Item 7. Management’s Discussion and Analysis of Financial Co ndition and Results of Operations.
You should read the following discussion and analysis together with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (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 “Part I, Item 1A. Risk Factors.”
Overview
We are a clinical stage biotechnology company leveraging evolutionary intelligence to translate tRNA synthetase biology into new therapies for fibrosis and inflammation. tRNA synthetases are ancient, essential proteins that have evolved novel domains that regulate diverse pathways extracellularly in humans. Our discovery platform is focused on unlocking hidden therapeutic intervention points by uncovering signaling pathways driven by our proprietary library of domains derived from all 20 tRNA synthetases.
Efzofitimod
Our lead therapeutic candidate is efzofitimod, a novel biologic immunomodulator in clinical development for the treatment of interstitial lung disease (ILD), a group of immune-mediated disorders that can cause inflammation and fibrosis, or scarring, of the lungs. Efzofitimod is a tRNA synthetase derived therapy that selectively modulates activated myeloid cells through neuropilin-2 (NRP2) to resolve aberrant inflammation without immune suppression and potentially prevent the progression of fibrosis. ILDs are predominantly immune-mediated disorders that are characterized by chronic inflammation, which can lead to progressive fibrosis of the lung. There are limited treatment options for ILD and there remains a high unmet medical need. Sarcoidosis and systemic sclerosis (SSc, also known as scleroderma)-associated ILD (SSc-ILD) are two major forms of ILD. The U.S. Food and Drug Administration (FDA) has granted efzofitimod orphan drug designations for the treatment of sarcoidosis and for the treatment of SSc, and Fast Track designations for the treatment of pulmonary sarcoidosis and for the treatment of SSc-ILD. The European Commission has granted efzofitimod orphan drug designations for the treatment of sarcoidosis and for the treatment of SSc, based on the opinion of the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP). The Pharmaceutical and Medical Devices Agency (PMDA) has granted efzofitimod orphan drug designation for the treatment of sarcoidosis to Kyorin Pharmaceutical Co., Ltd. (Kyorin), our partner in Japan.
In September 2025, we announced top-line data from a global Phase 3 randomized, double-blind, placebo-controlled clinical trial to evaluate the efficacy and safety of efzofitimod in patients with pulmonary sarcoidosis (the EFZO-FIT study). The EFZO-FIT study was a 52-week study in 268 patients with pulmonary sarcoidosis consisting of three parallel cohorts randomized equally to either 3.0 mg/kg or 5.0 mg/kg of efzofitimod or placebo dosed intravenously once every four weeks for a total of 12 doses, with a 4-week safety follow-up. The study design incorporated a protocol guided steroid taper in the first 12 weeks of the study, followed by continued taper or rescue until week 48. The study did not meet its primary endpoint of change from baseline in mean daily oral corticosteroid (OCS) dose at week 48. The change from baseline in mean daily OCS dose reduced to an average of 2.79 mg for 5.0 mg/kg efzofitimod vs 3.52 mg for placebo (p=0.3313). The study’s statistical analysis plan was designed on a hierarchical assessment basis, as such since the primary endpoint was not met, all subsequent statistical testing is reported as nominal findings. The study demonstrated a clinically meaningful improvement in the King’s Sarcoidosis Questionnaire (KSQ)-Lung score at week 48 for 5.0 mg/kg efzofitimod compared to placebo (p=0.0479), with a responder analysis of patients who achieved complete steroid withdrawal at week 48 with an improved KSQ-Lung score also showing in patients treated with 5.0 mg/kg efzofitimod compared to placebo (p=0.0196). Lung function as measured by vital capacity (FVC) at week 48 was maintained in all groups. Efzofitimod was generally well- at both the 3.0 mg/kg and 5.0 mg/kg doses, consistent with previously observed safety profile in all trials conducted to date. At the European Respiratory Society (ERS) Congress in September 2025, we announced additional findings from the EFZO-FIT study, including analyses of additional pre-specified outcomes that demonstrated clinical in mean change from baseline in the Fatigue Assessment (FAS) Total Score (p=0.0226) and KSQ-General Health score (p=0.0197) in patients treated with 5.0 mg/kg efzofitimod versus placebo. Treatment with efzofitimod was also associated with a trend toward a proportion of patients steroid-free status for at least six months. Based on the trial findings, which we believe indicate drug activity for efzofitimod as evidenced by across multiple clinically relevant efficacy endpoints, we have scheduled a Type C meeting with the FDA in mid-April 2026 to review the results of the EFZO-FIT study and determine the path forward for efzofitimod in pulmonary sarcoidosis.
We believe efzofitimod has potential applications in the treatment of other ILDs, such as chronic hypersensitivity pneumonitis (CHP) and connective tissue disease related ILD (CTD-ILD), including SSc-ILD and rheumatoid arthritis-associated ILD. As such, we designed a focused Phase 2 proof-of-concept clinical trial of efzofitimod (the EFZO-CONNECT study) in patients with SSc-ILD. The EFZO-CONNECT study is a randomized, double-blind placebo-controlled proof-of-concept study to evaluate the efficacy, safety and tolerability of efzofitimod in patients with SSc-ILD. This is a 28-week study with three parallel cohorts randomized 2:2:1 to either 270 mg or 450 mg of efzofitimod or placebo dosed intravenously monthly for a total of six doses. The study intends to enroll up to 25 patients at multiple centers in the United States. The objective of the study is to evaluate the efficacy of multiple doses of IV efzofitimod on pulmonary, cutaneous (limited or diffuse) and systemic manifestations in patients with SSc-ILD. The primary endpoint is reduction in FVC. Secondary endpoints include certain measures regarding safety and tolerability. In July 2024, we amended the study to add an
open-label extension (OLE) to patients. Patients who complete the study and wish to receive ongoing treatment with efzofitimod are eligible to participate in the 24-week OLE. In June 2025, we announced interim data from the study showing three out of four efzofitimod-treated diffuse SSc-ILD patients showed clinically important improvement based on the modified Rodnan Skin Score (mRSS) assessment at 12 weeks and that efzofitimod was generally well-tolerated at all doses. We expect to complete enrollment of the study in the first half of 2026.
In January 2020, we entered into a collaboration and license agreement (Kyorin Agreement) with Kyorin for the development and commercialization of efzofitimod for the treatment of ILD in Japan. Under the terms of the Kyorin Agreement, Kyorin received exclusive rights to develop and commercialize efzofitimod in Japan for all forms of ILD, and is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan. We are responsible for supplying all drug product for Japan, as well as supporting development activities for efzofitimod. In 2020, Kyorin conducted and funded a Phase 1 clinical trial of efzofitimod (known as KRP-R120 in Japan). The Phase 1 clinical trial was a placebo-controlled clinical trial to evaluate the safety, pharmacokinetics (PK) and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers. Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events, and PK findings were consistent with previous studies of efzofitimod. Kyorin has also participated in the EFZO-FIT study as the local sponsor in Japan. In February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study which triggered a $10.0 million milestone payment to us. To date, the Kyorin Agreement has generated $20.0 million in upfront and milestone payments to us, and we are eligible to receive up to an additional $155.0 million in the aggregate upon of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.
Discovery Platform
Using efzofitimod as a model, we have developed a process to advance novel tRNA synthetase domains from a concept to therapeutic candidate. This process leverages our early discovery work as well as current scientific understanding of tRNA synthetase evolution, protein structure, gene splicing and tissue-specific regulation to identify potentially active protein domains. Screening approaches are employed to identify target cells and extracellular receptors for these tRNA synthetase-derived proteins. These cellular systems can then be used in mechanism-of-action studies to elucidate the role these proteins play in cellular responses and their potential therapeutic utility. We are working to identify new tRNA synthetase based drug candidates through our internal discovery efforts and external collaboration efforts.
tRNA Synthetase Candidates
Utilizing our novel approach, we have identified target receptors for domains of two additional tRNA synthetases, gaining insights into their potential biological activity in immunology and fibrosis. These fragments form the basis of our additional pipeline candidates. We plan to further elucidate the therapeutic potential of these candidates through mechanistic investigations, including in vitro and in vivo preclinical studies.
ATYR0101
ATYR0101 is a fusion protein derived from a domain of aspartyl-tRNA synthetase (DARS) that is engineered with a human Fc region to extend its serum half-life. The molecule possesses a unique mechanism of action focused on the selective elimination of activated myofibroblasts, which are the primary cellular drivers of pathological extracellular matrix (ECM) deposition in fibrotic diseases. ATYR0101 specifically targets Latent TGF-β Binding Protein-1 (LTBP-1) within the ECM, binding to a region that encompasses the fibrillin-1 binding domain at the C-terminus. LTBP-1 serves a dual role in matrix architecture by organizing structural proteins and modulating the signaling of Transforming Growth Factor-beta (TGF-β) through a complex mechanosensory apparatus. Early data suggest ATYR0101 exerts its antifibrotic effects by inducing apoptosis of myofibroblasts in a TGFβ dependent manner. We believe ATYR0101 may have broad therapeutic applications in multiple fibrotic diseases, such as pulmonary fibrosis, SSc, liver fibrosis and kidney fibrosis.
ATYR0750
ATYR0750 is a fusion protein derived from a domain of alanyl-tRNA synthetase (AARS). ATYR0750 is a novel ligand to fibroblast growth factor receptor 4 (FGFR4), which is involved in many cellular processes, including cell proliferation, differentiation, and tissue repair. FGFR4 is known to play a role in diseases related to inflammation and fibrosis, particularly in the liver. As a novel ligand, ATYR0750 interacts with FGFR4 in a differentiated way to other approaches targeting the receptor, which may lead to improved therapeutic benefit.
Liquidity and Capital Resources
We have incurred losses and negative cash flows from operations since our inception. As of December 31, 2025, we had an accumulated deficit of $606.2 million, and we expect to continue to incur net losses for the foreseeable future. As of December 31, 2025,
we had cash, cash equivalents, restricted cash and available-for-sale investments of $80.9 million. We believe that our current cash, cash equivalents, restricted cash and available-for-sale investments, will be sufficient to meet our material cash requirements from known contractual and other obligations for a period of at least one year from the date of this Annual Report. In addition to the factors discussed under “Material Cash Requirements,” our ability to fund our longer-term operating needs will depend on our ability to raise additional funding through equity or debt offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and other factors, including those discussed in Part I, Item 1A. “Risk Factors—Risks related to our financial condition and need for additional capital—We will need to raise additional capital or enter into strategic partnering relationships to fund our operations.”
Sources of Cash
From our inception through December 31, 2025, we have financed our operations primarily through the sale of equity securities and convertible debt, venture debt, term loans and through license and collaboration agreement revenues. In recent years, we have relied primarily on our “at-the-market” offering program (the Jefferies ATM Offering Program) implemented through our Open Market Sale Agreement SM with Jefferies LLC (Jefferies) for financing our activities. Given ongoing volatility in capital markets generally, the price of our common stock has fluctuated materially since the start of 2025 and, since the announcement of top-line data from the EFZO-FIT study particularly, we have experienced a material decline in our stock price. If markets remain volatile or our stock price continues to remain depressed, this may negatively affect our ability to generate cash from financing activities in future periods, including negatively affecting our ability to generate sufficient funds through our Jefferies ATM Offering Program.
Public Offerings
In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’ option to purchase additional shares, at a price to the public of $2.25 per share. The total net proceeds from the offering were approximately $48.1 million, after deducting underwriting discounts, commissions and offering expenses payable by us.
At-the-Market Offering Programs
In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies implementing the Jefferies ATM Offering Program. In December 2024, we amended the Jefferies ATM Offering Program. Under the Jefferies ATM Offering Program, we may offer and sell, from time to time and at our option, up to an aggregate of $215.0 million of shares of our common stock (inclusive of $65.0 million of sales made prior to the amendment) through Jefferies, acting as sales agent. Jefferies is entitled to a fixed commission rate of up to 3.0% of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program. During the year ended December 31, 2023, we sold an aggregate of 10,530,795 shares of common stock at a weighted-average price of $1.82 per share for net proceeds of approximately $18.4 million under the Jefferies ATM Offering Program. During the year ended December 31, 2024, we sold an aggregate of 20,653,450 shares of common stock at a weighted-average price of $2.02 per share for net proceeds of approximately $40.3 million under the Jefferies ATM Offering Program. During the year ended December 31, 2025, we sold an aggregate of 13,887,177 shares of common stock at a weighted-average price of $4.94 per share for net proceeds of approximately $66.4 million under the Jefferies ATM Offering Program.
Kyorin Agreement Milestone Payments
On February 6, 2023, we announced that our partner Kyorin dosed the first patient in Japan in the EFZO-FIT study, which triggered a $10.0 million milestone payment by Kyorin to us pursuant to the Kyorin Agreement. We recorded this $10.0 million milestone as revenue in December 2022 and received the cash in February 2023. Kyorin is our partner for the development and commercialization of efzofitimod for ILD in Japan. Under the Kyorin Agreement, we have generated $20.0 million in upfront and milestone payments to date and are eligible to receive up to an additional $155.0 million in the aggregate upon the achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan. Kyorin has the exclusive rights to develop and commercialize efzofitimod in Japan for all forms of ILD.
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,
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net change in cash, cash equivalents and restricted cash
Operating activities. Net cash used in operating activities for the years ended December 31, 2025, 2024 and 2023, was $62.0 million, $69.1 million and $33.2 million, respectively. Net cash used in operating activities during the year ended December 31, 2025 was primarily due to costs for efzofitimod development, including pre-commercialization and manufacturing costs incurred prior to the announcement of top-line data from the EFZO-FIT study. Net cash used in operating activities during the year ended December 31, 2024 was primarily due to increased costs for the EFZO-FIT and EFZO-CONNECT studies and upfront payments for manufacturing efforts for efzofitimod. Net cash used in operating activities during the year ended December 31, 2023 included the receipt of a $10.0 million milestone from the Kyorin Agreement. We expect cash used in operating activities will fluctuate and be dependent upon our determination of the path forward for efzofitimod in pulmonary sarcoidosis.
Investing activities. Net cash provided by (used in) investing activities for the years ended December 31, 2025, 2024 and 2023 was $(5.1) million, $17.2 million and $(20.1) million, respectively. The fluctuation in net cash provided by or used in investing activities resulted primarily from the timing differences in investment purchases, sales and maturities, and the fluctuation of our portfolio mix between cash equivalents and investment holdings. The average term to maturity in our investment portfolio as of December 31, 2025 was less than one year. Net cash used for December 31, 2023 included $4.2 million purchases of property and equipment primarily for tenant improvements associated with our corporate headquarters facility lease.
Financing activities. Net cash provided by financing activities for the year ended December 31, 2025 was $66.0 million and consisted primarily of $66.4 million in proceeds from our Jefferies ATM Offering Program, net of issuance costs. Net cash provided by financing activities for the year ended December 31, 2024 was $39.9 million and consisted primarily of $40.3 million in proceeds from our Jefferies ATM Offering Program, net of issuance costs. Net cash provided by financing activities for the year ended December 31, 2023 was $66.2 million and consisted primarily of $48.1 million in proceeds from an underwritten follow-on public offering, net of offering costs, and $18.4 million proceeds from our Jefferies ATM Offering Program, net of issuance costs.
Material Cash Requirements
To date, we have not generated any revenues from product sales. Our expenses may increase in connection with the potential advancement of efzofitimod in clinical development, manufacturing, regulatory and pre-commercialization activities, and the continuation of our research and development activities with respect to other potential therapies based on tRNA synthetase biology and the seeking of 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 minimal sales and 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. Refer to Part I, Item 1A, "Risk Factors - Risks related to our financial condition and need for additional capital—We will need to raise additional capital or enter into strategic partnering relationships to fund our operations.” for a discussion of these factors.
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. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional funds, we may be required to delay, limit, 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.
As of December 31, 2025, our material cash requirements from known contractual and other obligations consisted primarily of (i) an operating lease for our corporate headquarters and laboratory space, and (ii) our master financing lease agreement for various research and development and informational technology equipment.
Corporate Headquarters Facility Lease
In May 2022, we entered into a non-cancelable facility lease that is subject to base lease payments that started at $5.75 per square foot of rentable area per month for the first 12 months of the lease and which escalate 3.0% annually over the term of the lease, and additional charges for common area maintenance and other costs. The term of the lease (the Lease Term) commenced on March 20, 2023 (the Lease Commencement Date) and will continue for 124 months from the Lease Commencement Date. We also have one option to extend the Lease Term for five years. In April 2024, we entered into a lease amendment for additional common area amenities, effective as of June 2023. The amendment increased the total rentable square feet from 23,696 rentable square feet to 24,866 rentable square feet. We provided a $0.7 million security deposit in the form of a letter of credit which is included in restricted cash as of December 31, 2025.
Financing Lease
In April 2022, we entered into a financing lease to lease various research and development and information technology equipment over a 48-month term. Financing lease liabilities totaled $0.9 million as of December 31, 2025. Additionally, as of December 31, 2025, we have $1.1 million in cash collateral for the financing lease, and this amount is included in restricted cash.
We did not have any off-balance sheet arrangements as of December 31, 2025.
Financial Operations Overview
Organization and Business; Principles of Consolidation
We conduct substantially all of our activities through aTyr Pharma, Inc., a Delaware corporation, at our facility in San Diego, California. aTyr Pharma, Inc. was incorporated in the State of Delaware in September 2005. The consolidated financial statements include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma, as of December 31, 2025. All intercompany transactions and balances are eliminated in consolidation.
Revenue Recognition
In January 2020, we entered into the Kyorin Agreement with Kyorin for the development and commercialization of efzofitimod for the treatment of ILD in Japan. Under the terms of the Kyorin Agreement, Kyorin received exclusive rights to develop and commercialize efzofitimod in Japan for all forms of ILD, and Kyorin is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan. We are responsible for supplying all drug product for Japan, as well as supporting development activities for efzofitimod. In 2020, Kyorin conducted and funded a Phase 1 clinical trial of efzofitimod (known as KRP-R120 in Japan). The Phase 1 clinical trial, which was conducted and funded by Kyorin, was a placebo-controlled clinical trial to evaluate the safety, PK and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers. Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events and PK findings were consistent with previous studies of efzofitimod. Kyorin has also participated in the EFZO-FIT study as the local sponsor in Japan. In February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study which triggered a $10.0 million milestone payment to us. To date, the Kyorin Agreement has generated $20.0 million in upfront and milestone payments to us, and we are eligible to receive up to an additional $155.0 million in the aggregate upon of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan. During the year ended December 31, 2025, we recognized $0.2 million in revenue from Kyorin for product material sold to Kyorin to support analytical method validation in Japan.
Research and Development Expenses
To date, our research and development expenses have been 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 immunomodulators. 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 and to support biologics license application (BLA) filing activities with contracted development and manufacturing organizations (CDMOs);
costs to support our pre-commercialization efforts;
costs incurred under clinical trial agreements with CROs and investigative sites;
costs for laboratory supplies; and
allocated facilities, depreciation and other allocable expenses.
Product candidates in later stages of clinical development, such as efzofitimod, 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 primarily outsource our clinical trial administration to CROs, and we outsource our manufacturing of clinical trial materials to CDMOs. These outsourced expenses are typically substantially higher than the expenses we incur on our other product candidates which are all currently in preclinical development. As such, we separately track and report on the majority of our research and development expenses associated with the advancement of efzofitimod. For our candidates in preclinical development, the nature of the research and development expenses incurred to advance these candidates is primarily internal personnel and laboratory supply expenses. We do not fully track or allocate these internal expenses between preclinical product candidates because the expenses can often be shared between candidates. We also incur other shared expenses to support our research and development efforts such as facilities expenses, and these expenses are not allocated to efzofitimod or our preclinical product candidates. Additionally, non-cash research and development expenses such as depreciation and stock-based compensation are not tracked or allocated between product candidates and are shared among all product candidates.
We expect that the levels of our research and development expenses will fluctuate and be dependent upon our determination of the path forward for efzofitimod in pulmonary sarcoidosis. We have scheduled a Type C meeting with the FDA in mid-April 2026 to review the results of the EFZO-FIT study and determine the path forward for efzofitimod in pulmonary sarcoidosis. 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, pre-commercialization, 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.
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. 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, CDMOs and other service providers, pursuant to contractual arrangements, which may include provisions for time and materials-based payments, project-based fees and milestone payments. We base our accrual for these expenses on our estimates of the services received and efforts expended pursuant to our contractual arrangements. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our service providers will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust our accrual or prepaid expenses accordingly.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates and the amounts actually incurred.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
In this section, we discuss the results of our operations for the year ended December 31, 2025, compared to the year ended December 31, 2024. For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2025.
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
Increase /
(Decrease)
License and collaboration agreement revenues
Research and development expenses:
Efzofitimod expenses
Preclinical development and other shared research and development expenses
Non-cash expenses (depreciation and stock-based compensation)
Total research and development expenses
General and administrative expenses:
Other general and administrative expenses
Non-cash expenses (depreciation and stock-based compensation)
Total general and administrative expenses
Other income (expense), net
License and collaboration agreement revenues. Revenues of $0.2 million for the year ended December 31, 2025 consisted of product material sold to Kyorin to support analytical method validation in Japan. Revenues of $0.2 million for the year ended December 31, 2024 consisted of drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study.
Research and development expenses. Research and development expenses were $60.2 million and $54.4 million for the years ended December 31, 2025 and 2024, respectively. The increase of $5.8 million was due primarily to an increase of $3.9 million in efzofitimod expenses which primarily consisted of increased manufacturing costs incurred prior to the announcement of top-line data from the EFZO-FIT study offset by decreased expenses for the EFZO-FIT study as the study was completed during the year ended December 31, 2025. Preclinical development and other shared research and development expenses increased by $1.5 million, and was primarily attributable to increased discovery costs for our preclinical product candidates. Non-cash expenses increased by $0.5 million primarily due to increased non-cash stock-based compensation expense. We anticipate that our research and development expenses will fluctuate and be dependent upon our determination of the path forward for efzofitimod in pulmonary sarcoidosis. We have scheduled a Type C meeting with the FDA in mid-April 2026 to review the results of the EFZO-FIT study and determine the path forward for efzofitimod in pulmonary sarcoidosis.
General and administrative expenses. General and administrative expenses were $17.6 million and $13.8 million for the years ended December 31, 2025 and 2024, respectively. The increase of $3.8 million was attributable to pre-commercialization expenses incurred prior the announcement of top-line data from the EFZO-FIT study, higher personnel related costs as well as higher professional fees. Non-cash expenses increased by $1.5 million primarily due to increased non-cash stock-based compensation expenses.
Other income (expense), net. Other income (expense), net was $3.5 million and $3.9 million for years ended December 31, 2025 and 2024, respectively. The change was primarily a result of lower interest rates as compared to the same period in the prior year.
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.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk.
Not Applicable.
Item 8. Financial Stateme nts and Supplementary Data.
Report of Independent Regist ered Public Accounting Firm
To the Stockholders and the Board of Directors of aTyr Pharma, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of aTyr Pharma, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Accrued clinical and manufacturing costs
Description of the Matter
As of December 31, 2025, the Company had $6.0 million of clinical and manufacturing costs recorded as an accrual. The Company has entered into contractual arrangements related to its clinical studies with clinical research organizations and contracted development and manufacturing organizations. As described in Note 2 to the consolidated financial statements, costs for clinical and manufacturing are estimated based on the time period over which services will be performed and the level of effort to be expended in each period.
Auditing management’s accounting for accrued clinical and manufacturing costs is especially challenging because it is dependent on data from third parties and involves judgments applied by management to determine the commencement and completion date of vendor tasks as well as the extent of work performed during the reporting period, which may not match the pattern of bills received or payments made to third-party service providers. The testing of accrued clinical and manufacturing costs is dependent upon a high-volume of data and input exchanged between clinical personnel and clinical research organizations and contracted development and manufacturing organizations, which includes the total clinical trial management costs, number of sites activated, number of patients enrolled, and number of patient visits, which is tracked in spreadsheets and other end user computing programs.
How We Addressed the Matter in Our Audit
Our substantive testing procedures over the completeness of the Company’s accrued clinical and manufacturing costs include obtaining from third-parties confirmation of total costs billed and work completed as of December 31, 2025, for significant clinical trial and manufacturing activities. We obtained an understanding of the status of significant clinical trial and manufacturing activities from accounting personnel and the clinical project managers to understand the status of significant clinical trial and manufacturing activities. To assess the appropriate measurement of accrued clinical and manufacturing costs, we inspected key terms, timelines of completion, activities and costs for a sample of vendor contracts, including amendments, and compared these to management’s analyses used in tracking the progress of service agreements. We also inspected a sample of subsequent payments, obtained invoice support, and tested the expense was recorded to the appropriate period.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
San Diego, California
March 5, 2026
aTyr Pharma, Inc.
Consolida ted Balance Sheets
(in thousands, except share and per share data)
December 31,
December 31,
Assets
Current assets:
Cash and cash equivalents
Available-for-sale investments
Other receivables
Prepaid expenses
Total current assets
Restricted cash
Property and equipment, net
Operating lease, right-of-use assets
Financing lease, right-of-use assets
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Current portion of operating lease liability
Current portion of financing lease liability
Total current liabilities
Long-term operating lease liability, net of current portion
Long-term financing lease liability, net of current portion
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $ 0.001 par value per share; 5,000,000 undesignated authorized shares as of December 31, 2025 and 2024, respectively; no shares issued or outstanding as of December 31, 2025 and 2024, respectively
Common stock, $ 0.001 par value per share; 170,000,000 authorized shares as of December 31, 2025 and 2024, respectively; issued and outstanding shares – 98,031,104 as of December 31, 2025 and 84,038,922 as of December 31, 2024, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total aTyr Pharma, Inc. stockholders’ equity
Noncontrolling interest in Pangu BioPharma Limited
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes.
aTyr Pharma, Inc.
Consolidated S tatements of Operations
(in thousands, except share and per share data)
Years Ended December 31,
Revenues:
License and collaboration agreement revenues
Total revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Total other income (expense), net
Consolidated net loss
Net loss (gain) attributable to noncontrolling interest in Pangu BioPharma Limited
Net loss attributable to aTyr Pharma, Inc.
Net loss per share, basic and diluted
Shares used in computing net loss per share, basic and diluted
See accompanying notes.
aTyr Pharma, Inc.
Consolidated State ments of Comprehensive Loss
(in thousands)
Years Ended December 31,
Consolidated net loss
Other comprehensive income:
Change in unrealized gain on available-for-sale investments, net of tax
Comprehensive loss
Comprehensive loss (gain) attributable to noncontrolling interest in Pangu BioPharma Limited
Comprehensive loss attributable to aTyr Pharma, Inc. common stockholders
See accompanying notes.
aTyr Pharma, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
Common Stock
Additional
Paid-In
Other
Comprehensive
Accumulated
Noncontrolling
Total
Stockholders’
Shares
Amount
Capital
Gain/(Loss)
Deficit
Interest
Equity
Balance as of December 31, 2022
Issuance of common stock upon release of restricted stock units
Issuance of common stock pursuant to employee stock purchase plan
Issuance of common stock from at-the-market offerings, net of offering costs
Issuance of common stock from underwritten follow-on offering, net of offering costs
Stock-based compensation
Net unrealized gain on investments, net of tax
Net loss
Balance as of December 31, 2023
Issuance of common stock upon release of restricted stock units
Issuance of common stock pursuant to employee stock purchase plan
Issuance of common stock from at-the-market offerings, net of offering costs
Stock-based compensation
Net unrealized gain on investments, net of tax
Net loss
Balance as of December 31, 2024
Issuance of common stock upon release of restricted stock units
Issuance of common stock pursuant to employee stock purchase plan
Issuance of common stock upon exercise of stock options
Issuance of common stock from at-the-market offerings, net of offering costs
Stock-based compensation
Net unrealized gain on investments, net of tax
Net loss
Balance as of December 31, 2025
See accompanying notes.
aTyr Pharma, Inc.
Consolidated S tatements of Cash Flows
(in thousands)
Years Ended December 31,
Cash flows from operating activities:
Consolidated net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Stock-based compensation
Accretion of discount of available-for-sale investment securities
Amortization of right-of-use assets
Gain on disposal of property and equipment
Changes in operating assets and liabilities:
Other receivables
Prepaid expenses and other assets
Accounts payable and accrued expenses
Operating lease liability
Net cash used in operating activities
Cash flows from investing activities:
Purchases of property and equipment
Purchases of available-for-sale investment securities
Maturities of available-for-sale investment securities
Proceeds from sale of property and equipment
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock through option exercises
Proceeds from issuance of common stock through employee stock purchase plan
Proceeds from issuance of common stock from at-the-market offerings, net of offering costs
Proceeds from issuance of common stock from underwritten follow-on public offering, net of offering costs
Principal paid on finance lease liabilities
Net cash provided by financing activities
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at the end of period
Cash and cash equivalents at the end of period
Restricted cash at the end of period
Cash, cash equivalents and restricted cash at the end of period
Supplemental disclosure of cash flow information:
Interest paid
Purchases of property and equipment in accounts payable
Right-of-use assets obtained in exchange for lease obligation
See accompanying notes.
aTyr Pharma, Inc.
Notes to Consolidated Financial Statements
1. Organization, Business and Basis of Presentation
Organization and Business
We were incorporated in the state of Delaware on September 8, 2005. We are a clinical stage biotechnology company leveraging evolutionary intelligence to translate tRNA synthetase biology into new therapies for fibrosis and inflammation. tRNA synthetases are ancient, essential proteins that have evolved novel domains that regulate diverse pathways extracellularly in humans. Our discovery platform is focused on unlocking hidden therapeutic intervention points by uncovering signaling pathways driven by our proprietary library of domains derived from all 20 tRNA synthetases.
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.
Liquidity and Financial Condition
We have incurred losses and negative cash flows from operations since our inception. As of December 31, 2025, we had an accumulat ed deficit of $ 606.2 million and we expect to continue to incur net losses for the foreseeable future. As of December 31, 2025, our cash, cash equivalents, available-for-sale investments and restricted cash were $ 80.9 million. We currently have an “at-the-market” offering program (the Jefferies ATM Offering Program) through an Open Market Sale Agreement SM with Jefferies LLC (Jefferies). During the year ended December 31, 2025, we sold an aggregate of 13,887,177 shares of common stock at a weighted-average price of $ 4.94 per share for net proceeds of approximately $ 66.4 million under the Jefferies ATM Offering Program.
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 to fund our operations. 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 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. However, we may be unable to raise additional capital or enter into such arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such arrangements when needed would have a negative impact on our financial condition and ability to develop our product candidates.
We believe that our current cash, cash equivalents, available-for-sale investments and restricted cash, will be sufficient to meet our anticipated cash requirements for a period of at least one year from the date of this Annual Report.
Restricted Cash
As of December 31, 2025, restricted cash was approximately $ 2.2 million, of which $ 1.8 million was held as a security deposit in conjunction with our corporate headquarters facility lease and financing leases as discussed further in Note 6 - Commitments and Contingencies.
Use of Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles (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 for these items 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 trial and research and development expenses. 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.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (CODM) in making decisions regarding resource allocation and assessing performance. We view our operations and manage our business in one operating segment, which includes all activities related to the discovery and development of our product candidates. Our CODM is our Chief Executive Officer , who reviews and evaluates consolidated research and development expenses, general and administrative expenses, net loss, net cash used in operating activities and our consolidated cash and cash equivalents for purposes of making operating decisions, allocating resources and planning and forecasting future periods.
The table below summarizes the significant expense categories regularly reviewed by our CODM for the years ended December 31, 2025, 2024 and 2023.
Years Ended December 31,
License and collaboration agreement revenues
Research and development expenses:
Efzofitimod expenses
Preclinical development and other shared research and development expenses
Non-cash expenses (depreciation and stock-based compensation)
Total research and development expenses
General and administrative expenses:
Other general and administrative expenses
Non-cash expenses (depreciation and stock-based compensation)
Total general and administrative expenses
Other segment items (1)
Consolidated net loss
(1) Other segment items included interest income and interest expense.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consist of checking, money market and highly liquid investments that are readily convertible to cash and that have an original maturity of three months or less from date of purchase. The carrying amounts approximate fair value due to the short maturities of these instruments.
Employee Retention Credit
Under the Coronavirus Aid, Relief, and Economic Security Act of 2020, we were eligible to claim the employee retention credit (ERC), which is a refundable tax credit against certain employment taxes. During the year ended December 31, 2023, we amended certain payroll tax filings and applied for a refund of $ 1.2 million of ERC benefits. The refund was recorded within other receivables in our audited consolidated balance sheets, and as a $ 0.8 million reduction of research and development expenses and a $ 0.4 million reduction of general and administrative expenses in our audited consolidated statements of operations for the year ended December 31, 2023. As of December 31, 2025, we have fully received the ERC benefits refund.
Allowance of Credit Losses
For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings. For available-for-sale securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the severity of the impairment, any changes in interest rates, market conditions,
changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive income (loss) on the consolidated statements of operations and comprehensive loss.
We elected the practical expedient to exclude the applicable accrued interest from both the fair value and amortized costs basis of our available-for-sale securities for purposes of identifying and measuring an impairment. Accrued interest receivable on available-for-sale securities is recorded within other receivables on our consolidated balance sheets. Our accounting policy is to not measure an allowance for credit loss for accrued interest receivable and to write-off any uncollectible accrued interest receivable as a reversal of interest income in a timely manner, which we consider to be in the period in which we determine the accrued interest will not be collected by us.
Concentration of Credit Risk
Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash, cash equivalents, restricted cash and available-for-sale investments. We have established guidelines regarding diversification of investments and their maturities, which are designed to maintain principal and maximize liquidity. We maintain deposits in federally insured financial institutions in excess of federally insured limits. We have not experienced any losses in such accounts and we believe that we are not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful life of the related assets (generally four years to seven years ). Leasehold improvements are stated at cost and amortized on a straight-line basis over the lesser of the remaining term of the related lease or the estimated useful life of the leasehold improvements. Repairs and maintenance costs are charged to expense as incurred .
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment and right-of-use assets (ROU) associated with our operating and financing leases. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. While our current and historical operating losses are indicators of impairment, we believe that future cash flows to be received support the carrying value of our long-lived assets and, accordingly, have no t recognized any impairment losses since inception.
Accrued Expenses
Accrued expenses include salaries, wages, benefits costs, consulting fees, legal and research and development costs. We have entered into contractual arrangements related to our clinical studies with clinical research organizations (CROs) and contracted development and manufacturing organizations (CDMOs) and recognize expense based on work completed and efforts expended pursuant to our contractual arrangements. We make estimates of our accrued CRO costs as of each balance sheet date based on facts and circumstances known at the time and include total trial management costs, sites activated, patients enrolled and number of patient visits. We estimate the time period over which services will be performed and the level of effort to be expended in each period. There may be instances in which payments made to our service providers including CROs and CDMOs, will temporarily exceed the level of services provided and result in a prepayment of the expense. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense balance accordingly. Historically, our estimated accrued liabilities have materially approximated actual expenses incurred.
Leases
We determine if an arrangement is a lease at inception. Short-term leases with an initial term of 12 months or less are not recorded on our balance sheet. For long-term leases with an initial term of greater than 12 months, we recognize a right-of-use asset (ROU) and a lease liability based on 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. We determine the lease term at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise. Rent expense for operating leases is recognized on a straight-line basis over the lease term and is included in operating expenses in our consolidated statements of operations. For financing leases, interest expense and amortization of the ROU is included in operating expenses in our consolidated statements of operations and variable lease payments are recorded as incurred.
If a lease is modified, the modified contract is evaluated to determine whether it is or contains a lease. If a lease continues to exist, the lease modification is determined to be a separate contract when the modification grants the lessee an additional ROU that is
not included in the original lease and the lease payments increase commensurate with the standalone price for the additional ROU. A lease modification that results in a separate contract will be accounted for in the same manner as a new lease. For a modification that is not a separate contract, we reassess the lease classification using the modified terms and conditions and the facts and circumstances as of the effective date of the modification and recognize the amount of the remeasurement of the lease liability for the modified lease as an adjustment to the corresponding lease ROU asset.
Our ROU assets consist of a non-cancelable operating lease for our corporate headquarters and financing leases for various research and development and information technology equipment.
We do not separate lease and non-lease components for our long-term leases.
Revenue Recognition
We evaluate our agreements under ASC Topic 606, Revenue from Contracts with Customers and ASC Topic 808, Collaborative Arrangements . We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under our agreement, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We use key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.
We recognize revenue in one of two ways, over time or at a point in time. We recognize revenue over time when we are executing on our performance obligation over time and our partner receives benefit over time. For example, we recognize revenue over time when we provide research and development services. We recognize revenue at a point in time when we transfer control of a distinct performance obligation to our partner. For example, if a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs include: 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 advisors; costs to acquire, develop and manufacture preclinical study and clinical trial materials; costs incurred under clinical trial agreements with CROs and investigative sites; costs for laboratory supplies; payments related to licensed products and technologies; allocated facilities and information technology costs; and depreciation.
Patent Costs
Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.
Stock-Based Compensation
We evaluate our stock-based compensation arrangements under ASC Topic 718, Compensation – Stock Compensation. Stock-based compensation expense represents the grant date fair value of employee stock option and restricted stock unit grants recognized as expense over the requisite service period of the awards (usually the vesting period) on a straight-line basis. We estimate fair value of stock option grants using the Black-Scholes option pricing model. We estimate the fair value using assumptions, including the risk-free interest rate, the expected volatility of a peer group of similar companies, the expected term of the awards and the expected dividend yield. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial
statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized as income in the period that includes the enactment date.
We recognize net deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If we determine that we would be able to realize the deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
We record uncertain tax positions on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability.
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. Diluted net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common stock and common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of warrants for common stock, stock options and restricted stock units outstanding under our stock option plans and inducement grants and estimated shares to be purchased under our 2015 Employee Stock Purchase Plan (the 2015 ESPP). 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.
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):
Years Ended December 31,
Common stock warrants
Common stock options and restricted stock units
Employee stock purchase plan
Total
The following table summarizes our net loss per share (in thousands, except per share data):
Years Ended December 31,
Numerator:
Net loss attributable to aTyr Pharma, Inc.
Denominator:
Shares used in computing net loss per share, basic and diluted
Net loss per share - basic and diluted
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-09, Improvements to Income Tax Disclosures, which requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. We adopted the standard on January 1, 2025 , prospectively. The adoption did not have a material effect on our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, which requires entities to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items on the face of the income statement. The guidance
addresses investors’ requests for more detailed expense information, which they said is critical to understanding an entity’s performance, assessing its prospects for future cash flows, and comparing its performance both over time and with that of other entities. The standard is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027 with early adoption permitted. We are currently evaluating the disclosure requirements related to the new standard.
3. 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. 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 commercial paper, corporate debt securities and municipal bonds. We have no financial liabilities measured at fair value on a recurring basis. None of our non-financial assets and liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.
Assets measured at fair value on a recurring basis are as follows (in thousands):
Fair Value Measurements Using
Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of December 31, 2025
Assets:
Current:
Cash equivalents
Available-for-sale investments:
Commercial paper
Corporate debt securities
Municipal bonds
Total available-for-sale investments
Total assets measured at fair value
Fair Value Measurements Using
Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
As of December 31, 2024
Assets:
Current:
Cash equivalents
Available-for-sale investments:
Commercial paper
Corporate debt securities
U.S. government agencies
Total available-for-sale investments
Total assets measured at fair value
As of December 31, 2025 and 2024, available-for-sale investments are detailed as follows (in thousands):
December 31, 2025
Contractual Maturity
Gross
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Market Value
Available-for-sale investments:
Commercial paper
Within 1 year
Corporate debt securities
Within 1 year
Municipal bonds
Within 1 year
December 31, 2024
Contractual Maturity
Gross
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Market Value
Available-for-sale investments:
Commercial paper
Within 1 year
Corporate debt securities
Within 1 year
U.S. government agencies
Within 1 year
We evaluate our available-for-sale debt securities for credit losses when the amortized cost basis exceeds fair value. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Unrealized gains and losses that are not credit-related are included in accumulated other comprehensive income (loss). When evaluating an investment for impairment, we review factors such as the severity of the impairment, changes in underlying credit ratings, our intent to sell or the likelihood that we would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. Based on our evaluation, we did not record allowance for credit losses in the consolidated statement of operations during the year ended December 31, 2025.
As of December 31, 2025, all available-for-sale investments had effective maturity dates of less than one year . As of December 31, 2025, 6 out of 21 available-for-sale investments were in a gross unrealized loss position, all which were in such position for less than 12 months .
As of December 31, 2025 and 2024, accrued interest receivable on available-for-sale securities for each of the periods was $ 0.4 million and $ 0.2 million, respectively.
4. License and Collaboration Agreements
Kyorin Pharmaceutical Co., Ltd.
In January 2020, we entered into a collaboration and license agreement (Kyorin Agreement) with Kyorin Pharmaceutical Co., Ltd. (Kyorin) for the development and commercialization of efzofitimod for the treatment of interstitial lung disease (ILD) in Japan. Under the Kyorin Agreement, Kyorin received an exclusive right to develop and commercialize efzofitimod in Japan for all forms of ILD, and is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan. In 2020, Kyorin conducted and funded a Phase 1 clinical trial of efzofitimod (known as KRP-R120 in Japan). The Phase 1 clinical trial was a placebo-controlled clinical trial to evaluate the safety, pharmacokinetics (PK) and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers. Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events, and PK findings were consistent with previous studies of efzofitimod. Kyorin has also participated in the EFZO-FIT study as the local sponsor in Japan. In February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study which triggered a $ 10.0 million milestone payment to us. To date, the Kyorin Agreement has generated $ 20.0 million in upfront and milestone payments to us, and we are eligible to receive up to an additional $ 155.0 million in the aggregate upon of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.
Either party may terminate the Kyorin Agreement in the event that the other party breaches the agreement and fails to cure the breach, becomes insolvent or challenges certain of the intellectual property rights licensed under the agreement.
We assessed our license and collaboration with Kyorin in accordance with Topic 606 which applies to delivered goods or services to a customer and concluded that Kyorin is a customer. For the years ended December 31, 2024 and 2023, we recognized $ 0.2 million and $ 0.4 million, respectively, in collaboration revenue from Kyorin for drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study. For the year ended December 31, 2025, we recognized $ 0.2 million in collaboration revenue for drug product material sold to Kyorin to support analytical method validation in Japan.
The remaining milestones and royalty payments under the Kyorin Agreement are variable consideration. Since the milestone payments are binary in nature, we will use the “most-likely” method to evaluate whether the milestones should be included as revenue. We will constrain these amounts until they become probable of being achieved. The royalties are dependent on future sales by Kyorin which are at the full discretion of Kyorin. Accordingly, we will apply a constraint to these amounts until the future sales have occurred.
5. Balance Sheet Details
Prepaid expenses consist of the following (in thousands):
December 31,
Prepaid clinical and research expense
Prepaid manufacturing expenses
Other prepaid expenses
Property and equipment consist of the following (in thousands):
December 31,
Computer and office equipment
Scientific and laboratory equipment
Tenant improvements
Less accumulated depreciation and amortization
For each of the years ended December 31, 2025, 2024 and 2023, depreciation expense was $ 0.7 million, $ 0.7 million and $ 0.6 million, respectively.
Accrued expenses consist of the following (in thousands):
December 31,
Accrued salaries, wages and benefits
Accrued clinical and manufacturing
Other accrued expenses
6. Commitments and Contingencies
Operating Leases
Corporate Headquarters Facility Lease
In May 2022, we entered into a non-cancelable facility lease that is subject to base lease payments that started at $ 5.75 per square foot of rentable area per month for the first 12 months of the lease and which escalate 3.0 % annually over the term of the lease, and additional charges for common area maintenance and other costs. The term of the lease (the Lease Term) commenced on March 20, 2023 (the Lease Commencement Date) and will continue for 124 months from the Lease Commencement Date. We also have one option to extend the Lease Term for five years . In April 2024, we entered into a lease amendment for additional common area amenities, effective as of June 2023. The amendment increased the total rentable square feet from 23,696 rentable square feet to 24,866 rentable square feet. We provided a $ 0.7 million security deposit in the form of a letter of credit which is included in restricted cash as of December 31, 2025.
Future minimum payments under the facility lease and reconciliation to the operating lease liability as of December 31, 2025 were as follows (in thousands):
Operating Leases
2030 and thereafter
Less: Amount representing interest
Present value of lease payments
Less: Current portion of operating lease liability
Long-term operating lease liability, net of current portion
Operating lease expense was $ 1.5 million, $ 1.5 million and $ 1.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025 and 2024, the weighted average remaining lease term was 7.6 years and 8.6 years, respectively. As of December 31, 2025 and 2024, the weighted average discount rate for each period was 8.8 %.
Financing Leases
In April 2022, we entered into a master financing lease agreement to lease various research and development and information technology equipment over a 48-month term. Future minimum payments under the financing lease and reconciliation to the financing lease liability as of December 31, 2025 were as follows (in thousands):
Financing Leases
Less: Amount representing interest
Present value of lease payments
Less: Current portion of financing lease liability
Long-term financing lease liability, net of current portion
As of December 31, 2025 and 2024, the weighted-average remaining lease term was 1.2 years and 2.1 years, respectively, and the weighted-average discount rate for each period was 8.4 %. We provided a $ 1.1 million deposit to be held as collateral for the leased equipment, and this deposit is included in restricted cash as of December 31, 2025.
Litigation
On October 9, 2025 and October 22, 2025 , two substantially similar putative securities class action complaints were filed in the U.S. District Court for the Southern District of California, naming aTyr Pharma, Inc. and our Chief Executive Officer, Sanjay Shukla . The complaints assert that we and Mr. Shukla violated Section 10(b) of the Exchange Act of 1934, as amended (the Exchange Act), and SEC Rule 10b-5, by making materially false or misleading statements related to efzofitimod. The complaints also assert that Mr. Shukla violated Section 20(a) of the Exchange Act. Plaintiffs seek class certification, an award of unspecified damages, and award of reasonable costs and expenses, including attorneys’ fees and expert fees, and further relief as the court may deem just and proper. On February 9, 2026, the court consolidated the two cases and appointed co-lead plaintiffs to oversee the litigation.
We make provisions for liabilities when they are both probable that a liability has been incurred and the amount can be reasonably estimated. No such liability has been recorded related to this matter. With regard to legal fees, such as attorney fees related to this matter or any other legal matters, we recognize such costs as incurred.
7. Stockholders’ Equity
Underwritten Follow-On Public Offerings
In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’ option to purchase additional shares, at a price to the public of $ 2.25 per share. The total net proceeds from the offering were approximately $ 48.1 m illion, after deducting underwriting discounts, commissions and offering expenses payable by us.
At-the-Market Offering Programs
In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies implementing the Jefferies ATM Offering Program. In December 2024, we amended the Jefferies ATM Offering Program. Under the Jefferies ATM Offering Program, we may offer and sell, from time to time and at our option, up to an aggregate of $ 215.0 million of shares of our common stock (inclusive of $ 65.0 million of sales made prior to the amendment) through Jefferies, acting as sales agent. Jefferies is entitled to a fixed commission rate of up to 3.0 % of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program. During the year ended December 31, 2023, we sold an aggregate of 10,530,795 shares of common stock at a weighted-average price of $ 1.82 per share for net proceeds of approximately $ 18.4 million under the Jefferies ATM Offering Program. During the year ended December 31, 2024, we sold an aggregate of 20,653,450 shares of common stock at a weighted-average price of $ 2.02 per share for net proceeds of approximately $ 40.3 million under the Jefferies ATM Offering Program. During the year ended December 31, 2025, we sold an aggregate of 13,887,177 shares of common stock at a weighted-average price of $ 4.94 per share for net proceeds of approximately $ 66.4 million under the Jefferies ATM Offering Program.
2015 Stock Plan
Total shares available for issuance under the 2015 Stock Plan as of December 31, 2025 were 6,592,933 . Shares underlying any awards under the 2015 Stock 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 Stock Plan.
The maximum term of stock options granted under 2015 Stock Plan is ten years . For an initial grant to an employee, 25 % of the stock options generally vest on the first anniversary of the original vesting date, with the balance vesting monthly over the remaining three years. For subsequent grants to an employee, the stock options generally vest monthly over a four-year term.
Inducement Plan and Grants
In March 2022, our Compensation Committee of the Board of Directors approved and adopted our 2022 Inducement Plan (the Inducement Plan). Awards granted under our Inducement Plan are in accordance with Nasdaq Listing Rule 5635(c)(4). A total of 300,000 shares of our common stock were reserved for the issuance under our Inducement Plan. In March 2025, our Compensation Committee of the Board of Directors approved an amendment to increase the aggregate number of authorized shares of common stock reserved for issuance under the Inducement Plan from 300,000 shares to 600,000 shares.
The maximum term of stock options granted under our Inducement Plan is ten years . Each option vests over a period of four years , with 25 % of the shares vesting on the one-year anniversary of the applicable vesting commencement date and the remaining 75 % vesting in equal monthly installments over three years , thereafter, subject to continuous employment.
During the year ended December 31, 2025, we granted nonstatutory stock options under our Inducement Plan to purchase an aggregate of 367,400 shares of our common stock, with a weighted-average exercise price of $ 3.84 per share as inducement awards to new employees. During the year ended December 31, 2024, we granted nonstatutory stock options under our Inducement Plan to
purchase an aggregate of 9,400 shares of our common stock, with a weighted-average exercise price of $ 1.86 per share as inducement awards to new employees. D uring the year ended December 31, 2023, we granted nonstatutory stock options under our Inducement Plan to purchase an aggregate of 23,400 shares of our common stock, with a weighted-average exercise price of $ 2.26 per share as inducement awards to new employees.
Total shares available under the 2022 Inducement Plan as of December 31, 2025 were 167,642 .
2015 Employee Stock Purchase Plan
As of December 31, 2025, total shares reserved for issuance under the 2015 ESPP were 574,212 .
Stock-based Compensation
Stock Options
Stock option activity is summarized as follows:
Number of
Outstanding
Stock Options
Weighted-
Average
Exercise Price
Weighted
Remaining Contractual Term
Aggregate
Intrinsic Value
Outstanding as of December 31, 2024
Granted
Exercised
Canceled/forfeited/expired
Outstanding as of December 31, 2025
The assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:
Years Ended December 31,
Expected term (in years)
Risk-free interest rate
Expected volatility
Expected dividend yield
The assumptions used in the Black-Scholes option pricing model to determine the fair value of the ESPP offering were as follows:
Years Ended December 31,
Expected term (in years)
Risk-free interest rate
Expected volatility
Expected dividend yield
Expected term . The expected term represents the period of time that stock options are expected to be outstanding. Because we do not have sufficient history of exercise behavior, we determine the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.
Risk-free interest rate. We base the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.
Expected volatility. The expected volatility assumption is based on our historical volatility.
Expected dividend yield. We base the expected dividend yield assumption on the fact that we have never paid cash dividends and have no present intention to pay cash dividends.
Restricted Stock Units
Occasionally, we grant restricted stock units to employees. The fair value of restricted stock is determined by the closing price of our common stock reported on the Nasdaq Capital Market on the date of grant. 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, 2024
Released
Balance as of December 31, 2025
The allocation of stock-based compensation for all stock options and restricted stock units is as follows (in thousands):
Years Ended December 31,
Research and development
General and administrative
Total stock-based compensation expense
The weighted-average grant date fair value per share of stock options granted by us, during the years ended December 31, 2025, 2024 and 2023 wa s $ 2.51 , $ 1.16 and $ 1.59 , respectively. There were no restricted stock units granted by us during the years ended December 31, 2025, 2024 and 2023. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2025 was approximately $ 10,000 . There were no stock options exercised during the years ended December 31, 2024 and 2023. The fair value of restricted stock units released during the years ended December 31, 2025, 2024 and 2023 was approximately $ 76,000 , $ 37,000 and $ 124,000 , respectively. As of December 31, 2025, total unrecognized share-based compensation expense related to unvested stock options and restricted stock units was approximately $ 8.4 million and $ 10,000 , respectively. As of December 31, 2025, these unrecognized costs for stock options and restricted stock units are expected to be recognized ratably over a weighted-average period of approximately 2.7 years and 0.1 years, respectively.
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance was as follows:
December 31, 2025
Common stock options and restricted stock units
Shares available under the 2015 equity incentive plan
Shares available under the 2022 inducement plan
Shares available under the employee stock purchase plan
8. Income Tax
Pretax losses were generated by both domestic and foreign operations as follows (in thousands):
Years Ended December 31,
United States
Foreign
Worldwide pre-tax loss
As described in Note 2, Summary of Significant Accounting Policies, we adopted ASU 2023-09 prospectively. The following table is a reconciliation of the U.S. federal statutory rate of 21.0 % to our effective rate for the year ended December 31, 2025 after the adoption of ASU 2023-09.
December 31, 2025
U.S. federal statutory tax rate
State and local income taxes, net of federal income tax effect (1)
Foreign tax effects
Tax credits
Research and development credits
Orphan drug credit
Changes in valuation allowances
Nontaxable or nondeductible items:
Other nondeductible items
Stock options
Imputed interest
Changes in unrecognized tax benefits
Other reconciling items
Total tax expense
(1) State taxes in California made up the majority (greater than 50%) of the tax effect in this category.
For the years ended December 31, 2025, 2024, and 2023, we did no t record a provision for income taxes due to a full valuation allowance against our deferred taxes.
Deferred income taxes are provided for temporary differences in recognizing certain income and expense items for financial and tax reporting purposes. The deferred tax assets consisted primarily of the income tax benefits from net operating loss (NOL) carryforwards, research and development credits and capitalized research and development expenses, along with other accruals and reserves. Valuation allowances of $ 142.2 m illion and $ 124.2 million as of December 31, 2025 and 2024, respectively, have been recorded to offset deferred tax assets as realization of such assets does not meet the more-likely-than-not threshold under ASC 740, Accounting for Income Taxes .
Significant components of our deferred tax assets are summarized as follows (in thousands):
December 31,
Deferred tax assets:
Net operating loss carryforwards
Capitalized research and development expenses
Research credits and other state credits
Intangible assets
Reserve and accruals
Share-based compensation expense
Lease liability
Total tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Right of use lease assets
Total deferred tax liabilities
Net deferred tax assets
As of December 31, 2025, we had federal NOL carryforwards of approximately $ 347.7 million, with $ 235.3 million of NOLs generated after December 31, 2017 carrying forward indefinitely and $ 112.4 million of NOLs that will expire from 2026 through 2037 . Federal NOLs generated after January 1, 2018 are subject to an 80% of taxable income limitation in accordance with the Tax Cuts and Jobs Act of 2017. We had state NOL carryforwards of approximately $ 298.6 million, with $ 177.9 million of state NOLs generated after
December 31, 2017, which carry forward indefinitely and $ 120.7 million of state NOLs that will expire from 2026 through 2045 . We had foreign NOL carryforwards of approximately $ 9.6 million which carry forward indefinitely.
As of December 31, 2025, we had federal and state research and development credit carryforwards of approximately $ 12.7 million and $ 6.9 million, respectively, which will begin to expire in 2026 for both federal and state purposes. We had $ 26.7 million of federal Orphan Drug Credits as of December 31, 2025, which will begin to expire in 2035 .
Utilization of the domestic NOL and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders. Since the Company’s formation, we raised capital through the issuance of capital stock on several occasions which on its own or combined with the purchasing stockholders’ subsequent disposition of those shares, has resulted in such an ownership change, and could result in an ownership change in the future.
Upon the occurrence of an ownership change under Section 382 as outlined above, utilization of the NOL and research and development credit carryforwards become subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, which could be subject to additional adjustments. Any limitation may result in expiration of a portion of our NOL or research and development credit carryforwards before utilization. Due to the existence of the valuation allowance, any impact to the NOL and research and development tax credit carryforwards from Section 382 analysis will be offset by a corresponding adjustment to valuation allowance, resulting in no tax provision impact.
We recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized.
Our practice is to recognize interest and penalties related to income tax matters in income tax expense. We had no accrual for interest and penalties on our balance sheet and had not recognized interest or penalties in the consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023.
Due to the existence of the valuation allowance, future changes in unrecognized tax benefits will not impact our effective tax rate.
Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement. Adjustments may result, for example, upon resolution of an issue with the taxing authorities, or expiration of a statute of limitations barring an assessment for an issue.
The activity related to our unrecognized tax benefits is summarized as follows (in thousands):
December 31,
Balance as of beginning of year
Decrease related to prior year tax positions
Increase related to current year tax positions
Balance as of end of year
We are subject to taxation in the United States, Hong Kong and state jurisdictions. Our tax years from inception are subject to examination by the United States, Hong Kong and various state authorities due to carry forward of unutilized NOLs and research and development credits.
9. Employee Benefits
401(k) Plan
We maintain a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited to the maximum amount allowable under federal tax regulations. In April 2015 , our board of directors approved a policy, beginning on June 1, 2015 , to match employee contributions equal to 50 % of the participant’s contribution of up to a maximum of 6 % of the participant’s annual salary. We made discretionary contributions totaling $ 0.3 million, $ 0.2 million and $ 0.2 million during the years ended December 31, 2025, 2024 and 2023.
