You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our condensed consolidated
financial statements and the related notes and other financial information
included elsewhere in this Quarterly Report on Form 10-Q and our consolidated
financial statements and related notes thereto for the year ended
In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "should," "will" or the negative of these terms or other similar expressions. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ from those anticipated. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a clinical-stage biopharmaceutical company developing a class of new complement medicines for patients with classical complement-mediated disorders of the body, brain and eye. Our pipeline is based on our platform technology addressing well-researched classical complement-mediated autoimmune and neurodegenerative disease processes, both of which are triggered by aberrant activation of C1q, the initiating molecule of the classical complement pathway. Evidence suggests that potent and selective inhibition of C1q can prevent tissue damage triggered in antibody-mediated autoimmune disease and preserve loss of functioning synapses associated with cognitive and functional decline in complement-mediated neurodegeneration. Our upstream complement approach targeting C1q acts as an "on/off switch" designed to block all downstream components of the classical complement pathway that lead to excess inflammation, tissue damage and patient disability in a host of complement-mediated disorders, while preserving the normal immune function of the lectin and alternative complement pathways involved in the clearance of pathogens and damaged cells.
We are advancing a portfolio of innovative product candidates designed to block the activity of C1q and the entire classical complement pathway in a broad set of complement-mediated diseases. Our first clinical candidate, ANX005, is a full-length monoclonal antibody formulated for intravenous administration in autoimmune and neurodegenerative disorders. Our second clinical candidate, ANX007, is an antigen-binding fragment, or Fab, formulated for intravitreal administration for the treatment of neurodegenerative ophthalmic disorders. Our third clinical candidate, ANX009, is a subcutaneous formulation of a Fab designed for the treatment of antibody-mediated autoimmune diseases of blood and vascular tissues. We have completed Phase 1b safety and dose-ranging clinical trials for ANX005 and ANX007 in patients with Guillain-Barré Syndrome, or GBS, and glaucoma, respectively. Both ANX005 and ANX007 were well-tolerated and showed full inhibition of C1q and the classical complement pathway in the Phase 1b clinical trials. We recently completed a Phase 1 dose-escalation study of ANX009 in healthy volunteers, in which ANX009 was well-tolerated and demonstrated complete and sustained C1q inhibition supporting the potential for twice weekly subcutaneous administration. Our preclinical candidates include ANX105, an investigational monoclonal antibody designed for chronic neurodegenerative diseases, and ANX1502, an oral small molecule program designed for chronic autoimmune diseases.
We are conducting ongoing clinical trials in multiple serious autoimmune, neurodegenerative and ophthalmic diseases, including GBS, warm autoimmune hemolytic anemia, Huntington's Disease, amyotrophic lateral sclerosis and geographic atrophy, and planning to advance into lupus nephritis and Multifocal Motor Neuropathy (MMN). Data from these clinical trials are anticipated over the next two years through 2023. Based on learnings from our initial trials, we are evaluating additional orphan and large market indications that are driven by aberrant or excess classical complement activation. Additionally, we are deploying a rigorous, biomarker-driven development strategy designed to improve the probability of technical success of our portfolio. We hold worldwide development and commercialization rights, including through exclusive licenses, to all of our product candidates, which allows us to strategically maximize value from our product portfolio over time.
We hold worldwide development and commercialization rights, including through exclusive licenses, to all of our product candidates, which allows us to strategically maximize value from our product portfolio over time. Our patent portfolio includes patent protection for our upstream complement platform and each of our product candidates.
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We were incorporated in
Initial Public Offering
On
Impact of COVID-19 Pandemic
The COVID-19 pandemic continues to rapidly evolve, and its ongoing impact is uncertain and subject to change. For instance, we have experienced shortages in clinical site staff and longer timelines for clinical site initiation. We will continue to monitor the COVID-19 situation closely. The extent of the impact of the COVID-19 pandemic on our clinical trials, business, financial condition, results of operations and clinical development timelines and plans remains uncertain, and will depend on, among other factors, the duration of the outbreak, the emergence of variants, rates of infection in the locations in which we do business, restrictions that may be requested or mandated by governmental authorities, and the impact of the pandemic on our clinical trial enrollment, trial sites, contract research organizations, or CROs, third-party manufacturers, regulatory authorities and other third parties with whom we do business.
Components of Operating Results
Revenue
Our product candidates are not approved for commercial sale. We have not generated any revenue from sales of our product candidates and do not expect to do so in the foreseeable future and until we complete clinical development, submit regulatory filings and receive approvals from applicable regulatory bodies for such product candidates, if ever.
Operating Expenses
Research and Development
Research and development expenses account for a significant portion of our operating expenses. Research and development expenses consist primarily of direct and indirect costs incurred for the development of our product candidates.
Direct expenses include:
• preclinical and clinical outside service costs associated with discovery, preclinical and clinical testing of our product candidates; • professional services agreements with third party contract organizations, investigative clinical trial sites and consultants that conduct research and development activities on our behalf; • contract manufacturing costs to produce clinical trial materials; and • laboratory supplies and materials.
Indirect expenses include:
• compensation and personnel-related expenses (including stock-based compensation); • allocated expenses for facilities and depreciation; and • other indirect costs.
We record research and development expenses as incurred. Payments made to other entities are under agreements that are generally cancelable by us. Advance payments for goods or services to be received in future periods for use in research and development activities are deferred as prepaid expenses. The prepaid amounts are then expensed as the related services are performed. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates.
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We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, particularly as they advance into later stages of development and as we conduct larger clinical trials, engage in other research and development activities and seek regulatory approvals for any product candidates that successfully complete clinical trials and as we incur expenses associated with hiring additional personnel to support our research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain.
General and Administrative
General and administrative expenses consist primarily of compensation and personnel-related expenses (including stock-based compensation) for our personnel in executive, finance and other administrative functions. General and administrative expenses also include professional fees paid for accounting, legal and tax services, allocated expenses for facilities and depreciation and other general and administrative costs.
We expect our general and administrative expenses to increase substantially for
the foreseeable future as we continue to support our research and development
activities, grow our business and, if any of our product candidates receive
marketing approval, commercialization activities. We will also incur additional
expenses as a result of operating as a public company, including expenses
related to compliance with the rules and regulations of the
Other Income, Net
Other income, net, primarily consists of non-recurring income from research grants and interest income earned on our cash equivalents and short-term investments.
Results of Operations
Comparison of the Three Months Ended
The following tables summarize our results of operations for the periods presented. Three Months Ended June 30, Dollar % 2021 2020 Change Change (in thousands) Operating expenses: Research and development$ 24,572 $ 9,287 $ 15,285 165% General and administrative 6,801 2,950 3,851 131% Total operating expenses 31,373 12,237 19,136 156% Loss from operations (31,373 ) (12,237 ) (19,136 ) 156% Other income, net 79 1 78 * Net loss before taxes (31,294 ) (12,236 ) (19,058 ) 156% Provision for income taxes - 4 - * Net loss$ (31,294 ) $ (12,240 ) $ (19,058 ) 156% * Not meaningful 24
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Research and Development Expenses
Three Months Ended June 30, Dollar % 2021 2020 Change Change (in thousands)
Direct costs:
Clinical and nonclinical outside services
2,111 764 1,347 176% Contract manufacturing 4,513 1,784 2,729 153% Laboratory supplies and materials 319 216 103 48% Indirect costs: Compensation and personnel-related (including stock-based compensation) 6,391 2,224 4,167 187% Facilities and depreciation 1,112 228 884 * Other 18 33 (15 ) (45%)
Total research and development expenses
* Not meaningful
Research and development expenses increased by
General and Administrative Expenses
Three Months Ended June 30, Dollar % 2021 2020 Change Change (in thousands)
Compensation and personnel-related
(including stock-based compensation)
2,533 1,735 798 46% Facilities and depreciation 523 120 403 * Other 205 97 108 111%
Total general and administrative expenses
* Not meaningful 25
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General and administrative expenses increased by
Comparison of the Six Months Ended
The following tables summarize our results of operations for the periods presented. Six Months Ended June 30, Dollar % 2021 2020 Change Change (in thousands) Operating expenses: Research and development$ 45,268 $ 19,504 $ 25,764 132% General and administrative 12,307 5,189 7,118 137% Total operating expenses 57,575 24,693 32,882 133% Loss from operations (57,575 ) (24,693 ) (32,882 ) 133% Other income, net 221 116 105 91% Net loss before taxes (57,354 ) (24,577 ) (32,777 ) 133% Provision for income taxes - 4 - * Net loss$ (57,354 ) $ (24,581 ) $ (32,777 ) 133% * Not meaningful
Research and Development Expenses
Six Months Ended June 30, Dollar % 2021 2020 Change Change (in thousands)
Direct costs:
Clinical and nonclinical outside services
3,843 1,372 2,471 180% Contract manufacturing 9,705 4,785 4,920 103% Laboratory supplies and materials 601 273 328 120% Indirect costs: Compensation and personnel-related (including stock-based compensation) 11,311 4,463 6,848 153% Facilities and depreciation 1,686 444 1,242 * Other 105 81 24 30%
Total research and development expenses
* Not meaningful 26
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Research and development expenses increased by
General and Administrative Expenses
Six Months Ended June 30, Dollar % 2021 2020 Change Change (in thousands)
Compensation and personnel-related
(including stock-based compensation)
4,881 2,806 2,075 74% Facilities and depreciation 909 233 676 * Other 398 215 183 85%
Total general and administrative expenses
* Not meaningful
General and administrative expenses increased by
Liquidity and Capital Resources
Sources of Liquidity
Due to our significant research and development expenditures, we have generated operating losses since our inception.
We have funded our operations primarily through the sale of equity securities.
From our inception through
Historical Cash Flows Six Months Ended June 30, 2021 2020 (in thousands) Cash used in operating activities$ (48,074 ) $ (20,247 ) Cash used in investing activities (120,655 ) (16 ) Cash provided by financing activities 920 101,095 Net (decrease) increase in cash, cash equivalents and restricted cash$ (167,809 ) $ 80,832 27
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Cash Flows from Operating Activities
Cash used in operating activities for the six months ended
Cash used in operating activities for the six months ended
Cash Flows from Investing Activities
Cash used in investing activities for the six months ended
Cash used in investing activities for the six months ended
Cash Flows from Financing Activities
Cash provided by financing activities for the six months ended
Cash provided by financing activities for the six months ended
Funding Requirements
We use our cash to fund operations, primarily to fund our clinical trials, research and development expenditures and related personnel costs. We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to our product candidates, particularly as they advance into later stages of development and as we conduct larger clinical trials, engage in other research and development activities, seek regulatory approvals for any product candidates that successfully complete clinical trials and as we incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, we expect our general and administrative expenses to increase substantially for the foreseeable future as we continue to support our research and development activities and to grow our business and as we expect to engage in commercialization activities, if any of our product candidates receive marketing approval. We will also incur additional expenses as a result of operating as a public company and also expect to increase the size of our administrative function to support the growth of our business. The timing and amount of our operating expenditures will depend on many factors, including:
• the scope, progress, results and costs of researching and developing our current product candidates or any other future product candidates we choose to pursue, and conducting preclinical studies and clinical trials; • the timing of, and the costs involved in, obtaining regulatory approvals for our lead product candidates or any future product candidates; • the number and characteristics of any additional product candidates we develop or acquire; • the timing and amount of any milestone, royalty and/or other payments we are required to make pursuant to our current or any future license or collaboration agreements; • the cost of manufacturing our lead product candidates or any future product candidates and any products we successfully commercialize; • the cost of building a sales force in anticipation of product commercialization; • the cost of commercialization activities of our product candidates, if approved for sale, including marketing, sales and distribution costs; 28
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• our ability to establish strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement; • any product liability or other lawsuits related to our products; • the expenses needed to attract, hire and retain skilled personnel; • the costs associated with operating as a public company; • the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and • the timing, receipt and amount of sales of any future approved products.
Based upon our current operating plan, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements through 2023. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We expect to continue to expend significant resources for the foreseeable future. Until such time, if ever, as we can generate substantial product revenue, we will be required to seek additional funding in the future and currently intend to do so through public or private equity offerings or debt financings, credit or loan facilities, collaborations or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. If we fail to obtain necessary capital when needed on acceptable terms, or at all, we could be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements,
as defined in the rules and regulations of the
Emerging Growth Company and Smaller Reporting Company Status
We are an "emerging growth company," as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
As of
Because (i) the aggregate worldwide market value of our voting common stock held
by non-affiliates (or "public float") exceeded
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Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with
There were no material changes to our critical accounting policies or in the
methodology used for estimates from those described in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in our
Annual Report except for the adoption of ASU No. 2016-02, Leases (Topic 842) on
In the second quarter of 2021, we adopted ASU No. 2016-02 using the modified
retrospective approach as of
Upon adoption of Accounting Standards Codification 842, Leases, as of
As a practical expedient, we elected, for all facility leases, not to separate non-lease components from lease components and instead to account for each separate lease component and its associated non-lease components as a single lease component. We elected to exclude from our balance sheets recognition of leases having a term of 12 months or less (short-term leases).
Recent Accounting Pronouncements Not Yet Adopted
See Note 2-Basis of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of operations.
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