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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-03-02 · 178 added, 129 removed, 165 unchanged (65% of the section changed)

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You should also carefully read “Special Note Regarding Forward-Looking Statements”.

We are a clinical stage biotechnology company developing first-in-class immunology therapeutic product candidates to patients.

We are focused on emerging immune control mechanisms applicable to inflammation and immuno-oncology indications.

We develop our product candidates using our proprietary antibody discovery technology platform, which is based upon a breakthrough understanding of the natural process of antibody generation, known as somatic hypermutation, or SHM, and replicates this natural process of antibody generation in vitro .

We are a clinical stage biotechnology company developing first-in-class immunology therapeutic product candidates focused on emerging immune control mechanisms applicable to inflammation and immuno-oncology indications.

We develop our product candidates using our proprietary antibody discovery technology platform, which is based upon a breakthrough understanding of the natural process of antibody generation, known as somatic hypermutation (“SHM”), and replicates this natural process of antibody generation in vitro .

Our strategy is to advance the development of our proprietary product candidates, and where applicable, establish partnerships with leading biopharmaceutical companies where we retain certain development and commercialization rights.

Our most advanced wholly-owned antibody programs, etokimab, ANB019, ANB030 and ANB032, are designed to modulate therapeutic targets that are genetically associated with human inflammatory disorders.

Etokimab, our anti-IL-33 antibody previously referred to as ANB020, inhibits the activity of the interleukin-33 cytokine, or IL-33, which we believe is broadly applicable to the treatment of respiratory disorders.

We are conducting a randomized, placebo-controlled Phase 2 trial of etokimab in approximately 100 adult patients with CRSwNP, also referred to as the ECLIPSE trial, which is a debilitating atopic disorder associated with elevated IL-33 pathway signaling.

We anticipate interim top-line data from this trial to be available in the first half of 2020.

We have previously completed a Phase 2a randomized, placebo-controlled, single dose study of etokimab in 25 severe adult eosinophilic asthma patients.

We presented full data from this trial at the 2019 European Academy of Allergy and Clinical Immunology (EAACI), which demonstrated that a single dose of etokimab resulted in rapid and sustained lung function improvement as measured using Forced Expiratory Volume in One Second, or FEV1, patient reported outcomes associated with asthma symptoms, as measured using the Asthma Control Questionnaire 5.

As a result of the topline data from our recently completed Phase 2b etokimab ATLAS trial in moderate-to-severe atopic dermatitis, the Company has decided to discontinue further clinical development in atopic dermatitis.

We have also postponed initiation of a previously announced Phase 2b etokimab clinical trial in eosinophilic asthma until data is available from the aforementioned ECLIPSE trial.

Our ANB019 antibody inhibits the interleukin-36 receptor, or IL-36R, and is being developed for the treatment of rare inflammatory diseases including generalized pustular psoriasis, or GPP, and palmoplantar pustulosis, or PPP.

We completed a Phase 1 clinical trial in healthy volunteers, which was presented at EAACI 2018, where ANB019 was well-tolerated by all subjects, no dose-limiting toxicities were observed, and no serious adverse events were reported among any subjects in the trial.

We are conducting an open-label, multi-dose, single-arm Phase 2 trial of ANB019 in up to 10 GPP patients, also referred to as the GALLOP trial, where an interim analysis, announced in September 2019, was conducted after the first two patients completed 16-weeks (Day 113) with ANB019 monotherapy.

Both patients achieved the primary endpoint of disease improvement at Day 29 and Day 113 without requiring rescue therapy.

Patients demonstrated rapid and sustained modified Japanese Dermatology Association (mJDA) improvement and complete clearance of skin pustules from Day 8 through Day 113.

C-reactive protein, or CRP, levels decreased to nearly normal in both patients and genotypic testing of these two patients indicated that ANB019 may be broadly applicable to pustular disease patients without a requirement for genetic screening.

Enrollment is ongoing in GALLOP and we anticipate additional clinical data and a regulatory strategy update for the development of ANB019 in GPP during 2020.

We are also conducting a randomized, double-blind, placebo-controlled approximately 50-patient multi-dose trial of ANB019 in PPP, also referred to as the POPLAR trial, where top-line data are anticipated in the second half of 2020.

Our third wholly-owned program ANB030, an anti-PD-1 agonist antibody program, is designed to augment PD-1 signaling through ANB030 treatment to suppress T-cell driven human inflammatory diseases.

Genetic mutations in the PD-1 pathway are known to be associated with increased susceptibility to human inflammatory diseases, and hence we believe ANB030 is applicable to diseases where PD-1 checkpoint receptor function may be under-represented.

Preclinical data for ANB030 was presented at the 2019 Federation of Clinical Immunological Societies (FOCIS) Annual Meeting in June 2019.

have submitted an Investigational New Drug Application, or IND, for ANB030 in the fourth quarter of 2019 and anticipate initiation of a Phase 1 healthy volunteer clinical trial in the first half of 2020.

Our fourth wholly-owned program is an anti-BTLA modulator antibody, known as ANB032, which is broadly applicable to human inflammatory diseases associated with lymphoid and myeloid immune cell dysregulation.

Our most advanced wholly-owned antibody programs, imsidolimab, ANB030 and ANB032, are designed to modulate therapeutic targets that are genetically associated with human inflammatory disorders.

Imsidolimab, our IL-36R antibody previously referred to as ANB019, inhibits the interleukin-36 receptor (“IL-36R”), and is being developed for the treatment of multiple dermatological inflammatory diseases.

We completed a Phase 1 clinical trial in healthy volunteers, which was presented at the European Academy of Allergy and Clinical Immunology in 2018, where imsidolimab was well-tolerated by all subjects, no dose-limiting toxicities were observed, and no serious adverse events were reported among any subjects in the clinical trial.

In July 2020, the U.S.

Food and Drug Administration (the “FDA”) granted Orphan Drug Designation for imsidolimab for the treatment of patients with GPP.

We are conducting an open-label, multi-dose, single-arm Phase 2 clinical trial of imsidolimab in 8 GPP patients, also referred to as the GALLOP clinical trial, where we announced positive topline data in October 2020.

Six of 8 (75%) patients treated with imsidolimab monotherapy achieved the primary endpoint of improvement in the clinical global impression scale (“CGI”) on Day 29.

Two of 8 (25%) patients were considered to have not met the primary endpoint because they dropped out of the clinical trial prior to Day 29.

The modified Japanese Dermatology Association Severity Index (“mJDA-SI”) score, which incorporates both dermatological and systemic aspects of GPP, decreased on average by 29% on Day 8 and 54% on Day 29.

Erythema with skin pustules, which clinically defines GPP, decreased by 60% on Day 8 and 94% on Day 29.

Serum c-reactive protein (“CRP”), which is an indicator of systemic inflammation, was normal (less than 5 mg/L) for 5 of the 6 patients achieving the primary endpoint on Day 29.

Genotypic testing indicated homozygous wild-type IL-36RN, CARD14 and AP1S3 alleles for all 8 patients.

We believe this suggests that imsidolimab may be broadly applicable to pustular diseases irrespective of genetic drivers.

Anti-drug antibodies were not detected as of Day 29 in any patient.

Imsidolimab was generally well-tolerated, and most treatment-emergent adverse events were mild to moderate in severity and resolved without sequelae.

No infusion or injection site reactions were observed.

One patient dropped out of the clinical trial due to a diagnosis of Staphylococcal aureus bacteremia in the first week, which was a serious adverse event deemed to be possibly drug-related.

Because the patient was symptomatic prior to dosing and had a prior medical history of bacteremia, a common comorbidity of GPP, we do not believe this event is likely attributable to imsidolimab.

Another patient dropped out of the study on Day 22 due to investigator reported inadequate efficacy.

One patient contracted COVID-19 during the course of the clinical trial, which was mild, unrelated to imsidolimab, and did not lead to study discontinuation.

Data from the first two patients to have completed the Day 113 treatment period under this clinical trial, which we announced in September 2019, indicated sustained efficacy in these two patients through Day 113.

We plan to report full data from the GALLOP clinical trial at a medical conference in 2021.

While initial GPP epidemiology studies suggested at least 3,000 patients in the United States, recent medical claims analyses suggest GPP prevalence in the United States of at least 10,000 patients.

We met with the FDA during the fourth quarter of 2020 to review an orphan disease registration plan for imsidolimab for the treatment of GPP and anticipate initiating a Phase 3 clinical trial in mid-2021 following completion of protocol alignment and review of 16-week data from the GALLOP clinical trial by the FDA.

We are also conducting a randomized, double-blind, placebo-controlled 59-patient multi-dose clinical trial of imsidolimab in PPP, also referred to as the POPLAR clinical trial, where enrollment was completed in 2020 and top-line data are anticipated in the first quarter of 2021.

The primary endpoint of this clinical trial is change in palmo-plantar pustulosis area severity index (PPPASI) at week 16 relative to baseline.

PPP is a non-fatal form of pustular psoriasis that we estimate affects approximately 150,000 patients in the United States alone.

We have initiated a global registry of GPP and PPP patients, also referred to as the RADIANCE study, which we anticipate will improve understanding of the patient journey in these two indications and assist in enrollment of future GPP and PPP clinical trials.

We have initiated clinical development of imsidolimab for the treatment of skin toxicities associated with treatments with inhibitors of epidermal growth factor (“EGFRi”) and MAPK/ERK kinase (“MEKi”).

Treatment of solid tumors with EGFRi and/or MEKi is frequently limited by the occurrence of skin toxicities, including acneiform or papulopustular rash.

Recent translational data has suggested that these skin toxicities are mediated by excess IL-36 signaling, leading to IL-8-mediated cutaneous neutrophilia and acneiform rash.

Based on existing claims data, approximately 60,000 patients are prescribed EGFRi and/or MEKi treatments annually, and the vast majority of these patients experience skin toxicity, which in some cases leads to dose reduction and/or discontinuation of treatment.

Current standard-of-care treatments are generally ineffective in patients with the most severe grades of EGFRi and/or MEKi mediated skin toxicity.

During the fourth quarter of 2020, we initiated a Phase 2 clinical trial, called EMERGE, of imsidolimab in combination with EGFRi inhibitors, for the treatment of patients diagnosed with a certain baseline severity of skin toxicity, where 45 patients are randomized 2:1 between imsidolimab and placebo arms, to assess the efficacy of imsidolimab in the treatment of this indication.

We anticipate interim top-line data from this clinical trial at the end of 2021.

We have also initiated clinical development of imsidolimab in ichthyosis, which is a family of rare, inherited, dermatological disorders characterized by dry, scaling and thickened skin.

Recent human translational studies have suggested that the underlying skin inflammation responsible for ichthyosis is mediated by dysregulated IL-36 signaling, and we believe that imsidolimab treatment may be efficacious in treatment of this condition.

Approximately 6,000 patients in the United States are affected with moderate-to-severe levels of ichthyosis, and no approved therapies are available for this disease.

We have initiated a Phase 2 clinical trial, called INSPIRE, of imsidolimab in patients with certain baseline severity of ichthyosis, where 24 patients are randomized 2:1 between imsidolimab and placebo arms, and interim top-line data is anticipated in 2022.

We plan to initiate clinical development of imsidolimab in hidradenitis suppurativa, also known as acne inversa, which is a chronic inflammatory skin disease characterized by painful nodules in intertriginous areas that can progress to abscesses, sinus tracks and scarring.

Current treatment options for hidradenitis suppurativa, including antibiotics, corticosteroids and anti-TNF therapy, have variable efficacy in moderate-to-severe patients, which often leads to surgery for removal of hidradenitis suppurativa nodules.

Human translational studies have demonstrated elevated IL-36 cytokine expression in hidradenitis suppurativa skin biopsies, and we believe treatment of moderate-to-severe hidradenitis suppurativa with imsidolimab may lead to therapeutic benefit for this patient population.

Moderate-to-severe hidradenitis suppurativa affects approximately 150,000 adults in the United States.

We intend to initiate a Phase 2 clinical trial of imsidolimab in hidradenitis suppurativa, called HARP, in the second quarter of 2021.

We plan to initiate clinical development of imsidolimab in acne, which is the most common skin disorder in the United States, with approximately 7 million patients diagnosed with moderate-to-severe disease.

Moderate-to-severe acne typically presents with painful papules, pustules, nodules, cysts and scarring.

A key contributing factor to the pathogenesis of acne is the immune response to p.

acnes, which is associated with upregulated IL-36 cytokine activity, localized inflammation and neutrophil infiltration of the skin.

Existing therapies, including isotretinoin and systemic antibiotics, provide variable efficacy for moderate-to-severe acne patients and have practical limitations to their use given potential for clinically meaningful side effects.

We anticipate initiating a Phase 2 clinical trial of imsidolimab, called ACORN, for the treatment of moderate-to-severe acne

Our second wholly-owned program, ANB030, is an anti-PD-1 agonist antibody program designed to augment PD-1 signaling through ANB030 treatment to suppress T-cell driven human inflammatory diseases.

Genetic mutations in the PD-1 pathway are known to be associated with increased susceptibility to human inflammatory diseases, and hence we believe that ANB030 is applicable to diseases where PD-1 checkpoint receptor function may be under-represented.

We presented preclinical data for ANB030 at the Festival of Biologics Annual Meeting in March 2020, including translational data demonstrating in vitro activity of ANB030 in alopecia areata patient samples.

We initiated a Phase 1 healthy volunteer clinical trial in the first half of 2020, which is designed to assess the safety, pharmacokinetics and pharmacodynamics of ANB030 in single and multiple ascending dose cohorts.

We anticipate top-line data from this Phase 1 clinical trial in mid-2021.

We plan to initiate Phase 2 clinical trials of ANB030 in alopecia areata and vitiligo in the second half of 2021.

Our third wholly-owned program is an anti-BTLA modulator antibody, known as ANB032, which is broadly applicable to human inflammatory diseases associated with lymphoid and myeloid immune cell dysregulation.

Mutations in the BTLA signaling pathway are associated with human inflammatory disease, and we believe ANB032 silences pro-inflammatory signaling by modulating BTLA binding to HVEM.

We anticipate filing an IND for ANB032 in the second half of 2020.

In addition to our wholly-owned antibody programs, multiple AnaptysBio-developed antibody programs have been advanced to preclinical and clinical milestones under our collaborations.

We filed a Clinical Trial Notification (“CTN”) in Australia for ANB032 during the first quarter of 2021 and anticipate initiating a healthy volunteer Phase 1 trial in the first half of 2021 upon clearance of the CTN.

We presented preclinical data regarding ANB032 at the 2020 Federation of Clinical Immunology Societies (FOCIS) Virtual Annual Meeting in October 2020.

Etokimab, our anti-IL-33 antibody previously referred to as ANB020, inhibits the activity of the interleukin-33 cytokine (“IL-33”).

We have conducted a randomized, placebo-controlled Phase 2 clinical trial of etokimab in approximately 100 adult patients with CRSwNP (a debilitating atopic disorder associated with elevated IL-33 pathway signaling), also referred to as the

ECLIPSE clinical trial.

We recently reported top-line data from a week 16 analysis of the ECLIPSE clinical trial.

Patients dosed with etokimab every four (q4w) or eight weeks (q8w) failed to achieve the co-primary endpoints of statistically significant improvement in their bilateral nasal polyps score (“NPS”), an endoscopic measure of nasal occlusion, and in their sino-nasal outcome test (“SNOT-22”), a patient reported quality-of-life assessment, versus placebo at the week 8 time point.

Both endpoints demonstrated statistically significant improvement over baseline levels of NPS and SNOT-22.

Blood eosinophil levels, which are a biomarker of etokimab’s mechanism, demonstrated statistically significant reduction relative to baseline in both etokimab treatment arms.

Following this data, we have decided to discontinue further development of etokimab.

In addition to our wholly-owned antibody programs, multiple Company-developed antibody programs have been advanced to preclinical and clinical milestones under our collaborations.

We have received to date approximately $164.6 million in cash receipts from collaborations.

Our collaborations include an immuno-oncology-focused collaboration with TESARO, Inc.

and TESARO Development, Ltd., or collectively TESARO, now a part of GlaxoSmithKline or “GSK”, and an inflammation-focused collaboration with Celgene Corporation, or Celgene, now part of Bristol-Myers Squibb.

A BLA for our most advanced partnered program, which is an anti-PD-1 antagonist antibody called dostarlimab, was recently submitted by GlaxoSmithKline, and we anticipate US approval in the near-term.

For more information about these collaborations, see “- Collaboration Revenue” below.

Our collaborations include an immuno-oncology-focused collaboration with GlaxoSmithKline, Inc.

(“GSK”) and an inflammation-focused collaboration with Bristol-Myers Squibb (“BMS”).

A Biologics License Application (“BLA”) for our most advanced partnered program, which is an anti-PD-1 antagonist antibody called dostarlimab, was submitted by GSK and accepted by the FDA for the treatment of advanced or recurrent deficient mismatch repair endometrial cancer (“dMMREC”), and FDA approval is anticipated in this indication during the first half of 2021.

This FDA approval is dependent on a pre-approval inspection of the dostarlimab manufacturing site by the FDA and is therefore contingent on easing of the coronavirus (“COVID-19”) pandemic travel restrictions.

In addition, the European Medicines Agency (“EMA”) recently accepted GSK’s Marketing Authorization Application (“MAA”) for dostarlimab in the European Union (“EU”) for dMMREC, and EMA approval is anticipated in this indication during the first half of 2021.

A second BLA submitted by GSK was accepted by the FDA during the first quarter of 2021 for dostarlimab in pan-deficient mismatch repair tumors (“PdMMRT”).

We received a $10.0 million cash milestone payment upon the FDA acceptance of GSK’s first BLA for dostarlimab and anticipate an additional $20.0 million cash milestone payment upon first FDA approval of dostarlimab during the first half of 2021.

We also received a $5.0 million milestone payment for the EMA acceptance of GSK’s first MAA for dostarlimab and anticipate an additional $10.0 million cash milestone payment upon first EMA approval of dostarlimab during the first half of 2021.

An additional $10.0 million cash milestone payment is anticipated by the end of the first quarter of 2021 for acceptance of the second FDA BLA referred to above.

Dostarlimab is currently in clinical development for various solid tumor indications, including dMMREC, PdMMRT, colorectal cancer, ovarian cancer, non-small cell lung cancer, cervical cancer, rectal cancer, clear cell sarcoma and head-and-neck squamous cell carcinoma.

We anticipate receiving additional milestones from GSK, of equal magnitude to the milestone payments outlined above, upon approval of the BLA and acceptance and approval of the EMA filings of dostarlimab for the PdMMRT indication.

Depending upon the timing of the aforementioned dostarlimab regulatory acceptance and approval milestones, we anticipate a total of $75.0 million in such milestone payments over the upcoming 18 months.

An additional $165.0 million in sales milestones is anticipated upon achievement of certain dostarlimab annual sales revenues.

In October 2020, we amended our GSK collaboration to increase royalties on global net sales of dostarlimab to 8-25%, add 1% royalty rate on GSK’s global net sales of Zejula and received a one-time cash payment of $60.0 million.

For more information about these collaborations, see “— Collaborations”.

As of December 31, 2020, we had an accumulated deficit of $264.0 million, primarily as a result of losses incurred since our inception in 2005.

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For our discussion related to the results of our operations and liquidity and capital resources for fiscal year ended December 31, 2019 compared to the year ended December 31, 2018, please refer to Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019.

Public Offerings

On January 31, 2017, we completed an initial public offering, or IPO, selling 5,750,000 shares of common stock at $15.00 per share, which included 750,000 shares sold pursuant to the exercise of the underwriters’ options to purchase additional shares.

Proceeds from our initial public offering net of underwriting discounts and commissions were $80.2 million.

On October 17, 2017, we completed an underwritten public offering of 3,000,000 shares of common stock.

All shares were offered by us at a price to the public of $68.50 per share.

The aggregate net proceeds received by us from the offering were $194.7 million , net of underwriting discounts and commissions.

As part of the underwritten public offering, on November 14, 2017, the underwriters exercised an additional 271,380 shares of common stock at a discounted price to the public of $68.50 per share for aggregate net proceeds of $17.6 million , net of underwriting discounts and commissions.

On September 28, 2018, we completed an underwritten public offering of 2,530,000 shares of common stock, which included the exercise of the underwriters’ option to purchase an additional 330,000 shares of common stock.

All shares were offered by us at a price to the public of $94.46 per share.

The aggregate net proceeds received by us from the offering were $227.5 million , net of underwriting discounts and commissions.

In December 2019, a strain of coronavirus was reported in Wuhan, China and began to spread globally, including to the United States and Europe, in the following months.

The World Health Organization has declared COVID-19 to be a global pandemic.

The full impact of the COVID-19 pandemic is inherently uncertain at the time of this Annual Report.

The COVID-19 pandemic has resulted in travel restrictions and, in some cases, prohibitions of non-essential activities, disruption and shutdown of businesses, and greater uncertainty in global financial markets.

As COVID-19 has spread, it has significantly impacted the health and economic environment around the world, and many governments have closed most public establishments, including restaurants, workplaces, and schools.

Our ongoing clinical trials have been, and may continue to be, affected by the closure of offices, or country borders, among other measures being put in place around the world.

The inability to travel and conduct face-to-face meetings can also make it more difficult to enroll new patients in ongoing or planned clinical trials.

Any of these circumstances will potentially have a negative impact on our financial results and the timing of our clinical trials.

The COVID-19 pandemic has caused us to modify our business practices (including but not limited to curtailing or modifying employee travel, moving to full remote work, and cancelling physical participation in meetings, events, and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, patients, and business partners.

The extent of the impact of the COVID-19 pandemic on our future liquidity and operational performance will depend on certain developments, including the duration and spread of the outbreak, the availability and effectiveness of vaccines, the impact on our clinical trials, patients, and collaboration partners, and the effect on our suppliers.

Financial Overview

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From inception through December 31, 2020, we have received $164.6 million in cash in non-dilutive funding from our collaborators.

Collaboration and Exclusive License Agreement with TESARO

In March 2014, we entered into an exclusive worldwide license and collaboration agreement with TESARO, now a part of GlaxoSmithKline, for the development and commercialization of therapeutic monospecific and bispecific antibodies that antagonize PD-1, TIM-3, LAG-3 and/or a fourth undisclosed checkpoint receptor.

We received $17.0 million in upfront fees from TESARO in March 2014, and in November 2014, we amended the agreement with TESARO to include the development

and commercialization of bispecific antibodies to another undisclosed target, for an additional upfront fee of $2.0 million.

Both upfront fees were recognized over the same period that our research and development services for which we were reimbursed were performed, which was extended through December 31, 2016 by amendment of the agreement in February 2016.

From inception of the agreement through December 31, 2019 , we have recognized $67.3 million in total revenue from TESARO.

For each of the four targets under the TESARO agreement, we are eligible to receive up to $273.0 million in milestone payments, which are comprised of $18.0 million for preclinical and clinical development milestone payments, $90.0 million upon certain regulatory events and $165.0 million upon worldwide commercial sales thresholds.

In addition, TESARO is obligated to pay us tiered royalties, ranging from 4% to 8%, on annualized net sales of each antibody commercialized from the collaboration.

Milestones achieved through December 31, 2019 under the TESARO Agreement are as follows:

(TSR042/Dostarlimab)

Milestone Event

Quarter Recognized

Collaboration and Exclusive License Agreement with GSK

In March 2014, we entered into a Collaboration and Exclusive License Agreement GSK (the “GSK Agreement”) for the development and commercialization of therapeutic monospecific and bispecific antibodies that antagonize PD-1, TIM-3, LAG-3 and/or a fourth undisclosed checkpoint receptor.

We received $17.0 million in upfront fees from GSK in March 2014, and in November 2014, we amended the agreement with GSK to include the development and commercialization of bispecific antibodies to another undisclosed target, for an additional upfront fee of $2.0 million.

For each of the four targets under the GSK agreement, we are eligible to receive up to $273.0 million in milestone payments, which are comprised of $18.0 million for preclinical and clinical development milestone payments, $90.0 million upon certain regulatory events and $165.0 million upon worldwide commercial sales thresholds.

In addition, GSK is obligated to pay us tiered royalties, ranging from 4% to 8%, for each product developed under the agreement, except in the case of dostarlimab where the royalties payable will be 8% to 25% as amended below, on annualized net sales of each antibody commercialized from the collaboration.

On October 23, 2020, we amended the GSK Agreement (the “Amendment”).

Under the Amendment, we agreed to permit GSK to conduct development and commercialization of Zejula, an oral, once-daily poly (ADP-ribose) polymerase (PARP) inhibitor, which has received US approval for the maintenance treatment of adult patients with advanced epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to first-line platinum-based chemotherapy and is under development for additional cancer indications.

In addition, under the Amendment, we were granted increased royalties upon sales of dostarlimab, an anti-PD-1 antagonist antibody under development by GSK for multiple oncological disorders, including endometrial cancer, non-small cell lung cancer, ovarian cancer, colorectal cancer, and mismatch repair deficient solid tumors, equal to 8% of Net Sales (as defined in the GSK Agreement) below $1.0 billion and from 12% up to 25% of Net Sales above $1.0 billion.

The Amendment also provided for a one-time non-refundable cash payment of $60.0 million that we received in the fourth quarter of 2020.

GSK also agreed, starting January 1, 2021, to pay us a 1% royalty on all GSK Net Sales of Zejula.

The $1.1 billion in cash milestone payments due under the GSK Agreement remain unchanged.

Additionally, under the terms of the Amendment, GSK has agreed to certain diligence commitments with respect to the future development of dostarlimab, and the parties have agreed to review such commitments under regular joint review committee meetings going forward.

From inception of the agreement through December 31, 2020, we have recognized $142.3 million in total revenue from GSK.

Milestones achieved through December 31, 2020 under the GSK Agreement are as follows:

(GSK4057190A/Dostarlimab)

(GSK4069889A/Cobolimab)

(GSK40974386)

Milestone Event Amount Quarter Recognized Amount Quarter Recognized Amount Quarter Recognized

Initiated in vivo toxicology studies using good laboratory practices (GLPs)

IND clearance from the FDA

Phase 2 clinical trial initiation

Phase 3 clinical trial initiation - first indication

Phase 3 clinical trial initiation - second indication

$1.0M Q2'15 $1.0M Q4'15 $1.0M Q3'16

IND clearance from the FDA $4.0M Q1'16 $4.0M Q2'16 $4.0M Q2'17

Phase 2 clinical trial initiation $3.0M Q2'17 $3.0M Q4'17 $3.0M Q4'19

Phase 3 clinical trial initiation - first indication $5.0M Q3'18 — — — —

Phase 3 clinical trial initiation - second indication $5.0M Q2'19 — — — —

Filing of the first NDA - first indication $10.0M Q1'20 — — — —

Filing of the first MAA - first indication $5.0M Q1'20 — — — —

Milestones achieved during the discovery period were recognized as revenue pro-rata through December 31, 2016.

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Cash is generally received within 30 days of milestone achievement.

Antibody Generation Agreement with Celgene Corporation

In December 2011, we entered into a license and collaboration agreement with Celgene, now a part of Bristol-Myers Squibb, to develop therapeutic antibodies against multiple targets.

We granted Celgene the option to obtain worldwide commercial rights to antibodies generated against each of the targets under the agreement, which option was triggered on a target-by-target basis by our delivery of antibodies meeting certain pre-specified parameters pertaining to each target under the agreement.

The agreement provided for an upfront payment of $6.0 million from Celgene, which we received in 2011, milestone payments of up to $53.0 million per target, low single-digit royalties on net sales of antibodies against each target, and reimbursement of specified research and development costs.

From inception of the agreement through December 31, 2019 , we have recognized $10.0 million in total revenue from Celgene.

Milestone Event

Quarter Recognized

Antibody Generation Agreement with Bristol-Myers Squibb

In December 2011, we entered into a license and collaboration agreement (the “BMS Agreement”) with Celgene, now a part of Bristol-Myers Squibb (Celgene and Bristol-Myers Squibb are hereinafter referred to, collectively, as “BMS”), to develop therapeutic antibodies against multiple targets.

We granted BMS the option to obtain worldwide commercial rights to antibodies generated against each of the targets under the agreement, which option was triggered on a target-by-target basis by our delivery of antibodies meeting certain pre-specified parameters pertaining to each target under the agreement.

The BMS Agreement provided for an upfront payment of $6.0 million from BMS, which we received in 2011, and recognized through 2014, milestone payments of up to $53.0 million per target, low single-digit royalties on net sales of antibodies against each target, and reimbursement of specified research and development costs.

From inception of the agreement through December 31, 2020, we have recognized $10.0 million in total revenue from BMS.

Milestone Event Amount Quarter Recognized

Completion of first in vivo toxicology studies using GLPs

Phase 1 clinical trial initiation

Phase 1 clinical trial initiation $1.0M Q4'16

Milestones were recognized as revenue in the period earned.

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Our research and development expenses include:

External research and development expenses incurred under arrangements with third-parties, such as Contract Research Organizations, or CROs, consultants, members of our scientific and therapeutic advisory boards, and Contract Manufacturing Organizations, or CMOs;

• External research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”), consultants, members of our scientific and therapeutic advisory boards, and contract manufacturing organizations (“CMOs”);

• Employee-related expenses, including salaries, benefits, travel, and stock-based compensation;

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We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expense when the service has been performed or when the goods have been received.

We recognize the Australian Research and Development Tax Incentive, or the Tax Incentive, as a reduction of research and development expense.

The amounts are determined on a cost reimbursement basis based on our eligible research and development expenditures and are non-refundable, provided that in order to qualify for the Australian benefits we must have revenue of less than AUD $20.0 million during the reimbursable period and cannot be controlled by income tax exempt entities.

The Tax Incentive is recognized when there is reasonable assurance that the Tax Incentive will be received, the relevant expenditure has been incurred, and the amount can be reliably measured.

We are conducting research and development activities primarily on inflammation programs.

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We conduct some of our early research and preclinical activities internally and plan to rely on third parties, such as CROs and CMOs, for the execution of certain of our research and development activities, such as in vivo toxicology and pharmacology studies, drug product manufacturing, and clinical trials.

We have completed Phase 1 and 2a trials for etokimab and Phase 1 trials for ANB019 and have ongoing Phase 2 and 2b clinical trials as well .

We have completed Phase 1 clinical trials and have ongoing Phase 2 clinical trials for imsidolimab and an ongoing Phase 1 clinical trial for ANB030.

We expect our research and development expenses to be higher for the foreseeable future as we continue to advance our product candidates.

General and Administrative Expense

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Interest Expense

Interest expense consists of floating interest payments and amortization of discounts on our outstanding notes payable relating to our Loan and Security Agreement with Oxford Finance LLC and Silicon Valley Bank, as amended, which we refer to as the Loan Agreement.

On January 1, 2020, the Loan Agreement was paid in full, without penalty or premium.

Interest Income

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Net Operating Loss and Research and Development Tax Credit Carryforwards

Since inception, we have accumulated net operating losses, or NOLs in all years except December 31, 2015 and 2014, in which we generated taxable income as a result of our collaboration agreement with TESARO as well as expenses incurred by our Australian subsidiary which are not deductible for U.S.

Since inception, we have accumulated net operating losses, or NOLs in all years except December 31, 2015 and 2014, in which we generated taxable income as a result of our collaboration agreement with GSK as well as expenses incurred by our Australian subsidiary which are not deductible for U.S.

income tax purposes.

While we utilized NOLs in 2015 and 2014, we have since incurred losses and therefore continue to have a valuation allowance against our net deferred tax assets due to the uncertainty of the realization of such assets.

At December 31, 2019 , we had federal and state net operating loss carryforwards, or NOLs, of $239.4 million and $64.1 million , respectively.

The federal and state NOLs generated prior to 2018 will both begin to expire in 2028 , unless previously utilized.

The federal NOLs include $179.4 million of net operating losses generated in 2018 and after.

Federal net operating losses generated in 2018 and after carryover indefinitely and may generally be used to offset up to 80% of future

taxable income.

At December 31, 2020, we had federal and state net operating loss carryforwards (“NOLs”), of $248.4 million and $64.2 million, respectively.

The federal and state NOLs will begin to expire in 2028, unless previously utilized.

The federal NOLs includes $188.4 million of net operating losses generated in 2018 and after.

Federal net operating losses generated in 2018 and after carryover indefinitely and may generally be used to offset up to 80% of future taxable income.

At December 31, 2020, we had federal and California research tax credit carryforwards of approximately $14.3 million and $8.9 million, respectively.

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Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles, or GAAP.

generally accepted accounting principles (“GAAP”).

The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements.

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As discussed within license arrangements above, our licenses have historically held no value without the research and development services we provide.

As we generally only provide research and development services for internally generated

antibodies that require a license to be utilized by a third party, our research and development services are not considered distinct.

As we generally only provide research and development services for internally generated antibodies that require a license to be utilized by a third party, our research and development services are not considered distinct.

• Steering Committee Meetings.

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To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Prior to January 1, 2019, we recognized our leases in accordance with ASC 840, Leases, and all current leases were classified as operating leases.

Rent expense was recognized on a straight-line basis over the terms of the leases and, accordingly, we recorded the cumulative difference between cash rent payments and the recognition of rent expense as a deferred rent liability.

When an operating lease included lease incentives, such as a rent abatements or leasehold improvement allowances, or required fixed escalations of the minimum lease payments, the aggregate rental expense, including such incentives or increases, was recognized on a straight-line basis over the term of the lease.

Effective January 1, 2019, we adopted ASU 2016-02, ASC 842, Leases, under which all outstanding leases continued to be classified as operating leases.

Rent expense is recognized on a straight-line basis.

When an operating lease includes rent

abatements or requires fixed escalations of the minimum lease payments, the aggregate rental expense is recognized on a straight-line basis over the term of the lease.

When an operating lease includes lease incentives such as leasehold improvement allowances, the lease incentive is included in the right-of-use asset “ROU”.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

We account for fixed lease components separately from non-lease components.

Recently Issued Accounting Pronouncements

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Collaboration revenue was $75.0 million compared to $8.0 million for the years ended December 31, 2020 and 2019, respectively.

A comparison of revenue by collaborator is as follows:

(in thousands)

TESARO-milestones

A comparison of collaboration revenue is as follows:

December 31, Increase

(in thousands) 2020 2019 (Decrease)

GSK Amendment No.

3 Payment $ 60,000 $ — $ 60,000

GSK milestones 15,000 8,000 7,000

Total collaboration revenue

Collaboration revenue during the year ended December 31, 2019 increased $3.0 million compared to the year ended December 31, 2018 primarily due to the timing of milestones achieved.

$ 75,000 $ 8,000 $ 67,000

Collaboration revenue during the year ended December 31, 2020 increased $67.0 million compared to the year ended December 31, 2019 primarily due to payment received related to an amendment to the GSK Agreement during 2020 and the timing of milestones achieved.

We expect that any collaboration revenue we generate will continue to fluctuate from period to period as a result of the timing and amount of milestones from our existing collaborations.

Research and Development Expenses

Research and development expenses were $99.3 million during the year ended December 31, 2019 compared to $56.2 million during the year ended December 31, 2018 , for an increase of approximately $43.1 million .

The increase is primarily attributable to a $20.9 million increase in clinical expenses, a $16.0 million increase in outside services for preclinical and manufacturing expenses, a $5.4 million increase in salaries and related expenses, including stock compensation expense, and a $0.8 million increase in other research and development expenses.

We do not track fully burdened research and development costs separately for each of our drug candidates.

Research and development expenses were $80.0 million during the year ended December 31, 2020 compared to $99.3 million during the year ended December 31, 2019, for a decrease of approximately $19.3 million.

The decrease is primarily

attributable to a $14.1 million decrease in outside services for preclinical and manufacturing expenses, a $3.7 million decrease in clinical expenses, a $1.1 million decrease in salaries and related expenses, including stock compensation expense, and a $0.4 million decrease in other research and development expenses.

We do not track fully burdened research and development costs separately for each of our product candidates.

We review our research and development expenses by focusing on external development and internal development costs.

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The following table summarizes the external costs attributable to each program and internal costs:

December 31, Increase/(Decrease)

(in thousands) 2020 2019

External Costs

Imsidolimab $ 25,577 $ 18,570 $ 7,007

Etokimab 14,483 41,872 (27,389)

ANB030 4,563 9,261 (4,698)

ANB032 9,447 2,216 7,231

Preclinical and other unallocated costs 8,143 8,564 (421)

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Internal Costs 17,812 18,855 (1,043)

Total Costs $ 80,025 $ 99,338 $ (19,313)

General and Administrative Expenses

General and administrative expenses were $18.9 million during the year ended December 31, 2020 compared to $16.1 million during the year ended December 31, 2019, for an increase of approximately $2.8 million.

The increase is primarily due to an increase in salaries and related expenses, which includes stock compensation expense, from the prior year.

The increase is primarily due to a $1.5 million increase in legal expenses, a $1.3 million increase in personnel costs including stock compensation expense, and a $0.7 million increase in insurance expense, offset by a $0.4 million decrease in professional fees, a $0.1 million decrease in travel expense, and $0.2 million decrease in other general and administrative expense.

We expect that our general and administrative expenses will increase for the foreseeable future as we incur additional costs associated with being a publicly traded company, including legal, auditing and filing fees, additional insurance premiums, investor relations expenses and general compliance and consulting expenses.

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Interest Expense

Interest expense was $1.0 million during the year ended December 31, 2019 and represents effective interest of approximately 12.67% on our outstanding Term Loans, as defined in Part II Item 8—5.

Notes Payable, which have a principal balance of $0.6 million as of December 31, 2019 .

Interest expense was $1.7 million during the year ended December 31, 2018 and primarily represents effective interest of approximately 13.32% on an outstanding principal balance of $8.1 million.

On January 1, 2020, the Term Loans were paid in full, without penalty or premium.

Interest Income and Other Income (Expense), Net

Interest income and other income (expense), net was $11.0 million during the year ended December 31, 2019 and primarily consisted of interest income from our short-term and long-term investments.

Interest income and other income (expense), net was $6.5 million during the year ended December 31, 2018 and primarily consisted of interest income of approximately $6.7 million from our short-term and long-term investments and foreign exchange losses of approximately $0.2 million related to our Australian subsidiary.

Interest expense was $0.0 million during the year ended December 31, 2020.

Interest expense was $1.0 million during the year ended December 31, 2019 and primarily represents effective interest of approximately 12.67% on our outstanding Term Loans on an outstanding principal balance of $0.6 million as of December 31, 2019.

The decrease in interest expense during the periods is due to the final payment made on the Loan Agreement on January 1, 2020.

Interest Income

Interest income was $4.0 million and $11.0 million during the years ended December 31, 2020 and 2019, respectively, which primarily related to our short-term and long-term investments, the balance of which decreased during the periods as a result of funding our clinical trial programs.

The decrease in interest income is also attributable to lower interest rates during the year ended December 31, 2020.

Provision for Income Taxes

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The income tax benefit for the year ended December 31, 2019 is primarily related to the allocation of tax benefit to continuing operations offsetting income tax expense recorded in other comprehensive income that is related to unrealized gains.

The income tax benefit for the year ended December 31, 2018 is primarily related to a credit for alternative minimum taxes, or AMT, which is eligible for refund under the Tax Cuts and Jobs Act.

Liquidity and Capital Resources

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In addition to our existing cash, cash equivalents and investments, we are eligible to earn milestone and other contingent payments for the achievement of defined collaboration objectives and certain nonclinical, clinical, regulatory and sales-based events, and royalty payments under our collaboration agreements.

Our ability to earn these milestone and contingent payments and the timing of achieving these milestones is primarily dependent upon the outcome of our collaborators’ research and development activities and is uncertain at this time.

Our rights to payments under our collaboration agreements are our only committed external source of funds.

As of December 31, 2019 , the future principal maturities of the Term Loans, as defined in Part II Item 8—5.

Notes Payable, were $0.6 million.

The effective interest rate on the Term Loans at December 31, 2019 was 12.67% .

On January 1, 2020, the Term Loans were paid in full, without penalty or premium.

Specific to our collaboration agreement with GSK, dostarlimab is currently in clinical development for various solid tumor indications.

We anticipate receiving additional milestones from GSK, of equal magnitude to the milestone payments outlined above, upon acceptance and approval of BLA and EMA filings of dostarlimab for the PdMMRT indication.

An additional $165.0 million in sales milestones is anticipated upon achievement of certain dostarlimab annual sales revenues.

Our amended GSK Agreement also includes a royalty to GSK’s global net sales of Zejula that began in 2021.

Funding Requirements

We may seek to obtain additional financing in the future through equity or debt financings or through collaborations or partnerships with other companies.

If we are unable to obtain additional financing on commercially reasonable terms, our business, financial condition and results of operations will be materially adversely affected.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, third-party clinical and preclinical research and development services, including manufacturing, laboratory and related supplies, compensation and related expenses, legal, patent and other regulatory expenses, and general overhead costs.

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Under such agreements, we are contractually obligated to make certain minimum payments to the vendors with the amounts to be based on the timing of the termination and the specific terms of the agreement.

As a publicly traded company, we incur significant legal, accounting and other expenses that were not required as a private company.

In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the SEC and The Nasdaq Global Stock Market, requires public companies to implement specified corporate governance practices that were inapplicable to us as a private company.

These rules and regulations have increased our legal and financial compliance costs, have made and will continue to make certain activities more time-consuming and costly.

Cash, cash equivalents and investments totaled $411.2 million as of December 31, 2020, compared to $428.5 million as of December 31, 2019.

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We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.

Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

The following table summarizes our cash flows for the years ended December 31, 2020 and 2019:

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Net increase in cash, cash equivalents and restricted cash

$ 79,439 $ 57,421

Operating Activities

Net cash used in operating activities during the year ended December 31, 2019 of $69.5 million was primarily due to our net loss of $97.3 million , adjusted for addbacks for non-cash items of $11.0 million which includes stock-based compensation and income from marketable securities and increases in working capital of $16.9 million .

Net cash used in operating activities during the year ended December 31, 2020 of $14.2 million was primarily due to our net loss of $19.9 million, adjusted for addbacks for non-cash items of $12.5 million which includes stock-based compensation and income from marketable securities and decreases in working capital of $6.8 million.

Net cash used in operating activities during the year ended December 31, 2019 of $69.5 million was primarily due to our net loss of $97.3 million, adjusted for addbacks for non-cash items of $11.0 million which includes stock-based compensation and income from marketable securities and increases in working capital of $16.9 million.

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Cash used in financing activities during the year ended December 31, 2020 of $0.9 million was primarily related to $1.4 million in repayments on our outstanding Term Loan, offset by proceeds of $0.5 million from the issuance of common stock as a result of option exercises.

Cash provided by financing activities during the year ended December 31, 2018 of $223.4 million was primarily related to proceeds of $227.5 million from our follow-on public offering, net of underwriting discounts and commissions, as well as proceeds of $2.9 million from the issuance of common stock as a result of option and warrant exercises, offset by $6.9 million in repayments on our outstanding Term Loan.

Cash used in financing activities during the year ended December 31, 2019 of $4.5 million was primarily related to $7.5 million in repayments on our outstanding Term Loan, offset by proceeds of $3.0 million from the issuance of common stock as a result of option exercises.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2019 :

Payments Due by Period

(in thousands)

Notes payable, including interest and final payment fee

Operating lease obligation (2)

Future minimum annual obligations for license payments under all collaborative in-license agreements at December 31, 2019 were $0.2 million in fiscal 2020 and in the years thereafter.

These obligations are excluded from the table above as the annual minimum payments are payable through ten years from the first commercial sale, if any, or expiration of the last patent to expire, the dates of which are not determinable at this time.

Operating lease obligation includes future rent payments under our office leases, which both expire in 2021.

We have entered into agreements with certain vendors for the provision of goods and services, which includes manufacturing services with contract manufacturing organizations and development services with contract research organizations.

These agreements may include certain provisions for purchase obligations and termination obligations that could require payments for the cancellation of committed purchase obligations or for early termination of the agreements.

The amount of the cancellation or termination payments vary and are based on the timing of the cancellation or termination and the specific terms of the agreement and therefore are cancelable contracts and not included in the table above.

For further information related to our operating lease and future minimum annual obligations for license payments under our collaboration in-license agreements, see Note 11 — Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis