ATYR PHARMA, INC. 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). InJanuary 2020 , we entered into a license withKyorin Pharmaceutical Co., Ltd. (Kyorin) for the development and commercialization of ATYR1923 for ILDs inJapan . Under the collaboration and license agreement with Kyorin (the Kyorin Agreement), Kyorin received an exclusive right to develop and commercialize ATYR1923 inJapan 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 inJapan . Under the terms of the Kyorin Agreement, Kyorin will fund all research, development, regulatory, marketing and commercialization activities inJapan , 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, inJanuary 2019 , we expanded a successful pilot study and entered into a research collaboration with theUniversity of Nebraska Medical Center (UNMC) and Dr.Kaustubh Datta , who has published extensively in the 57
-------------------------------------------------------------------------------- field of NRP2 biology. InOctober 2019 , we entered into a research collaboration with Dr.Diane Bielenberg atBoston 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. InMarch 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. InMay 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 inJune 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 throughaTyr Pharma, Inc. , aDelaware corporation, at our facility inSan Diego, California .aTyr Pharma, Inc. was incorporated in theState of Delaware inSeptember 2005 . The consolidated financial statements include our accounts and our 98% majority-owned subsidiary inHong Kong ,Pangu BioPharma Limited , as ofDecember 31, 2019 . All intercompany transactions and balances are eliminated in consolidation.
Leases
OnJanuary 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
InMarch 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 inMay 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 ofDecember 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. 58 -------------------------------------------------------------------------------- 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
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 withThe 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)
InNovember 2016 , we entered into a loan and security agreement, as amended (Loan Agreement) withSilicon 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 inNovember 2016 ,$5.0 million of which was funded inJune 2017 and$5.0 million of which was funded inDecember 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. 59
--------------------------------------------------------------------------------
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 inthe 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
The following table summarizes our results of operations for the years ended
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.
60
--------------------------------------------------------------------------------
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
The following table summarizes our results of operations for the years ended
Years Ended December 31, Increase /
2018 2017 (Decrease)
Research and development expenses
(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 endedDecember 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 endedDecember 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 endedDecember 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 ofDecember 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 ofDecember 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 throughDecember 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 throughJune 1, 2018 , followed by consecutive equal monthly payments of principal and interest in arrears through the 61 -------------------------------------------------------------------------------- maturity date ofNovember 18, 2020 . Accordingly, we started paying the principal balance of the Term Loans inJune 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 inNovember 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
InJune 2016 , we entered into a sales agreement withCowen 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. InMay 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 . InMay 2019 , we entered into a sales agreement withH.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 ofDecember 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 . InFebruary 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. InMarch 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 2017Net 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
Operating activities. Net cash used in operating activities was$20.0 million ,$31.1 million and$42.4 million for the years endedDecember 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 endedDecember 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 endedDecember 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 endedDecember 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. 62 -------------------------------------------------------------------------------- Investing activities. Net cash provided by investing activities for the year endedDecember 31, 2019 consisted of$5.0 million of net maturities of investment securities. Net cash provided in investing activities for the year endedDecember 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 endedDecember 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 endedDecember 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 endedDecember 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 endedDecember 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 andNPR2 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,
63
--------------------------------------------------------------------------------
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 ofDecember 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
space under an operating lease that expires in
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 theSEC .
© Edgar Online, source
