Earnings Call Transcript - ATYR Q3 2021

Operator, Operator

Good afternoon, ladies and gentlemen, and welcome to the aTyr Pharma Third Quarter 2021 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. And to ask a question during the session, you will need to press Star 1 on your telephone. If you require any further assistance, an operator will be available to help. And 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.

Ashlee Dunston, Director of Investor Relations and Corporate Communications

Thank you, operator, and good afternoon, everyone. Thank you for joining us today to discuss aTyr’s third quarter 2021 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 and our research and discovery programs in Neuropilin-2, including our preclinical program for ATYR2810. Jill will review the financial results and our 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.

Sanjay Shukla, President and CEO

Thank you, Ashlee. Good afternoon, everyone, and thank you for joining us for our third quarter 2021 results conference call. The third quarter was a major inflection point for aTyr in which we demonstrated clinical proof of concept for ATYR1923 and that our novel tRNA synthetase biology platform has the potential to treat serious diseases. The positive results reported from our Phase Ib/IIa study of ATYR1923 in sarcoidosis, our initial interstitial lung disease or ILD indication, suggests that ATYR1923 could be a transformative therapy for patients by reducing steroid burden while also improving lung function and measures of sarcoidosis symptoms. Since we reported these findings, we have had the opportunity to share them with many of the groups that played a key role in supporting us to get to this point, including the principal investigators, Kyorin Pharmaceutical, our partner for ILD in Japan, the Foundation for Sarcoidosis Research with whom we collaborated to conduct the study and even some sarcoidosis patients. In each case, the feedback has been outstanding. This enthusiasm reinforces our confidence in the strength of the data, and we are more excited than ever to proceed with the development of ATYR1923. We look forward to advancing ATYR1923 to a registrational trial in pulmonary sarcoidosis next year, which will bring us one step closer to delivering a potential new treatment to sarcoidosis patients with clinically meaningful outcomes. As we begin, I will summarize a few highlights since we last spoke in August. We announced positive results from a Phase Ib/IIa, multiple-ascending dose placebo-controlled study of ATYR1923 in 37 patients with pulmonary sarcoidosis. ATYR1923 was safe and well tolerated at all doses with no drug-related serious adverse events or signals of immunogenicity. Additionally, the study demonstrated consistent dose response for ATYR1923 on key efficacy endpoints and improvements compared to placebo, including measures of steroid reduction, lung function, sarcoidosis symptom measures and inflammatory biomarkers. Furthermore, the clinical proof-of-concept data support the expansion of the development of ATYR1923 in other forms of ILD, such as connective tissue disease-related ILD and chronic hypersensitivity pneumonitis. We announced the presentation of preclinical research at the 2021 Society for Immunotherapy of Cancer Annual Meeting, demonstrating the effects of ATYR2810, our lead anti-Neuropilin-2 antibody and IND candidate, on tumor-associated macrophages. These data advance the understanding of ATYR2810’s mechanism of action and the process by which it may inhibit tumor progression and disrupt immune evasion. These findings will help support the clinical development of ATYR2810, including a planned Phase I study in cancer next year. We appointed industry veteran, Dr. Robert Ashworth, as Vice President of Regulatory Affairs. And finally, we raised net proceeds of $80.6 million through the issuance of 10.8 million shares of common stock in September 2021 from a public offering. We’re thrilled with all that we have accomplished thus far in 2021. We’re working diligently to finish the year strong and set ourselves up for a highly productive year in 2022. Let’s begin with our clinical program for ATYR1923. ATYR1923 is a potential first-in-class immunomodulator for severe inflammatory lung disease. ATYR1923 is a novel Fc-fusion protein based on a naturally occurring splice variant of the lung-enriched tRNA synthetase HARS fragment that downregulates aberrant immune responses in inflammatory disease states. ATYR1923 has been shown preclinically to downregulate inflammatory cytokine and chemokine signaling and reduce inflammation and fibrosis. Neuropilin-2 or NRP2 is upregulated on key immune cells known to play a role in inflammation and is enriched in inflamed lung tissue. ATYR1923 binds selectively to NRP2 and therefore has the potential to normalize the immune system, serving to resolve inflammation and prevent progressive fibrosis, thereby stabilizing lung function and alleviating morbidity and mortality. We’re developing ATYR1923 as a potential treatment for patients with ILD, a group of rare immune-mediated disorders that can cause progressive fibrosis of the lung. Our initial ILD indication for ATYR1923 is pulmonary sarcoidosis, a disease that is characterized by the formation of granulomas or clumps of immune cells in the lungs. The formation of these granulomas is driven by persistent abnormal inflammation. If left untreated, it can lead to irreversible scarring or fibrosis and diminished lung function, which may lead to respiratory failure or the need for a lung transplant. We estimate that there are approximately 200,000 patients with pulmonary sarcoidosis in the US alone, although estimates do vary. About half of all patients will require some form of systemic therapy and 30% of all patients will have chronic progressive disease despite available treatments. The current standard of care typically includes treating the inflammation with corticosteroids and other immunosuppressive therapies, which can help manage inflammation and alleviate symptoms such as cough and shortness of breath. However, they have no demonstrated efficacy on disease progression and can result in serious long-term toxicity. Additionally, many patients do not respond to currently available treatments. There’s a substantial need for a safer, more effective treatment that could reduce or replace the requirement for chronic corticosteroid or other immunosuppressive therapy and prevent disease progression. In September, we reported positive results from our proof-of-concept study for ATYR1923 in pulmonary sarcoidosis. We want to take a few minutes to recap these outstanding findings. In doing so, we will also incorporate some of the commentary and feedback received from recent meetings held with our study principal investigators, or PIs, where we presented the results to obtain important insight regarding what they viewed to be the most impactful takeaways. The Phase Ib/IIa study was a randomized double-blind, placebo-controlled, multiple ascending dose clinical trial consisting of three cohorts testing doses of 1, 3 and 5 milligrams per kilogram of ATYR1923 or placebo, dosed intravenously every month for 6 months. The study enrolled 37 histologically confirmed pulmonary sarcoidosis patients. These patients had active and symptomatic disease at baseline and were stably managed on a dose of corticosteroid treatment of greater than or equal to 10 milligrams per day. The primary objective was to evaluate the safety, tolerability, immunogenicity and pharmacokinetic profile of multiple doses of ATYR1923 compared to placebo. Secondary objectives included assessment of the potential steroid sparing effects of ATYR1923 in addition to other exploratory assessments of efficacy, including lung function by evaluating forced vital capacity or FVC; serum biomarkers, health-related quality of life scales and PET imaging. Because it was a small study, it was not powered for statistical significance. The trial included an in-study steroid taper, where patients’ daily steroid dose was tapered to 5 milligrams from a stable dose of anywhere between 10 to 25 milligrams of prednisone by week 8. The study aimed to keep patients at a dose of 5 milligrams until study completion. If the patient’s symptoms got worse, the PI had the option to increase the patient’s dose of steroid largely based on clinical symptom worsening. If the patient’s symptoms remained stable at week 16, the PI could attempt to titrate the patient completely off steroid. At the end of the study, we assessed steroid reduction in the ATYR1923 versus placebo arms. Now let’s recap some of the key findings. To begin, the study met its primary safety endpoint. Monthly dosing of ATYR1923 was determined to be safe and well tolerated at all doses. There were no drug-related serious adverse events and no signal of immunogenicity. These findings are consistent with previous studies of ATYR1923 in patients and healthy volunteers, and they reinforce ATYR1923’s favorable safety profile, a key part of ATYR1923’s value proposition considering current treatments typically have serious side effects and long-term toxicity for pulmonary sarcoidosis and other ILDs. In terms of the efficacy endpoints, perhaps one of the most remarkable findings was the improvement in lung function observed in patients who were treated with ATYR1923 compared to placebo. Lung function is an important measure of disease in this patient population. The granulomas that form in the lungs of these patients can cause their lungs to become fibrotic, meaning they become stiff and make it more difficult to breathe. FVC is a measure of the volume of air exhaled over one full breath and is an objective measure of lung function in patients with ILD. The greater the FVC, the better the lung function. By decreasing steroid use, it might be expected that FVC would decline. In the placebo and 1 milligram per kilogram treatment groups, FVC remained stable or slightly declined. But in the higher dose treatment groups, patients had an improvement of 2.8% in the 3 milligram per kilogram treatment group and 3.3% in the 5 milligram per kilogram group, indicating that patients who had their steroid dose substantially decreased, received ATYR1923 and their lung function greatly improved compared to placebo. The PIs viewed these results as very important findings. From their perspective, improvement of 2.5% is considered clinically meaningful and comparable to what other studies in interstitial lung disease have shown. In addition, an amount of improvement is substantial might be expected in a year. So the degree and speed of these FVC percentage improvements demonstrated with ATYR1923, particularly in the context of a steroid taper in a short 6-month study, were very impressive findings to these clinicians. As we mentioned, steroid reduction was one of the key assessments of efficacy included in the study. All patients enrolled were stably managed on steroids and baseline steroid use was mostly balanced across treatment groups, with the mean daily steroid doses ranging from 11 to 14 milligrams per day across the ATYR1923 and placebo groups. Some patients were also taking background immunomodulators, which were permitted in the study. While there was a slightly higher use of immunomodulators in the placebo group, it did not impact our analysis. Most patients were able to taper to 5 milligrams of steroids successfully. Nearly all of the patients in the ATYR1923 treatment groups were able to taper to 5 milligrams, while only 75% of the patients on placebo were able to do so. When you look at the average daily dose, we saw a relative overall reduction of steroid use in all of the ATYR1923 groups compared to placebo. Notably, we saw some impressive activity in the 5-milligram per kilogram treatment group where throughout the duration of the trial, there was a 22% relative reduction of steroid dose compared to placebo, demonstrating these patients’ disease could be managed with lower steroid doses by receiving ATYR1923. And when you look at the change from baseline overall for steroid dose, patients were able to reduce their steroids by 58% from what they were on when they entered the study on average. To put that in context, many PIs have stated that for patients receiving baseline steroid doses of around 15 milligrams per day, an overall reduction of 50% or greater would be highly impactful to patients if you also saw concomitant symptom improvement. Upon reviewing the findings, the PIs were very pleased to see an overall reduction greater than 50% and one that was maintained throughout the post-taper period. Finally, we have three patients who are able to completely taper off steroids, all in the 5-milligram per kilogram treatment group. This was an outstanding finding and sets up ATYR1923 as a potential transformative steroid replacement therapy. To add to this, what we heard from the PIs is that there were additional patients who were well maintained at 5 milligrams of steroid and, in their opinion, could have possibly tapered down further to 0 milligrams. In some instances, patients did not want to try to taper to 0 milligrams, citing that they felt great at 5 milligrams. We’re very pleased with the findings of steroid reduction, which on their own show a dose response and a measure of drug activity. But steroid reduction, combined with improvements in other efficacy endpoints like lung function and clinical symptoms, confirm the potential for ATYR1923 to be a very impactful therapy. Perhaps what made the biggest impression on the PIs were the clinically meaningful symptom improvements. These include quality of life assessments used for sarcoidosis symptom determination to measure how patients felt at baseline compared to the end of the study. There were several validated symptom measures that we used in the study, including those for dyspnea or shortness of breath, cough, fatigue, and sarcoidosis symptoms. We assessed the findings compared to a defined minimal clinically important difference for each of these indices. Overall, the findings showed dose-dependent clinically meaningful symptom improvement in the ATYR1923 treatment groups compared to placebo. While patient symptom scores remained mostly stable in the 1 milligram per kilogram treatment group compared to placebo, we saw a clinically meaningful improvement in nearly all symptom scores in the 3 milligram per kilogram treatment group and, in the eyes of our experts, drastic symptom improvement in the 5 milligram per kilogram treatment group. These results are really what have our PIs excited. In their view, this is the only study in ILD to show substantial steroid reduction with meaningful symptom improvement. Physicians know firsthand the high cost of chronic steroid use in these patients. Steroids have side effects that could greatly impact patients’ quality of life as much as or even more so than the disease itself. Quality of life compared to current treatment options is of high priority to patients living with sarcoidosis. Many of the PIs have stated that they prefer to prescribe the lowest amount of steroid as needed and in some cases, none at all if possible. Each and every milligram that can be reduced of prednisone in the near and long term is extremely beneficial. Finally, we will comment on some of the biomarker findings. From a high-level takeaway, we saw that when we’re moving steroid and adding ATYR1923, patient biomarker levels were controlled in a dose-dependent manner compared to placebo, and this aligned to what we saw clinically in other studies. This includes the same inflammatory cytokines and key markers of sarcoidosis that we saw impacted by ATYR1923 in our preclinical lung inflammation models and a previous clinical study we conducted in patients with COVID-19 pneumonia. We expect to go into more detail of these findings at an upcoming medical conference. The results of this study support the advancement of ATYR1923 to the next stage of clinical development, and we expect to initiate a registrational trial in pulmonary sarcoidosis next year. We anticipate meeting with regulators, including the U.S. Food and Drug Administration, very shortly to discuss these data and subsequent clinical development and path to registration for ATYR1923 for pulmonary sarcoidosis. As part of our regulatory efforts, we appointed Dr. Robert Ashworth as Vice President of Regulatory Affairs. Dr. Ashworth is an industry veteran with more than 35 years of regulatory and drug development expertise, including a track record of contributing to the FDA approval of more than 12 new drugs across a broad range of categories and disease indications. In addition to mapping out our regulatory strategy, since we reported the results, we have been preparing for next steps for ATYR1923 in many other ways. As we mentioned, we conducted an investigator meeting to present the findings and obtain valuable feedback that will contribute to trial design for the next study. We also presented the findings to our partner, Kyorin, to help determine the optimal ways in which they will be able to participate in the next study, in addition to their development efforts of ATYR1923 for ILD in Japan. While our current focus for ATYR1923 is on pulmonary sarcoidosis and planning for the next study in that indication, the mechanism of action, translational work and clinical data for ATYR1923, combined with the overlapping disease pathology across ILDs, strongly suggest that ATYR1923 could have potential in other ILD indications as well. There are more than 200 types of ILD that can cause fibrosis or scarring of lung tissue, primarily driven by aberrant immune response to an inhaled exposure or other insult. The four main types that make up roughly 80% of the population include connective tissue disease-related ILD where lung manifestations are secondary to autoimmune diseases, such as systemic sclerosis; chronic hypersensitivity pneumonitis, which results from an exaggerated immune response to environmental antigens; and idiopathic pulmonary fibrosis, the prototypical fibrotic lung disease. We estimate there are over 500,000 patients currently living with ILD in the United States and over 3 million patients globally. Like sarcoidosis, all of these diseases have limited standard of care with substantial morbidity and mortality. Outcomes for these patients remain poor despite current treatment options, with median survival as low as three years in certain cases. Scarring of the lung can occur in upwards of 20% of patients across all forms of ILD. Standard of care outside of IPF is treatment with immunomodulatory therapy similar to those used in sarcoidosis. And like sarcoidosis, these treatments have limited clinical evidence of efficacy and are associated with significant long-term toxicity. When you think about some of these opportunities that we may be able to explore, we think we have a transformative therapy in ATYR1923 with an addressable multibillion-dollar market. While we’ve been focused on advancing our ATYR1923 clinical program, we’ve also progressed our preclinical pipeline, which includes the development of anti-NRP2 antibodies for cancer and inflammation. We’ve discussed in detail the clinical proof of concept for ATYR1923. What’s also very exciting about this data is that it validated NRP2, ATYR1923’s binding partner, as a target. A broad receptor screen for ATYR1923 led us to this very selective receptor, and we believe it is a compelling therapeutic target in a number of these disease areas in addition to inflammation, including oncology. As NRP2’s role in various disease states is now better established, we utilized our in-house antibody engineering capabilities to develop a panel of blocking antibodies to selectively target distinct domains of this untapped target, including those interacting with semaphorins, VEGF and certain chemokines, such as CCL21. When it comes to cancer, NRP2 is upregulated on a variety of solid tumors and is particularly enriched in highly aggressive tumors with expression linked to worsened patient outcomes in several cancers, which may include drug resistance to current therapies, such as chemotherapy or targeted agents. NRP2 is also highly expressed on key immune cells implicated in regulating cancer progression, including tumor-associated macrophages and myeloid-derived suppressor cells, among others. Antibodies that can selectively block different aspects of NRP2 signaling pathways may have therapeutic potential in these aggressive cancers where NRP2 is implicated. One of the antibodies we developed, ATYR2810, is a fully humanized monoclonal antibody that specifically and functionally blocks the interaction between NRP2 and VEGF. This is our lead anti-NRP2 antibody, an IND candidate in preclinical development for cancer. The role of NRP2 and VEGF signaling in the tumor microenvironment and its potential importance in the progression of certain aggressive cancers is becoming increasingly validated. We have generated a body of compelling preclinical data in both human-derived and animal models, demonstrating ATYR2810’s blocking ability and tumor inhibitory effects. We continue to investigate ATYR2810’s mechanism of action and the potential ways in which this novel antibody may confer some of the antitumor effects that we have seen. Recent data announced just this week at SITC adds to our growing body of knowledge of this antibody’s mechanism of action. The research details the effects of ATYR2810 on tumor-associated macrophages, or TAMs, differentiated from human triple-negative breast cancer tumor cells. It is well known that TAMs suppress T cell activity, cells that play an important role in mounting an immune response to kill cancer cells. TAMs also play an important role in the induction of epithelial-mesenchymal transition, or EMT, a process that is of great importance in regulating tumor growth, progression and the metastatic cascade as well as being implicated in tumor evasion of the immune system. Furthermore, these highly suppressive TAMs express high levels of NRP2. Treatment with ATYR2810 was shown to decrease the suppressive capabilities of TAMs against T cells compared to untreated TAMs. Furthermore, TAMs treated with ATYR2810 showed a decrease in ZEB1 gene expression, which is a master transcription factor regulating EMT. These results suggest that ATYR2810 may be able to treat cancer by targeting tumor immune avoidance mechanisms as well as regulating EMT. These findings demonstrate for the first time modulation of tumor-associated macrophage suppression of T cell-mediated antitumor responses in the tumor microenvironment as a result of treatment with ATYR2810. These data advance our understanding of ATYR2810’s mechanism of action and the process by which it may inhibit tumor progression and disrupt immune evasion, suggesting the ways in which ATYR2810 may be a potentially effective anticancer agent, and these findings will help support the clinical development of ATYR2810, including, as I mentioned, a planned Phase I study in cancer next year. Finally, today, we want to emphasize the magnitude of what the recent clinical proof of concept for ATYR1923 means for our tRNA synthetase biology platform, which is the foundation for aTyr science and our approach to drug development. We have shown that we can effectively take a tRNA synthetase and its biological pathway and translate it into an innovative therapy with the potential to improve outcomes for patients. In essence, we are well on our way to fulfilling our mission of creating a new class of medicines. Our first case, as evidenced from the data from ATYR1923, comes from HARS, the synthetase driving our lead clinical program that has shown promise for pulmonary sarcoidosis, but has great potential for other ILDs as well. And through this work, we have found a compelling and largely untapped novel target in NRP2, which also forms the backbone of our lead preclinical program with ATYR2810 and two additional NRP2-targeting antibodies with implications for cancer and inflammation. As a reminder, there are 20 tRNA synthetase gene families. aTyr’s intellectual property portfolio covers protein derivatives from all of these with over 300 protein compositions patented. The results for ATYR1923 are a major step forward in unlocking the potential and promise of this novel biology platform. I will now turn it over to our Chief Financial Officer, Jill Broadfoot, to review our financial results.

Jill Broadfoot, Chief Financial Officer

Thank you, Sanjay. Cash, cash equivalents and investments as of September 30, 2021, were $116.4 million. This includes net proceeds of approximately $80.6 million raised through a public offering in September, where we received strong support from several of our existing shareholders and also generated interest and demand from high-quality institutions who are newcomers to aTyr. Research and development expenses were $5.1 million for the third quarter of 2021, which consisted primarily of expenses related to ATYR1923, ATYR2810 and our discovery program. General and administrative expenses were $2.6 million for the third quarter of 2021. Common shares outstanding were $27.8 million and fully diluted shares were $29.6 million as of September 30, 2021. With our updated cash position, clean balance sheet and support from several high-quality, long-term focused investors, we’re in the strongest position that the company has been in quite some time and this allows us to move the company forward. The combination of capital and clinical proof-of-concept data in hand situates us to drive meaningful value for the company. Now I’d like to turn the call back over to Sanjay before we open the call to Q&A.

Sanjay Shukla, President and CEO

Thanks, Jill. Well, our recent clinical readout represents years of hard work and intense dedication to developing and advancing our tRNA synthetase biology platform to one that can generate new therapeutic targets and from which we can develop a potential new class of medicines. While we’re very excited and encouraged by these recent results for ATYR1923, we’re even more excited for what is still yet to come. So with that, we appreciate your interest and continued support. At this time, Jill and I will be happy to take your questions.

Operator, Operator

And as a reminder, to ask a question you will need to press Star 1. Our first question is from Kenan MacKay of RBC Capital Markets.

Kennen MacKay, Analyst, RBC Capital Markets

Congrats on a really transformative quarter. Two questions. Sanjay, maybe first, I would imagine the data from ATYR1923 in pulmonary sarcoidosis has, to your point, sparked a huge amount of interest. Just thinking about this asset and some of the other indications there, are there any thoughts around potentially partnering this asset? And if so, can you just help us understand sort of what that could look like? And then next, just thinking about the potential registrational path in pulmonary sarcoidosis. You mentioned starting a potential registrational trial next year. Just wondering, from a registrational perspective, what endpoints we should be considering for an approval trial...

Sanjay Shukla, President and CEO

Thanks, Kenan, for the questions. So certainly, our data is being viewed as probably the—well, maybe the best sarcoidosis data really produced in the last, say, 15 years. I think the fact that we are the only therapy that has been able to, frankly, reduce steroids and see this magnitude of clinical improvement is garnering a lot of interest not only from experts, but as you can imagine from potential partners as well. It is something that we can’t comment too much about with regards to partnering activities. We’re going to do what’s right here to make sure that we continue to drive value for this program. As you’re aware, biotech companies like us can sometimes do that on our own and sometimes we can do that through partners. If it makes sense for us and shareholders, we may pursue those kinds of options. But at this point, we are really bullish on the data and our findings. We have a really strong win behind us at this point with regards to the endpoints, which was your second question. The endpoints that we looked at hit on really all of the key endpoints: steroid reduction, FVC improvement and also the rather large symptom improvement gives us really, really great options when we talk to the regulators. We know there’s guidance from the FDA talking about how symptoms and meaningful outcomes like that are really important for new therapies. We also know that there’s other guidance saying we need better therapies when the standard of care is toxic. In this environment that we’re in with ILD, we’ve also demonstrated that could also be an effective strategy. And then the FVC improvement we saw, as I mentioned, more than 2.5% is viewed as significant in the eyes of the clinicians; to see 2.8%, 3.3% in our highest dose is very competitive to, as I mentioned, the types of therapies that have been approved for IPF mostly. So we have great options here. The delta that we have and delta of improvement gives us a lot of ability to carefully craft a trial and hit a p-value in a large registrational trial. So I will say stay tuned with regards to these endpoints. We have three very, very good options to discuss with the FDA. And I do think that we are in an extremely favorable position to argue for any of these and really work closely with them—for example, to determine what they think is most important. When you talk about patients and providers, they really want to see symptom improvement and they want to see that improvement while at the same time removing steroids. As I said, we’re really the only therapy that’s been able to do that thus far in ILD.

Kennen MacKay, Analyst, RBC Capital Markets

Thank you.

Operator, Operator

Our next question is from Zegbeh Jallah of Roth Capital Partners. Please go ahead.

Zegbeh Jallah, Analyst, Roth Capital Partners

Hi. Thanks for taking my questions. I think I just have a couple of quick ones here. The first one is just about ATYR1923. You prepared material and shared the data with Kyorin. Are they prepared to actually start the Phase III study alongside you? Or will there be a little bit of a delay waiting for them? Or I suppose, is it possible to start recruitment in the U.S. to expand into the other territories? Just kind of wondering if that could impact the timing of the study since you’re waiting for them. And then the second part is just about ATYR2810. Just want to get a sense of what needs to be completed for the IND. What are some things that are under consideration in terms of the dose and the indications, how you’re thinking through that? And then the last bit, are you working alongside partners to also decide how to move forward with the program?

Sanjay Shukla, President and CEO

Yes. Thanks, Zegbeh. Certainly, with your first question around Kyorin, there’s no delay. There’s no waiting. If anything, they’d like to get started tomorrow probably. As you are aware, our current trial had some impacts with regards to COVID in the middle of the trial that we were able to battle through and get the trial enrolled. Kyorin themselves have completed the necessary work that allows them to join our trial immediately. So we will be looking to launch at the same time with Kyorin here in a trial together. So really no delays related to that partnership. Your second question was around ATYR2810. I would say right now, we’re in the final stages of honing in on the indication—or at least the phenotype of indication—to look for in a trial next year. We’ve seen a lot of excellent data over the last two years with ATYR2810; we’ve pointed to efficacy in triple-negative breast cancer and lung cancer. We’re really completing, I would say, now the indication selection process. But what you can also appreciate is many early cancer trials also sometimes take a basket approach where they look at specific environments, for example, where Neuropilin might be highly enriched, so it could be across multiple solid tumors. We are right now working very closely with the key opinion leaders in Neuropilin biology but also those who have more of a cancer biology focus. This recent data around our mechanism at SITC, obviously, is going to really inform us also around looking at that tumor microenvironment. So much in the same way that we developed ATYR1923, we are taking a very curated, carefully crafted approach to advancing ATYR2810 doing it by being data-driven. I really like the setup here for ATYR2810 to potentially be our next real opportunity at aTyr, in particular because of what we’re learning around Neuropilin biology and some of those aspects around TAMs and EMT that I discussed.

Zegbeh Jallah, Analyst, Roth Capital Partners

Thank you.

Operator, Operator

Our next question is from Prakhar Agrawal of Jones Trading.

Prakhar Agrawal, Analyst, Jones Trading

So firstly, on the trial design for ATYR1923. In terms of the potential primary endpoints for registration, what is your preference between steroid reduction, FVC and symptoms? What I’m trying to understand is among the three, which endpoint do you think has the least risk? And secondly, on development plans for other ILDs. Any details on the timing for moving forward? And what are the gating factors for a potential trial start?

Sanjay Shukla, President and CEO

Okay. You broke up a little bit there for the second part, but I think I got it. So the first question is around preference. I mean, I honestly—this is a situation where I think for me as a clinician, I look at symptoms, and I also look at the magnitude of improvement we saw in our symptom scores. It’s really something that I think jumps off the page. So that gives us a lot of room if we want to actually power a study and hit a minimal clinically important difference there. So there’s a lot of opportunity with symptoms and symptom improvement. We also have to look at regulatory precedents that IPF drugs have been approved based on FVC. We have that also because we’ve hit a threshold in a very short study—threshold that PIs think would be dramatic to see 2.5% over the course of a year; we’re seeing north of 3% in six months. So two very, very good options there. With regard to steroid reduction, we also are hitting a threshold that is really important. But we have to understand that there isn’t necessarily as much precedent when you look at steroid reduction as an endpoint compared to FVC. And if you think about steroid reduction versus symptoms, most patients and providers really want to see that symptom benefit, not just a steroid reduction without that. So maybe that gives you an idea of the lean here. But again, we have three really good options here to have an informed discussion with the FDA and worldwide regulators. I would say right now, the symptoms are the area that we really, really like about potentially pushing forward symptom improvement. Your second question was about plans for other ILDs and timing and gating factors. We are game-ready to be able to move into some of the ILD indications. But we want to make sure that we focus and get sarcoidosis in that trial launched and running well first. At the same time, as you’re aware, we produced really good efficacy data in animal models, for example, in scleroderma ILD. So with our current data being now starting to be talked about and consumed by more pulmonologists in other areas, we are getting a lot of interest in connective tissue disease-related ILD, chronic hypersensitivity pneumonitis, and even IPF because IPF still has quite a bit of inflammation that patients have trouble with on top of pirfenidone or nintedanib. So there’s no shortage of interest. For us, we just want to remain focused, move our core value—the core value here in sarcoidosis. But I do think that we would be able to quickly jump into other indications. Right now, I would say stay tuned about another IND in the work for another non-sarcoidosis ILD. But I want to make sure that we get sarcoidosis launched crisply and executed well first, and then we can get into those other indications.

Prakhar Agrawal, Analyst, Jones Trading

Thank you.

Operator, Operator

Our next question is from Yale Jen of Laidlaw & Co. Please go ahead.

Yale Jen, Analyst, Laidlaw & Co.

My first question is that I know that you mentioned earlier in terms of this drug could be a potential partnering opportunity. But still, given the small patient size or more limited the reach for the physicians, was that something that you can also potentially market it by yourself? And what will be the thoughts if that’s the potential route you have to take? Any thoughts on that? And any comments on that?

Sanjay Shukla, President and CEO

Yes. Thanks, Yale. We have the capabilities and we’ve already demonstrated the ability to execute and move a really, really difficult indication forward. So I have no doubt that we can actually move this forward and market and commercialize the drug ourselves. We’re really the world leader, I would say, right now in a non-IPF therapy here. So we have entirely the focus and mindset to take this forward ourselves. At all times with partnering, you have to just sort of weigh some of those considerations. I would say that interest has never been hotter, if you will. Obviously, data like this is going to generate a tremendous amount of interest. So you can look at those companies that are in the respiratory space. This is an extremely attractive opportunity. Having worked in those large organizations prior to aTyr, this is built very, very well to be a late-stage asset really for anybody. And because it has that transformative potential, I think any commercial team would also look at this as a potential type of game changer for their franchise. But thinking about how we want to move forward, we know that this is an extremely valuable asset, and we are prepared to really take it all the way here. That’s our mindset at this point.

Yale Jen, Analyst, Laidlaw & Co.

Okay. Great. That’s very helpful. And maybe one more short question, which is I assume the next step really is you need to speak with the agency and understand their thoughts on the registration trial design. Do you guys have a timeline in terms of when that meeting might take place? Would that be in the fourth quarter or more likely in the first half or first quarter of next year?

Sanjay Shukla, President and CEO

We’re moving as quickly as possible. As I said, we’ve been quite busy the last couple of weeks here with talking to investigators from around the world. I will say, stay tuned. We are working very, very quickly here to get with the FDA because we do want to start this trial quickly next year. Patients can’t afford the wait. There’s a lot of interest to move into a Phase III trial from sites and clinicians around the world. I’d say we’re probably up to 50 to 60 centers that want to commit now to entering into our trial. So the excitement is there. We’re not going to slow down our regulatory efforts, and we will be meeting with the FDA as quickly as possible.

Yale Jen, Analyst, Laidlaw & Co.

Okay. Great. And again, congrats on the very good quarter. This is a more transformative quarter.

Sanjay Shukla, President and CEO

Thank you, Yale.

Operator, Operator

Our next question is from Joseph Bananas of HC Wainwright. Please go ahead.

Emanuela Branchetti, Analyst, HC Wainwright (on behalf of Joseph)

This is Emanuela on for Joe. So with regards to the data, thank you for sharing the feedback of the investigators. And I was wondering, I know this is a small study, but as you look at baseline characteristics, are there any biomarkers that could potentially predict duration or progression?

Sanjay Shukla, President and CEO

That’s a great question. A predictive biomarker for progression is something that all of the experts have been searching for worldwide. Region to region, you may have a biomarker that an individual or a group of experts may favor more than others. I will say that what we tried to do when we looked at our biomarker panel is take into account everybody’s favorite. What I’m really encouraged by is we see consistency regardless of which biomarker people like the most. We’re controlling all of them. We’re doing a great job with regards to, for example, controlling IL-6. Again, I don’t want to go into too many details about each individual biomarker. We have a very important abstract and a publication that we’d like to get out. So I do want to save a little bit of powder for what I think would be a major medical journal. But the key takeaway here is when you look at the cytokines we’ve looked at previously—IL-6, TNF, interferon gamma, MCP-1, IP-10—these are the markers that we followed years ago in our animal studies that the drug seemed to impact. These are the markers that were highly upregulated in, say, COVID pneumonia patients that ATYR1923 did a substantial job of knocking down. I think what you’re going to find is the same findings in this study. This is why we spend a lot of time really understanding mechanism, and we talk a lot about biology and mechanism. That way, we de-risk things as early as possible so that when we do have clinical results, we’re not surprised by the kind of results the ATYR1923 program has produced. So I’d say stay tuned for that, Emanuela, but I’d probably refer you to our recent ERS publication, which if you take a look at the box and whisker plots from those COVID pneumonia patients, we’re going to have a similar kind of presentation, hopefully at a medical conference, that will show that consistency again now in sarcoidosis patients.

Emanuela Branchetti, Analyst, HC Wainwright (on behalf of Joseph)

Got it. And with regards to the potential registrational trial in sarcoidosis, again, you already shared your thoughts on the endpoints. But can you give us a sense of the expected size and duration of the trial?

Sanjay Shukla, President and CEO

Yes, that’s a great question. So when you look at, for example, the magnitude of our effects in lung symptoms and improving lung symptoms, we can basically model that if we wanted to power a trial to see a significant signal in symptoms, what would the trial look like? Right now, ballpark, as we’ve said previously, we’re looking at about 200 patients. We’ve always thought that that would be kind of the ballpark ahead of data. Now that we have the data we feel even more confident that we’re going to be able to plan for a well-powered trial with numbers around there. Again, it’s all dependent on interactions with the agency. So I can’t say definitively until we finish that. But I will say that we’re looking at a trial somewhere in that ballpark of around 200 patients. From a duration standpoint, this was a 6-month study. There’s a suggestion that if we run a longer study, we may see even more worsening in placebo. So I do think to see a potentially larger effect and certainly a more durable effect, we will be looking at a longer trial. Right now, we will be discussing somewhere between a 9- to 12-month trial with the regulators. So again, that’s dependent on those interactions. But right now, those are our draft plans.

Emanuela Branchetti, Analyst, HC Wainwright (on behalf of Joseph)

Thank you.

Operator, Operator

Our next question is from Hartaj Singh of Oppenheimer. Please go ahead.

Analyst, Analyst, Oppenheimer (on behalf of Hartaj Singh)

Hello, everyone. This is Hartaj. Congrats on all the progress, and I have just a couple of questions. Could you give us an update or any color on the upcoming milestones from Kyorin, especially after your discussions with them? Just on the timing, since those are development, regulatory, and in the future sales related. For instance, after ATYR1923 moves to the next stage of development next year, but for this year, could we still expect some regulatory milestones? Our second question is about the IND filing for ATYR2810. I’m just wondering, and I believe you also have a partner for manufacturing, Lonza. Could you comment on CMC, what sections you have completed and what you need to complete? Just trying to get a sense of where you are with manufacturing. Any color on this would be very helpful.

Sanjay Shukla, President and CEO

Yes. So the first question around Kyorin and milestones—I can’t get into specific numbers around those milestones. I will point out that the bulk of the remaining milestones, which are approximately $165 million, are really largely development focused. The majority of those milestones are development milestones. Now as we start to develop a compound with Kyorin, we will be unlocking those milestone payments. It’s predicated on developing, getting the trial up and running and moving it along with Kyorin. So I think we’ll have a better idea and be able to talk about timing of those milestone payments once we actually get the trial organized and launch activities planned with Kyorin. With regards to ATYR2810 and the IND, what I can tell you is things are on track. You asked specifically around Lonza. Yes, you are right. Last year, we signed a deal with Lonza to manufacture ATYR2810. We were fortunate to do that, perhaps ahead of some of the supply chain issues that a lot of sponsors are facing right now. We got in early, we got things locked down. And we also qualified for some aspects of an accelerated pathway to manufacture ATYR2810. That’s going to allow us to again hit our timelines and allow us to start a Phase I cancer trial for ATYR2810 because we made that investment early with Lonza; there are no delays, no issues thus far, and we expect CMC in no way to be a critical path activity or in danger of delaying the start of a cancer trial with ATYR2810.

Analyst, Analyst, Oppenheimer (on behalf of Hartaj Singh)

Thank you so much, Sanjay.

Operator, Operator

There are no further questions at this time. I will now turn the call over back to Dr. Sanjay Shukla, our President and CEO, for his closing remarks.

Sanjay Shukla, President and CEO

Thanks again. Excellent questions today. Obviously, a really important inflection—one of the most important inflection points in aTyr’s history occurred last quarter. We are really gratified by the response with how we’ve been able to move this program forward, and we really are excited about taking it now to this next stage here. So I really appreciate everyone’s interest. We will be in touch in the near future. Everyone be well. Thank you.

Operator, Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.