aTyr Pharma Inc (ATYR) 2018 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to aTyr Pharma Second Quarter 2018 Conference Call.

(Operator Instructions)

As a reminder to our audience, this conference call is being recorded for replay purposes.

It is now my pleasure to hand the conference over to Mark Johnson, Senior Director of Investor Relations.

Sir, you may begin.

Thank you, Nicole.

Good afternoon, everyone, and thank you for joining us today to discuss aTyr's second quarter 2018 operating results and corporate update.

We are joined today by Dr. Sanjay Shukla, our President and CEO; Dr. David King, our Chief Scientific Officer; and Jill Broadfoot, our Chief Financial Officer, who joined us only a couple of weeks ago.

Sanjay will provide an update on our corporate strategy and the clinical development of ATYR1923.

David will provide an update on our research activities, highlighting the translational studies which have been undertaken to further support our upcoming patient clinical trial for 1923.

Jill will review the financial results before handing it back to Sanjay to open it up to the question-and-answer session.

Before we begin, I would like to remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements.

Please see the forward-looking statement disclaimer on the company's earnings press release issued after the close of the market today 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 and as fact and circumstances underlying these forward-looking statements may change.

Except as required by law, the aTyr disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances.

I will now turn the call over to Sanjay.

Thank you, Mark, and good afternoon, everyone.

Before we begin, I would like to take this opportunity to welcome Jill Broadfoot to our team as Chief Financial Officer.

As Mark mentioned, Jill joined us a couple of weeks ago, and I am excited to have Jill join us as our business partner and a key member of our executive management team.

Jill will be joining us on the road this fall, and she looks forward to meeting with many of you in person then.

So if you recall, at the end of our previous earnings call, we highlighted 3 upcoming milestones: number 1, announcing top line results from our 1923 Phase I trial; number 2, updating our translational activities for 1923; and number 3, updating our understanding of the Neuropilin-2 receptor, or NRP-2 with 1923.

I'm pleased to say that we are in position today to discuss all 3, and we will provide an update on our clinical progress of our lead therapeutic candidate, 1923, which is in development for the treatment of patients with immune-mediated interstitial lung disease.

Over the past several months, we have gained a deeper understanding of 1923's mechanism of action, its interaction with the NRP-2 receptor and its potential clinical utility through a series of in vivo and in vitro studies, designed to answer important questions supporting our first patient trial initiating later this year.

We have already been able to present much of this research at scientific and patient conferences, including recently at the American Academy of Immunology Annual Meeting in Austin, Texas in May; the American Thoracic Society, or ATS, Annual Meeting in San Diego also in May; and just last month, at the Scleroderma Foundation National Patient Education Conference in Philadelphia.

In addition to this important foundational research, we've also completed and announced data from our Phase I clinical trial testing 1923 in healthy volunteers.

This was a randomized double-blind placebo-controlled study designed to investigate the safety, tolerability, immunogenicity and pharmacokinetics of intravenous 1923.

The study enrolled 36 healthy volunteers, who were randomized to 1 of 6 cohorts and received a single infusion of intravenous 1923, at doses ranging from 0.3 milligrams per kilogram to 5 milligrams per kilogram, or placebo.

We are happy to report that the drug was generally well tolerated at all dose levels tested, with no significant adverse events or induction of antidrug antibodies observed following 1923 dosing or throughout the 1-month follow-up period.

The PK profile of 1923 following single-dose administration was dose-proportional across the evaluated dose range.

Higher doses yielded sustained serum concentrations through the end of the 1-month follow-up period that were above the predicted therapeutic threshold, supporting the potential for a once-monthly dosing regimen.

This is an important finding from the study, as once-monthly dosing is much more attractive to patients and clinicians, as we prepare to embark on enrolling a meaningful patient trial by the end of the year.

Over the next several weeks, we'll be meeting with expert clinicians in the field of interstitial lung disease to discuss our potential indications and proposed protocols for our upcoming 1923 trial.

At this time, we believe this trial will be a Phase Ib/IIa, multiple-ascending dose, placebo-controlled, first-in-patient study, with the objective of evaluating the safety, tolerability and immunogenicity of multiple doses of 1923.

And importantly, we plan to evaluate several established functional pulmonary endpoints, imaging endpoints, patient-reported outcome

measures and potential biomarkers.

Our goal will be to evaluate patients over a treatment period with enough duration to provide not only a robust safety and immunogenicity profile for 1923, but also allow us the opportunity to potentially observe changes in clinically meaningful endpoints.

Following confirmation of our study plans with key opinion leaders, we plan to initiate this trial in the fourth quarter of this year.

We will identify the specific interstitial lung disease indication and finalize our protocol, and we'll provide an update at such time.

Before handing the call over to David, I'd like to highlight a collaborative study between aTyr, our subsidiary Pangu BioPharma, The Scripps Research Institute and several other academic institutions.

This study was a subject of 1 of the 2 recent publications referenced in our press release earlier this afternoon.

The study suggested that phenylalanine-tRNA synthetase, or PheRS, has potential activity independent of tRNA synthetase activities in protein translation and suggests that this PheRS activity is essential for normal function in multiple organs.

As we continue to elucidate a greater understanding of tRNA synthetase biology, we see great value in collaborating with academic institutions to further this knowledge.

We are currently initiating additional collaborative research at well-known academic institutions to broaden the range of our translational studies, to test new potential biomarkers and activity, to advance our understanding of the role of 1923/NRP-2 interaction in the regulation of the immune responses, and finally, to explore other biological situations in which the 1923/NRP-2 interaction plays a role, which could lead to additional potential therapeutic indications.

Our strategy and the overall mission of the company remains steadfast, and we are critically focused on providing clinical translation of our science using our current resources.

I believe that our aTyr team will be able to execute on our key objectives and deliver upon our clinical milestones, starting with the initiation of our Phase Ib/IIa clinical trial later this year.

With that I'd like to turn it over to our Chief Scientific Officer, David King to provide a brief overview of our research activities, which are being used to support our 1923 clinical development.

Thank you, Sanjay.

As you can tell, our research and development teams have been working hard this summer and we have some important and progressive updates, which I will summarize for you today.

The most important goal for our research efforts is to support the upcoming clinical patient trial for 1923.

As such, we are evaluating activity across a diverse set of experimental lung disease models, looking for signals of activity and potential biomarkers.

This work includes not only some of the in vivo work that we've presented recently, but also in vitro studies to help define appropriate sub-populations for target engagement pharmacodynamic assays.

We're also working on collaborative translational studies to fully explore the potential clinical utility for 1923, where a strong rationale for NRP-2 biology exists.

We are evaluating binding of 1923 to immune cells under various disease conditions and generating a set of improved reagents to aid development of target engagement assays.

These include 1923-specific monoclonal antibodies and a panel of monoclonal antibodies to the NRP-2 receptor.

Related to our mechanistic studies, we have a few early findings to share with you today.

NRP-2 is up-regulated during activation of myeloid cells, including macrophages, dendritic cells and neutrophils.

1923 binds to NRP-2 as it's being up-regulated on these cells types.

And in addition, we've recently also discovered interaction of 1923 with some additional cell types, a finding that is contributing to additional IP filings to cover new potential uses of 1923.

These findings are consistent with our in vivo translational studies.

Based on the effects on the immune cell activity and the efficacy of 1923 in rodent bleomycin-induced lung injury experiments, which were presented at ATS in May of this year, we hypothesize that administration of 1923 might modulate immune responses in multiple organs, including the lung and the skin.

We tested this hypothesis in a sclerodermatous chronic graft-versus-host disease murine model of systemic sclerosis.

We employed a minor histocompatibility antigen-mismatched model, which has been reported to mimic many of the pathological symptoms of human disease.

Briefly, bone marrow and splenocytes from B10.

D2 mice were transplanted into whole-body-irradiated recipient Balb/c mice.

Weekly intravenous treatment with 1923 of only 0.4 milligrams per kilogram was compared with daily oral nintedanib of 60 milligrams per kilogram, with administration beginning at day 7, the early intervention; or at day 21, the late intervention.

The model was helpful as it mimicked the course of inflammatory and fibrotic disease in the lungs and skin at an accelerated pace.

The day-7 time point represented the time when inflammation was still dominant, and by day-21 the disease course was mostly fibrotic.

As expected, nintedanib decreased lung and skin fibrosis in the model, qualifying the data obtained in this experiment.

1923, beginning on day-7, exhibited robust and consistent therapeutic activity in both skin and lung as revealed by significantly decreased dermal thickness in the skin and histological fibrosis or Ashcroft score in the lungs in comparison to the untreated controls.

The number of myofibroblasts and hydroxyproline, i.e.

collagen content, was also significantly reduced in both organs.

Observed effects with weekly dosing of 1923 were similar to those observed with daily dosing of

nintedanib.

Late intervention with 1923 at 0.4 milligrams per kilogram was not significantly effective with this dosing paradigm, consistent with our hypothesis that 1923 may be acting preferentially on disease undergoing an active inflammatory process.

We're particularly excited to see data in this sclerodermatous GvHD model, which is consistent with direct lung injury models that we previously presented at ATS in 2017 and in 2018.

In this model, damage to both lung and skin is indirect from a systemic GvHD reaction, and yet we see consistent therapeutic activity with 1923, supporting our therapeutic hypothesis and the potential of this compound in interstitial lung disease.

Personally, I think the progress we've made on our translational biology program with convincing efficacy across distinct animal models, either driven by direct lung injury or systemic pathology, is very encouraging.

And tied with our improved understanding of the 1923/NRP-2 interaction and the cell types involved in the mechanism of action of our drug, we are well placed to move the program forward.

With that, I will turn it over to Jill Broadfoot to review our financial results.

Jill?

Thank you, David.

And thank everyone for calling in today.

In the short time I have been interacting with the team here, I've been thoroughly impressed with the caliber of science and their level of expertise.

David's team has been working extremely hard to support the upcoming clinical trial for 1923.

It is truly an exciting time to join aTyr, and I look forward to talking to and meeting with most of you in the coming months.

Now let's discuss the financials.

Research and development expenses were $6.5 million and $12.6 million for the 3- and 6-month periods ending June 30, 2018, compared to $8.4 million and $17.6 million for the 3- and 6-month periods ending June 30, 2017.

The decreases were primarily related to lower clinical trial costs and lower costs related to product manufacturing.

This was partially offset by some increased expenses related to employee severance and other termination benefits related to the restructuring plan announced in May 2018.

General and administrative expenses were flat at $3.5 million and $7.5 million for the 3- and 6-month periods ending June 30, 2018, and 2017.

Although G&A costs will be decreased going forward, these initial cost savings related to the restructuring plans announced in May were offset by some increased expenses related to employee severance and other related termination benefits.

As we mentioned, the program prioritization and corporate restructuring will significantly reduce our operational cash burn in the second half of 2018.

To give you some idea of the cost savings net of our debt payments, we entered this year burning approximately $10 million per quarter in the fourth quarter of '17, and plan to exit the year burning approximately $6 million per quarter in the fourth quarter of '18.

This represents a 40% reduction in operating expenses year-over-year.

As of June 30, 2018, we had $64.3 million in cash, cash equivalents and investments.

Our net cash position is approximately $45 million as of June 30, 2018.

Our total cash position includes approximately $19.3 million in debt from our loan facility.

As of June 2018, we have begun paying down the principal of that debt facility.

We made our first principal payment of approximately $0.7 million in June and we will be making quarterly principal payments of approximately $2 million until the loan is paid off in late 2020.

Now I'd like to turn the call back over to Sanjay before we open it up to Q&A.

Thanks, Jill.

2018 has been a year focused on building the right scientific foundation to prepare for meaningful clinical trials.

And I'm very proud of our team for everything we have accomplished to date.

Our team is excited, we feel confident as we pursue our goal to successfully translate our novel biology in the clinic.

Going forward, we are focused on achieving the following milestones: announcing our Phase Ib/IIa protocol for the 1923 clinical trial in patients with a specific interstitial lung disease, and initiating this trial in the fourth quarter of this year.

Thank you, everyone.

At this time, David, Jill and I will be happy to take your questions.

(Operator Instructions) And our first question comes from Ted Tenthoff from Piper Jaffray.

Looking forward to the transition that's taking place and further clinical data coming next year.

So question on the Ib/II to start.

Can you tell us a little bit more about indication, patients, anything along those lines?

Or when should we be getting more data along those lines?

Sure.

Thanks for the question, Ted.

So as we have previously talked about this therapy and its utility in interstitial lung disease, we had highlighted the fact that those conditions, in particular, that have a bit more of a proinflammatory component in -- among the ILDs, that was the hypothesis where we thought 1923 would work.

These included conditions as previously highlighted, like sarcoid, hypersensitivity pneumonitis, scleroderma, ILD.

We still very much feel as though, especially now that we read out a lot of our translational data, that we have some real convincing efficacy guiding us and confirming that that's the right direction.

At this point, we're in the last stages here to really just confirm with the key opinion leaders on which of those indications would be the best fit.

We also have to balance some operational feasibility and look for readouts, look to enroll patients.

So now, we're sort of turning the page.

We've confirmed some things from our translational [state].

We feel good about really a number of those indications.

But I'll be working hard now in the coming weeks to now focusing on the specific indication.

The structure that I provided to you around the type of trial that it will be, that sort of guides you around the framework, that it's going to be Ib/IIa study.

And your next question comes from Katherine Xu from William Blair.

I have a follow-up, kind of 2-type question in a way.

So since 1923 is more anti-inflammatory than anti-fibrotic, of course, you are looking at diseases that are more inflammatory.

But I just want to have a sense of what you think the magnitude of benefit in these indications would be, what kind of target that you are looking at.

Do you need to do some kind of combination therapies with anti-fibrotic agents to achieve better results, eventually, for these patients?

And then the other question is for David.

You mentioned there's -- you generate antibodies against NRP-2 receptor.

I just wonder what you have found, if you could share activity of the antibody versus 1923.

Great.

Thanks for the questions.

I'll handle the first one.

I think you're right, Katherine, to think about this in the sense that we are really focused much more on the anti-inflammatory applicability of 1923.

As we think about our clinical strategy, we want to go into areas where we can get a quicker readout, a cleaner readout and a clinically meaningful readout.

While we have a lot of interest in using 1923, for example, on top of, say, nintedanib or pirfenidone in IPF, I think we're -- it's a smarter strategy to focus a little bit more on the inflammatory side of ILD.

I'll remind everyone that IPF only represents about 1/3 of the ILD spectrum.

The other 2/3 are primarily driven by a bit more of a pro-inflammatory -- a lot more of a pro-inflammatory signal.

There is a significant amount of morbidity associated there.

That's where we really want to attack and demonstrate activity.

I think down the road, of course, we have opportunities to be as add-on therapy.

But we see -- really see this as a green space from a clinical and regulatory strategy.

And we also see an opportunity to operationalize quickly.

Patients have a need, they don't have good therapies.

We know those other therapies in IPF don't work.

So this is really where I think the community is really excited about us getting into one of those more inflammatory-mediated interstitial lung diseases.

I'll turn it over to David to answer the second question.

Sure.

So regarding the NRP-2 antibodies, so 1923 is actually a pretty potent molecule.

And also, as you heard, it has a nice long half-life with potential monthly dosing.

So the antibodies that we made, we made those primarily to set up our PD target engagement assays.

Having said that, we have a really nice panel of antibodies that cover multiple different epitopes on the NRP-2 molecule.

So we are also conducting research on those to see if any of those may have additional applications.

And your next question comes from Matthew Luchini from BMO Capital.

So I guess first on the Phase I/II study.

Could you just confirm that -- you've previously sort of talked about how the gating factors ahead of starting that study are going to be additional evaluation of NRP-2, completion of the translational data package and meeting with KOLs for guidance on indication selection.

So could you just sort of put a little bit more specificity around if each of those 3 items -- it's -- obviously, number 3 is not complete, but number 1 and number 2, if they are complete?

Or if they're not, what's left?

And then as it relates to the pulmonary and imaging endpoints, I was just wondering if you could -- I was hoping if you could please put a little bit more specificity around what types of things -- which types of endpoints you're specifically looking at, and what level of -- sort of detail we should expect when the initial data comes out.

Sure.

Sure.

Good question, Matt.

So you're actually right about your first sort of notion there.

We clearly went through this summer looking to accomplish, number 1, getting through our Phase I trial, checking the box there on that, early safety and tolerability.

That has been accomplished.

We messaged that earlier this summer.

The next part was we wanted to finish our readouts of the translational data.

Looking at a number of different models, we feel really confident now, in particular, that we've seen a direct injury model bear out good efficacy for 1923 and a systemic model also bear out good efficacy for 1923.

Now we're -- so that's definitely been checked off now.

Now we're really in that last, I think, final stage, share, coalesce all this data in front of key opinion leaders.

A lot of interest, very encouraging excitement from the pulmonologists, who are clamoring for a therapy, a safe immunomodulator that can be used in that sort of more inflammatory interstitial lung diseases.

So that's really the last component now.

What we do know about the protocol and what we'll go into is, there is going to be a constellation of endpoints regardless of which specific ILD you're looking at.

With regard to PFTs, the way to think about it, depending on the indication, FEV or FVC are likely to be sort of the lead PFTs that you would look at.

But it really depends on which of those interstitial lung diseases you're focused on.

There could be a slight tweak where one might be used as a primary and the other as a secondary.

When you think of imaging, for the most part, high-res CT is what's really looked at very carefully and is more or less a validated imaging endpoint for all of these interstitial lung diseases.

But for example, things like PET imaging, looking at inflammation in lymph nodes, that's in particular gaining traction, in particular with regard to sarcoid.

You'll see that in some protocols that are out there with some of the experimental sarcoid protocols that are out there.

Lastly, when you think of patient-reported outcomes, you're thinking about cough, you're thinking about relief of shortness of breath on exertion.

Those are the common sort of constellation of patient-reported outcome measures that are used commonly in these types of patients.

And then lastly, the biomarkers, that's going to be dependent specifically, again, on which indication we choose.

There can be biomarkers, depending on which of those ILDs you look at, that we would want to track.

So I hope that gives you a little bit of color around the specific types of buckets of endpoints we're looking at.

The details of that and which ones we anchor to are really what will sort of bear out once we specifically pick out the specific ILD that we look to start the trial with.

And next question comes from Joel Beatty from Citi.

Question is kind of a little bit about the data timing that might be expected from the Phase Ib/IIa.

Just from the sense on, would this be a trial that we -- no one sees data from it until the end of the trial?

Or are they open-label, where you can even see it over time and potentially change the trial design, sort of depending on what is seen at the different doses or interim looks?

Could you elaborate on that a little bit?

Yes, Joel.

I mean these -- this is the exact sort of discussions we're having right now with the clinical team.

I think the way to think about this is we want to have the ability to, of course, maintain the integrity of the trial and, first and foremost, run it for a duration that creates a clinically meaningful output.

But depending on what those endpoints, for example, are, we may have the ability to sort of draw them down in interim analysis and look at it little bit more rapidly than another endpoint.

So there could be utility to look at cough sooner than later, for example, if you're looking at 1 indication.

There could be the opportunity to look at a biomarker, in which case the biomarker may -- we may see change in the biomarker earlier than the final readout.

So I think it's important for us to, once we actually get the protocol and the indication picked out, to carefully walk everyone through when there will be sort of launch points of evaluating efficacy.

In the end, we're looking for a way to actually run this trial and, again, see a clinically meaningful output.

But I think there is going to be ability for us to have some optionality on interim endpoints while preserving the relative integrity of the trial.

So I think, stay tuned, and it's something that we -- I really want to get back to you on.

Thank you.

And this ends our Q&A session for today.

I would now like to turn the call back to Dr. Sanjay Shukla for his final remarks.

Thanks very much.

Thanks for your time and attention today.

We very much look forward to providing updates in the months ahead.

Thank you, again.

And with that, ladies and gentlemen, we thank you for participating in today's conference.

This concludes today's program, and you may all disconnect.

Everyone, have a great day.