ANNOVIS BIO, INC.

(ANVS)
  Report
Delayed Nyse  -  03:59 2022-08-12 pm EDT
12.49 USD   +2.88%
08/08ANNOVIS BIO, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
AQ
08/08Annovis Bio, Inc. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2022
CI
08/08ANNOVIS BIO : Announces Second Quarter 2022 Results and Provides Corporate Update - Form 8-K
PU
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

ANNOVIS BIO, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

03/02/2022 | 04:20pm EDT

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read "Cautionary Note Regarding Forward-Looking Statements" and Item 1A. Risk Factors of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.


                                       65

  Table of Contents

Overview

Company Overview

We are a clinical stage, drug platform company addressing Alzheimer's disease ("AD"), Parkinson's disease ("PD") and other chronic neurodegenerative diseases such as AD in Down Syndrome ("AD-DS"). Our lead compound, Buntanetap, is a small molecule administered orally that attacks neurodegeneration by entering the brain and inhibiting the translation of neurotoxic proteins-amyloid precursor protein APP/A? ("APP"), tau/phospho-tau ("tau") and ?-Synuclein ("?SYN")-thereby improving axonal transport. Human studies in four mildly cognitive impaired patients have shown that Buntanetap lowered the levels of neurotoxic proteins and inflammatory factors. In preclinical studies, lower neurotoxic protein levels led to improved axonal transport, reduced inflammation, lower nerve cell death and improved function.

AD is a substantial market affecting over 30 million people worldwide and is expected to grow to over 100 million by 2050. While the market for neurodegeneration is over $100 billion, to date there are no disease modifying drugs for any neurodegenerative condition. Enormous efforts have gone into developing better drugs to treat neurodegeneration and the outcomes have been sobering. The results of clinical trials in AD, the two AD orphan indications AD-DS and early onset familial AD or in PD have not supported the development of successful disease modifying therapies.

Buntanetap is a small lipophilic molecule that is orally available and readily enters the brain, as demonstrated by preclinical pharmacokinetics analyses showing brain concentrations approximately six to eight times higher than plasma concentrations. Buntanetap has a mechanism of action that we believe to be unique, in that it inhibited the over-translation of and, therefore, reduced the levels of several neurotoxic proteins both in vitro and in vivo including APP, tau and ?SYN.

By targeting multiple neurotoxic proteins, Buntanetap resembles a combination therapy approach, with the added convenience of being a single drug with a single drug target. Therefore, we have worked to understand how Buntanetap is able to inhibit the translation of more than one neurotoxic protein.

We recently completed two Phase 2a clinical trials. In 2021 we completed a Phase 2a clinical trial in 14 AD and 54 PD patients (the "AD/PD Trial") which began treating patients in August 2020. In collaboration with the Alzheimer's Disease Cooperative Study ("ADCS") we conducted a trial in 16 early AD patients (the "ADCS Trial"). Both clinical trials were double-blind, placebo-controlled studies. We designed the two Phase 2a studies by applying our understanding of the underlying disease states in neurodegeneration and measured not just target, but also pathway validation in the spinal fluid of these patients. We measured as many factors as possible associated with the toxic cascade which begins with high levels of neurotoxic proteins which lead to impaired axonal transport, inflammation, the death of nerve cells and loss of cognition and motor function. By showing both target and pathway validation in two patient populations, we believe that our opportunity for successful Phase 3 studies is better than if we merely demonstrated target validation in one patient population.

We have never been profitable and have incurred net losses since inception. Our accumulated deficit at December 31, 2021 was $28,726.2 thousand. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.

Financial Operations Overview

The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.

                                       66

Table of Contents

Research and Development Expenses

Our research and development expenses consist of expenses incurred in development and clinical studies relating to our product candidates, including:

? expenses associated with clinical development;

? personnel-related expenses, such as salaries, benefits, travel and other

related expenses, including stock-based compensation; and

? payments to third-party contract research organizations ("CROs"), contractor

laboratories and independent contractors.

We expense all research and development costs as incurred. Clinical development expenses for our product candidates are a significant component of our current research and development expenses. Product candidates in later stage clinical development generally have higher research and development expenses than those in earlier stages of development, primarily due to increased size and duration of the clinical trials. We track and record information regarding external research and development expenses for each study or trial that we conduct. From time to time, we use third-party CROs, contractor laboratories and independent contractors in clinical studies. We recognize the expenses associated with third parties performing these services for us in our clinical studies based on the percentage of each study completed at the end of each reporting period.

Our research and development expenses in 2021 and 2020 primarily related to the AD/PD Trial which began treating patients in August 2020. In addition, we completed two long-term animal toxicology studies - a six-month study in rats and a nine-month study in dogs - which began in November 2019 and were substantially complete as of December 31, 2020. We expect that our research and development expenses in 2022 and for the next several years will be higher than in 2021 as a result of costs associated with the initiation of our planned Phase 3 trials. These expenditures are subject to numerous uncertainties regarding timing and cost to completion. Completion of our clinical development and clinical trials may take several years or more and the length of time generally varies according to the type, complexity, novelty and intended use of our product candidates. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:

? the number of sites included in the clinical trials;

? the length of time required to enroll suitable patients;

? the size of patient populations participating in the clinical trials;

? the duration of patient follow-ups;

? the development stage of the product candidates; and

? the efficacy and safety profile of the product candidates.

Due to the stage of our research and development, we are unable to determine the duration or completion costs of our development of Buntanetap. As a result of the difficulties of forecasting research and development costs of Buntanetap as well as the other uncertainties discussed above, we are unable to determine when and to what extent we will generate revenues from the commercialization and sale of approved product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our executive, finance, accounting, and administrative functions. Our

                                       67

Table of Contents

general and administrative expenses also include professional fees for legal services, including patent-related expenses, consulting, tax and accounting services, insurance, rent and general corporate expenses. We expect that our general and administrative expenses will increase with the continued development and potential commercialization of our product candidates. We expect that our general and administrative expenses in 2022 and for the next several years will be higher than in 2021 as we increase our employee count.

Grant Income

Grants received are recognized as grant income in the statements of operations as and when they are earned for the specific research and development projects for which these grants are designated. In September 2019, as modified in September 2020, we received a Notice of Award for a $1.9 million grant from the National Institute on Aging of the NIH to cover the costs of long-term toxicology studies on Buntanetap in rats and dogs. The costs of the studies and the grant income were substantially completed as of December 31, 2020.

Income Taxes

As of December 31, 2021, the Company had U.S. federal net operating loss ("NOL") carryforwards of $21,844,192, which may be available to offset future income tax liabilities. Federal NOL carryforwards generated in 2017 and prior of $2,764,240 will expire beginning 2032. The remaining federal NOL carryforwards generated beginning in 2018, do not expire. Following the enactment of the Coronavirus Aid, Relief, and Economic Security Act in March 2020, NOL carryforwards generated from 2018 through 2020 are permitted to offset 100% of taxable income in future years. NOL carryforwards generated beginning in 2021 are permitted to offset 80% of taxable income in future years.

NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the "IRS") and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code. This could substantially limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.

Critical Accounting Policies and Use of Estimates

We have based our management's discussion and analysis of financial condition and results of operations on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to clinical development expenses, stock-based compensation and grant income. We base our estimates on historical experience and on various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully discussed in Note 2 to our audited financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.

Research and Development Expenses

We rely on third parties to conduct our clinical studies and to provide services, including data management, statistical analysis and electronic compilation. At the end of each reporting period, we compare the payments made to each service provider to the estimated progress towards completion of the related project. Factors that we consider in preparing these estimates include the number of patients enrolled in studies, milestones achieved and other criteria


                                       68

  Table of Contents

related to the efforts of our vendors. These estimates are subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, we record net prepaid or accrued expenses related to these costs.

Stock-Based Compensation

We account for grants of stock options to employees and non-employees based on their grant date fair value and recognize compensation expense over the vesting periods. We estimate the fair value of stock options as of the date of grant using the Black-Scholes option pricing model. The Black-Scholes model requires us to make assumptions and judgments about the variables used in the calculations, including the expected term, the expected volatility of our common stock, the risk-free interest rate and the expected dividend rate. Given the lack of a public market for our common stock prior to the IPO, the expected stock price volatility is based on a weighted approach that incorporates the historic daily volatility of our common stock since the IPO and the historic daily volatility of similar companies that have been publicly traded for a period commensurate with the expected term of the option.

Grant Income

Grants received are recognized as grant income in the statements of operations as and when they are earned for the specific research and development projects for which these grants are designated. Grants payments received in excess of grant income earned are recognized as deferred grant on the balance sheet and grant income earned in excess of grant payments received is recognized as grant receivable on the balance sheets.

Results of Operations

Operating expenses and other income (expense) were comprised of the following:

                                                    Year Ended
                                                  December 31,
                                                2021         2020

                                                  (in thousands)
Operating expenses:
Research and development                      $ 8,479.0    $ 3,054.0
General and administrative                      6,058.2      3,586.2

Other income (expense): Change in fair value of derivative liability - (26.5) Interest income, net

                               13.3         47.2
Grant income                                       36.8      1,157.4


Years ended December 31, 2021 and 2020

Research and Development Expenses

Research and development expenses increased by $5,425.0 thousand for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily the result of an increase of $3,559.8 thousand in expenses related to our clinical trials, including production of material, an increase in stock-based compensation expense of $1,878.0 thousand, and an increase of $599.5 thousand in other personnel expenses, partially offset by a decrease of $725.8 thousand in expenses related to our long-term toxicology studies.

General and Administrative Expenses

General and administrative expenses increased by $2,472.0 thousand for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily the result of increases of $954.7 thousand in stock-based compensation expense, $458.4 thousand in other personnel expenses, an increase of $560.4 thousand in professional fees and recruiting expenses, and an increase of $259.5 thousand in conference and meeting expenses.

                                       69

Table of Contents

Change in Fair Value of Derivative Liability

The derivative liability represents an embedded derivative in our convertible promissory notes which were issued in March 2019. At each balance sheet date, we estimated the fair value of the derivative liability and recognized any change in our statements of operations. The fair value of the derivative liability was adjusted to $132.5 thousand immediately prior to the closing of our IPO on January 31, 2020. Effective upon the closing of the IPO, the derivative liability was eliminated, and the amount was reclassified to additional paid-in capital on the balance sheet.

Interest Income, Net

Interest income, net decreased $33.9 thousand for the year ended December 31, 2021 compared to the year ended December 31, 2020. The decrease was primarily the result of lower interest rates compared to the prior year.

Grant Income

Grant income decreased $1,120.6 thousand for the year ended December 31, 2021 compared to the year ended December 31, 2020. The decrease was the result of income recognized related to a grant from the NIH to reimburse the costs of our long-term toxicology studies in rats and dogs, which studies began in November 2019 and were substantially completed as of December 31, 2020.

Liquidity and Capital Resources

Since our inception in 2008, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of common stock, convertible preferred stock and convertible promissory notes. To date, we have not generated any revenues from the sale of products, and we do not anticipate generating any revenues from the sales of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of December 31, 2021, our principal source of liquidity was our cash, which totaled $45,686.0 thousand.

Equity Financings

We closed our IPO on January 31, 2020, raising gross proceeds of $13,800.0 thousand and net proceeds of $12,034.4 thousand, after deducting underwriting discounts and issuance costs.

We closed an equity offering on May 26, 2021, raising gross proceeds of $50,000.0 thousand and net proceeds of $46,648.4 thousand, after deducting underwriting discounts and issuance costs.

Debt Financings

In March 2019 we issued $530.0 thousand principal amount of convertible promissory notes. Upon the closing of our IPO on January 31, 2020, the outstanding convertible promissory notes plus accrued interest converted into 118,470 shares of our common stock at a 20% discount to the public offering price.

Future Capital Requirements

We expect that current cash and cash equivalents will be sufficient to fund our operations and capital requirements for at least the next 12 months. We believe that these available funds will be sufficient to complete a Phase 3 clinical trial for Buntanetap in PD and conduct a second Phase 3 study in AD or PD for this product candidate. However, it is difficult to predict our spending for our product candidates prior to obtaining FDA approval. Moreover, changing circumstances may cause us to expend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control.

To the extent that our capital resources are insufficient to meet our future operating and capital requirements, we will need to finance our cash needs through public or private equity offerings, debt financings, collaboration and

                                       70

Table of Contents

licensing arrangements or other financing alternatives. We have no committed external sources of funds. Additional equity or debt financing or collaboration and licensing arrangements may not be available on acceptable terms, if at all.

Cash Flows


The following table summarizes our cash flows from operating, investing and
financing activities.

                                                 Year Ended
                                               December 31,
                                            2021           2020

                                               (in thousands)
Statement of Cash Flows Data:
Total net cash provided by (used in):
Operating activities                     $ (9,132.1)    $ (3,970.8)
Financing activities                        46,743.5       12,043.6

Increase in cash and cash equivalents $ 37,611.4 $ 8,072.8

Years ended December 31, 2021 and 2020

Operating Activities

For the year ended December 31, 2021, cash used in operations was $9,132.1 thousand compared to $3,970.8 thousand for the year ended December 31, 2020. The increase in cash used in operations was primarily the result of the costs associated with our AD/PD Trial and higher personnel expenses.

We expect cash used in operating activities to increase in 2022 as compared to 2021 due to an expected increase in our operating losses associated with ongoing development of our product candidates and planned increases in our personnel count.

Financing Activities

Cash provided by financing activities was $46,743.5 thousand during the year ended December 31, 2021, attributable to net proceeds from our equity offering of approximately $46,648.4 thousand and proceeds from the exercise of stock options of $95.1 thousand.

Cash provided by financing activities was $12,043.6 thousand during the year ended December 31, 2020, attributable to net proceeds from our IPO of $12,034.4 thousand, after deducting underwriting discounts and issuance costs, and proceeds from the exercise of stock options of $9.2 thousand.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of this standard did not have an impact on our financial statements.

Significant Contractual Obligations and Commitments

We lease our office facilities under a month-to-month operating lease.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined by applicable SEC regulations.


                                       71

  Table of Contents

JOBS Act

Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

© Edgar Online, source Glimpses

All news about ANNOVIS BIO, INC.
08/08ANNOVIS BIO, INC. Management's Discussion and Analysis of Financial Condition and Resu..
AQ
08/08Annovis Bio, Inc. Reports Earnings Results for the Second Quarter and Six Months Ended ..
CI
08/08ANNOVIS BIO : Announces Second Quarter 2022 Results and Provides Corporate Update - Form 8..
PU
08/08Annovis Bio Announces Second Quarter 2022 Results and Provides Corporate Update
PR
08/01Annovis Bio to Participate on Alzheimer's Association International Conference Panel
PR
07/14Annovis Bio to Present at the Alzheimer's Association International Conference
PR
07/07SECTOR UPDATE : Health Care Stocks Gain Premarket Thursday
MT
07/07SECTOR UPDATE : Health Care
MT
07/07Annovis Bio Shares Rise 8% After FDA Allows Buntanetap Trial to Proceed
DJ
07/07Annovis Bio Says FDA Gives Permission to Proceed With Phase 3 Trial of Early Parkinson'..
MT
More news
Analyst Recommendations on ANNOVIS BIO, INC.
More recommendations
Financials (USD)
Sales 2022 - - -
Net income 2022 -30,6 M - -
Net Debt 2022 - - -
P/E ratio 2022 -3,37x
Yield 2022 -
Capitalization 102 M 102 M -
Capi. / Sales 2022 -
Capi. / Sales 2023 -
Nbr of Employees 3
Free-Float 69,1%
Chart ANNOVIS BIO, INC.
Duration : Period :
Annovis Bio, Inc. Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends ANNOVIS BIO, INC.
Short TermMid-TermLong Term
TrendsBearishNeutralBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 2
Last Close Price 12,49 $
Average target price 31,50 $
Spread / Average Target 152%
EPS Revisions
Managers and Directors
Maria-Luisa Maccecchini President, Chief Executive Officer & Director
Jeffrey B. McGroarty Chief Financial Officer
Michael B. Hoffman Chairman
Cheng Fang Senior Vice President-Research & Development
Claudine E. Bruck Independent Director
Sector and Competitors
1st jan.Capi. (M$)
ANNOVIS BIO, INC.-28.95%102
GILEAD SCIENCES, INC.-13.29%78 912
VERTEX PHARMACEUTICALS34.12%75 532
REGENERON PHARMACEUTICALS, INC.-0.45%67 214
WUXI APPTEC CO., LTD.-20.10%40 830
BIONTECH SE-37.80%38 968