore has the potential to normalize the immune system, serving to resolve inflammation, prevent progressive fibrosis, thereby stabilizing lung function and alleviate morbidity and mortality for these patients. Our lead program is focused on ILD, a group of rare immune-mediated disorders that cause progressive fibrosis of the lung. Our initial ILD indication is pulmonary sarcoidosis, the most inflammatory form of ILD, which is characterized by the formation of granulomas or clumps of immune cells in the lungs. If not treated, it can lead to irreversible scarring and diminished lung function. Current treatment options are limited and often include treating the inflammation with corticosteroids or other immunosuppressive therapies, but these have limited efficacy, serious long-term toxicity, and many patients do not respond. Our trial in pulmonary sarcoidosis is a Phase 1b/2a randomized, double-blind, placebo-controlled multiple ascending dose clinical trial in 37 pulmonary sarcoidosis patients. The trial consists of three cohorts testing doses of 1, 3 and 5 milligrams per kilogram of 1923 or placebo, dosed intravenously every month for six months. The primary objective of the study is to evaluate safety and tolerability of multiple ascending doses of 1923. Secondary objectives include assessment of the potential steroid-sparing effects of 1923, in addition to other exploratory assessments such as lung imaging, lung function assessed by pulmonary function tests and relevant serum biomarkers. We recently completed enrollment in this trial and data is expected in the third quarter of this year. But while we work to complete enrollment in our trial in sarcoidosis, we observed that many COVID-19 patients with severe disease experience a form of interstitial pneumonia caused by an excessive inflammatory response in the lung, which can lead to serious and sometimes fatal respiratory complications. Medical literature reported that lung tissue analyzed from patients who died from COVID-19 has shown expression of NRP2, the very same receptor that 1923 binds to. Based on the strong scientific rationale in 1923's mechanism of action and overlap in disease pathology, we initiated a trial to investigate 1923 in an acutely inflamed patient population. This trial also provided an opportunity for us to mechanistically test the ability of 1923 to downregulate inflammatory cytokines in patients, as hospitalized COVID-19 patients have systemically inflamed serum biomarkers that can be assayed and compared to placebo. This Phase 2 trial was a randomized, double-blind, placebo-controlled study in hospitalized COVID-19 positive patients with severe respiratory complications, who did not require mechanical ventilation. Patients enrolled in the trial were randomized to a single intravenous dose of either 1 or 3 milligrams per kilogram of 1923 or placebo, and were followed for 60 days post treatment. The study was not powered for statistical significance and was designed to evaluate safety and identify preliminary signals of activity of 1923 as compared to placebo. In January, we reported positive topline results from this study. The trial met its primary endpoint of safety, demonstrating that a single intravenous dose of 1923 was generally safe and well tolerated in both the 1 and 3-milligram per kilogram treatment groups with no drug-related serious adverse events. In addition, the study demonstrated a signal of activity and clinical improvement in the high-dose cohort of 3 milligrams per kilogram through the assessment of two determinants of recovery: time to recovery and the proportion of patients achieving recovery within a week. Patients who received a single 3-milligram per kilogram dose of 1923 experienced a median time to recovery of 5.5 days compared to 6 days in the placebo group. Also, 83% of patients who received the 3-milligram per kilogram dose of 1923 achieved recovery by day 6 compared to 56% of patients in the placebo group. Patients in the 1-milligram per kilogram treatment group had a median time to recovery of 7 days. All patients received standard-of-care treatment at the time of enrollment, which included remdesivir and/or dexamethasone. Today, we will add that we have completed analysis of the 60-day follow-up from the study and see no disability or long-term limitation of activities in patients treated with 3 milligrams per kilogram of 1923 as compared to placebo, where we still observed disability at day 60. This is further evidence of activity for this 3-milligram per kilogram dose. Demographic and baseline characteristics were mostly balanced in the study. However, we did notice some important imbalances in our randomization, including more patients in 1923 treatment groups over the age of 65, more patients with severe hypoxia, or more patients with multiple baseline comorbidities compared to placebo. These factors are associated with a greater risk of COVID-19 complications and worse outcomes and suggest that randomization in our treatment groups yielded a sicker cohort of patients compared to our placebo population. While we were encouraged by the modest benefit in clinical improvement reported for the 3-milligram per kilogram cohort, we were also very interested in the clinical biomarker data collected during the study as these patients were acutely inflamed in order to see if 1923 provided additional benefit and insight into COVID-19 disease pathology and its effects on key inflammatory biomarkers, including inflammatory cytokines. Last week, we reported positive biomarker results from this study, which showed that patients treated with 1923 demonstrated a trend of overall improvement in several key biomarkers analyzed compared to placebo. Today, we want to provide some additional details regarding these findings. The data we analyzed included 17 biomarkers that were both detectable and elevated in patient serum samples. These 17 biomarkers were those where patient serum levels had significant elevations compared to normal healthy volunteer data that aTyr has in its repository. Upon analysis, we saw that 14 of the 17 elevated biomarkers had a greater numerical reduction for the 1923 treatment group compared to placebo, thus indicating that patients treated with 1923 had an overall trend of improvement in 82% of these elevated biomarkers compared to placebo. In particular, patients treated with 1923 had the greatest reductions in levels of several inflammatory cytokines and chemokines, including interferon gamma, interleukin-6 and monocyte chemoattractant protein-1. Furthermore, patients treated with 1923 also had a statistically significant reduction in levels of SAA, a marker of inflammation and fibrosis that has implications in sarcoidosis. We're very pleased with these findings, which provide the first mechanistic proof-of-concept for 1923 in patients and demonstrate that 1923 is impacting inflammation in patients consistent with what we have seen preclinically. Notably, the cytokines that we saw reduced to the greatest extent as a result of 1923 treatment in these COVID-19 patients are the very same cytokines we assumed 1923 downregulates and impacted in our animal models. These findings further support and potentially validate 1923's anti-inflammatory mechanism of action. As we mentioned, demographic and baseline disease characteristics from the study showed that the 1923 treatment groups had more patients with factors associated with a greater risk of COVID-19 complications and worse outcomes. Biomarker data confirms this at baseline. Patients enrolled in the 1923 treatment arms compared to placebo had higher levels of inflammatory cytokines and known COVID-19 biomarkers, including ferritin, D-dimer and C-reactive protein, indicating a more inflamed patient population in the 1923 treatment arms. Overall, we're very pleased with the full results from this study, which continued to demonstrate 1923's favorable safety profile in inflammatory lung diseases as well as encouraged by the relatively faster time to recovery seen by adding just a single dose of 3 milligrams per kilogram of 1923 to standard of care compared to placebo. While this was a small study, the overall trend showing a reduction of inflammatory biomarkers, combined with the higher baseline levels observed in the 1923 treatment groups and the benefits seen in time to recovery, suggest a clinical correlation that we have drug activity and that 1923 appears to provide an added anti-inflammatory benefit even when given on top of steroids. These findings further demonstrate the potential of 1923 as a therapeutic for severe inflammatory lung disease, including pulmonary sarcoidosis and other ILD. We continue to focus on our upcoming readout for our lead study in pulmonary sarcoidosis, where we believe 1923 has the greatest opportunity and near-term ability to generate value. We are a leader in the development of potential new treatments for the most inflammatory forms of ILD. We strategically chose this therapeutic area based on the limitations of currently available treatments and the need for novel therapies for progressive disease with better efficacy and side effect profile. Our trial in COVID-19 allowed us to test and validate our mechanistic hypothesis for 1923. Now that we have full results of the Phase 2 trial, future development plans in COVID-19 are being assessed relative to the trajectory of the pandemic, the administration of vaccines and the assessment of an evolving treatment landscape. Against this backdrop of a constantly evolving pandemic, we remain laser-focused on the upcoming readout in sarcoidosis. As we think about the findings from the study in COVID-19, we want to highlight some of the main clinical and biomarker findings and takeaways as they relate to our lead program in ILD, including our current trial in pulmonary sarcoidosis. From a clinical perspective, we want to note that the trial in pulmonary sarcoidosis administers six monthly doses of 1923 compared to a single dose administered in the COVID-19 study. Throughout the COVID-19 study, standard of care evolved to include dexamethasone, a powerful steroid. We reported that the 3-milligram per kilogram dose in that study showed a signal of clinical activity on top of this steroid. By trial design, the study in pulmonary sarcoidosis reduces steroid use, tapering patients to a subtherapeutic dose of steroid and, if possible, removing steroid altogether while evaluating the 1, 3 and 5-milligram doses of 1923 compared to placebo. When it comes to biomarkers, we are highly encouraged that 1923 downregulated the same cytokines that we have seen it downregulate in our animal models, which was the fundamental translational work and mechanistic hypothesis upon which the ILD program was established. We also reiterate that patients treated with 1923 had a statistically significant reduction in levels of SAA, a rather excellent finding from this small study. Medical literature supports the growing importance of SAA as a marker of sarcoidosis, including a recent paper published by leading researchers at the Interstitial Lung Disease Center of Excellence in the Netherlands, suggesting that SAA has implications not just in sarcoidosis, but also in other fibrosing ILD. We look forward to the results of this study that evaluate 1923 in pulmonary sarcoidosis, which we expect to report in the third quarter of this year. Now let's turn to our research pipeline, starting with our NRP2 antibody program, which continues to advance toward producing its first potential IND. NRP2 is a compelling therapeutic target in the areas of oncology and inflammation. In cancer, NRP2 is upregulated on various solid tumors, such as breast, lung and renal, to name a few. High NRP2 expression is linked to worse patient outcomes in many cancers, which in some cases may include drug resistance to current therapies. Antibodies that can selectively block different NRP2 signaling pathways may have therapeutic potential in aggressive cancers where NRP2 is implicated. As we continue to explore the role of NRP2 in the progression of certain aggressive tumors, we wanted to determine the expression of NRP2 on a variety of immune cells in the tumor microenvironment and its role on each of these cells. Our recent poster presented at the virtual Keystone Symposia demonstrated that NRP2 was highly expressed on key immune cells implicated in regulating cancer progression. These included myeloid-derived suppressor cells or MDSCs, tumor-associated macrophages or TAMs generated from triple-negative breast cancer cell lines and mature dendritic cells. Further research showed that MDSCs and TAMs suppressed T cell proliferation and activation. So we're very pleased to have demonstrated for the first time that NRP2 is highly expressed on key immune suppressive cells of the tumor microenvironment, important cells that are implicated in regulating the progression of tumors and their metastasis. These findings provide further validation of NRP2 as a regulator of solid tumor progression and support the potential of NRP2 as a potent target for cancer therapeutics, possibly through the immune regulation of the tumor microenvironment. As we look at the panel of antibodies that we developed to selectively target distinct domains of NRP2, 2810 is our lead oncology candidate. This is a fully humanized monoclonal antibody that specifically and functionally blocks the interaction between NRP2 and VEGF, one of its primary ligands. The role of NRP2 and VEGF signaling in the tumor microenvironment and its importance in the progression of certain aggressive cancers is becoming increasingly validated. We selected this candidate to advance the IND-enabling activity based on data that we have generated in various tumor models and compelling preclinical data presented last year at the AACR annual meeting from a collaboration with Dr. Arthur Mercurio, one of our scientific advisers in his lab at the University of Massachusetts Medical School. This data showed that 2810 demonstrated tumor inhibitory effects and increased sensitivity to chemotherapy in human-derived organoids and other in vitro models of triple-negative breast cancer, an extremely aggressive cancer where NRP2 has been shown to be highly expressed and many patients are not responsive to currently available treatments. Since then, we have continued to explore the potential of 2810 in breast cancer and other solid tumor models where NRP2 is implicated. Next month, we will present two posters at this year's AACR annual meeting. One of these posters builds upon the research that we presented at AACR last year in breast cancer, while the second poster presents new preclinical findings from our research in lung cancer. We're looking forward to presenting these posters and providing additional details regarding these findings at AACR. Finally, I wish to update our tRNA synthetase discovery program, which has recently yielded some transformative findings. Most notably, we discovered new receptor targets for two tRNA synthetases from our pipeline, AARS and DARS. We presented these findings in a poster at SLAS in January. The receptor targets for these two tRNA synthetases may have utility in the development of new therapeutics to treat cancer, fibrosis and inflammation. In particular, these synthetase fragments demonstrate binding to NK cells, important immune cells that play a role in innate immune responses and may be key therapeutic targets in oncology. Based on these findings, aTyr is pursuing research activities related to selected fragments of AARS and DARS, and we have announced new discovery verticals that will initially focus on NK cell biology. We look forward to exploring these receptors and biologic pathways to determine their potential role in immune-mediated disease. We expect to provide more information regarding these findings in the future. These findings that were presented at SLAS further validate the relevance of our tRNA synthetase biology platform to important disease pathways and demonstrate its ability to generate new drug targets. We now have receptor targets identified for three tRNA synthetases: HARS, AARS, and DARS. As a reminder, aTyr's intellectual property portfolio consists of and covers protein derivatives from all 20 tRNA synthetase gene families with over 300 protein compositions patented. We believe we are only at the beginning of unlocking the potential and promise of this novel biology platform. So with that, I'd like to turn it over to our Chief Financial Officer, Jill Broadfoot, to review our financial results.

Thank you, Sanjay. We're proud to report $10.5 million in total revenues for 2020. Our revenues for 2020 consisted primarily of license and collaboration agreement revenues, which we received from Kyorin Pharmaceuticals. As you're aware, in January 2020, we entered into a collaboration and license agreement with Kyorin for the development and commercialization of 1923 for ILD in Japan, for which we received an $8 million upfront payment. In addition, we received a $2 million milestone payment in January 2021 for a Phase 1 milestone that was achieved by Kyorin in Japan in December 2020. On the expense side, our research and development expenses were $17.3 million and $14.0 million for the years ended December 31, 2020 and 2019, respectively. The increase was due primarily to the progression of 1923 clinical activities in both pulmonary sarcoidosis and COVID-19 patients with severe respiratory complications. General and administrative expenses were consistent between periods at $9.1 million and $9.4 million for the years ended December 31, 2020 and 2019, respectively. From a balance sheet perspective, we are now well positioned for the further development of our lead programs. Consistent with previous guidance in November 2020, we repaid all long-term loans. And exceeding our previous guidance of ending the year with greater than $20 million in cash, we ended the year with $31.7 million in cash, cash equivalents and investments. In addition, since year-end, we've raised over $25 million in cash in addition to receiving the $2 million Kyorin milestone payment. We raised approximately $9.9 million in gross proceeds from our at-the-market offering program before deducting commissions and offering expenses and raised approximately $15.3 million in gross proceeds from our purchase agreement with Aspire Capital Fund, LLC. While we won't be giving specific guidance this year for ending cash, we do expect our research and development expenses to increase as we continue to develop 1923 and 2810 and move forward in our discovery programs. Now I'd like to turn the call back over to Sanjay before we open it up to Q&A.

Thanks, Jill. Overall, we're very pleased with what we achieved in 2020 and are proud of our significant progress. We have a potential proof-of-concept readout for 1923 in pulmonary sarcoidosis in sight, now supported by a mechanistic proof-of-concept from our biomarker results from our trial in COVID-19 patients. We have a preclinical program for our lead anti-NRP2 antibody, 2810, undergoing IND-enabling studies in cancer. And we have two tRNA synthetase discovery programs with target receptors identified and ready to be explored. We started the year with a major license deal for 1923 for ILD in Japan with Kyorin, a partnership that has already brought in $10 million in payments. We had an onerous debt structure that we've been able to eliminate. We exceeded our previous guidance for our 2020 year-end cash position, and through milestone payments and use of available equity vehicles, we've raised over $25 million in the first quarter of this year. We're already off to a great start in 2021, and we look for that momentum to continue in the year to come. We appreciate your interest and your continued support. We look forward to providing updates in the future. At this time, Jill and I will be happy to take your questions.

Our first question will come from the line of Hartaj Singh from Oppenheimer.

Great. One question on 2810, which is what stage of IND-enabling is it at, Sanjay? And then as you're going to be presenting this data on breast cancer and follow-up on non-small cell lung cancer, you had a pretty heavy-duty addition to your scientific advisory board in the oncology area. Where do you think you'd see the initial usage of 2810? I mean, breast cancer, non-small cell lung cancer, would it be more monotherapy, more combination therapy once your IND-enabling work is done? And I just got a quick follow-up on that, too.

Yes. So for 2810 this year, we very much are in that stage of looking at in vivo efficacy models, testing different solid tumor models where neuropilin is implicated. And as you point out, we've already seen good data in triple-negative breast cancer year-on-year now with additional data coming out at AACR and now new data in lung cancer. So we're continuing to look at a few other tumor models. But towards the second half of this year, we'll take a look at that in-state animal efficacy data and determine really which tumor environment will be the best indication for us to move into once we get into patients. But we'll also learn along the way, as you point out, whether or not our therapy is best positioned as a monotherapy or on top of another therapy to unlock more efficacy or even be able to be used in conjunction with chemotherapy. So all of those answers will be laid out here over the course of this year, which is also why we really want to bring in expertise in the oncology space. Someone like Dr. Varner and even Dr. Mercurio previously added last year, are experts with regard to this biology, and they serve as great guides for us. In the meantime, there's also quite a bit of work on the tox side that we have to complete prior to the IND submission, so I would say stay tuned. We continue to demonstrate and learn more about where 2810 can be best used, which tumor environment. And then from that standpoint, we will also learn whether or not it's best used as a monotherapy or as a combination. We're testing it both ways.

Yes. And then, Sanjay, I think you made the point that 1923 is designed as chronic therapy, right, which is maybe one of the rate-limiting steps for the COVID-19 trial where you could only give it once. For 2810, I assume that that antibody would be designed in such a way to be given kind of in this acute cancer setting, correct?

Yes, I think that's yet to be determined. But in general, that is how you think about biologics and antibodies that are targeted. So it's meant to be a targeted therapy. The relative manner in which we dose and the PK of that is yet to be worked out, but we will certainly have that mapped out here before we move into a clinical indication.

Great. And then my last question is just on the CSL Behring collaboration. Can you just give us an update as to when we could see sort of next steps there? And then also, what kind of milestones could be hitting maybe this year or next year?

Yes. So that's a collaboration where our findings that we've been able to really bring back over the fence around AARS and DARS. Much of that work came out of that collaboration. And aTyr owns the areas of oncology from those findings. So we're really excited to have those findings on our side of the fence. With regard to further work with CSL, I think right now we are really focusing on internally moving these forward as they fall within a therapeutic area that CSL doesn't really prioritize. As it turns out, these findings have really benefited us, and we now are moving forward with some of those NK cell activities internally here.

Our next question will come from the line of Joe Pantginis from H.C. Wainwright.

Sanjay, my questions are going to focus right now on just continuing to build the profile for 1923. So as we look towards the third quarter update for sarcoidosis, are we going to have the ability to see biomarker data as it's built into the clinical trial protocols based on what you guys just announced, especially for SAA? And then sort of related, when do you think we might be able to get visibility for additional ILDs as well, especially since you mentioned that SAA has implications towards other ILDs?

Joe, one thing to remember that's unique about what we've been able to take advantage of from the COVID-19 study is readily assayable serum biomarkers. These patients are coming in not only severely inflamed in their lungs, but they're also presenting with a lot of, in the case of our study, 17 highly elevated biomarkers that we can assay just by pulling blood. In ILD patients, they tend to be severely inflamed locally in the lung, less so systemically. So from a biomarker perspective, the best way to do this is to do a bronchoscopy and really try to grab tissue from the lungs, which patients really don't like that much. So in the ILD sense, this mechanistic proof-of-concept that we were able to demonstrate in COVID-19 we think carries over, but let's also understand that assaying systemic biomarkers is a little trickier in ILD patients. Nonetheless, looking at the literature and looking at BAL fluid and bronchoscopy data that's available, the sensitive cytokines that we impact are the very same ones that are highly elevated in the lungs of ILD patients. So we rely on the experts. In Europe, of course, there's a little bit more tendency to assay lung and biopsy and bronchoscopy, not so much here in the U.S. But with these findings, I think it gives us very good confidence that we've got an anti-inflammatory that directly impacts some of the most important cytokines and chemokines that are involved in the pathology of ILD. And I think when we think about our trial that's leading out here, we will be looking at serum biomarkers, but I think the greater sensitivity here is probably being able to see clinical change mainly through the reduction of steroids in that study. I think that's the real activity endpoint to pay attention to.

Got it. And that clarification as well. So keeping with this indication, I was just curious if you—obviously, I know you would say we should ask them, but any updates around the Kyorin study?

I would just say that things are progressing as planned. Kyorin has their own IR and PR group that they manage. I can't speak to what they will put out or won’t for that. But I will say that we are on track to have Kyorin join our next trial, which we expect to be a worldwide registrational trial in sarcoidosis. A number of experts and centers are teed up to get started, and we do not anticipate any delays or hiccups with the clinical development plan that we are working on with them.

Got it. Got it. And then my last question is pretty quick because with regard to your comments about COVID-19 and potential next steps. Obviously, it's an ever-changing landscape that you alluded to, but maybe can you take a stab at sort of what the low-hanging fruit is regarding your decision tree, especially as the therapeutic landscape evolves to decide whether you want to move it forward?

I think the key thing here is we have seen even recently that dexamethasone is having greater utility, not only in patients that are ventilated, but also those who are not. We experienced that in our trial. There was a potential confounder to a lot of our data, but as it turns out, we've shown—and we've talked about today—that the additional benefit of 1923 is apparent. When you look at the clinical and the biomarker readouts that we presented, above and beyond dexamethasone, our drug is showing utility. Our view is that if there's a sensitive population that might be resistant to dexamethasone in COVID-19, that could be a low-hanging fruit. But we just don't know the epidemiology of that cohort yet. Is it tens of millions of patients, millions of patients, or 10,000 patients? We don't know. What I do know is that there are potentially 100,000 pulmonary sarcoidosis patients that are a sensitive population with pathology that we know our drug can impact looking at our preclinical data and also now from this COVID-19 data. So I think with that ever-evolving landscape and the fact that we have this very near-term readout coming, we're squarely focused on thinking about sarcoidosis and are excited to potentially make an impact here as we are really the leader in ILD work compared to any worldwide biopharma.

Our next question will come from the line of Zegbeh Jallah from ROTH Capital.

I think I just have a couple of different questions. I think the first will just kind of piggyback off of the COVID question. And I know, like you said, Sanjay, you're trying to kind of see how the clinical landscape evolves and learn a little bit more about those patients that might be unable to be treated with dexamethasone or be somewhat resistant. And so I think it would just be interesting if your pulmonary sarcoidosis data is really encouraging. Do you think that will actually influence your decision to move forward with the COVID study as well?

So your question is if we saw good data in sarcoidosis, does that change our mind for COVID? That's a good point. We're testing the highest dose in sarcoidosis. Certainly, if we see a dose-dependent sort of improvement in the sarcoidosis patients, that is valuable information. We have to be realistic: as a small company, we cannot run many large studies simultaneously. We've been encouraged to run multiple trials, but we try to be very careful about how we manage our cash and prioritize programs that can generate value in the near term. Right now, with COVID, there isn't a solid landscape given the movement in standard of care and vaccination. We've shown 3 milligrams could be potentially useful in an acute indication. Frankly, I think our drug could be used in any acute interstitial pneumonia. I think we've demonstrated that it could be useful whether you have viral pneumonia of COVID etiology or other etiology. But the drug is built as a chronic treatment, a treatment that can be used in chronic conditions like ILD. We see the ILD market as a multi-billion-dollar market where there's a need for novel, safer and more effective treatments. Patients want to get off steroids, whereas in the acute ICU setting, steroids are used to keep patients alive. So our focus is on the ILD side, where we want to compete with or replace steroids because patients want steroid-sparing options. I think it's a huge opportunity for us. And now with some of this biomarker data, we can see some daylight here.

And Sanjay, definitely agree that the biomarker data does set some positive expectations for the readout. And so regarding the readout, I just wanted to know if the pandemic had any of the data points missing or impacted; is there something that's going to be missing just as a heads up of what the impact could have been?

I think you can see certain impacts. Getting patients into every center is a little bit different; centers want to keep patients safe, so there can be missing data points here and there. We're trying to minimize that as much as possible. For example, pulmonary function testing is sometimes impacted: some hospitals are cautious about performing certain PFTs because of concerns about aerosol generation, so we're using local PFTs to cover those needs. That might be an area where reporting differs, but we don't think it will be a major problem. PET scans are another modality where not all institutions are prioritizing them right now; that's an exploratory endpoint for us, so there could be some missing PET data. But I think the key thing is that from a safety perspective and from a steroid-sparing perspective, we have the ability to preserve most of the critical data from this trial.

And then another point you made was with Kyorin and participation perhaps in the large global study, a Phase 3 study. And so I was just wondering when might you move into your next study after this data readout?

We'll be moving into that study after this readout assuming this readout is favorable and we feel good about moving forward. We'll sit down with regulators, and we'd like to start the trial next year. We feel as though we already have good alignment on the rationale of our drug and the relative nature of what the trial should look like based on trials that have been run previously in the ILD space. As one of the leading ILD development companies right now, there's a real need for a registrational trial in these patients. So we would be looking to move into that trial next year, likely with Kyorin and potentially other partners. I can't give you guidance on the specific quarter we would start because it's a little premature, but we are planning to move into that trial next year.

Perfect. Regarding partnerships, you mentioned earlier that there might be other partners. For 2810, it sounds like you are working on the preclinical tox studies with the IND. It sounds like you can execute on that independently, but for the early-stage work that came out of your collaboration with CSL, is that something that you will want to partner early on given your cash balance and how you're allocating capital?

Compared to about a year ago where we really just had one program, now we have three verticals: clinical, preclinical and discovery. We have a clinical program that's about to have a readout, a preclinical program undergoing IND-enabling work and discovery programs with new NK cell targets. We have to carefully consider what we can accomplish on our own. The great thing is now we have more opportunities for business development conversations. Kyorin came in early and was a transformative deal at the beginning of 2020. Now we have more opportunities for our BD team to reach out. If partners are interested in oncology data around neuropilin-2, we will have data sets to present. If they're interested earlier in discovery programs tied to NK cell biology, that's another option. We'll evaluate partnerships on a case-by-case basis if it's the right thing for aTyr and our shareholders. We now have more options this year than we've ever had previously.

And I'm not showing any further questions from the queue. I will now turn it over to Sanjay for any closing remarks.

Well, I thank everyone for their interest. We certainly had a lot of information to go through this year, which reflects the number of initiatives we have under way. It's a very important year for us. We're excited, in particular, for the readout in our sarcoidosis trial. I thank everyone for their interest, and we will keep you up-to-date and speak to you in the future. Thanks again.

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