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EX-31.2 - EX-31.2 - aTYR PHARMA INClife-ex312_6.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

OR

o

TRANSITION REPORT UNDER SECTION 13 OF 15(d) OR THE EXCHANGE ACT OF 1934

From the transition period from                 to                .

Commission File Number 001-37378

 

ATYR PHARMA, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-3435077

(State or other jurisdiction

of incorporation)

 

(IRS Employer

Identification No.)

 

 

 

3545 John Hopkins Court, Suite #250, San Diego, CA

 

92121

(Address of principal executive offices)

 

(Zip Code)

(858) 731-8389

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x     No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

¨

  

Accelerated filer

¨

 

 

 

 

 

 

Non-accelerated filer

 

x  (Do not check if a smaller reporting company)

  

Smaller reporting company

¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 6, 2016, there were 23,687,204 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

 


 

ATYR PHARMA, INC.

FORM 10-Q

TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

 

3

Condensed Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015

 

3

Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015 (unaudited)

 

4

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2016 and 2015

 

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 (unaudited)

 

6

Notes to Condensed Consolidated Financial Statements (unaudited)

 

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

21

Item 4. Controls and Procedures

 

22

PART II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

 

23

Item 1A. Risk Factors

 

23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

56

Item 3. Defaults Upon Senior Securities

 

56

Item 4. Mine Safety Disclosures

 

56

Item 5. Other Information

 

56

Item 6. Exhibits

 

56

SIGNATURES

 

57

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

aTyr Pharma, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,099

 

 

$

53,025

 

Short-term investments

 

 

31,949

 

 

 

42,510

 

Prepaid expenses and other assets

 

 

1,575

 

 

 

2,415

 

Total current assets

 

 

87,623

 

 

 

97,950

 

Long-term investments

 

 

25,557

 

 

 

29,814

 

Property and equipment, net

 

 

1,845

 

 

 

1,793

 

Other assets

 

 

100

 

 

 

118

 

Total assets

 

$

115,125

 

 

$

129,675

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,876

 

 

$

3,872

 

Accrued expenses

 

 

3,568

 

 

 

4,595

 

Current portion of deferred rent

 

 

320

 

 

 

315

 

Current portion of commercial bank debt

 

 

3,427

 

 

 

3,366

 

Total current liabilities

 

 

13,191

 

 

 

12,148

 

Deferred rent, net of current portion

 

 

49

 

 

 

130

 

Commercial bank debt, net of current portion

 

 

896

 

 

 

1,776

 

Other long-term liabilities

 

 

557

 

 

 

571

 

Commitments and contingencies (Note 3)

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.001 par value; authorized shares – 7,285,456

   at March 31, 2016 and December 31, 2015; issued and outstanding

   shares – none at March 31, 2016 and December 31, 2015

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Undesignated preferred stock, $0.001 par value; authorized shares –  5,000,000 at

   March 31, 2016 and December 31, 2015; issued and outstanding shares –  none at

   March 31, 2016 and December 31, 2015

 

 

 

 

 

 

Common stock, $0.001 par value; authorized shares – 150,000,000 at March 31, 2016

   and December 31, 2015; issued and outstanding shares – 23,677,303 at

   March 31, 2016 and 23,670,079 at December 31, 2015

 

 

24

 

 

 

24

 

Additional paid-in capital

 

 

274,638

 

 

 

273,321

 

Accumulated other comprehensive loss

 

 

(19

)

 

 

(171

)

Accumulated deficit

 

 

(174,211

)

 

 

(158,124

)

Total stockholders’ equity

 

 

100,432

 

 

 

115,050

 

Total liabilities, redeemable convertible preferred stock and stockholders’ equity

 

$

115,125

 

 

$

129,675

 

 

See accompanying notes.

 

 

 

3


 

aTyr Pharma, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

 

 

2016

 

 

2015

 

 

 

 

(unaudited)

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

$

12,000

 

 

$

6,593

 

 

General and administrative

 

 

4,115

 

 

 

2,329

 

 

Total operating expenses

 

 

16,115

 

 

 

8,922

 

 

Loss from operations

 

 

(16,115

)

 

 

(8,922

)

 

Other income (expense), net

 

 

28

 

 

 

(149

)

 

Net loss

 

 

(16,087

)

 

 

(9,071

)

 

Net loss per share, basic and diluted

 

$

(0.68

)

 

$

(9.39

)

 

Weighted average common stock shares outstanding, basic

   and diluted

 

 

23,631,133

 

 

 

966,322

 

 

 

See accompanying notes.

 

 

 

4


 

aTyr Pharma, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

 

2016

 

 

2015

 

 

 

 

(unaudited)

Net loss

 

$

(16,087

)

 

$

(9,071

)

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale investments

 

 

152

 

 

 

 

 

Comprehensive loss

 

$

(15,935

)

 

$

(9,071

)

 

 

See accompanying notes.

 

 

 

5


 

aTyr Pharma, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(16,087

)

 

$

(9,071

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

233

 

 

 

209

 

Issuance of common stock for technology

 

 

 

 

 

1,411

 

Stock-based compensation

 

 

1,280

 

 

 

603

 

Amortization of debt discount

 

 

54

 

 

 

128

 

Change in fair value of preferred stock warrant liability

 

 

 

 

 

(77

)

Amortization of investment premium

 

 

264

 

 

 

4

 

Deferred rent

 

 

(76

)

 

 

(71

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

858

 

 

 

(187

)

Accounts payable and accrued expenses

 

 

983

 

 

 

765

 

Net cash used in operating activities

 

 

(12,491

)

 

 

(6,286

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(314

)

 

 

(123

)

Purchases of investment securities

 

 

(9,994

)

 

 

 

Maturities of investment securities

 

 

24,700

 

 

 

1,950

 

Net cash provided by investing activities

 

 

14,392

 

 

 

1,827

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Issuance of preferred stock for cash, net of issuance costs

 

 

 

 

 

46,299

 

Proceeds from issuance of common stock through option exercises

 

 

11

 

 

 

69

 

Repayments on notes payable to bank

 

 

(838

)

 

 

(795

)

Costs paid in connection with initial public offering

 

 

 

 

 

(501

)

Net cash (used in) provided by financing activities

 

 

(827

)

 

 

45,072

 

Net change in cash and cash equivalents

 

 

1,074

 

 

 

40,613

 

Cash and cash equivalents at beginning of the period

 

 

53,025

 

 

 

13,899

 

Cash and cash equivalents at end of the period

 

$

54,099

 

 

$

54,512

 

 

 

 

 

 

 

 

 

 

Supplemental schedule of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Deferred initial public offering costs included in accounts payable and accrued expenses

 

$

 

 

$

1,233

 

 

See accompanying notes.

 

 

 

6


 

aTyr Pharma, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

1. Organization, Business, Basis of Presentation and Summary of Significant Accounting Policies

Organization and Business

aTyr Pharma, Inc. (we, us, and our) was incorporated in the state of Delaware on September 8, 2005. We are focused on the discovery and clinical development of innovative medicines for patients suffering from severe rare diseases.

Initial Public Offering

On May 12, 2015, we completed our initial public offering (IPO) of 6,164,000 shares of common stock at $14.00 per share, resulting in gross proceeds of approximately $86.3 million and net proceeds of $75.9 million, after underwriting and other expenses of approximately $10.4 million (consisting of approximately $6.0 million in underwriting discounts and commissions and approximately $4.4 million in other offering expenses).

Principles of Consolidation

Our consolidated financial statements include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma Limited (Pangu BioPharma). All intercompany transactions and balances are eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) and following the requirements of the United States Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In our opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position and our results of operations and cash flows for periods presented. These statements do not include all disclosures required by GAAP and should be read in conjunction with our financial statements and accompanying notes for the fiscal year ended December 31, 2015, contained in our Annual Report on Form 10-K filed with the SEC on March 30, 2016. The results of the interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.

Use of Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes. The most significant estimates in our consolidated financial statements relate to the fair value of equity issuances and awards, and clinical trials and research and development expense accruals. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ materially from these estimates and assumptions.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents and adjusted for the weighted average number of common shares outstanding that are subject to repurchase. We have excluded 44,136 and 39,439 shares subject to repurchase from the weighted average number of common shares outstanding for the three months ended March 31, 2016 and 2015, respectively. Diluted net loss per share is calculated by dividing the net loss by the weighted average number of common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of warrants for common stock and options outstanding under our stock option plan. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to our net loss position.

 

7


 

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common share equivalents):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Redeemable convertible preferred stock outstanding

 

 

 

 

 

17,808,867

 

Redeemable convertible preferred stock issuable upon conversion of convertible promissory note

 

 

 

 

 

94,455

 

Warrants for common stock

 

 

25,970

 

 

 

25,970

 

Common stock options and awards

 

 

3,742,770

 

 

 

1,799,392

 

Employee stock purchase plan

 

 

17,363

 

 

 

 

 

 

 

3,786,103

 

 

 

19,728,684

 

 

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements — Going Concern. ASU 2014-15 provides that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 is effective for the annual reporting period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our consolidated financial position or results of operations.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. We adopted ASU 2015-03 in January 2016 and the guidance did not affect our consolidated financial position or results of operations.

In April 2015, the FASB issued ASU 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.  ASU 2015-05 related to a customer’s accounting for fees in a cloud computing arrangement.  This guidance requires that management evaluate each cloud computing arrangement in order to determine whether it includes a software license that must be accounted for separately from hosted services.  We adopted ASU 2015-03 prospectively in January 2016 and the guidance did not have a material impact in our consolidated financial position or results of operations.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings and (ii) when the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. Additionally, ASU 2016-01 changes the disclosure requirements for financial instruments. The new standard will be effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for certain provisions. The adoption of ASU 2015-03 is not expected to have a material impact on our consolidated financial position or results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases, to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The new standard will become effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and is required to be adopted at the earliest period presented using a modified retrospective approach. We are currently evaluating the impact the provisions will have on our consolidated financial statements and whether we will adopt the guidance early.

 

8


 

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation, which involves several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 will be effective for the annual periods beginning after December 15, 2016 and interim periods within those annual periods, with early adoption permitted. We are currently evaluating the impact the provisions will have on our consolidated financial statements.

 

2. Fair Value Measurements

The carrying amounts of cash equivalents, prepaid and other assets, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. Based on the borrowing rates currently available to us for loans with similar terms, which is considered a Level 2 input, we believe that the fair value of our commercial bank debt approximate their carrying values. Investment securities are recorded at fair value.

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Financial assets measured at fair value on a recurring basis consist of investment securities. Investment securities are recorded at fair value, defined as the exit price in the principal market in which we would transact, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Level 2 securities are valued using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data, or discounted cash flow techniques and include our investments in corporate debt securities and commercial paper. We have no financial liabilities measured at fair value on a recurring basis. None of our non-financial assets and liabilities is recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

 

9


 

Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

 

Quoted Prices in

Active Markets

for Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

As of March 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

42,787

 

 

$

42,787

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

1,998

 

 

 

 

 

 

1,998

 

 

 

 

United States Treasury securities

 

 

3,003

 

 

 

3,003

 

 

 

 

 

 

 

Corporate debt securities

 

 

26,948

 

 

 

 

 

 

26,948

 

 

 

 

Sub-total short-term investments

 

 

31,949

 

 

 

3,003

 

 

 

28,946

 

 

 

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Treasury securities

 

 

5,003

 

 

 

5,003

 

 

 

 

 

 

 

Asset-backed securities

 

 

9,014

 

 

 

 

 

 

9,014

 

 

 

 

Corporate debt securities

 

 

11,540

 

 

 

 

 

 

11,540

 

 

 

 

Sub-total long-term investments

 

 

25,557

 

 

 

5,003

 

 

 

20,554

 

 

 

 

Total assets measured at fair value

 

$

100,293

 

 

$

50,793

 

 

$

49,500

 

 

$

 

As of December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

46,545

 

 

$

46,545

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

2,996

 

 

 

 

 

 

2,996

 

 

 

 

Corporate debt securities

 

 

39,514

 

 

 

 

 

 

39,514

 

 

 

 

Sub-total short-term investments

 

 

42,510

 

 

 

 

 

 

42,510

 

 

 

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Treasury securities

 

 

1,999

 

 

 

1,999

 

 

 

 

 

 

 

Asset-backed securities

 

 

10,912

 

 

 

 

 

 

10,912

 

 

 

 

Corporate debt securities

 

 

16,903

 

 

 

 

 

 

16,903

 

 

 

 

Sub-total long-term investments

 

 

29,814

 

 

 

1,999

 

 

 

27,815

 

 

 

 

Total assets measured at fair value

 

$

118,869

 

 

$

48,544

 

 

$

70,325

 

 

$

 

 

As of March 31, 2016 and December 31, 2015 available-for-sale investments are detailed as follows (in thousands):

 

 

 

March 31, 2016

 

 

 

Gross

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Market Value

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

1,998

 

 

$

 

 

$

 

 

$

1,998

 

United States Treasury securities

 

$

3,002

 

 

$

1

 

 

 

 

 

$

3,003

 

Corporate debt securities

 

 

26,964

 

 

 

5

 

 

 

(21

)

 

 

26,948

 

 

 

$

31,964

 

 

$

6

 

 

$

(21

)

 

$

31,949

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Treasury securities

 

$

4,999

 

 

$

4

 

 

$

 

 

$

5,003

 

Asset-backed securities

 

 

9,010

 

 

 

5

 

 

 

(1

)

 

 

9,014

 

Corporate debt securities

 

 

11,552

 

 

 

4

 

 

 

(16

)

 

 

11,540

 

 

 

$

25,561

 

 

$

13

 

 

$

(17

)

 

$

25,557

 

 

 

10


 

 

 

December 31, 2015

 

 

 

Gross

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Market Value

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

2,996

 

 

$

 

 

$

 

 

$

2,996

 

Corporate debt securities

 

 

39,575

 

 

 

 

 

 

(61

)

 

 

39,514

 

 

 

$

42,571

 

 

$

 

 

$

(61

)

 

$

42,510

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Treasury securities

 

$

2,006

 

 

$

 

 

$

(7

)

 

$

1,999

 

Asset-backed securities

 

 

10,928

 

 

 

 

 

 

(16

)

 

 

10,912

 

Corporate debt securities

 

 

16,990

 

 

 

 

 

 

(87

)

 

 

16,903

 

 

 

$

29,924

 

 

$

 

 

$

(110

)

 

$

29,814

 

 

Available-for-sale investments that are in an unrealized loss position as of March 31, 2016 are as follows (in thousands):

 

 

 

Estimated Fair

Value

 

 

Gross Unrealized

Losses

 

Asset-backed securities

 

$

2,000

 

 

$

(1

)

Corporate debt securities

 

 

19,079

 

 

 

(37

)

 

 

$

21,079

 

 

$

(38

)

 

As of March 31, 2016, all available-for-sale investments have contractual maturity dates within two years. As of March 31, 2016, there are 12 available-for-sale investments in gross unrealized loss position, all of which had been in such position for less than twelve months.

At each reporting date, we perform an evaluation of impairment to determine if the unrealized losses are other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, and our intent and ability to hold the investment until recovery of its amortized cost basis. We intend, and have the ability, to hold our investments in unrealized loss positions until their amortized cost basis has been recovered. Based on our evaluation, we determined that the unrealized losses were not other-than-temporary at March 31, 2016.

 

 

3. Debt, Commitments and Contingencies

Commercial Bank Debt

Commercial bank debt and unamortized discount balances are as follows (in thousands):

 

 

 

March 31, 2016

 

 

December 31, 2015

 

Commercial bank debt

 

$

4,364

 

 

$

5,202

 

Less debt discount, net of current portion

 

 

(1

)

 

 

(6

)

Commercial bank debt, net of debt discount

 

 

4,363

 

 

 

5,196

 

Less current portion of commercial bank debt

 

 

(3,467

)

 

 

(3,420

)

Commercial bank debt, net of current portion

 

$

896

 

 

$

1,776

 

Current portion of commercial bank debt

 

$

3,467

 

 

$

3,420

 

Current portion of debt discount

 

 

(40

)

 

 

(54

)

Current portion of commercial bank debt, net of debt discount

 

$

3,427

 

 

$

3,366

 

 

 

11


 

Future minimum principal and interest payments under our loan and security agreement with Silicon Valley Bank, including the final payment, are as follows (in thousands):

 

 

 

March 31, 2016

 

2016

 

$

2,716

 

2017

 

 

2,310

 

 

 

 

5,026

 

Less interest and final payment

 

 

(662

)

Commercial bank debt

 

$

4,364

 

 

Facility Lease

In December 2011, we entered into a noncancelable operating lease that included certain tenant improvement allowances and is subject to base lease payments, which escalate over the term of the lease, additional charges for common area maintenance and other costs. The lease expires in May 2017 and we have an option to extend the lease for a period of five years. Rent expense for the three months ended March 31, 2016 and 2015 was $0.1 million.

In conjunction with this lease, we borrowed $2.0 million under a subordinated unsecured convertible promissory note issued to the venture arm of our landlord. The convertible promissory note carried an annual interest rate of 8.0% and matured at the earlier of (i) May 2015, (ii) a liquidation event, or (iii) the closing of an initial firm commitment underwritten public offering of our common stock pursuant to a registration statement under the Act, at which time all outstanding principal and accrued interest amounts would be due, unless previously converted. In May 2015, the $2.0 million outstanding principal balance of the convertible promissory note and the $0.5 million accrued interest on the convertible promissory note was repaid in full in connection with our IPO.

Future minimum payments under the non-cancelable operating lease as of March 31, 2016 were as follows (in thousands):

 

 

 

Operating

Lease

 

2016

 

$

461

 

2017

 

 

231

 

Total

 

$

692

 

 

Research Agreements and Funding Obligations

In October 2007, we entered into a research funding and option agreement for certain technologies from The Scripps Research Institute (TSRI). Under the agreement, we provide funding to TSRI to conduct certain research activities. The agreement renews automatically for successive 12 month periods starting on May 31st of each year unless we provide 30 days’ prior written notice to terminate the agreement. TSRI has the right to terminate the agreement if we fail to make any payment under the agreement or for breach or insolvency. Under the research funding and option agreement, TSRI has granted us options to enter into license agreements to acquire rights and exclusive licenses to develop, make, have made, use, have used, import, have imported, offer to sell, sell, and have sold certain licensed products, processes and services based on certain technology arising from the sponsored research activities. Pursuant to the terms of these license agreements, TSRI is entitled to receive tiered royalties as a percentage of net sales and a percentage of nonroyalty revenue we may receive from our sublicensees or partners, with the amount owed decreasing if we enter into the applicable sublicense or partnering agreement after meeting a specified clinical milestone. In addition, we are obligated to pay TSRI up to an aggregate of $2.75 million under each license agreement upon the achievement of specific clinical and regulatory milestone events. In January 2015, we and TSRI entered into an amended and restated research funding and option agreement pursuant to which we agreed to issue 119,840 shares of our common stock to TSRI in consideration for the adjustment of sublicense payments and the assignment of certain intellectual property rights by TSRI to us. The $1.4 million fair value of the common stock issued to TSRI was recorded to research and development expense. We issued the shares of common stock to TSRI on March 31, 2015.

During the three months ended March 31, 2016 and 2015, excluding the fair value of the common stock issued to TSRI described above, we recognized expense under the agreement in the amount of $0.4 million and $0.2 million, respectively. A member of our board of directors is a faculty member at TSRI and such payments fund a portion of his research activities conducted at TSRI.

During the three months ended March 31, 2016 and 2015, we provided charitable donations to the National Foundation for Cancer Research of $0.1 million. We have requested that the donations be restricted to certain basic research in cancer biology and therapeutics, a portion of which funds research activities conducted at TSRI in the laboratory of a member of our board of directors.

 

12


 

FUJIFILM Diosynth Biotechnologies U.S.A., Inc. Agreement

In June 2015, we entered into a Master Services Agreement (the MSA) with FUJIFILM Diosynth Biotechnologies U.S.A., Inc. (Fujifilm) to complete the development of the manufacturing process and for the production of the drug substance for Resolaris, our drug in clinical development. Pursuant to the MSA, Fujifilm will provide the drug substance for Resolaris to support future clinical trials, including potential pivotal trials. Under the initial scope of work executed pursuant to the MSA, Fujifilm will conduct process optimization, scale-up and demonstration, and cGMP manufacturing of the drug substance of Resolaris, and we are required to pay Fujifilm based on development and production milestones up to the total payment in the mid seven figures. In addition, we are billed for consumables on a pass-through basis. During the three months ended March 31, 2016 and 2015, expenses associated with this agreement were $1.6 million and $0.3 million, respectively.

    

 

4. Stockholders’ Equity

Stock Option and Incentive Plans

2014 Stock Plan

We adopted a stock option plan in 2007 (the 2007 Plan), which was subsequently amended, restated and renamed in July 2014 (the 2014 Plan) to provide for the incentive stock options, nonstatutory stock options, stock and rights to purchase restricted stock to eligible recipients.  Recipients of incentive stock options are eligible to purchase shares of our common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The maximum term of options under the 2014 Plan is ten years. Options granted generally vest over four years.

2015 Stock Plan

In April 2015, our board of directors adopted, and our stockholders approved, the 2015 Plan. The 2015 Plan became effective on May 6, 2015 and we ceased granting any new awards under our 2014 Plan. Awards granted under the 2014 Plan prior to our IPO that are forfeited, canceled, reacquired by us prior to vesting satisfied without the issuance of stock or otherwise terminated (other than by exercise) will be added to shares available for issuance under the 2015 Plan. A total of 1,574,566 shares of our common stock were initially reserved for issuance under the 2015 Plan. In addition, the number of shares reserved and available for issuance under the 2015 Plan will automatically increase each January 1, beginning on January 1, 2016 and thereafter until January 1, 2019, by the lesser of (i) 1,840,000 shares, (ii) 4% of the outstanding number of shares of our common stock on the immediately preceding December 31 or (iii) an amount determined by our board of directors. Shares underlying any awards under the 2015 Plan that are forfeited, canceled, reacquired by us prior to vesting, satisfied without the issuance of stock or otherwise terminated (other than by exercise) will be added to shares available for issuance under the 2015 Plan.

Employee Stock Purchase Plan

In April 2015, our board of directors adopted, and our stockholders approved, our 2015 Employee Stock Purchase Plan (the 2015 ESPP). The 2015 ESPP became effective on May 6, 2015. A total of 227,623 shares of our common stock were initially reserved for issuance under the 2015 ESPP. In addition, the number of shares reserved and available for purchase under the 2015 ESPP will automatically increase each January 1, beginning on January 1, 2016 and thereafter until January 1, 2019, by 1% of the outstanding number of shares of our common stock on the immediately preceding December 31 or such lesser number of shares as determined by the administrator of the 2015 ESPP.

Stock option activity is summarized as follows:

 

 

 

Number of Outstanding

Options

 

 

Weighted

Average

Price

 

Balance as of December 31, 2015

 

 

2,625,280

 

 

$

8.83

 

Granted

 

 

1,310,569

 

 

$

7.21

 

Exercised

 

 

(5,144

)

 

$

2.06

 

Canceled

 

 

(314,448

)

 

$

11.28

 

Balance as of March 31, 2016

 

 

3,616,257

 

 

$

8.04

 

 

 

 

13


 

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Expected term (in years)

 

5.77 – 6.08

 

 

6.02 – 6.08

 

Risk-free interest rate

 

1.43% – 1.90

%

 

1.53

%

Expected volatility

 

81.15% – 82.11

%

 

100.90

%

Expected dividend yield

 

0.00

%

 

0.00

%

 

In January 2016, we granted to our executives, employees and certain consultants performance options with a market condition to purchase up to an aggregate 396,960 shares of common stock at an exercise price of $9.13.  Upon achievement of specified goals by January 4, 2018, such performance options shall begin to vest over four years in equal monthly installments, otherwise the options will be subject to forfeiture. The fair value of the stock options awarded that include market-based performance conditions is estimated on the date of the grant using a Monte Carlo simulation, based on the market price of the underlying common stock, expected performance measurement period, expected peer group stock price volatility and expected risk-free interest rate. The weighted average grant date fair value was $1.93. The performance options with market conditions grants are expensed using the accelerated attribution method over the requisite service period of 5.06 years regardless of whether the market condition is achieved or earned and vest.

 

The assumptions used to determine the fair value of the performance options with a market condition were as follows:

 

 

 

March 31, 2016

 

Expected term (in years)

 

5.06

 

Risk-free interest rate

 

2.24

%

Expected volatility

 

83.26

%

Expected dividend yield

 

0.0

%

 

During the quarter ended March 31, 2016, we granted restricted stock units to employees.  Restricted stock unit activity is summarized as follows:

 

 

 

Number of Outstanding

Restricted Stock Units

 

 

Weighted Average

Grant Date

Fair Value

 

Balance as of December 31, 2015

 

 

 

 

$

 

Granted

 

 

128,593

 

 

$

5.00

 

Released

 

 

(2,080

)

 

$

5.48

 

Canceled

 

 

 

 

$

 

Balance as of March 31, 2016

 

 

126,513

 

 

$

4.99

 

 

The allocation of stock-based compensation for all options, including performance options with a market condition, and restricted stock units is as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Research and development

 

$

547

 

 

$

355

 

General and administrative

 

 

733

 

 

 

248

 

 

 

$

1,280

 

 

$

603

 

 

14


 

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance is as follows:

 

 

 

March 31, 2016

 

 

December 31, 2015

 

Common stock warrants

 

 

25,970

 

 

 

25,970

 

Common stock options and awards outstanding

 

 

3,742,770

 

 

 

2,625,280

 

Shares available under the 2014 Plan

 

 

984,357

 

 

 

984,357

 

Shares available under the 2015 Plan

 

 

1,709,796

 

 

 

903,350

 

Shares available under the 2015 ESPP Plan

 

 

464,323

 

 

 

227,623

 

 

 

 

6,927,216

 

 

 

4,766,580

 

 

 

 

 

15


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the consolidated financial statements and accompanying notes thereto for the fiscal year ended December 31, 2015 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 30, 2016.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended or the Exchange Act. Such forward looking statements, which represent our intent, belief or current expectations, involve risks and uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. In some cases you can identify forward-looking statements by terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions. Factors that could cause or contribute to differences in results include, but are not limited to those set forth under “Risk Factors” under Item 1A of Part II below, and elsewhere in this Quarterly Report on Form 10-Q. Except as required by law we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

Overview

We engage in the discovery and clinical development of innovative medicines for patients suffering from severe, rare diseases using our knowledge of Physiocrine biology, a newly discovered set of physiological modulators. We have discovered approximately 300 Physiocrines, a class of naturally occurring human proteins that we believe promote homeostasis, a fundamental process of restoring stressed or diseased tissue to a healthier state. By leveraging our discovery engine and our knowledge of rare diseases, we aim to build a proprietary pipeline of novel product candidates with the potential to treat severe, rare diseases characterized by immune dysregulation. We plan to independently commercialize our Physiocrine-based therapeutics.

Since the identification of the Resokine pathway, we have successfully advanced Resolaris through preclinical development, current Good Manufacturing Practice, or cGMP, manufacturing, an initial Phase 1 clinical trial and three cohorts of our first exploratory Phase 1b/2 trial in adult patients with facioscapulohumeral muscular dystrophy, or FSHD. In the first quarter of 2014, we completed a double-blind, placebo-controlled Phase 1 clinical trial of Resolaris, in which we assessed its safety and tolerability in 32 healthy subjects. Resolaris was shown to be well tolerated at all doses tested, and no serious adverse events were reported. Based on the favorable clinical safety, pharmacokinetic and immunogenicity profile of Resolaris in this trial, we decided to advance Resolaris into clinical trials of rare myopathies with an immune component, or RMIC patients.

In March 2016, we announced results from our multi-national exploratory Phase 1b/2 clinical trial of Resolaris in adult patients with FSHD in the United States and European Union. This randomized, double-blind, placebo-controlled trial was designed to evaluate the safety, tolerability, pharmacokinetics and exploratory pharmacodynamics markers and clinical assessments of multiple intravenous doses of Resolaris in adults with FSHD. We completed three dose escalation cohorts of 0.3, 1.0 and 3.0 mg/kg.  We believe the safety, tolerability, immunogenicity and activity profile of Resolaris as demonstrated in this study warrants advancing our program in adult FSHD patients and potentially other rare diseases.

Our initial therapeutic efforts target severe, rare disease indications in which patients suffer from the immune-related consequences of their genetic disease. We have identified over 20 distinct, molecularly definable RMIC indications, including FSHD and limb-girdle muscular dystrophy 2B, or LGMD2B, in which we believe Resolaris has the potential to target the immune component of these genetic diseases. In 2015, we made progress in our therapeutic efforts by initiating new clinical studies in patients to further investigate Resolaris.  We initiated three additional trials, including a long term safety extension study, a study in adult patients with FSHD or a second rare genetic myopathy, LGMD2B, and a study in patients with early onset FSHD.

During 2015, we made advancements in our pre-clinical research through protein engineering, generating and testing the exposures in animals of multiple configurations of the iMod domain of the Resokine pathway, an immuno-modulatory Physiocrine domain. In the fourth quarter of 2015, we announced the selection of an investigational new drug (IND) candidate based on this iMod domain fused to the Fc region of a human antibody, iMod.Fc. We have selected this iMod.Fc molecule as our second product development candidate and it represents an expansion of our new class of Physiocrine-based therapeutics. With the selection of the this iMod.Fc molecule, we are harnessing the Resokine pathway and plan to test its potential role in lung disease and to develop iMod.Fc as a potential therapeutic for patients with rare pulmonary diseases with an immune component, or RPICs.

 

16


 

In May 2015, we completed our IPO whereby we sold 6,164,000 shares of common stock at a public offering price of $14.00 per share. As a result of the IPO, we raised a total of $75.9 million in net proceeds after deducting underwriting discounts and commissions of approximately $6.0 million and offering expenses of approximately $4.4 million. In addition, in connection with the IPO, all outstanding redeemable convertible preferred stock converted into 16,279,859 shares of our common stock.

Since our inception in 2005, we have devoted substantially all of our resources to the therapeutic application of Physiocrines, including the preclinical development of and clinical trials for Resolaris, the creation, licensing and protection of related intellectual property and the provision of general and administrative support for these operations. We have not generated any revenue from product sales and, through December 31, 2015, have funded our operations primarily with the aggregate proceeds from the sales of our common stock in our IPO, private placement of redeemable convertible preferred stock and convertible promissory notes, commercial bank debt and a convertible promissory note issued to our landlord.

We have never been profitable and have incurred net losses in each annual and quarterly period since our inception. For the three months ended March 31, 2016 and 2015, we have incurred consolidated net losses of $16.1 million and $9.1 million, respectively. As of March 31, 2016, we had an accumulated deficit of $174.2 million.

Substantially all of our net losses resulted from costs incurred in connection with our development of and clinical trials for Resolaris, our other research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, at least until we apply for and receive regulatory approval for Resolaris or another product candidate and generate substantial revenues from its commercialization, if ever. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the nature and extent of our research and development expenses and clinical trials. We expect our expenses will increase substantially in connection with our ongoing activities as we:

 

conduct clinical trials of Resolaris and any additional product candidates we may develop;

 

continue our research and product development efforts;

 

manufacture preclinical study and clinical trial materials;

 

expand, protect and maintain our intellectual property portfolio;

 

seek regulatory approvals for our product candidates that successfully complete clinical trials;

 

hire additional staff, including clinical, operational, financial and technical personnel to execute on our business plan and create additional infrastructure to support our operations as a public company; and

 

implement operational, financial and management systems.

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years at a minimum. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to raise substantial additional capital beyond the net proceeds from our IPO. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts and the timing and nature of the regulatory approval process for our product candidates. We anticipate that we will seek to fund our operations through public or private equity or debt financings or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and ability to develop our product candidates.

Financial Operations Overview

Organization and Business; Principles of Consolidation and Affiliates

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 March 31, 2016. All intercompany transactions and balances are eliminated in consolidation.

 

17


 

Research and Development Expenses

To date, our research and development expenses have related primarily to the development of and clinical trials for Resolaris and to research efforts targeting the potential therapeutic application of other Physiocrine-based immuno-modulators in rare disease indications. 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, or CROs, and investigative sites;

 

costs for laboratory supplies;

 

payments and stock issuances related to licensed products and technologies; and

 

allocated facilities, depreciation and other allocable expenses.

Research and development costs are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. We accrue for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from our external service providers. We adjust our accrual as actual costs become known.

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 during the foreseeable future as we: (i) continue to advance Resolaris in clinical development; (ii) advance our iMod.Fc discovery program; and (iii) engage in additional research, discovery and development activities relating to our discovery engine for therapeutic applications of Physiocrines.

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. 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 Resolaris and any other product candidates that we may develop. 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 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 and legal services, expenses associated with applying for and maintaining patents, the cost of various consultants, occupancy costs, information systems costs and depreciation.

We anticipate that our general and administrative expenses will substantially increase for the foreseeable future as we increase support the continued development of our product candidates and the increased costs of operating as a public company, including expenses related to services associated with maintaining compliance with NASDAQ listing rules and SEC requirements, insurance and investor relations costs. These increases will likely include increased costs related to personnel, fees to outside consultants, lawyers and accountants, among other expenses.

Other Income (Expense)

Other income (expense) consists primarily of interest income earned on cash and cash equivalents and investments and interest expense on our loans outstanding with Silicon Valley Bank, or SVB.

 

18


 

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, or 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 in our Annual Report on Form 10-K. There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K.

Results of Operations

Comparison of the Three Months Ended March 31, 2016 and 2015

The following table summarizes our results of operations for the three months ended March 31, 2016 and 2015 (in thousands):

 

 

 

Three Months Ended March 31,

 

 

Increase /

 

 

 

2016

 

 

2015

 

 

(Decrease)

 

Research and development expenses

 

$

12,000

 

 

$

6,593

 

 

$

5,407

 

General and administrative expenses

 

 

4,115