aTyr Pharma Inc (ATYR) 2019 Q3 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to today's third quarter 2019 earnings conference call.

(Operator Instructions)

It is now my pleasure to introduce your host, Ms. Jill Broadfoot.

Thank you.

You may begin.

Thank you and good afternoon, everyone.

Thank you for joining us today to discuss aTyr's third quarter 2019 operating results and corporate update.

We are joined today by Dr. Sanjay Shukla, our President and CEO.

On the call, Sanjay will provide an update on our corporate strategy, including the clinical development of ATYR1923 and our recent research collaboration announcement with Boston Children's Hospital.

I will then review the financial results and our current 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 fact, 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 on 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.

Thank you, Jill.

Good afternoon, everyone, and thank you for joining us for our third quarter results conference call.

During the third quarter, we continued to make positive strides towards developing novel therapeutic candidates for patients with high unmet medical needs by using our knowledge of the extracellular functionality and signaling pathway of tRNA synthetases.

Today, I will update you on our progress with our lead therapeutic candidate, ATYR1923, and advancements in our Neuropilin-2, or NRP-2, biology research and development efforts.

Jill will continue with a review of our financial position.

1923 is an engineered, long-acting protein that is derived from the HARS gene.

We are exploring the use of 1923 across a series of inflammatory diseases in the lung, which are known as interstitial lung diseases or ILD.

Our initial ILD indication is pulmonary sarcoidosis, one of the more inflammatory forms of ILD.

Pulmonary sarcoidosis is characterized by granulomatous inflammation in the lung that, if left untreated, can lead to irreversible scarring and diminished lung function.

As we look to build upon the significant body of 1923 translational data in the animal efficacy models, we recently began characterizing expression of NRP-2 in human tissue samples.

We obtained tissue samples from a biobank of sarcoidosis patients, not in our study, in order to evaluate NRP-2 expression in target tissue, and we have observed some rather striking finding.

We've confirmed positive expression of NRP-2 localized within granulomatous tissue from these patients in both lung and skin granulomas.

These results are quite impactful as they confirm that NRP-2, the target receptor for 1923, is expressed in the essential pathologic tissue from sarcoidosis patients.

We plan to present this data at a medical conference in the near future, and these important findings considerably strengthens our hypothesis that 1923 will have clinical activity in pulmonary sarcoidosis.

1923 is currently being evaluated in a Phase Ib/IIa randomized, double-blind, placebo-controlled, multiple ascending dose clinical trial in pulmonary sarcoidosis patients.

The trial continues to progress and we remain on track to report initial safety data next month.

We plan on issuing a press release with interim safety data during the second week of December.

Specifically, the interim safety data will include patient demographics, adverse events, immunogenicity and ADA information.

Interim safety data will be provided for all patients who have received a minimum of 1 dose of 1923 or placebo.

I would like to thank the clinical team, principal investigators and our trial sites for their hard work and efforts on this trial in keeping us on track with our goal of providing interim data at the end of this year, consistent with our original guidance.

In the past quarter, we made an important amendment to our protocol that I'd like to highlight at this time.

As a reminder, our steroids-sparing protocol aims to establish a 5-milligram dose of prednisone as the target maintenance dose.

Patients in our trial entered the study at a prednisone dose between 10 to 25 milligrams and subsequently enter a forced steroid taper that takes down their steroid dose to 5 milligrams of prednisone by week 8 in the study.

We then attempt to keep patients at this level until study completion.

As our study has progressed, we have discussed with our principal investigators the possibility for patients in our trial to completely taper off of their steroid dose.

As we have consistently heard, patients and experts agree that getting off steroid medication and avoiding the toxicities associated with steroids is an important treatment goal.

Based on discussions with our PIs, we have made a key protocol change to our steroid maintenance plan.

Patients who are now stable on 5 milligrams of prednisone at the week 16 visit may now have option to be titrated off steroid completely, if determined by the investigator to be feasible.

We feel this important amendment incorporates the real-time feedback from PIs in our trial and enhances our ability to observe activity from 1923.

The results of our current study will guide future development of 1923 in pulmonary sarcoidosis and provide insight for the potential of 1923 in other ILDs.

We are focused on all forms of ILDs, with the exception of idiopathic pulmonary fibrosis or IPF, which is the least inflammatory ILD.

These inflammatory ILDs represent a unique area of opportunity where there's little competition, and we believe these conditions represent a $2 billion to $3 billion market opportunity.

Overall, we believe our value proposition in the area of ILD is significant and leading pulmonary experts remain very, very interested in our trial.

Our interactions with these leading pulmonologists continue as we gain momentum in this trial, as well as through our support of groups such as the World Association for Sarcoidosis and Other Granulomatous Disorders or WASOG.

We were recently a sponsor of an international joint conference between WASOG and the Japan Society of Sarcoidosis in Yokohama, Japan, where we continue to gain support from key opinion leaders in the ILD therapeutic space worldwide.

In summary, our progress with the trial and the protocol enhancements we've enacted based on guidance from our trial experts, coupled with the recent NRP-2 granuloma finding, provides further evidence that we have designed our clinical trial for success.

Let's shift gears and discuss our efforts to understand the role of NRP-2 in various other diseases as we move towards developing new pipeline opportunities.

NRP-2 is a potentially novel target for inflammatory disorders and cancer.

In inflammatory disorders, expression is up-regulated both in immune cells; while in tumors, high tumor expression of NRP-2 is linked to worsened patient outcome.

We continue to expand our leadership position in NRP-2 biology and currently have 6 active scientific collaborations with leading institutions.

These collaborations explore potential therapeutic use of selectively targeting the NRP-2 receptor in the context of specific diseases.

To protect our proprietary discoveries in NRP-2 biology, we recently filed U.S. and international patents to protect our lead NRP-2 antibodies.

These patents cover novel antibody that bind to a unique repertoire of distinct, functional domains of this receptor, thereby modulating different aspects of NRP-2 biology.

These antibodies offer compelling possibility of developing multiple, new, well-differentiated product opportunity.

In addition to the well-established role of NRP-2 in mediating cancer growth and metastasis, there are a number of novel applications for selective NRP-2 antibody, which we are also actively exploring.

One collaboration of this type, which we recently announced, is a research collaboration with Dr. Diane Bielenberg and Boston Children's Hospital that we hope will further advance our knowledge of NRP-2 and expedite the development of targeted therapeutics that potentially address new indications.

Dr. Bielenberg's research will initially explore the ability of NRP-2 antibodies to prevent, inhibit or reverse smooth muscle decompensation in mouse models.

The ability of NRP-2 to modulate smooth muscle could be exploited for therapeutic-benefiting conditions such as diseases of the bladder.

Targeting NRP-2 offers a potential new therapeutic opportunity to treat unmet bladder conditions, and it builds upon many years of research conducted by the Bielenberg lab to understand the role of NRP-2 in the disease progression of these conditions.

We are excited to enter this research collaboration with Boston Children's Hospital and we believe reflects the broad clinical utility of NRP-2 modulators and strengthens aTyr's leadership position in this field.

This is consistent with our strategy of partnering with leaders in industry and academia to expand our research and development efforts while preserving capital for the ongoing development of our lead therapeutic candidate, 1923.

Overall, we are very encouraged with our progress and look forward to hitting another milestone on our interim safety data from our trial.

This interim safety review is an important first step in establishing proof-of-concept of 1923 in pulmonary sarcoidosis.

Additionally, our pipeline efforts around NRP-2 biology are advancing, both internally and with key strategic collaborator.

I believe we have a unique opportunity to help significant and underserved patient population while at the same time, creating long-term value for our shareholders.

With that, I'd like to turn it over to our Chief Financial Officer, Jill Broadfoot, to review our financial results.

Thank you, Sanjay.

For the 3 and 9 months ended September 30, 2019, we recognized collaboration revenue of $184,000 and $278,000, respectively.

These revenues are associated with the research collaboration and option agreement with CSL Behring, or CSL, where we also have the opportunity to receive up to a total of $4.25 million in auction fees per synthetase program, up to a total of $17 million if all 4 synthetase programs are advanced by CSL.

Our net loss for the 3 and 9 months ended September 30, 2019, was $5.6 million and $17.6 million, respectively, compared to $7.1 million and $28.2 million for the same period in 2018, respectively.

The year-to-date decrease in net income is primarily due to a reduction in expenses of over $10 million.

We ended the quarter with $38.1 million in cash, cash equivalents and investments.

And for the 9 months ended September 30, 2019, our cash burn, net of debt and equity, was only $14.8 million.

We continue to find ways to operate more efficiently, and our quarterly cash burn has now declined for the second consecutive quarter this year.

For the year ending 2019, we continue to project a total cash burn at the lower end of our previous guidance range of $23 million to $25 million, net of debt and equity.

Our long-term debt decreased from $16 million at year-end 2018 to $10.6 million as of September 30, 2019.

We are on target to have our loans fully repaid by November 2020.

We believe the combination of revenue, cost-saving measures and equity proceeds over this year gives us sufficient cash to comfortably complete our current Phase Ib/IIa clinical trial.

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

Thanks, Jill.

We appreciate your continued interest and support and look forward to providing further updates in the near future.

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

(Operator Instructions) Our first question comes from the line of Joel Beatty with Citi.

This is Shawn Egan calling in for Joel.

Three for me today.

In the context of the protocol change in the clinical trial, maybe you can comment on how common it is for pulmonary sarcoidosis patients to completely go off steroids?

Sure.

Thanks, Shawn.

Good question here.

As we designed our trial, we were looking for a population that required steroids to manage their day-to-day cough and shortness of breath.

So these are patients that certainly have moderate disease and based on their PET scans, one would also say they have a disease phenotype that is progressing to becoming fibrotic and that's the guidance we got from our experts.

Getting off steroids is a key component, but the ability for these patients to taper off, frankly, is very, very difficult.

It's part of the reason why our drug is viewed as an attractive replacement to steroids.

And in our trial, the reason we wanted to originally set 5 milligrams as the maintenance dose is we really wanted to test our drug to see if whether or not it would spare patients off steroids.

These patients are typically on 10 to 25 milligrams.

Taking them down to 5 was viewed as a subtherapeutic dose.

To be able to completely taper off steroids, I think, is a real fantastic goal and the fact that we're able to, in conjunction with our PIs, agree to this on the tail end of our protocol, I think, is a nice win for us, and certainly will be -- allow us to -- in those patients that can accomplish that goal, achieve a greater delta and a greater ability to see 1923 utility.

Great, Sanjay.

I appreciate the color.

Kind of considering the new histological findings you guys have had regarding the expression, are you able to comment -- are you getting any patients with kind of skin manifestations in your clinical trial?

Yes.

So I mean, I wanted to highlight that those were samples taken outside of our trial because we don't have active capture of lung samples in this trial.

Many clinical trials, it's hard to get consent, especially here in the U.S., to get a lung biopsy, especially at this stage.

In our trial, you're correct, that cutaneous sarcoid is allowed and if patients have skin manifestations, we'll certainly be able to assay that.

At this time, not into the demographics of how many patients have cutaneous symptoms, but I will say that those patients that do have cutaneous manifestations, we are going to assay those granulomas.

I would expect that once our trial is complete, you might have 5 or 6 individuals, maybe upwards to 10 if we're lucky, that have cutaneous manifestation.

So I would say stay tuned.

I think with regard to those granuloma findings, it really speaks to the first clear connection between Neuropilin-2 expression in a inflamed granuloma, specifically in pulmonary sarcoidosis patients.

We knew and we hypothesized based on the literature that Neuropilin-2 is highly expressed in the inflammatory state, especially with T cells and macrophages.

We knew that from the literature and other airway diseases, RA, even bladder inflammation, some of Dr. Bielenberg's work pointed to that.

This was really the first finding here to look specifically at pulmonary sarcoidosis granulomas.

And I think we had, as I said, a very striking finding.

So this bodes well for our trial.

And certainly, those patients that have cutaneous manifestations, we're going to look very closely there to see if our drug has an effect.

Okay.

Yes, perfect.

That makes a lot of sense.

And for my last question, are you able to comment at all, with the new Boston Children's collaboration, maybe just speak a little bit on the biology of NRP-2, kind of in smooth muscle contractility and why do you think it could be effective there?

Sure.

So in a number of bladder conditions where it's called -- caused by an outlet obstruction, you can have neurogenic or non-neurogenic types of bladder disorders.

In conditions where the outlet is obstructed and it's non-neurogenic, to compensate what the smooth muscle does is it starts to get inflamed, and that inflammation is driven by T cells and some of the same immune cells that you start to see other areas where NRP-2 plays a role.

So Dr. Bielenberg had previously published that in inflammatory bladder conditions such as this where the outlet is obstructed, NRP-2 seems to be highly expressed.

So in her view, a modulator of NRP-2 could quiesce this inflamed bladder and get it functioning better.

As most are aware, once the smooth muscle becomes quite inflamed and over time it decompensates, and this, in turn, leads to the more chronic bladder conditions, such as interstitial cystitis, for example.

So this is an early discovery project, but we also think it has a very clear shot on goal with literature that Dr. Bielenberg has spent a lot of time understanding the bladder and understanding how neuropilin plays a role in that sort of inflammatory pathology.

And similarly, we think if we modulate the inflammation there, we could potentially restore function and help in a number of conditions.

For example, interstitial cystitis being perhaps one of them.

Our next question comes from the line of Joe Pantginis with H.C. Wainwright.

Wanted to focus on the long-term pipeline expansion, especially with the -- coming off of the last question in potential in smooth muscle biology.

You have a lot of opportunities here, as you mentioned, with inflammatory disorders and cancer.

So I guess my question, which is somewhat rhetorical because it will be research-based is -- are -- do you have any sort of favored indications yet or things you would like to take forward based on internal expertise versus saying having to maybe do some external ISTs before you decide to move forward?

How do you look to see the pipeline evolve?

Great.

Thanks for the question, Joe.

Yes.

So we do have a lot of opportunity, but it is about focusing.

Internally, we're tending to focus a little bit more on the cancer biology side.

There are a number of in vivo experiments that we've moved into.

As it's clear, we have some really nice blocking antibodies.

With regards to inflammation, there's some targeted collaborations, such as Dr. Bielenberg's, that we're working on.

I think it's smarter to partner with folks that have a real understanding in those sort of niche indications.

So I think the way we're thinking about it is, internally, perhaps focusing a little bit more on cancer; externally, through our collaborations, we're looking at those sort of specialized inflammatory state.

I'll make one caveat here that there are a number of -- a number of new pieces of literature that have bubbled up with some of the collaborators we work with, where they're looking at Neuropilin-2 expression in resistant tumors.

You'll see a number of papers over the last several months that have come out pointing to potentially an antibody approach to treat prostate or pancreatic-resistant tumors.

So that's -- those are specialized collaborations where we are also working with those labs that have experience looking at, for example, Neuropilin-2 expression in resistant cancers of, as I said, pancreas and prostate.

So I think the way we think about it is sort of continue to leverage that expertise externally.

Internally, we are focusing a bit more on the cancer biology angle of Neuropilin-2.

Got it.

No, that's very helpful.

And if I could just take the -- your discussion around the steroid taper in your clinical studies -- a clinical study one step forward.

You did mention, for example, that the 5-milligram dose is considered subtherapeutic, so I was just curious maybe if you could provide a little more feedback from the PI standpoint about why it would be important to even potentially to go to 0, even though you're reaching the "subtherapeutic levels"?

Sure.

So 5 milligrams is certainly subtherapeutic in treating these patients, and we set that as the sort of low bar in this study because we want to, in essence, see the placebo patients perhaps exacerbate and titrate back up, and what we'd like to see is the 1923 patients remain at that dose.

But 5 milligrams, you can still create some toxic burden.

And I think at the end of the day, if you talk to patients in particular, they want to be done with steroids.

So in the lens of our trial, if you're doing well at week 16, we discussed this with the PIs, there is an opportunity, if we had amended the protocol as we did, to maybe just get completely off steroids.

So I think it's a nice win for us.

In particular, patients are doing well in our trial and they're 4 months in, why not remove steroids?

There's an ethical component here that if patients are doing well, why not try to titrate them completely off?

So I think this is something we've learned in the course of our trial and also after spending time with our experts.

As you can imagine, during a clinical trial, as experts begin to get more experience with the experimental therapy, they're still blinded to whether or not patients are on 23 or placebo.

But as they gain more experience on -- around safety, I think these are the sort of approaches that we want to be flexible to because certainly, if we can demonstrate more folks can even taper off steroids completely, I think it just really drives home the efficacy of -- the potential efficacy of 1923.

Our next question comes from the line of Robert LeBoyer with Ladenburg Thalmann.

My question was on pipeline and anything moving into clinical trials.

Pretty much just answered in the previous questions, but if there's anything else you could add to that or any publications and presentations that we could look forward to in the next couple of months.

That would be helpful.

Sure, Robert.

Yes, and I think we tend to be very active with regards to any data we produce.

We'd like to get out there in a medical conference, in an open forum and be very transparent about it.

In actuality, I've kind of advanced this granuloma data because I think it's really important for the market to understand that, because that's a real profound finding, in my mind, to see that.

And we will be putting that together in a presentation, and targeting a spring medical conference where pulmonologists worldwide can see that data.

With regard to our pipeline, as you can imagine, we're currently conducting a number of in-house experiments, specifically looking at NRP-2 biology.

We'd love to be active also in the early spring at perhaps some cancer conferences.

And then finally, with any of our external collaborations, we want to be very open and transparent should we see some new evidence there and get those out.

So I would say right now, stay tuned.

We don't have a set conference or an abstract announced just yet, but I think conferences such as AACR and ATS in the spring, these are important conferences for us here at aTyr.

(Operator Instructions) It appears there are no further questions at this time.

I'd like to turn it back to Sanjay for closing comments.

Great.

Well, thank you for the excellent questions today.

We certainly are looking forward to an update next month, as are most of you regarding our interim safety data.

So we will be in contact, and thanks again for the questions.

Thank you.

Ladies and gentlemen, this concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.