aTYR PHARMA INC Q4 FY2023 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the aTyr Pharma fourth quarter and full year 2023 conference call. At this time, all participants are in a listen-only mode. Operator instructions were provided. 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 Public Affairs. Ms. Dunston, you may begin.

Thank you, and good afternoon, everyone. Thank you for joining us today to discuss aTyr's fourth quarter and full year 2023 operating results and corporate updates. 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 Efzofitimod and research and discovery program. Jill will review our financial results and our current financial position 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 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 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 subsequently filed Quarterly Reports on Form 10-Q and in our other SEC filings. Undue reliance should not be placed on forward-looking statements, which speak only as of the day 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 2023 results conference call. At aTyr, we are leveraging evolutionary intelligence to translate tRNA synthetase biology into new therapies for fibrosis and inflammation. Our lead therapeutic candidate, Efzofitimod, is a first-in-class biologic immunomodulator based on a naturally occurring, long-enriched splice variant of the tRNA synthetases, HARS. Efzofitimod selectively modulates activated myeloid cells via neuropilin-2, or NRP-2, to resolve inflammation without immune suppression and potentially prevent the progression of fibrosis. We're developing Efzofitimod as a treatment for patients with interstitial lung disease, or ILD, a group of rare immune-mediated disorders that can cause chronic inflammation and fibrosis of the lungs. 2023 was an important year for aTyr as we progressed and expanded our Efzofitimod clinical development program, which now includes two ongoing clinical studies: the Phase 3 EFZO-FIT study in patients with pulmonary sarcoidosis, a major form of ILD; and the Phase 2 EFZO-CONNECT study in patients with ILD related to systemic sclerosis, which is known as SSc or more commonly, scleroderma. Throughout the past year, we have also greatly enhanced our mechanistic understanding of the way in which Efzofitimod is confirming its anti-inflammatory effects. NRP-2 is highly expressed on activated immune cells during an inflammatory response, notably myeloid cells including monocytes and macrophages. By binding NRP-2, Efzofitimod guides the differentiation of monocytes at the site of inflammation into a macrophage subtype that is less pro-inflammatory to resolve aberrant inflammation. Dysregulated inflammation is a hallmark of myelo-driven diseases such as ILD, where persistent, uncontrolled inflammation can lead to the progression of fibrosis. With this new understanding, we now have even greater clarity and confidence as to why Efzofitimod may represent a breakthrough in treatment for ILD. Our lead indication for Efzofitimod is pulmonary sarcoidosis, the most prevalent form of ILD, where approximately 70% of patients will have symptomatic disease and nearly 20% will develop lung fibrosis. Current standard of care is primarily oral corticosteroids, a highly toxic treatment that has limited clinical evidence, is broadly immunosuppressive, and comes with side effects resulting in a high disease burden for patients. EFZO-FIT is a global pivotal Phase 3 study evaluating Efzofitimod compared to placebo in the context of a four-steroid taper in patients with pulmonary sarcoidosis. This study is currently enrolling at more than 90 centers in nine countries. We're pleased with the progress we've made thus far with this study, which is expected to be the largest interventional study ever conducted in sarcoidosis. Completing enrollment in EFZO-FIT is our primary focus and we anticipate doing so in the second quarter of this year. In the past few months as patients have completed the 52-week EFZO-FIT study, we've received multiple inquiries from study principal investigators, or PIs, whose patients have requested to continue treatment once they completed the trial. While aTyr PIs and patients are all blinded to what treatment patients received as part of the study, either Efzofitimod or placebo, the feedback we've received has suggested that some patients have performed well and want to continue on study drug rather than returning to the treatment regimen they had prior to the study. For some patients that may entail resuming or increasing steroid dose, which many patients are reluctant to do. Based on this feedback, we decided to implement an individual patient expanded access program, or EAP, for patients who complete EFZO-FIT. This individual patient EAP is designed to allow access to Efzofitimod for patients who have completed or are in the process of completing EFZO-FIT beyond the duration of the clinical trial. The company, PIs, and patients will remain blinded to treatment that occurred as part of EFZO-FIT. Safety is a key component of any EAP. We were able to implement this program based on the existing safety database from prior Efzofitimod clinical studies and additional safety and tolerability data from a Data Safety & Monitoring Board, or DSMB, review of data from EFZO-FIT, which included the evaluation of patients that completed 52 weeks of treatment. The DSMB review recommended the study proceed without modification, suggesting no major safety concerns. And while many types of EAPs are typically implemented after data from a study has been unblinded, we decided to implement this individual patient EAP early not only based on feedback and demand, but in part to continue to support those patients who have dedicated their time and entrusted us with their health by participating in this important study. This program reflects our ongoing commitment to the sarcoidosis community as we work to develop a safe and effective treatment for those in need. Our second indication for Efzofitimod is SSc-ILD. SSc is a form of connective tissue disease where ILD commonly occurs and is a leading cause of mortality. Current treatment options are limited and, like sarcoidosis, do not treat the underlying disease or improve quality of life. EFZO-CONNECT is a Phase 2 proof-of-concept study evaluating Efzofitimod compared to placebo in patients with SSc-ILD. This study, which dosed the first patient last quarter, is currently open for enrollment at multiple centers in the U.S. We're focused on generating data from this study in 2024, and we expect to provide an update on the study later this year. We estimate that the two indications that comprise our current clinical program for Efzofitimod, pulmonary sarcoidosis and SSc-ILD, collectively represent a potential $2 billion to $3 billion global market opportunity. This does not include any upside potential in other forms of the more than 200 ILDs, where Efzofitimod's unique mechanism of action to address complex immune pathology and desirable safety profile may be able to disrupt standard of care. While our primary focus is our clinical program for Efzofitimod, we continue to leverage our intellectual property estate covering domains from all 20 human tRNA synthetases and utilize our platform as an engine to generate new pipeline candidates. tRNA synthetases are ancient essential proteins that have evolved novel domains to regulate diverse pathways extracellularly in humans. By identifying extracellular receptors and signaling pathways for these domains, we can elucidate the role these proteins play in cellular response and explore disease areas where they may have therapeutic benefit. Our two most advanced tRNA synthetase candidates in preclinical development are ATYR0101 and ATYR0750, both of which have specific interactions with targets that have implications in fibrosis. These targets include latent transforming growth factor beta binding protein 1, or LTBP1, and fibroblast growth factor receptor 4, or FGFR4, respectively. ATYR0101, which is derived from a domain of the tRNA synthetase DARS, exerts its anti-fibrotic effects by selectively inducing apoptosis of myofibroblasts, targeting a key hallmark of fibrosis pathology, which is the persistence of activated myofibroblasts. This mechanism may support broad therapeutic application in indications like lung, liver, and kidney fibrosis. The hidden biology that we have been able to unlock from our platform continues to inspire us, including the way in which some of these appended domains like Efzofitimod interact extracellularly with previously under-the-radar targets like NRP-2 and, in particular, its role as an immune regulator, or bind more well-known targets in unique ways like ATYR0101 and ATYR0750. This platform, which is based on signaling pathways that have evolved over billions of years to maintain homeostasis, is an excellent example of bioinnovation and has the potential to disrupt traditional drug discovery, a process that is increasingly reliant on exploiting existing signaling pathways to generate therapies. Our conviction in the potential of tRNA synthetase biology to lead to transformative medicines continues to grow stronger as our research advances. I'll now turn it over to our Chief Financial Officer, Jill Broadfoot, to review our financial results.

Thank you, Sanjay. We ended 2023 with $101.7 million in cash, restricted cash, cash equivalents and investments. Collaboration and license revenue related to the Kyorin agreement was $0.4 million for the year ended 2023, which consisted of drug product materials sold to Kyorin for the Japan portion of EFZO-FIT. As a reminder, Kyorin, our partner for the development and commercialization of Efzofitimod for ILD in Japan, is responsible for costs related to EFZO-FIT in Japan and purchases drug product material from us with a small markup. Under this agreement, we have received $20 million in upfront and milestone payments from this partnership to date, and we are eligible to receive up to an additional $155 million, which is primarily related to certain development and regulatory milestones. Research and development expenses were $42.3 million for the year ended 2023, which consisted primarily of clinical trial costs for EFZO-FIT and EFZO-CONNECT studies, manufacturing costs for the Efzofitimod program, and research and development costs for the Efzofitimod and discovery programs. General and administrative expenses were $13.0 million for the year ended 2023. Based on our current operational plans and existing cash, we maintain our prior financial guidance and believe our cash runway is expected to be sufficient to fund the company through the filing of a biologics license application for Efzofitimod in pulmonary sarcoidosis. This takes into account the continued allocation of the majority of our resources to our Efzofitimod clinical development program, which is our main value driver for the company, while also committing judicious resources to our tRNA synthetases pipeline candidates to maintain an active discovery program and advance our IP estate. Furthermore, our forecast for our cash guidance does not include any potential future milestone payments from Kyorin or any proceeds that may result from additional potential partnerships or sources of non-dilutive funding. It does consider potential proceeds from the prudent use of our at-the-market facility. We implemented this operational plan more than a year ago, driven by our emphasis on maximizing efficiency and adapting to prevailing macroeconomic conditions, and this plan continues to be an effective way to meet our primary corporate objectives relative to optimal capital utilization. Now, I'd like to turn the call back over to Sanjay before we open it up to Q&A.

Thanks, Jill. As we look back on the past year, we're filled with optimism for the future. Our scientific expertise in understanding tRNA biology is unparalleled across the industry. We're leveraging this unique biology and harnessing ancient genetic codes developed throughout billions of years across a trillion species. While other companies are just beginning to explore the untapped potential of tRNA biology, we're leading the way with our decades of understanding this science, which we have leveraged to progress a Phase 3 therapeutic candidate. It's not just our understanding of the endless frontier of tRNA synthetase biology that sets us apart. Scleroderma represents the reality, not just the concept, of a potential near-term, meaningful tRNA-based therapy that can change the lives of patients. We're on the cusp of a once-in-a-generation therapy for sarcoidosis engineered from our natural physiology and are marching toward the chance to transform the lives of ILD patients. Efzofitimod in sarcoidosis is only the starting point for how Efzofitimod may be able to help millions of ILD patients. As the only biotech company in Phase 3 development for this indication, we note the accelerating pipeline of candidates not just for sarcoidosis, but also for ILD more broadly. Other biopharmaceutical companies who are following our lead also see the multibillion-dollar market opportunity in this space. While these companies have yet to show proof of concept, Efzofitimod is well beyond that, with patients requesting to remain on treatment as they complete our current trial in sarcoidosis due to the benefits they are experiencing. So we believe it's just the beginning for us here at aTyr. New validated targets are emerging from our evolutionary intelligence-driven drug discovery platform. Artificial intelligence-driven drug discovery is really in its infancy, and these unproven, hyped approaches do not have the advantage of our discovery engine. aTyr is uncovering hidden functions embedded in our genetic code that were developed throughout evolution encompassing real-life biological experiments in over a trillion species over billions of years. The synthetase domains that we have mapped have developed over billions of years since the beginning of the tree of life. Since the evolution of complex systems, all species, including humans, share these same genetic domains that were created over billions of years of biological stress and strain, allowing species to thrive and overcome disease and dysfunction. As companies embark on computational models and approaches to find new and novel targets, aTyr meanwhile has an IP library of hundreds of potentially efficacious proteins just waiting to be unleashed from our own genetic programming, leveraging novel domains that have been tested and validated since the beginnings of life that we now look to target toward current-day disease and dysfunction. I hope you can now better understand why we're so optimistic here at aTyr, not only in the short term with Efzofitimod, but also in the long-term potential for aTyr to become a transformative biotech company of our time. We appreciate your interest. At this time, Jill and I will be happy to take your questions.

Operator instructions were provided. Our first question comes from Gregory Renza with RBC Capital Markets. You may proceed.

Great. Good afternoon, Sanjay and Jill. Congrats on the progress. Thanks for the updates and thanks for taking my questions. Sanjay, maybe just going to the expanded access program — it's great to hear the color you've provided. I just wanted to ask if you could maybe put into context the significance of this to you and to Efzofitimod, especially as these blinded patients are undergoing the considerable steroid taper for the trial? And then secondly, any other details that you are seeing, whether it's the patterns from the centers or what that demand is in order to have these patients and these trial participants continue with respect to the program? I have a follow-up as well. Thanks.

Sure, Greg, thanks for the question. Over the last six months, we've been hearing directly from dozens of PIs around the world about how happy they are with the performance of the study drug. I want to emphasize again that we are blinded and do not know whether individual patients received Efzofitimod or placebo, but the consistent feedback is that patients are performing quite well in the trial. It has reached the point, however, that patients rolling off the trial often don't want to go back on steroids if they have been able to taper off or reduce their steroid dose. Many of these patients have been on steroids for five, 10, sometimes 20 years. This trial has offered a real opportunity for them to live their lives with less or no steroids. It had gotten to the point where we felt it best to implement an EAP early. Most programs are put in place after unblinding and finishing the trial, but with the data review and the persistent demand, we wanted to be patient-oriented and support those patients. Since we announced the program, interest has increased. This is a relief to many patients, and I believe doing this is the right thing clinically and ethically. From my perspective, this patient demand is a meaningful real-world signal.

Yeah, that's helpful, appreciate the color. And then shifting to EFZO-CONNECT, the trial is open for enrollment across multiple centers. I heard you mention an update should come later this year. Just with respect to that uptake, what is your objective there? Of course, we're all interested in the 12-week skin assessment as well, but curious how we should be thinking about that. Is it more procedural in nature or is it something where we'll at least see some details of that program? Thanks again and congrats.

Sure. We're now in a phase where approximately six to ten centers are fully up and ready to enroll. Getting the first patient dosed last quarter was important, and now we're entering the period where sites are actively enrolling. We'll have a better idea later this year regarding the kind of data we can present. There are opportunities to look at shorter endpoints, such as three-month skin scoring assessments, which you mentioned. We'll see how enrollment progresses in the first half of the year now that the centers we want are nearing full activation for enrolling and screening.

One moment for questions. Our next question goes from Joe Pantginis with H.C. Wainwright. You may proceed.

Hey everybody, good afternoon. Thanks for taking the questions. Sanjay, I want to start with the EAP. It's intriguing to have an EAP ahead of data. If I heard you correctly, both physicians and patients remain blinded even after exiting EFZO-FIT as to what they had been previously on. First, could you provide more color or anecdotes that the physicians are giving you about wanting to be in the EAP? You mentioned patients are feeling better; any more details? Second, what are the general logistics of setting up an EAP, and related to that, what are the cost implications? Thanks.

Great questions, Joe. At a high level, physicians are concerned that their patients may have to resume steroids or other prior regimens as they exit the trial. Many patients are refusing to resume those treatments because they have improved while on study. This underscores the lack of options for sarcoidosis and the clinical need. Logistically, in the U.S., this is typically managed as an individual PI submission to the FDA, akin to classical compassionate use. Because we have positive safety assessments from the DSMB and existing safety data, we're in a strong position to support this pathway. We will provide drug for free and may provide small grants to help patients with travel or infusion costs on a case-by-case basis. Centers will bear some administrative or other costs, and drug supply is adequate. We do not expect this program to materially impact our cash position. For regions outside the U.S., the approach will vary by country and local regulations; some have more streamlined formal pathways, others will be managed case by case with hospitals.

Very helpful. Then on manufacturing, given you're in a pivotal study and the Phase 2 SSc study, how would you characterize your manufacturing needs to get beyond that and to potential commercialization for Efzofitimod?

We transitioned a few years ago to a commercially oriented and scalable manufacturing partnership. In the near term, we're in good shape to manufacture drug to support our clinical program and initial commercialization activities, and we've mapped initial batches and runs. We also have good line of sight and control because our manufacturers are based in the U.S., which helps de-risk supply concerns. Over a longer horizon, five to seven years out, additional capacity planning would be needed if demand is very high, but for our current path toward approval and early launch preparations, we are well positioned. We've also engaged regulators to ensure our drug product will be ready for patients given anticipated demand if approved.

Thank you. Our next question comes from Yasmeen Rahimi with Piper Sandler. You may proceed.

Congrats on the continued progress and thanks for taking our questions. For EFZO-FIT, do you still need additional sites to bring enrollment to the finish line? And is there an opportunity for additional enrollment beyond the 264 patients? Second, could you provide more color on the percentage or number of patients continuing from EFZO-FIT to the EAP program?

264 is our enrollment goal based on our power calculations. It assumes a nominal dropout rate and provides a buffer to maintain statistical power; the study is about 92% powered at that enrollment. Sometimes trials enroll a few more or fewer patients due to screening dynamics, but we expect to be in that ballpark. Regarding how many patients will move into the EAP, we don't have an exact number yet. We continue to receive requests as patients finish the trial. We are prepared to support a substantial number of patients who want drug access and are ready from a manufacturing and supply standpoint, but we'll have to see how demand evolves as more patients complete the trial. Since announcing the EAP, interest has increased.

Our next question comes from Yale Jen with Laidlaw & Co. You may proceed.

Good afternoon, and thanks for taking the questions. I came in late, so maybe if you can reiterate a little bit in terms of EFZO-FIT enrollment. I know the press release indicated it's on track — any other color? Then I have another question.

No, Yale — very much on track to complete enrollment in the second quarter this year and feeling good about our progress.

Great, that's good. The preclinical programs look interesting. Are those programs you intend to partner out at some point, or what is the path you are considering moving forward with those preclinical programs?

As with most biotechs, we will evaluate partnering opportunities for our preclinical programs. There is substantial interest in novel platforms, and as our platform generates validated opportunities, we will consider potential collaborations. At the same time, some assets are showing early, unique signals — for example, inducing apoptosis of myofibroblasts is a notable mechanism. We have to be careful about giving away these assets too early but are open to discussions with large partners as appropriate.

Okay, great. One more question: regarding Japan, given its smaller contribution, have they already completed enrollment or can you provide any color on that?

I can't get into specific site-level completions. Enrollment is competitive and not hard-capped by country, although regionally we plan and expect certain patient distributions. Historically, we anticipated roughly 25 to 30 patients from Japan. Overall, Japan is on track along with other regions to meet our enrollment projections for an expected Q2 completion of enrollment.

Our next question comes from Robert LeBoyer with NOBLE Capital Markets. You may proceed.

Good afternoon and congratulations on all the progress. I have a question on the expanded access program. Will you be compiling endpoints or other data from the EAP that could be used in the BLA or presented at medical meetings either before or after the EFZO-FIT data announcement? Could some of the extension data be shared?

Good question, Robert. The EAP will be conducted outside of our protocol for a few reasons. Health authorities did not mandate an open-label extension, and we already have long-term safety data from prior studies and the DSMB review, so there was no regulatory need for a formal extension. Running the EAP outside the protocol helps us maintain focus on our primary BLA timelines and get the randomized data submitted. That said, academics are already interested in looking at longer-term outcomes for patients — 18 to 24 months out — and I would support academic efforts to analyze observational data or surveys. Such analyses could explore long-term steroid reduction effects, weight changes from steroid reduction, imaging outcomes, and other real-world observations. Those academic efforts could potentially inform post-approval or Phase 4 insights. We do not plan to incorporate EAP data into the BLA as part of the primary submission since it is outside the protocol, but there may be opportunities for academic publications or presentations based on data collected outside the trial.

I would now like to turn the call back over to Sanjay for any closing remarks.

Well, thank you for everyone's interest and great questions today. There's a lot of expectation around getting this trial wrapped up and so are we. We appreciate your following us and look forward to talking with you in the future. Thank you again.

Thank you for your participation. You may now disconnect.