After lead drug misses in late trial and stock craters, what's next for aTyr?

Shares of aTyr Pharma, a biotech developer of therapies for pulmonary sarcoidosis, collapsed 83% in a single day on September 15 after the company’s lead drug failed in a pivotal phase III trial. The candidate, efzofitimod, showed little advantage over placebo in reducing steroid dependence among patients. This marks another setback for aTyr, which seven years earlier halted its cancer research program after disappointing preclinical results that cut its market value nearly in half.

ATyr Pharma was founded in 2005 by Scripps Research Institute scientists Paul Schimmel and Xiang-Lei Yang. MarketWatch lists Bruce Beutler, winner of the 2011 Nobel Prize in Physiology or Medicine, as a cofounder. Schimmel and Yang studied a specific enzyme that helps amino acids attach to transfer RNA (tRNA). According to Schimmel’s theory, this enzyme could be used in therapy for various diseases because it influences the immune system.

This concept became the basis of aTyr Pharma’s approach to developing drugs for serious diseases linked to immune dysfunction, including facioscapulohumeral muscular dystrophy, certain lung and liver disorders, and cancer.

Initially, aTyr funded its operations through grants, with backing from venture capital funds Alta Partners, Cardinal Partners, and Polaris Ventures. In 2015, it went public through an IPO, selling 6.16 million shares at $14 per share. By autumn 2017, the stock peaked at above $88 per share on encouraging early data from trials in muscular dystrophy.

Soon after, in its 2017 financial report, the company highlighted two priority clinical programs it viewed as most promising: oncology and lung disease. A year later, in its first-quarter 2018 report, aTyr announced it was halting cancer research because the candidate proved ineffective in the preclinical stage. The decision pushed its share price to a record low at the time.

That left aTyr with only one program, focused on lung diseases. Its main product in this area is efzofitimod, which the company is testing in patients with several conditions but most extensively for pulmonary sarcoidosis, an inflammatory disease that often leads to fibrosis and reduces the blood’s oxygenation capacity.

Today, people with this diagnosis must take anti-inflammatory drugs, i.e., steroids, for long periods, which can cause serious side effects and require treatment through additional drugs. ATyr claimed that efzofitimod could significantly reduce steroid use. The supporting data – the results of the final phase of clinical trials – was published in September.

Wall Street had been waiting for it. “This will be a key milestone for the company, defining its strategic direction for the future,” Freedom Broker wrote in an August note (seen by Oninvest). Ahead of the results, Jefferies raised its target price for aTyr’s stock by almost 90% to $17 per share while reiterating its “buy” rating.

However, things did not go as planned. Although the daily steroid dose declined in patients taking efzofitimod, the reduction was roughly the same among those on placebo, according to the press release.

“Achieving complete steroid withdrawal in a record 40% of patients in the placebo group came as a surprise to the researchers. Based on real-world data from medical practice, this figure should not have exceeded 10-15%,” Freedom Broker wrote in September.

Following the results, aTyr’s shares collapsed 83% in a single day, September 15, to $1 apiece, and later fell further to $0.70 apiece.

Several analysts lowered their ratings and target prices. Freedom revised downward its recommendation from “buy” to “hold” and cut its target price nearly tenfold to $1 per share. Other analysts revised their calls too. Cantor Fitzgerald’s Prakhar Agrawal downgraded the stock to “neutral," while Faisal Khurshid of Leerink Partners cut his rating to “market perform,” BioPharma Dive reported.

In the wake of the failed trial, law firm Hagens Berman launched an investigation into whether aTyr may have misled investors about earlier-phase data or the design of the final phase.

aTyr maintains that efzofitimod is effective and plans to meet with regulators to discuss next steps. Freedom Broker estimates the meeting could take place in the first quarter of 2026 but sees a lower likelihood of approval than before, which negatively affects the company’s financial outlook. In August, Freedom Broker analysts projected aTyr’s first revenue in 2027 at $59.6 million; they now forecast less than $30.0 million.

Leerink’s Khurshid said it will be difficult for aTyr to “make its case” given the “unclear relevance” of the reported benefits.

H.C. Wainwright analysts are more optimistic. Although efzofitimod did not achieve the primary objective of the study, they noted that it showed sustained improvement in overall health and a reduction in other disease symptoms such as cough, shortness of breath, and fatigue. These results, they said on September 30, support the drug’s potential to improve quality of life for patients with pulmonary sarcoidosis and reduce dependence on long-term steroid therapy. H.C. Wainwright maintained its recently downgraded, "neutral" rating on aTyr’s stock, noting that it expects greater regulatory clarity next year.

Beyond sarcoidosis, aTyr is also testing efzofitimod for scleroderma, an autoimmune connective tissue disease, now in the second of three clinical trial phases. But Cantor Fitzgerald’s Agrawal warned that aTyr may have a tough time bouncing back with the ongoing trial in scleroderma-related lung disease, as that condition is in “an even riskier indication.”

The AI translation of this story was reviewed by a human editor.