aTyr Pharma, Inc. (NASDAQ:LIFE) Q4 2022 Earnings Call Transcript

aTyr Pharma, Inc. (NASDAQ:LIFE) Q4 2022 Earnings Call Transcript March 10, 2023

Operator: Good afternoon, ladies and gentlemen, and welcome to the aTyr Pharma Fourth Quarter and Full Year 2022 Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded for replay purposes. It is now my pleasure to hand the conference over to Ashlee Dunston, aTyr’s Director of Investor Relations and Corporate Communications. Ms. Dunston, you may begin.

Ashlee Dunston: Thank you, and good afternoon, everyone. Thank you for joining us today to discuss aTyr’s fourth quarter and full year 2022 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 efzofitimod and research and discovery program. 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 our 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 fourth quarter and full year 2022 results conference call. At aTyr, we’re working to develop a new class of medicines from our tRNA synthetase biology platform with the current focus on diseases €“ disease areas related to inflammation and fibrosis with a high unmet medical need. Our lead therapeutic candidate, efzofitimod, is a novel immunomodulator that down regulates innate immune responses in uncontrolled inflammatory disease states. via selective modulation of neuropilin-2 or NRP-2. We’re developing efzofitimod as a potential treatment for patients with interstitial lung disease, or ILD, a group of rare immune-mediated fibrotic lung disorders, with the goal of resolving inflammation to prevent the progression of fibrosis, in order to improve outcomes for patients.

2022 was an important year for aTyr as we advanced efzofitimod to a global pivotal Phase 3 study in patients with pulmonary sarcoidosis, the most prevalent form of ILD that affects nearly 200,000 people in the U.S. and more than 1.2 million worldwide. Despite current treatments in standard of care, which is primarily steroids, approximately half of patients will develop progressive disease and nearly one in five of all patients will develop lung fibrosis. There remains a need for safer and more effective treatments, including those that reduce steroid burden for patients. This Phase 3 study, which is known as EFZO-FIT, is currently enrolling at multiple centers in the U.S., Europe and Japan. We’re pleased with the current pace of enrollment, and we expect to provide additional details regarding the progress of this study in the future.

Our strategy for efzofitimod includes investigating the role this novel immunomodulator may play as a potential treatment for other more inflammatory forms of ILD. We announced last month that we are expanding the clinical development program for efzofitimod to include a Phase 2 study in patients with ILD associated with systemic sclerosis, which is known as SSC or more commonly scleroderma. This is a major type of connected tissue disease that affects nearly 100,000 people in the U.S., with up to 80% of these patients developing ILD, which is the leading cause of death in these patients. We see SSc-ILD as a logical second indication to explore for efzofitimod, based on the clinical proof-of-concept demonstrated in pulmonary sarcoidosis patients and the translational effects seen in an animal model of SSs, where efzofitimod was shown to reduce lung and skin fibrosis.

Additionally, the pathology of SSc-ILD is driven by the same immune cells that are central to pulmonary sarcoidosis pathology. NRP2 is upregulated on these cells and is also implicated in scleroderma. Furthermore, like sarcoidosis, standard of care is limited and current treatments are not disease-modifying and do not improve quality of life. We recently received clearance of an investigational new drug application by the U.S. FDA for a Phase 2 study of efzofitimod in patients with SSc-ILD and we are planning to initiate this study later this year. This Phase 2 study is expected to be a randomized double-blind placebo-controlled proof-of-concept study to evaluate the efficacy, safety and tolerability of efzofitimod in patients with SSc-ILD.

This is expected to be a 28-week study with three parallel cohorts randomized to either high or low dose efzofitimod or placebo, dosed intravenously monthly for a total of six doses. The study intends to enroll 25 patients with progressive disease who are currently receiving background mycophenolate therapy at multiple centers in the U.S. The primary objective of the study is to evaluate the efficacy of multiple doses of intravenous efzofitimod on pulmonary, cutaneous and systemic manifestations in patients with SSc-ILD. We expect to provide additional details about this study once it begins. This program expansion increases the potential market opportunity for efzofitimod in these forms of ILD. Taken collectively, we believe there is a multibillion-dollar global market opportunity for efzofitimod in pulmonary sarcoidosis and SSs-ILD and situates aTyr as the biotech leader in ILD.

While our primary focus is our clinical program for efzofitimod, we continue to leverage our intellectual property estate, covering fragments from all 20 human tRNA synthetases and utilize our platform as an engine to generate potential pipeline candidates and identify therapeutic targets. By leveraging the advanced technology made available to us through our research collaboration with Dualsystems Biotech, we have the opportunity to increase productivity in our discovery engine and efficiently generate new therapeutics from our tRNA synthetase domain library. As a reminder, in addition to efzofitimod, this platform has recently generated data characterizing the extracellular targets for two previously uncharacterized tRNA synthetase domain, which identified specific interactions with key targets involved in fibrosis.

We’re excited to advance pipeline candidates through the discovery phase and unlock the unique biology underlying these novel pathways while we work to complete our two clinical trials for efzofitimod. We also plan to actively explore ways to accelerate these discovery programs, including through business development. I’ll now turn it over to our Chief Financial Officer, Jill Broadfoot, to review our financial results.

Jill Broadfoot: Thank you, Sanjay. Our results of operations included research and development expenses of $42.8 million for the year ended 2022, which consisted of clinical development costs for the Phase 3 EFZO-FIT study, manufacturing costs for the efzofitimod and ATYR2810 programs and research and development costs for the efzofitimod and discovery programs. Also, our general and administrative expenses were $14 million for the year ended 2022. We ended the year 2022 with $69.3 million in cash, restricted cash, cash equivalents and investments. Subsequent to the end of the year, we received a $10 million milestone payment in connection with the Kyorin Agreement that was related to their initiation of the EFZO-FIT study in Japan, and we generated gross proceeds of approximately $52 million from the public offering of common stock.

Based on our current operational plans and existing cash, we believe our cash runway extends into 2026, which is expected to be sufficient to fund the company through the readout for our two efzofitimod clinical trials. This takes into account the allocation of resources to programs that are driving the most meaningful value for the company, namely the clinical development program for efzofitimod and maintaining an active discovery program with our tRNA synthetase pipeline candidates, where we continue to €“ we intend to continue to identify targets for some of our tRNA synthetase fragments, but not proceed with more costly late-stage preclinical activities. We expect this strategy to reduce our spend on late-stage preclinical activities by over 30% compared to the prior year.

In addition to program allocation, this forecast does not take into account any potential financial upsides, such as the opportunity for additional milestone payments from Kyorin, our partner for the development and commercialization of efzofitimod for ILD in Japan. While the forecast does consider some partial proceeds from the prudent use of our at-the-market facility, it also does not include any additional proceeds that may result from business development efforts. 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. As mentioned, 2022 was a year of significant accomplishments for aTyr as we now start 2023, we believe we have the financial resources and a strategic plan to carry us through the next inflection point of the company. Moving forward with our focus on executing our 2 clinical trials and generating discovery targets from our pipeline, we intend to only hold an annual fourth quarter and full year conference call to discuss our financial results and provide operational updates. On a go-forward basis, in order to streamline our internal process, we’ll release quarterly results by press release only. We plan to continue to provide a high degree of transparency regarding the progress of our programs and pipeline through press releases, presentations and events. So in closing, we appreciate your interest. At this time, Jill and I will be happy to take your questions.

Q&A Session

Operator: Thank you. Our first question comes from the line of George Renza €“ sorry, Gregory Renza of RBC. Your line is open.

Gregory Renza: Great. Thanks, Sanjay and team, congrats on the progress, and thanks for taking my questions. Sanjay, to the extent possible, it would be great to hear just a little bit more about the scleroderma ILD trial. It’s great to hear that getting up and running. And just as you think about setting that up, certainly, with the 28-week study, it looks like there’s a possibility of having some clarity on this indication prior to the EFZO-FIT trial. So I’m just curious how you think about how that could kind of inform our understanding of efzofitimod in clinic. And then maybe just related to that, as we think about the fixed doses of 270 and 450, how we should think about that as it pertains to the dosing in the EFZO-FIT trial. Thanks so much.

Sanjay Shukla: Sure, Greg. Good question. So SSs-ILD is something that, years ago, we thought about actually moving into before sarcoidosis. We had quite a bit of debate with pulmonologists, rheumatologists around the world. They actually wanted us to move into both indications. But back then, as a sub-$10 million market cap company, we had to prioritize. And our view was we needed to establish proof-of-concept. Sarcoidosis was picked, but it’s always been in the back of the mind of many of the rheumatology experts that efzofitimod could be useful in this indication. Back in 2017/2018 time period, we ran a very, very difficult mouse model comparing efzofitimod to nintedanib. In that model, efzofitimod did a really nice job. And in the early phase of that model, our competing nintedanib showing significant amelioration of lung and skin fibrosis.

So always been in the back of our mind that this could be a natural expansion. What we’ve seen in the market after our proof-of-concept is an overwhelming interest by more rheumatologists and pulmonary experts on the autoimmune side to try efzofitimod with their patients. Some of the rheumatologists involved in our last trial, immediately after our results, wanted to attempt to use efzofitimod because there really isn’t anything out there for these patients. Mycophenolate is used systemically, but once you develop ILD and you have scleroderma, it can really be, perhaps, the most serious morbidity for these patients. And the mortality rates basically approach 75% to 80% in some of these patients. So we knew we had a strong rationale. As it turns out last summer, one of the €“ through some of the interactions even with the FDA, there were questions about moving into other forms of ILD, and we quickly received a fast-track designation based on our preclinical data.

So over the last several months, we sat down with those experts. We wrote a protocol that we think now can establish proof-of-concept in that indication. We think this effectively doubles the market opportunity for efzofitimod. We always thought it was a solid opportunity in sarcoidosis, but now with SSC as well, we clearly are in a multibillion-dollar space. And we’re the leader. We’re the furthest along here. With regard to the trial, it is a six-month trial while we want to be able to establish a signal primarily looking at lung. I’ll be able to provide more details probably through a KOL call as well where we can learn a little bit more about scleroderma, but the existing drugs that are out there, even those that are approved, show limited, limited efficacy, mostly just less reduction of decline of FVC.

We think our drug can do better. And none of those therapies that are out there for patients do anything for quality of life. They don’t move the needle at all with skin inflammation or fibrosis. So efzofitimod provides a real strong opportunity for us to move into scleroderma ILD while keeping our eyes on the ball with sarcoidosis. With regards to dosing, we are €“ and we have contemplated a fixed dose. This is just going to allow us to have a little bit more commercial knowledge around our drug. It’s a small point, but the full 450 and 270 milligrams that you point out, they approximate 5 milligrams per kilogram and 3 milligrams per kilogram from our current trial. It’s just going to give us the opportunity to look at our drug from a fixed dose versus a weight-based dose in preparation to commercialize drug.

So it’s going to give us a little bit more data looking at it in this manner in this trial. Nonetheless, I think we can get the data, and I expect to get the data in 2024. I’ll probably guide to exactly when that would be. And that would be ahead of when we expect sarcoidosis readouts, which I think right now are on track, as I said, for Q1 2025. So there’s two real opportunities here, I would say, in the next several years for efzofitimod to demonstrate not only clinical proof-of-concept in this indication, but clinical efficacy in sarcoidosis, and this is why we think we’re really poised to be the leader in a space that we’re the furthest along.

Gregory Renza: That’s great. Very helpful. Maybe I’ll sneak in a more near-term quick one. Just with respect to ATS coming up in EMEA. I’m just curious if there’s anything you wanted to highlight for those posters and presentation and just mainly around what should we and the physician community be looking at in order to really just enhance their confidence and our confidence in the efzofitimod mechanism of action? Thanks, again, and congrats on the progress, Sanjay.

Sanjay Shukla: Thanks, Greg. And to mention ATS, thank you for promising that. We have two, I think, really exciting data points coming out there. The first, you mentioned is the mechanism of action. We’ve made significant strides, I would say, in the last six to nine months in fully understanding efzofitimod’s MOA. You’re going to see some more data come out at ATS, pointing to how efzofitimod modulates myeloid cells. This is something that I think is going to be really useful for us to help enrollment, but also to start to give those clinicians a better understanding of how the drug is basically changing the immune system. So we have a presentation that has been upgraded to symposia. And I would expect to have a full house there as most of the clinicians really want to now understand how did we see some of the outstanding effects we saw in our last trial.

I’ll also add that we also have a small exposure response analysis poster that’s going to be coming out for those of you that understand what this means, it basically looks at our last Phase 2 data, gives us further confidence that as you administer basically more efzofitimod, we see better and better response. So this was a third-party analysis done by a sophisticated PK/PD group that is well known to many folks, and we’ll be €“ everyone will see it on the poster. This is another way that we can look at our Phase 2 data and say the trends we observed when we now look at it from a more sophisticated statistical PK modeling perspective, the more drug you give with efzofitimod, the better the response. And it also highlights that we’re approaching E-Max, which means the 5-milligram dose is about 88%, 90% to its maximal benefit.

Remember, the outstanding benefits we saw in quality of life, steroid reduction and FPC have never really been seen before. Those three things, we check the box there that experts have been wanting for the last 50 years. This exposure response will provide even further confidence for those clinicians who really want to see some of the pharmacokinetic data. So two very important presentations at ATS. We’ll also be spending a lot of time with our investigators, our worldwide investigators, not just from the U.S. but also from Europe and Japan. So it will be a busy week for us or five days for us in D.C. in May.

Operator: Thank you. One moment, please. Our next question comes from the line of Joseph Pantginis of H.C. Wainwright. Your line is open.

Sara Nik: Hi, my name is Sara on for Joe. Thanks for taking the questions. Just following up on the earlier question regarding SSc-ILD. Are there plans currently to initiate the Phase 2 study outside the U.S.? And then within the U.S., are there particular regions you would expect to see outperform in this study?

Sanjay Shukla: Good question. So our current plan is to focus on the U.S. We want to be able to leverage, frankly, the sites that we already have activated in sarcoidosis. Why is this important? Things such as contracts, legal start-up, it’s already been negotiated on the sarcoidosis side. So I’ll us, for example, and I’m using this as an example, the Cleveland Clinic, which is our lead center for the sarcoidosis trial. Colleagues down the hall in the same pulmonary group will want to launch in efzofitimod. So operationalizing and getting start-up, I think we can be a lot faster than a typical biotech by leveraging the existing sites that are interested and who have the patients in SSc-ILD. We have a lot of interest in Europe and Japan to participate.

But right now, the plans are just to sort of stick to the U.S. It is a smaller trial, 25 patients. We’re aiming to get proof-of-concept in this trial. And we think focusing on the U.S. here is the best way for us to get readouts as quickly as possible. Right now, that’s a plan I really feel good about given the fact that we have existing relationships with more than 30 centers in the U.S. And we’re not going to need 30 centers for this trial. We’ll probably focus on a core, say, 10 or 12 once we launch.

Sara Nik: Okay, great. Yes, that’s helpful. And if I could, I’ll ask one more. You reported dosing your first patient last month with your partner Kyorin in Japan. Can you give any color on the current enrollment trajectory there? Anything you can reveal about likely size or anything regarding trajectory in Japan in general? Thanks.

Sanjay Shukla: Japan, I mean we’re thrilled. We’re getting started there. Of course, that kicked off a $10 million €“ we’ve received a $10 million milestone payment from our partner, Kyorin. It’s a very important component of our trial. We expect to potentially enroll about €“ somewhere in the neighborhood of about 10% of our patients from Japan. So you’re looking at, say, 25, 26 patients. Thus far, the trajectory has been great in Japan. I’ve been very happy with the performance there in general. Also, the pace of enrollment, I’m very encouraged by where we are globally. So right now, there’s competition between sites and countries and we continue to generate goodwill that way. The goal here is to really focus on executing this trial in Japan is an important component. And thus far, very pleased with the fast start there.

Sara Nik: Okay, great. Thank you so much.

Operator: Thank you. One moment, please. Our next question comes from the line of Yale Jen of Laidlaw. Your line is open.

Yale Jen: Great. Thanks for taking the questions and congrats on the progress. In terms of SSc-ILD trials, I recall one of the secondary endpoint in the skin analysis about 12 weeks versus the primary endpoint of 24 weeks. Just curious what’s the sort of rationale behind it? And then I have another follow-up.

Sanjay Shukla: Yes, Yale. We are going to be able to look at cutaneous readouts in SSc-ILD. As you point out, had about 12 weeks in the protocol, we’re going to do some sampling to be able to look at, first of all, any kind of immune cell change that we see in those skin plaques. We may look at some of the visual changes, quality of life, things of that nature. So the advantage of SSc-ILD is easier access to skin readouts unlike sarcoidosis, where a very small percentage of patients have cutaneous nodules. These scleroderma patients are going to have skin manifestations and we believe efzofitimod could positively impact these manifestations. So we’ll be looking at 12 weeks to see if we see any changes at the local histopath level, but also just clinically as well. So it is going to allow us to have an early read on the skin readouts while we really focus on lung, which has been the approved endpoint for the existing therapies for efzofitimod.

Yale Jen: Okay, great. Maybe just one more question here that given the Phase 2 €“ given the study will be on the stable background medicines, would this, too, initially considered as a “€second-line therapy” or you have other thoughts in terms of how to position this drug in the SSc-ILD space in effects?

Sanjay Shukla: Yes. So mycophenolate is the standard of care for when you have scleroderma. Some docs can try other kinds of immunosuppressants as well, but scleroderma typically is treated systemically by mycophenolate. And mycophenolate does a pretty good job in helping those patients. However, once you develop interstitial lung disease, there is a much more serious complication. And there, mycophenolate has not been able to really show the same utility as it does systemically. We need a better therapy for these patients, and that’s a more serious diagnosis. So once you progress to become fibrotic in your lungs and you have inflammation, now you have SSc-ILD. And this is where we think efzofitimod can have an advantage and play a role.

So it could work on top of mycophenolate. It can help these patients in a way mycophenolate can’t. So in many ways, it would be a first-line therapy for SSc-ILD, but it would be an add-on therapy for scleroderma patients. What I don’t know is if efzofitimod could also have some systemic effects, we’re going to be looking at that as well because we are looking at cutaneous pulmonary and systemic. And there’s also the potential for efzofitimod to do some positive things for these patients systemically working with or without mycophenolate. So this is going to be allowed in the next trial. I mean there could be €“ most patients I would expect to be on mycophenolate. Could there be some that are not for various reasons, tox could be a reason, well then efzofitimod could be attractive.

So we’ll be able to look at with or without mycophenolate. But right now, I would anticipate most of these patients will be already on that for their systemic disease.

Yale Jen: Okay, great. That’s very helpful. And appreciate that and congrats on the progress so far.

Sanjay Shukla: Thanks, Yale.

Operator: Thank you. I’m showing no further questions at this time. I turn the call back over to Sanjay Shukla for any closing remarks.

Sanjay Shukla: Great. Great questions today. I appreciate everyone’s interest. Tough tape today, a tough day to put out earnings. But I really think that moving forward, we are going to be focusing on execution here. Really paramount for us to keep our heads down, move these trials forward and aim for readouts here and expect good things here for €“ in 2024 and 2025. So thank you all for your interest. Be well.

Operator: Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.