aTyr Pharma, Inc.

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ATYR PHARMA : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

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03/26/2020 | 09:37 pm


You should read the following discussion and analysis together with "Item 6.
Selected Financial Data" and the consolidated financial statements and related
notes included elsewhere in this Annual Report. The following discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those expressed or implied in any
forward-looking statements as a result of various factors, including those set
forth under the caption "Item 1A. Risk Factors."


Overview




We are a biotherapeutics company engaged in the discovery and development of
innovative medicines based on novel immunological pathways. We have concentrated
our research and development efforts on a newly discovered area of biology, the
extracellular functionality and signaling pathways of tRNA synthetases. Built on
more than a decade of foundational science on extracellular tRNA synthetase
biology and its effect on immune responses, we have built a global intellectual
property estate directed to a potential pipeline of protein compositions derived
from 20 tRNA synthetase genes and their extracellular targets, such as
neuropilin-2 (NRP2).

Our primary focus is on ATYR1923, a clinical stage product candidate which binds
to the NRP2 receptor and is designed to down regulate immune engagement in
interstitial lung diseases (ILDs). ATYR1923, a fusion protein comprised of the
immuno-modulatory domain of histidyl tRNA synthetase (HARS) fused to the
fragment cystallizable (FC) region of a human antibody, is a selective modulator
of NRP2 that downregulates the innate and adaptive immune response in
inflammatory disease states. We are developing ATYR1923 as a potential
therapeutic for patients with ILDs, a group of immune-mediated disorders that
cause progressive fibrosis of the lung tissue. We selected pulmonary sarcoidosis
as our first ILD indication and are currently enrolling a proof-of-concept Phase
1b/2a clinical trial in patients. The study has been designed to evaluate the
safety, tolerability and immunogenicity of multiple doses of ATYR1923 and to
evaluate established clinical endpoints and certain biomarkers to assess
preliminary activity of ATYR1923. A blinded interim analysis of safety and
tolerability, the primary endpoint of our ongoing Phase 1b/2a clinical trial,
showed study drug (ATYR1923 or placebo) was observed to be generally well
tolerated with no drug-related serious adverse events (SAEs), consistent with
the earlier Phase 1 study results in healthy volunteers. The final results of
our current Phase 1b/2a clinical trial will guide future development of ATYR1923
in pulmonary sarcoidosis and provide insight for the potential of ATYR1923 in
other ILDs, such as chronic hypersensitivity pneumonitis (CHP) and connective
tissue disease ILD (CTD-ILD).

In January 2020, we entered into a license with Kyorin Pharmaceutical Co., Ltd.
(Kyorin) for the development and commercialization of ATYR1923 for ILDs in
Japan. Under the collaboration and license agreement with Kyorin (the Kyorin
Agreement), Kyorin received an exclusive right to develop and commercialize
ATYR1923 in Japan for all forms of ILDs. We received an $8.0 million upfront
payment and we are eligible to receive an additional $167.0 million in the
aggregate upon achievement of certain development, regulatory and sales
milestones, as well as tiered royalties ranging from the mid-single digits to
mid-teens on net sales in Japan. Under the terms of the Kyorin Agreement, Kyorin
will fund all research, development, regulatory, marketing and commercialization
activities in Japan, as well as support our global development efforts for
ATYR1923.


In conjunction with our clinical development of ATYR1923, we have in parallel
been expanding our knowledge of NRP2 antibodies and tRNA synthetases.




NRP2 is a receptor that plays a key role in lymphatic development and in
regulating inflammatory responses. In many forms of cancer, high NRP2 expression
is associated with worse outcomes. NRP2 can interact with multiple ligands and
coreceptors to influence their functional roles. We are actively investigating
NRP2 receptor biology, both internally and in collaboration with key academic
thought leaders, to identify new product candidates for a variety of disease
settings, including cancer, inflammation, and lymphangiogenesis. We have
generated a panel of certain NRP2 antibodies that we believe have potential
therapeutic value in oncology and are currently evaluating such antibodies in
experimental models. We are also working closely with other collaborators and
academia to further research in these areas. For example, in January 2019, we
expanded a successful pilot study and entered into a research collaboration with
the University of Nebraska Medical Center (UNMC) and Dr. Kaustubh Datta, who has
published extensively in the

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field of NRP2 biology. In October 2019, we entered into a research collaboration
with Dr. Diane Bielenberg at Boston Children's Hospital, an expert in NRP2
biology, to examine the therapeutic efficacy of anti-NRP2 antibodies in
potential new roles and indications. Dr. Bielenberg's research will initially
explore conditions characterized by inappropriate smooth muscle contractility,
such as urinary incontinence and gastrointestinal tract motility disorders,
where current treatments often have limited efficacy and serious side effects.

Our continued research of tRNA synthetases is being conducted through both
industry and academic collaborations. In March 2019, we entered into a research
collaboration and option agreement with CSL Behring (CSL) for the development of
product candidates derived from up to four tRNA synthetases from our preclinical
pipeline. Under the terms of the collaboration, CSL is obligated to fund all
research and development activities and will pay a total of $4.25 million per
synthetase program ($17.0 million if all four synthetase programs advance) in
option fees based on achievement of research milestones and CSL's determination
to continue development.

In May 2018, we implemented a corporate restructuring and program prioritization
plan (Restructuring Plan) to streamline our operations and concentrate
development efforts on the advancement of our therapeutic candidate,
ATYR1923. In connection with the Restructuring Plan, we reduced our workforce by
approximately 30% to 42 full-time employees. We completed the workforce
reduction in June 2018. We recorded charges of approximately $0.9 million for
employee severance and other related termination benefits and approximately $0.4
million
in one-time, non-cash stock-based compensation charges due to the
acceleration of time-based vesting provisions of outstanding equity awards in
accordance with our Executive Severance and Change in Control Policy.


Financial Operations Overview



Organization and Business; Principles of Consolidation




We conduct substantially all of our activities through aTyr Pharma, Inc., a
Delaware corporation, at our facility in San Diego, California. aTyr Pharma,
Inc.
was incorporated in the State of Delaware in September 2005. The
consolidated financial statements include our accounts and our 98%
majority-owned subsidiary in Hong Kong, Pangu BioPharma Limited, as of December
31, 2019
. All intercompany transactions and balances are eliminated in
consolidation.


Leases




On January 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016­02,
Leases (Topic 842) (ASU No. 2016-02). For our long-term operating leases, we
recognized a right-of-use asset and a lease liability in our consolidated
balance sheets. The lease liability is determined as the present value of future
lease payments using an estimated rate of interest that we would pay to borrow
equivalent funds on a collateralized basis at the lease commencement date. The
right-of-use asset is based on the liability adjusted for any prepaid or
deferred rent. We determined the lease term at the commencement date by
considering whether renewal options and termination options are reasonably
assured of exercise.

We elected the package of practical expedients permitted under the transition
guidance within the new standard, which among other things, allowed us to
exclude from our consolidated balance sheets recognition of leases having a term
of 12 months or less (short-term leases) and we elected to not separate lease
components and non-lease components for our long-term leases.


Rent expense for the operating lease is recognized on a straight-line basis over
the lease term and is included in operating expenses in our consolidated
statements of operations.




Prior period amounts continue to be reported in accordance with our historical
accounting practices under previous lease guidance, Accounting Standards
Codification (ASC) 840, Leases. See "-Recent Accounting Pronouncements" in Note
1 to our consolidated financial statements included elsewhere in this Annual
Report, for more information about the impact of the adoption on ASU No.
2016-02.


Revenue Recognition




In March 2019, we entered into a research collaboration and option agreement
with CSL for the development of product candidates derived from up to four tRNA
synthetases from our preclinical pipeline (CSL Agreement). Under the terms of
the CSL Agreement, CSL will fund all research and development activities related
to the development of the applicable product candidates for the duration of the
collaboration. CSL reimburses us for all research and development activities.
The research and development activities will be performed in six phases by both
parties. The first phase totaling $0.6 million was funded in May 2019 and future
phases will be funded on a quarterly basis.

In addition, CSL will pay a total of up to $4.25 million per synthetase program
($17 million if all four synthetase programs advance) in option fees based on
achievement of research milestones and CSL's determination to continue
development. As of December 31, 2019, no research milestones had been met. We
will grant CSL an option to negotiate licenses for worldwide rights to each
investigational new drug (IND) candidate that emerges from this research
collaboration. Specific license terms will be negotiated during an exclusivity
period following the exercise of each program option.

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CSL has the right to terminate the research collaboration and option agreement
in its entirety or with respect to one or more synthetases upon 45 days' notice.
Either party has the right to terminate the agreement upon material breach of
obligation or insolvency of the other party.


For the year ended December 31, 2019, we recognized $422,000 as collaboration
revenue under the CSL Agreement.



Research and Development Expenses




To date, our research and development expenses have related primarily to the
development of, and clinical trials for, our product candidates, and to research
efforts targeting the potential therapeutic application of other tRNA
synthetase-based immuno-modulators (including funding of our former research
collaboration with The Scripps Research Institute) and, more recently research
efforts related to NRP2 biology. These expenses consist primarily of:


• salaries and employee-related expenses, including stock-based compensation



and benefits for personnel in research and product development functions;



• costs associated with conducting our preclinical, development and



regulatory activities, including fees paid to third-party professional



consultants, service providers and our scientific, therapeutic and
clinical advisory board;



• costs to acquire, develop and manufacture preclinical study and clinical



trial materials;



• costs incurred under clinical trial agreements with clinical research



organizations (CROs) and investigative sites;


• costs for laboratory supplies; and


• allocated facilities, depreciation and other allocable expenses.


Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect that the levels of our research and development expenses will increase
in the current year and will consist primarily of costs related to our ATYR1923
Phase 1b/2a clinical trial and research, and other potential therapeutics based
on our tRNA synthetase biology and NRP2 biology.

We cannot determine with certainty the timing of initiation, the duration or the
completion costs of current or future preclinical studies and clinical trials of
our product candidates. In particular, as a result of the recent COVID-19
outbreak in the United States, many clinical trial sites in our ongoing Phase
1b/2a clinical trial have temporarily suspended dosing of previously-enrolled
patients and/or enrollment of new patients. As a result, we anticipate that the
availability of top-line results from the clinical trial will be delayed. This
delay may also cause certain research and development expenses related to the
trial to be incurred in future quarters, and ultimately, the incurrence of such
expenses related to the clinical trial could shift materially. At this time, due
to the inherently unpredictable nature of preclinical and clinical development
and given the early stage of our programs, we are unable to estimate with any
certainty the costs we will incur or the timelines we will require in the
continued development of our product candidates. Clinical and preclinical
development timelines, the probability of success and development costs can
differ materially from expectations. We anticipate that we will make
determinations as to which product candidates to pursue and how much funding to
direct to each product candidate on an ongoing basis in response to the results
of ongoing and future preclinical studies and clinical trials, regulatory
developments and our ongoing assessments as to each product candidate's
commercial potential. In addition, we cannot forecast which programs or product
candidates may be subject to future collaborations, when such arrangements will
be secured, if at all, and to what degree such arrangements would affect our
development plans and capital requirements.


General and Administrative Expenses




General and administrative expenses consist primarily of salaries and related
costs for employees in executive, finance and administration, corporate
development and administrative support functions, including stock-based
compensation expenses and benefits. Other significant general and administrative
expenses include accounting, legal services, expenses associated with applying
for and maintaining patents, cost of insurance, cost of various consultants,
occupancy costs, information systems costs and depreciation.


Other Income (Expense)




In November 2016, we entered into a loan and security agreement, as amended
(Loan Agreement) with Silicon Valley Bank and Solar Capital Ltd. (Lenders) to
borrow up to $20.0 million issuable in three separate tranches (the Term Loans),
$10.0 million of which was funded in November 2016, $5.0 million of which was
funded in June 2017 and $5.0 million of which was funded in December 2017. Other
income (expense), net consists primarily of interest income earned on cash, cash
equivalents and investments and interest expense on our Term Loans outstanding
with the Lenders as discussed below.

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Critical Accounting Policies and Significant Judgments and Estimates




Our management's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States
(GAAP). The preparation of these consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities as of the date of the consolidated financial statements, as well as
the reported expenses during the reporting periods. We monitor and analyze these
items for changes in facts and circumstances, and material changes in these
estimates could occur in the future. We base our estimates on our historical
experience and on various other factors we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Changes in estimates are reflected in reported results for the
period in which they become known. Actual results may differ materially from
these estimates under different assumptions or conditions.

We discuss our accounting policies and assumptions that involve a higher degree
of judgment and complexity within Note 2 to our audited consolidated financial
statements appearing elsewhere in this Annual Report. We believe that our
accounting policies related to research and development expense accruals involve
the most significant estimation and judgment in accounting for our reported
consolidated financial results.


Research and Development Expense Accruals




As part of the process of preparing our consolidated financial statements, we
are required to estimate our accrued expenses. This process involves reviewing
open contracts and purchase orders, communicating with our personnel to identify
services that have been performed on our behalf and estimating the level of
service performed and the associated cost incurred for the service when we have
not yet been invoiced or otherwise notified of the actual cost. The majority of
our service providers invoice us monthly in arrears for services performed or
when contractual milestones are met. We make estimates of our accrued expenses
as of each balance sheet date in our consolidated financial statements based on
facts and circumstances known to us at that time. We periodically confirm the
accuracy of our estimates with the service providers and make adjustments if
necessary. Examples of estimated accrued research and development expenses
include fees paid to investigative sites and CROs in connection with clinical
trials; service providers in connection with preclinical development activities;
and service providers related to product manufacturing, development and
distribution of clinical supplies.

We currently rely on third parties for the clinical development of our product
candidates and the manufacture of our product candidates to support our ongoing
and future clinical trials. We pay these third parties, including consultants,
CROs, manufacturers and other service providers, pursuant to contractual
arrangements, which may include provisions for time and materials-based
payments, project-based fees and milestone payments. We base our accrual for
these expenses on our estimates of the services received and efforts expended
pursuant to our contractual arrangements. The financial terms of these
agreements are subject to negotiation, vary from contract to contract and may
result in uneven payment flows. There may be instances in which payments made to
our service providers will exceed the level of services provided and result in a
prepayment of the clinical expense. Payments under some of these contracts
depend on factors such as the successful enrollment of patients and the
completion of clinical milestones. In accruing service fees, we estimate the
time period over which services will be performed and the level of effort to be
expended in each period. If the actual timing of the performance of services or
the level of effort varies from our estimate, we adjust our accrual or prepaid
expenses accordingly.

Although we do not expect our estimates to be materially different from amounts
actually incurred, if our estimates of the status and timing of services
performed differs from the actual status and timing of services performed, we
may report amounts that are too high or too low in any particular period. To
date, there have been no material differences between our estimates and the
amounts actually incurred.


Results of Operations



Comparison of the Years Ended December 31, 2019 and 2018



The following table summarizes our results of operations for the years ended
December 31, 2019 and 2018 (in thousands):






Years Ended December 31, Increase /
2019 2018 (Decrease)
Revenues $ 422 $ - $ 422
Research and development expenses 14,048 20,385


(6,337 )



General and administrative expenses 9,352 12,435


(3,083 )



Other income (expense), net (785 ) (1,695 ) (910 )





Revenues. Revenues consist of collaboration revenue under our research
collaboration and option agreement with CSL.



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Research and development expenses. Research and development expenses were $14.0
million
and $20.4 million for the years ended December 31, 2019 and 2018,
respectively. The decrease of $6.4 million was due primarily to a $2.8 million
decrease in personnel associated costs mainly as a result a reduction in force
initiated in May 2018, a decrease of $1.7 million in costs associated with our
research collaboration with The Scripps Research Institute which we terminated
effective November 2018, a $1.7 million decrease in preclinical research and
development expenses and a decrease of $0.7 million related to lower product
manufacturing costs. The decrease was partially offset by an increase of $0.7
million
related to our ATYR1923 Phase 1b/2a clinical trial.

General and administrative expenses. General and administrative expenses were
$9.4 million and $12.4 million for the years ended December 31, 2019 and 2018,
respectively. The decrease of $3.0 million was due primarily to a $2.2 million
decrease in personnel associated costs mainly as a result of the May 2018
reduction in force, and a $0.8 million decrease in professional fees.

Other income (expense), net. Other income (expense), net was $0.8 million and
$1.7 million for the years ended December 31, 2019 and 2018, respectively. The
$0.9 million decrease was primarily a result of lower principal balances on our
Term Loans with our Lenders which we started repaying in June 2018.


Comparison of the Years Ended December 31, 2018 and 2017



The following table summarizes our results of operations for the years ended
December 31, 2018 and 2017 (in thousands):






Years Ended December 31, Increase /
2018 2017 (Decrease)



Research and development expenses $ 20,385 $ 30,067



(9,682 )



General and administrative expenses 12,435 17,078 (4,643 )
Other income (expense), net (1,695 ) (1,062 ) 633




Research and development expenses. Research and development expenses were $20.4
million
and $30.1 million for the years ended December 31, 2018 and 2017,
respectively. The decrease of $9.7 million was due primarily to a $4.2 million
decrease related to the completion of preclinical and certain clinical studies
related to ATYR1923 and ATYR1940, a $3.3 million decrease in product
manufacturing costs, a $1.7 million decrease in personnel associated costs due
to lower headcount, which was mainly a result of the Restructuring Plan, a $1.4
million
decrease in overall general research and development expenses and a $0.2
million
decrease in non-cash stock-based compensation expense. The decrease was
partially offset by an increase of $1.1 million related to the initiation of our
ATYR1923 Phase 1b/2a clinical trial.

General and administrative expenses. General and administrative expenses were
$12.4 million and $17.1 million for the years ended December 31, 2018 and 2017,
respectively. The decrease of $4.6 million was due primarily to a $3.2 million
decrease in non-cash stock-based compensation expense due to executive
transitions in 2017, a $0.6 million decrease in personnel associated costs due
to lower headcount, which was mainly a result of the Restructuring Plan and a
$0.8 million decrease in intellectual property and legal expenses.

Other income (expense), net. Other expense was $1.7 million and $1.1 million for
the years ended December 31, 2018 and 2017, respectively. The $0.6 million
increase was primarily a result of increased interest expense related to our
Term Loans.


Liquidity and Capital Resources




We have incurred losses and negative cash flows from operations since our
inception. As of December 31, 2019, we had an accumulated deficit of $322.3
million
and we expect to continue to incur net losses for the foreseeable
future. As of December 31, 2019, we had cash, cash equivalents and
available-for-sale investments of $31.1 million. Since that time, we received
$8.0 million related to the Kyorin Agreement and approximately $20.7 million in
gross proceeds from our underwritten follow-on public offering of common stock,
before deducting underwriting discounts, commissions and offering expenses
payable by us. We believe that our current cash, cash equivalents and
available-for-sale investments, will be sufficient to meet our anticipated cash
requirements for a period of at least one year from the date of this Annual
Report.


Sources of Liquidity




From our inception through December 31, 2019, we have financed our operations
primarily through the sale of equity securities and convertible debt and through
venture debt and term loans.


Debt Financing




We have a Loan Agreement with our Lenders for the Term Loans. Under the Loan
Agreement, we are obligated to make interest-only payments through June 1, 2018,
followed by consecutive equal monthly payments of principal and interest in
arrears through the

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maturity date of November 18, 2020. Accordingly, we started paying the principal
balance of the Term Loans in June 2018. The Term Loans bear interest at the
prime rate, as reported in The Wall Street Journal on the last date of the month
preceding the month in which interest will accrue, plus 4.10%. A final payment
equal to 8.75% of the funded amounts is payable when the Term Loans become due
or upon the prepayment of the respective outstanding balance. We have the option
to prepay the outstanding balance of the Term Loans in full, subject to a
prepayment fee ranging from 1.0% to 3.0% depending upon when the prepayment
occurs, including any non-usage fees. We intend to retire the outstanding
amounts due under our Loan Agreement at the maturity date in November 2020.

In connection with the first tranche, we issued warrants to each of the Lenders
to purchase an aggregate of 3,415 shares of our common stock with an exercise
price of $43.93 per share. In connection with the second tranche, we issued
warrants to each of the Lenders to purchase an aggregate of 1,489 shares of our
common stock with an exercise price of $50.37 per share. In connection with the
third tranche, we issued warrants to each of the Lenders to purchase an
aggregate of 1,443 shares of our common stock with an exercise price of $51.98
per share. The warrants are immediately exercisable and have a maximum
contractual term of seven years.


Sales of Equity Securities




In June 2016, we entered into a sales agreement with Cowen and Company, LLC
(Cowen) for an at-the-market offerings program (ATM Offering Program), under
which we were able to offer and sell shares of our common stock having an
aggregate offering price of up to $35.0 million from time to time. In May 2019,
we terminated the ATM Offering Program with Cowen. Under the ATM Offering
Program with Cowen, we sold an aggregate of 243,393 shares of common stock at an
average price of $7.88 per common share for net proceeds of $1.8 million.

In May 2019, we entered into a sales agreement with H.C. Wainwright & Co., LLC
(Wainwright) for an ATM Offering Program under which we may offer and sell
shares of our common stock having an aggregate offering price of up to $10.0
million
. Wainwright is entitled to a commission at a fixed commission rate equal
to 3% of the gross proceeds. Under the ATM Offering Program with Wainwright, as
of December 31, 2019, we had sold an aggregate of 611,687 shares of common stock
at an average price of $5.43 per common share for net proceeds of $3.0 million.

In February 2020, we completed an underwritten follow-on public offering of
4,235,294 shares of our common stock at a price to the public of $4.25 per
share. In March 2020, the underwriters fully exercised their over-allotment
option for the issuance of an additional 635,294 shares of common stock. The
total gross proceeds from the underwritten follow-on public offering, including
the over-allotment, was approximately $20.7 million, before deducting
underwriting discounts, commissions and offering expenses payable by us. We
anticipate using the net proceeds from the offering for general corporate
purposes, including clinical trial expenses, research and development expenses,
manufacturing expenses, and general administrative expenses.


Cash Flows



The following table sets forth a summary of the net cash flow activity for each
of the periods indicated (in thousands):






Years Ended December 31,
2019 2018 2017



Net cash (used in) provided by:



Operating activities $ (20,013 ) $ (31,063 ) $ (42,364 )
Investing activities 4,925 37,172 (27,637 )
Financing activities 1,336 (4,238 ) 52,704



Net change in cash and cash equivalents $ (13,752 ) $ 1,871 $ (17,297 )







Operating activities. Net cash used in operating activities was $20.0 million,
$31.1 million and $42.4 million for the years ended December 31, 2019, 2018 and
2017, respectively. The net cash used in operating activities in each of these
periods was primarily due to our net losses. The primary differences between net
cash used in operating activities and our net loss in the year ended December
31, 2019
related to non-cash charges including: $0.6 million for depreciation,
$1.8 million for stock-based compensation, $0.7 million for debt discount
accretion and non-cash interest expense, $0.7 million for accretion of a
right-of-use asset and a $0.2 million decrease in our net operating assets and
liabilities. The primary differences between net cash used in operating
activities and our net loss in the year ended December 31, 2018 related to
non-cash charges including: $0.7 million for depreciation and amortization, $3.4
million
for stock-based compensation, $1.0 million for debt discount accretion
and non-cash interest expense, and a $1.4 million increase in our net operating
assets and liabilities. The primary differences between net cash used in
operating activities and our net loss in the year ended December 31, 2017
related to non-cash charges including: $0.7 million for depreciation and
amortization, $6.8 million for stock-based compensation, $0.6 million for debt
discount accretion and non-cash interest expense and a $2.1 million increase in
our net operating assets and liabilities.

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Investing activities. Net cash provided by investing activities for the year
ended December 31, 2019 consisted of $5.0 million of net maturities of
investment securities. Net cash provided in investing activities for the year
ended December 31, 2018 consisted of $37.8 million of net maturities of
investment securities offset in part by $0.6 million of property and equipment
purchases. Net cash used in investing activities for the year ended December 31,
2017
consisted of $26.3 million of net purchases of investment securities and
$1.3 million of property and equipment purchases.

Financing activities. Net cash provided by financing activities for the year
ended December 31, 2019 was $1.3 million and consisted primarily of $4.4 million
in proceeds from at the market issuances of common stock, net of issuance costs,
and $4.9 million in proceeds from a registered direct offering, net of issuance
costs, offset in part by $8.0 million of principal payments on the Term Loans.
Net cash used by financing activities during the year ended December 31, 2018
was $4.2 million and consisted primarily of $4.7 million of principal payments
on the Term Loans, partially offset by $0.4 million of net proceeds from the at
the market issuances of common stock, net of issuance costs. Net cash provided
by financing activities during the year ended December 31, 2017 was $52.7
million
and consisted primarily of $42.5 million of proceeds from a private
placement of equity securities, net of offering costs paid in the period and
$9.9 million from the second and third tranches of the Term Loans, net of
issuance costs.


Funding Requirements




To date, we have not generated any revenues from product sales. We expect our
expenses to increase in connection with our ongoing activities, particularly as
we continue to advance ATYR1923 in clinical development, continue our research
and development activities with respect to other potential therapies based on
tRNA synthetase biology and NPR2 biology, and seek marketing approval for
product candidates that we may develop. In addition, if we obtain marketing
approval for any of our product candidates, we expect to incur significant
commercialization expenses related to product sales, marketing, manufacturing
and distribution. We currently have no sales or marketing capabilities and would
need to expand our organization to support these activities. Accordingly, we
will need to obtain substantial additional funding in connection with our
continuing operations. Our forecast of the period of time through which our
financial resources will be adequate to support our operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could vary materially.


Our future capital requirements are difficult to forecast and will depend on
many factors, including:



• our ability to initiate, and the progress and results of, our current and



planned clinical trials of ATYR1923;



• delays of our current and planned clinical trials of ATYR 1923 and any



resulting cost increases as a result of the COVID-19 outbreak;


• the number and characteristics of product candidates that we pursue;



• the scope, progress, results and costs of preclinical development, and



clinical trials for other product candidates;


• the manufacturing of preclinical study and clinical trial materials;



• our ability to maintain existing and enter into new collaboration and



licensing arrangements and the timing of any payments we may receive
under such arrangements;



• the costs, timing and outcome of regulatory review of our product candidates;



• the costs and timing of preparing, filing and prosecuting patent



applications, maintaining and enforcing our intellectual property rights
and defending any intellectual property-related claims;



• the costs and timing of future commercialization activities, including



product manufacturing, marketing, sales and distribution, for any of our
product candidates for which we receive marketing approval; and



• the extent to which we acquire or in-license other products and technologies.





Until such time, if ever, as we can generate substantial product revenues, we
expect to finance our cash needs through a combination of equity offerings,
grant funding, collaborations, strategic partnerships and/or licensing
arrangements, and when we are closer to commercialization of our product
candidates potentially through debt financings. To the extent we raise
additional capital through the sale of equity, the ownership interest of our
stockholders will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect the rights of our common
stockholders. If we raise additional funds through collaborations, strategic
partnerships or licensing arrangements with third parties, we may have to
relinquish valuable rights to our product candidates, our other technologies,
future revenue streams or research programs or grant licenses on terms that may
not be favorable to us. The incurrence of additional indebtedness would increase
our fixed payment obligations and may require us to agree to certain restrictive
covenants, such as limitations on our ability to incur additional debt,
limitations on our ability to acquire, sell or license intellectual property
rights and other operating restrictions that could adversely impact our ability
to conduct our business. We may be unable to raise additional funds on
acceptable terms or at all. The impact of COVID-19 on capital markets may affect
the availability, amount and type of financing available to us in the future. If
we are unable to raise additional funds, we may be required to delay, limit,

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reduce or terminate our product development or future commercialization efforts
or grant rights to develop and market our product candidates even if we would
otherwise prefer to develop and market such product candidates ourselves.


Contractual Obligations and Commitments




The following table summarizes our contractual obligations as of December 31,
2019
:

Payments Due by Period
Less than More than 5
Total 1 Year 1-3 Years 3-5 Years Years
(in thousands)
Term Loans, principal payments
including final payment $ 9,083 $ 9,083 $ - $ - $ -
Facilities lease (1) 2,994 754 1,842 398 -
Total $ 12,077 $ 9,837 $ 1,842 $ 398 $ -



(1) Our operating lease obligations relate to our corporate headquarters in



San Diego, California. We have 20,508 square feet of office and laboratory



space under an operating lease that expires in May 2023.





We enter into contracts in the normal course of business with clinical trial
sites and clinical supply manufacturing organizations and with vendors for
preclinical safety and research studies, research supplies and other services
and products purposes. These contracts generally provide for termination after a
notice period, and therefore are cancelable contracts and not included in the
table of contractual obligations and commitments.


Recent Accounting Pronouncements



For discussion of recently issued accounting pronouncements, refer to the
Section titled "Recent Accounting Pronouncements" within Note 2 of our
consolidated financial statements included in this Annual Report.



Off-Balance Sheet Arrangements




We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
SEC.

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