aTyr Pharma, Inc. (NASDAQ:LIFE) Q3 2022 Earnings Call Transcript

aTyr Pharma, Inc. (NASDAQ:LIFE) Q3 2022 Earnings Call Transcript November 10, 2022

aTyr Pharma, Inc. reports earnings inline with expectations. Reported EPS is $-0.46 EPS, expectations were $-0.46.

Operator: Good afternoon, ladies and gentlemen and welcome to aTyr Pharma’s Third Quarter 2022 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.

Photo by National Cancer Institute on Unsplash

Ashlee Dunston: Thank you, and good afternoon, everyone. Thank you for joining us today to discuss aTyr’s third quarter 2022 operating results and corporate update. We are joined today by Dr. Sanjay Shukla, our President and CEO; Ms. Jill Broadfoot, our CFO; and Dr. Leslie Nangle, our VP of Research. On the call, Sanjay will provide an update on our corporate strategy, including our clinical program for efzofitimod, and research and discovery programs. Jill will review the financial results and our current financial position before handing it back to Sanjay to open up the call 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, subsequently filed quarterly reports on Form 10-Q and in other SEC filings. 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: Thank you, Ashlee. Good afternoon, everyone, and thank you for joining us for our third quarter 2022 results conference call. The third quarter saw the initiation of EFZO-FIT, a global pivotal Phase 3 study of our lead therapeutic candidate efzofitimod in patients with pulmonary sarcoidosis, the most prevalent form of interstitial lung disease or ILD. We dosed the first patient in this study in September meeting aggressive timelines and guidance. Amid current market conditions, we intend to focus our resources on prioritizing EFZO-FIT, which is our highest value program to ensure a timely and successful completion of this study. As we begin, I will summarize a few additional highlights since we last spoke in August.

We announced a publication of results from the Phase 1b/2a study of efzofitimod in patients with pulmonary sarcoidosis in the peer-reviewed medical journal CHEST. We presented a poster at European Respiratory Society or ERS International Congress on findings for an antibody for immunohistochemical detection of neuropilin-2 or NRP2 in patient tissue sample. NRP2 is efzofitimod’s binding partner and these findings suggest that this antibody may provide an extremely useful clinical tool potentially aiding in patient selection or stratification. We received FDA Fast Track designation for efzofitimod for the treatment of systemic sclerosis, SSc or scleroderma-associated ILD. We announced a research collaboration with Dualsystems Biotech AG, a company specializing in custom proteomics to identify and validate 10 target €“ 10 new target receptors for tRNA synthetases from our intellectual property or IP by 2025.

This collaboration is a way to potentially accelerate drug discovery and identify new drugs from our platform. And finally, we received a notice of allowance from the U.S. Patent and Trademark Office for anti-neuropilin-2 monoclonal antibodies, which is the first to be granted to our IP state (ph) for this program. We’ve experienced another quarter of crisp operational execution, both internally and in cooperation with our partners and collaborators and we anticipate a strong finish to the year. Now let’s focus on some more specific updates around our clinical program for efzofitimod. As a reminder, efzofitimod is a first-in-class immunomodulator for fibrotic lung disease. Efzofitimod is a novel Fc fusion protein based on the naturally occurring splice variant of the lung-enriched tRNA synthetase HARS fragment that downregulates aberrant immune responses in inflammatory disease states.

Efzofitimod has been shown preclinically to downregulate inflammatory cytokine and chemokine signaling and reduce inflammation and fibrosis. The NRP2 receptor is upregulated on key immune cells during active inflammation and is enriched in inflamed lung tissue. Efzofitimod 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 efzofitimod as a potential treatment for patients with ILD, a group of rare immune-mediated fibrotic lung disorders. Our initial ILD indication is pulmonary sarcoidosis. Sarcoidosis is the most prevalent ILD and is characterized by the formation of granulomas, which can occur in any organ but predominantly affects the lung.

If left untreated, this can lead to irreversible scarring or fibrosis, which greatly increases the risk of death. We estimate that there are close to 200,000 patients with pulmonary sarcoidosis in the US, and around 150,000 in the major European markets with another 20,000 in Japan, up to 75% of patients require treatment for their disease and approximately half of these will have progressive disease despite treatment. Around one in five of all patients will go on to develop lung fibrosis. First-line treatment is typically corticosteroids, which may effectively control symptoms, but are associated with severe debilitating side effects, particularly with chronic treatment. In patients unresponsive to steroid treatment, cytotoxic immunosuppressants or biologic immunomodulators may be used, but are also known to cause serious side effects.

The use of all of these therapies is empiric and not supported by current clinical evidence standards. We believe the addressable market for efzofitimod in the three geographies mentioned is around 200,000 patients. Even with conservative assumptions, this represents a significant market opportunity in sarcoidosis alone. Efzofitimod has received orphan drug designation and Fast Track designation from the FDA for sarcoidosis. We see upside potential for efzofitimod in other forms of ILD. This includes indications such as scleroderma-related ILD where we have also garnered FDA orphan drug and Fast Track designations. Also other connective tissue disease related ILDs and chronic hypersensitivity pneumonitis among others. These diseases share overlapping immune pathology with sarcoidosis and others having limited treatment options.

And efzofitimod has demonstrated efficacy in animal models of these diseases. Taken collectively, this represents a multibillion dollar market opportunity for efzofitimod in ILD. And aTyr is poised as a front runner in this expensive opportunity. Now let’s recap the data we have generated for efzofitimod and some updates on the current EFZO-FIT study. In September 2021, we reported clinical proof-of-concept for efzofitimod based on positive results from a Phase 1b/2a study in pulmonary sarcoidosis. The study which included a four steroid taper demonstrated safety, tolerability and consistent dose response for efzofitimod on key efficacy endpoints and improvements compared to placebo. Including measures of steroid reduction, lung function, sarcoidosis symptom measures and inflammatory biomarkers.

Just this past week, the full results from this study were published online in the peer-reviewed medical journal CHEST with Dr. Daniel Culver, Chief of Pulmonary Medicine at the Cleveland Clinic, serving as lead author. This marks the first peer-reviewed publication of clinical data for efzofitimod. For that matter, any tRNA synthetase derived therapy in a major medical journal. These data indicate that efzofitimod is providing substantial benefit to patients, improving lung function and symptoms of cough, shortness of breath and fatigue, all while reducing their toxic steroid burden. According to medical experts, this is the first randomized placebo controlled trial of any therapy for pulmonary sarcoidosis that demonstrates effects on physiologic and quality of life measures concurrent with steroid reduction.

With the full data set now available for review, we expect this publication will generate additional education, awareness and support for efzofitimod among the specialist and generalist provider community, particularly as we are currently enrolling for EFZO-FIT. EFZO-FIT is a global pivotal Phase 3 randomized double-blind placebo controlled study to evaluate the efficacy and safety of efzofitimod in patients with pulmonary sarcoidosis. It is a 52-week study consisting of three parallel cohorts randomized equally to either 3 milligrams per kilogram or 5 milligrams per kilogram of efzofitimod or placebo, dosed intravenously once a month for a total of 12 doses. The study intends to enroll 264 patients with pulmonary sarcoidosis at multiple centers in the U.S. Europe and Japan.

The trial design incorporates a forced steroid taper and the primary endpoint of the study is steroid reduction. Secondary endpoints include measures of lung function and sarcoidosis symptoms. We’ve dosed the first patient in the study and have several sites in the U.S. open for enrollment. We expect additional sites to open in the U.S. later this year and we will remind you that this is a global study. We held a productive meeting with European investigators during ERS in September and we now have rapidly achieved regulatory approval to proceed with the study in a number of countries including the U.K., Netherlands, France and Spain. We anticipate sites opening for enrollment in those countries in the coming months and early 2023. Finally, our partner, Kyorin Pharmaceutical has also completed submission of the clinical trial notification or CTM in Japan and we could see a center there open for enrollment by the end of the year.

We’re highly encouraged by the rapid pace of this progress, as it permits us to initiate the study in those regions and signifies alignment with these regulators on the trial design, including the steroid sparing primary endpoint. I want to give kudos to our regulatory group led by Dr. Bob Ashworth for skillfully navigating towards these regulatory approvals. EFZO-FIT is expected to be the largest interventional study for patients with sarcoidosis to-date. It is also the largest study that aTyr has undertaken in the history of the company. We’re laser focused on assuring that this study receives the resources they acquirers and we intend to focus our resources on efzofitimod to ensure its completion. Shifting to our preclinical and discovery programs, let’s discuss some of the progress with our pipeline.

This includes ATYR2810 or 2810. And today, we’d like to provide a strategic update regarding this program, which we have advanced to be Phase 1 ready. Due to current market conditions and the need for prioritization of capital, most importantly focusing our resources on the EFZO-FIT study. We made a strategic decision not to use our internal resources to initiate a Phase 1 study of 2810 this year. We intend to look at other potential non-dilutive avenue, including academic collaborations or other funding sources to bring this program forward. Multiple academic centers are particularly interested in advancing 2810 in rare aggressive cancers where many patients remain unresponsive to currently available treatments, such as neuroendocrine prostate and pancreatic neuroendocrine tumors.

Recent published literature regarding the role of NRP2 in these types of cancers and interest from these centers have encouraged us to consider interrogating an anti NRP2 agent such as 2810 in these indications. This includes an exciting publication recently from one of our key collaborators, Dr. Kausttubh Datta and his colleagues from the University of Nebraska Medical Center indicating the role of NRP2 in promoting metastasis and conferring therapeutic resistance in neuroendocrine like prostate cancer, which outlines the potential for the therapy in this aggressive tumor type. As a reminder, 2810 is Phase 1 ready having completed IND-enabling activities including GMP manufacturing and GLP tox studies. And we have been granted allowance from the U.S. Patent and Trademark Office for the patent for anti-NRP2 antibodies, which covers us for 2810.

I’ll close with reiterating how excited we are with our tRNA synthetases platform and what is yielded thus far as we get closer to our mission of translating our tRNA synthetases biology into new therapeutics for fibrosis, inflammation and cancer. We’ve advanced efzofitimod, which is derived from a fragment of histidyl-tRNA synthetase or HARS into Phase 3 study. Meanwhile, we’ve identified and validated the receptor target for a fragment of another tRNA synthetases, alanyl-tRNA synthetase or AARS and we expect to reveal the receptor of yet a third fragment, this one from aspartyl-tRNA synthetase or DARs in the near future. I’ll now turn it over to our Chief Financial Officer, Jill Broadfoot to review our financial results.

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Jill Broadfoot: Thank you, Sanjay. We ended the third quarter 2022 with $79.6 million in cash, restricted cash, cash equivalents and investments. Research and development expenses were $9.9 million for the third quarter 2022, which consisted of product development and manufacturing costs for the efzofitimod and 2810 programs, as well as startup costs for the Phase 3 EFZO-FIT study. General and administrative expenses were $3.6 million for the third quarter 2022. Common shares outstanding were approximately $29 million and fully diluted shares were $34 million as of September 30, 2022. From a balance sheet perspective, we are comfortable with our current cash position, which we believe enables us to carry out the most meaningful value driving catalyst for the company.

While running a large global Phase 3 study in a rare disease such as EFZO-FIT is capital intensive we do share a portion of the cost with our partner Kyorin, who is responsible for the cost of all operations and patient costs in Japan and purchases drug supply from us with a small market. And as a reminder, under our agreement with Kyorin, we are eligible to receive up to an additional $155 million in milestone payments, of which the majority are development and regulatory related. As we stated on the call today, we have made some important decisions around our pipeline that will allow us to better manage our cash. At this point in time, we have a financial and strategic plan for the company to fund operations to the data readout for EFZO-FIT.

This plan contemplates our current cash balance, the potential for milestones from Kyorin and potential proceeds from the use of our existing equity vehicles. Now, I’d like to turn the call back over to Sanjay before we open it up to Q&A.

Sanjay Shukla: Thank you, Jill. We are a highly dedicated team with a track record of exceptional execution and we continue to make outstanding progress with efficient use of capital. We understand that the markets have been challenging as of late and certainly know that they do not — in any way adequately reflect the intrinsic value of the company, including the data and progress we’ve generated for efzofitimod, considering its stage of development as of late phase asset, and its potential to address a multibillion dollar market. The prioritization we’ve discussed today provides us with the ability to ensure adequate resources to successfully advance the highest value driving catalyst for the company. I’ll close with a comment recently from one of our top shareholders, who told me aTyr is a platform company that’s generating transformative research and clinical opportunity from our tRNA synthetase biology state.

This is a company that I think is poised right now to be a leader in an area of interstitial lung disease where as I mentioned, we are the front runner. So we appreciate your interest, continued support. At this time, Jill, and I will be happy to take your questions. Thank you.

Q&A Session

Operator: And our first question will come from Gregory Renza of RBC. Your line is open.

Unidentified Participant: Hi. This is for Greg. Congrats on the progress and thanks for taking our questions. Maybe first on the Phase 3 trial, some companies in the space are seeing some clinical trial conduct slow down. Could you just provide some color on what you’re seeing around site activation and enrollment cadence as well as your confidence level and the guided timeline of the Phase 3 trial? Thank you.

Sanjay Shukla: Sure. Appreciate the question. So it’s quite early to necessarily get into projections and the trajectory. But what I can tell you is, the excitement from the PIs worldwide, they’ve been waiting 20 years, sometimes longer for a therapy like this to get to this stage. So certainly from that perspective, I think you can look at the pace of our regulatory approvals and even the fact that we were able to get a patient enrolled basically about three months from getting the green light from the FDA. This speaks to a rapid sort of interest and uptake to enter our trial. I also think the data we produced is checking the box in all the areas that these experts have been waiting for probably going back really 50 years. A drug that can reduce symptom — improve symptoms, improve lung function and all doing that while reducing steroids.

This has never been seen before. So what do I anticipate? I anticipate a fast start. I’m glad we’ve started fast with the first patient. I also have seen the quick pace of regulatory approvals. I will be at three sites next week. So I think it’s something — it’s off to a fast start here. We’re going to have to watch to see as this is the largest sarcoidosis trial, how we really progress here. And I think I’ll have a better estimate of that once we get a good 30, 40 centers up and let’s allow them to enroll. Let’s allow them to enroll for a few months. I think our publication is also really, really important. This is the first major sarcoidosis publication from a clinical trial, I’d say going back to the infliximab data in the 2000. So this is a field that’s hungry to actually interrogate efzofitimod, they like the initial data.

And I can tell you that patients certainly are responding well in that we are really trying to address their steroid burden. So I will get back to you to see how we’re doing here, but early signs here are very, very encouraging.

Unidentified Participant: That’s great. Thanks for the color. And then maybe secondly, could you talk a little about your latest development strategy in scleroderma ILD and what do you see as the key differentiation of the mechanism of action that could drive clinical potential in this indication? Thank you.

Sanjay Shukla: Great. Yeah. So scleroderma, I think it’s something that in honesty it’s an adjacent condition. We are seeing a number of pulmonologists and rheumatologists after seeing our EFZO data in sarcoidosis become very interested. Conversely, we’ve also received maybe rather surprisingly some nice designations early from the FDA. Scleroderma ILD represents probably the worst form of scleroderma. It’s where some of the morbidity and mortality is just really quite dramatic and these patients don’t have treatment options. So while we have a good kind of feel from patients and providers and regulators. We have to be careful about thinking about how do we keep our eyes focused on sarcoidosis first. So at this point, I think we are really keeping eyes on sarcoidosis, but it is really encouraging that based on really our data and even going back to our preclinical data, we have animal efficacy showing efzofitimod can impact sclerodermatous plaques and lung inflammation in mice.