Annexon, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 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 December 31, 2023, included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission, or the SEC, on March 26, 2024. 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 about us and our industry that involve substantial 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 “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “position,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms. 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 pioneering a new class of complement medicines for people living with devastating inflammatory-related diseases. The classical complement pathway is a core component to the body’s immune system that activates a powerful inflammatory cascade. We believe that by stopping the classical complement pathway at its start by targeting C1q, the initiating molecule of the classical complement pathway, our approach may have the potential to provide more complete protection against complement-mediated disorders of the body, brain and eye. Using our proprietary platform, we are identifying and characterizing the role of the classical complement pathway in three therapeutic areas—autoimmune, neurodegeneration and ophthalmology. In so doing, we are advancing a pipeline of product candidates designed to block the early classical cascade and all downstream pathway components and their tissue-damaging functions. Our goal is to suppress excessive or aberrant classical complement activity that contributes to chronic inflammation and tissue damage to slow or even halt disease progression, while preserving the beneficial immune functions of the lectin and alternative complement pathways involved in the clearance of pathogens and damaged cells. We have demonstrated robust target engagement in the body, brain and eye, and clinical proof of concept in multiple diseases, and have focused our resources on development of three priority programs: • Guillain-Barré Syndrome, or GBS: We are advancing our lead candidate, ANX005, an investigational, full-length monoclonal antibody, or mAb, formulated for intravenous administration for the potential treatment of patients with GBS, a rare antibody-mediated autoimmune disease that is the most common cause of acute neuromuscular paralysis with no approved therapies in the U.S. In the second quarter of 2024, we announced positive results from the completed pivotal Phase 3 trial in GBS at the 2024 Peripheral Nerve Society (PNS) Annual Meeting. Data showed that ANX005-treated patients demonstrated faster and more complete recovery from week 1 through week 26 on primary and multiple pre-specified endpoints. Early, robust and durable treatment effects expedited recovery and led to patients walking and off ventilation approximately one month earlier. A single infusion of ANX005 was generally well-tolerated with a safety profile similar to placebo and adverse events balanced across groups. We intend to establish comparability of the GBS patient population in our Phase 3 trial with patients from the International Guillain-Barré Syndrome Outcomes Study, or IGOS, a global, prospective, observational, multicenter cohort study that has enrolled 2,000 patients who were followed for one to three years. We have initiated a real-world evidence, or RWE, comparability protocol with IGOS with initial topline data anticipated by year-end 2024 to support our planned Biologics License Applications, or BLA, submission in the first half of 2025. ANX005 has been granted Fast Track and orphan drug designation for the treatment of GBS from the FDA. ANX005 has also been granted orphan designation from the European Medicines Agency, or EMA. • Geographic Atrophy, or GA: We are advancing ANX007, an antigen-binding fragment, or Fab , formulated for intravitreal administration for the potential treatment of patients with GA, the leading cause of blindness in the elderly, that affects an estimated eight million people globally. In the Phase 2 ARCHER trial, ANX007 was shown to preserve vision on multiple measures and provided significant structural protection within the retina, particularly of photoreceptors in the central fovea that are important to visual acuity. ANX007 was generally well-tolerated through month 12, with no increase in choroidal 17 neovascularization (CNV) rates between the treated and sham arms and no events of retinal vasculitis reported. In August 2024, we announced that patient dosing was initiated in the global pivotal Phase 3 ARCHER II trial, the only GA pivotal program utilizing visual protection as the global regulatory-aligned primary end point. Topline data from the ARCHER II trial are expected in the second half of 2026. Plans for a Phase 3 injection-controlled study, ARROW, to assess the prevention of ≥15-letter loss of BCVA, are also ongoing. ANX007 has been granted Fast Track designation from the FDA and is the first therapeutic candidate for the treatment of GA to receive Priority Medicine, or PRIME, designation by the EMA, which provides early and proactive support to developers of promising medicines that may offer a major therapeutic advantage over existing treatments or benefit to patients without treatment options. • ANX1502 for Autoimmune Indications: We are advancing ANX1502, a novel oral small molecule inhibitor of classical complement which we believe is first-in-kind. In a Phase 1 single-ascending dose, or SAD, and multiple-ascending dose, or MAD, clinical trial in healthy volunteers, ANX1502 was generally well tolerated with no serious adverse events, achieved target levels of active drug and showed supportive impact on a pharmacodynamic (PD) biomarker of complement activity. We have completed a bridging study from liquid to a tablet formulation of ANX1502 and are on track to advance a proof-of-concept study designed to assess PD in patients with cold agglutinin disease, or CAD, with data expected in the fourth quarter of 2024. We were incorporated in March 2011 and commenced operations later that year. To date, we have focused primarily on performing research and development activities, hiring personnel and raising capital to support and expand these activities. We do not have any products approved for sale, and we have not generated any revenue from product sales. We have incurred net losses each year since our inception. Our net losses were $29.6 million and $35.2 million for the three months ended June 30, 2024 and 2023, respectively, and $54.8 million and $73.9 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $627.3 million and cash and cash equivalents and short-term investments of $368.7 million. 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 commercial materials to support any biologics license applications (BLA) to the FDA; 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 18 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. We expect our future research and development expenses to vary substantially for the foreseeable future as we continue to prioritize our pipeline opportunities, advance our product candidates through clinical trials, invest in next generation development, pursue regulatory approval of our product candidates, and hire 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 for the foreseeable future to remain relatively flat as we continue to support our research and development activities, grow our business, advance our product candidates toward regulatory approval and commercialization activities, and operate as a public company. Interest and Other Income, Net Interest and other income, net, primarily consists of interest income earned on our cash equivalents and short-term investments. Results of Operations Comparison of the Three Months Ended June 30, 2024 and 2023 The following tables summarize our results of operations for the periods presented: Three Months Ended June 30, 2024 2023 Dollar Change % Change (in thousands) Operating expenses: Research and development $ 25,026 $ 30,251 $ (5,225 ) (17 %) General and administrative 8,554 7,440 1,114 15 % Total operating expenses 33,580 37,691 (4,111 ) (11 %) Loss from operations (33,580 ) (37,691 ) 4,111 (11 %) Interest and other income, net 3,970 2,503 1,467 59 % Net loss $ (29,610 ) $ (35,188 ) $ 5,578 (16 %) 19 Research and Development Expenses Three Months Ended June 30, 2024 2023 Dollar Change % Change (in thousands) Direct costs: Clinical and nonclinical outside services $ 7,905 $ 11,894 $ (3,989 ) (34 %) Consulting and professional services 3,835 2,575 1,260 49 % Contract manufacturing 2,970 5,287 (2,317 ) (44 %) Laboratory supplies and materials 161 607 (446 ) (73 %) Indirect costs: Compensation and personnel-related (including stock-based compensation) 8,158 8,405 (247 ) (3 %) Facilities and depreciation 1,770 1,231 539 44 % Other 227 252 (25 ) (10 %) Total research and development expenses $ 25,026 $ 30,251 $ (5,225 ) (17 %) Research and development expenses decreased by $5.2 million, or 17%, for the three months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily due to a decrease of $4.0 million in direct clinical and nonclinical outside services costs due to completion of the Phase 2 ARCHER trial in GA in 2023, a decrease of $2.3 million in contract manufacturing expenses for ANX005, a decrease of $0.4 million in laboratory supplies and materials, and a decrease of $0.2 million in compensation and personnel-related expenses due to a decrease in headcount, partially offset by an increase of $1.3 million in consulting and professional services, and an increase of $0.5 million in facilities related costs due to completion of sublease agreement. General and Administrative Expenses Three Months Ended June 30, 2024 2023 Dollar Change % Change (in thousands) Compensation and personnel-related (including stock-based compensation) $ 4,324 $ 4,267 $ 57 1 % Consulting and professional services 3,089 2,397 692 29 % Facilities and depreciation 637 419 218 52 % Other 504 357 147 41 % Total general and administrative expenses $ 8,554 $ 7,440 $ 1,114 15 % General and administrative expenses increased by $1.1 million, or 15%, for the three months ended June 30, 2024 compared to the same period in 2023. The increase was primarily due to an increase of $0.7 million in consulting and professional services costs for business development and market research, and an increase of $0.2 million in facilities related costs. Interest and other income, net Interest and other income, net, increased by $1.5 million, or 59%, for the three months ended June 30, 2024 compared to the same period in 2023. The increase was primarily due to higher average cash balance and favorable interest rates. 20 Comparison of the Six Months Ended June 30, 2024 and 2023 The following tables summarize our results of operations for the periods presented: Six Months Ended June 30, 2024 2023 Dollar Change % Change (in thousands) Operating expenses: Research and development $ 45,989 $ 62,596 $ (16,607 ) (27 %) General and administrative 16,163 16,337 (174 ) (1 %) Total operating expenses 62,152 78,933 (16,781 ) (21 %) Loss from operations (62,152 ) (78,933 ) 16,781 (21 %) Interest and other income, net 7,366 5,069 2,297 45 % Net loss $ (54,786 ) $ (73,864 ) $ 19,078 (26 %) Research and Development Expenses Six Months Ended June 30, 2024 2023 Dollar Change % Change (in thousands) Direct costs: Clinical and nonclinical outside services $ 14,611 $ 23,092 $ (8,481 ) (37 %) Consulting and professional services 6,061 4,586 1,475 32 % Contract manufacturing 4,728 13,531 (8,803 ) (65 %) Laboratory supplies and materials 318 1,025 (707 ) (69 %) Indirect costs: Compensation and personnel-related (including stock-based compensation) 16,331 17,373 (1,042 ) (6 %) Facilities and depreciation 3,457 2,475 982 40 % Other 483 514 (31 ) (6 %) Total research and development expenses $ 45,989 $ 62,596 $ (16,607 ) (27 %) Research and development expenses decreased by $16.6 million, or 27%, for the six months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily due to a decrease of $8.8 million in contract manufacturing expenses for ANX005, a decrease of $8.5 million in direct clinical and nonclinical outside services costs due to completion of the Phase 2 ARCHER trial in GA in 2023, a decrease of $1.0 million in compensation and personnel-related expenses due to a decrease in headcount, and a decrease in $0.7 million of laboratory supplies and materials, partially offset by an increase of $1.4 million in consulting and professional services, and an increase of $1.0 million in facilities related costs due to completion of sublease agreement. General and Administrative Expenses Six Months Ended June 30, 2024 2023 Dollar Change % Change (in thousands) Compensation and personnel-related (including stock-based compensation) $ 8,285 $ 8,639 $ (354 ) (4 %) Consulting and professional services 5,641 5,986 (345 ) (6 %) Facilities and depreciation 1,313 935 378 40 % Other 924 777 147 19 % Total general and administrative expenses $ 16,163 $ 16,337 $ (174 ) (1 %) General and administrative expenses decreased by $0.2 million, or 1%, for the six months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily due to a decrease of compensation and personnel-related expenses of $0.4 million due 21 to a decrease in headcount, and a decrease of $0.3 million in consulting and professional services costs, partially offset by an increase in $0.4 million in facilities related costs due to completion of sublease agreement. Interest and other income, net Interest and other income, net, increased by $2.3 million, or 45%, for the six months ended June 30, 2024 compared to the same period in 2023. The increase was primarily due to higher average cash balance and favorable interest rates. 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. As of June 30, 2024, we had available cash and cash equivalents and short-term investments of $368.7 million and an accumulated deficit of $627.3 million. Historical Cash Flows Six Months Ended June 30, 2024 2023 (in thousands) Net cash used in operating activities $ (49,976 ) $ (69,374 ) Net cash (used in) provided by investing activities (173,883 ) 25,048 Net cash provided by financing activities 156,064 17,926 Decrease in cash, cash equivalents and restricted cash $ (67,795 ) $ (26,400 ) Cash Flows from Operating Activities Cash used in operating activities for the six months ended June 30, 2024 was $50.0 million, which consisted of a net loss of $54.8 million and a net change of $3.6 million in our operating assets and liabilities, partially offset by $8.4 million in non-cash charges. The non-cash charges consisted of stock-based compensation of $9.6 million, depreciation and amortization of $1.1 million, reduction in the carrying amount of right-of-use assets of $0.6 million, partially offset by accretion of discount on available-for-sale securities of $2.9 million. Cash used in operating activities for the six months ended June 30, 2023 was $69.4 million, which consisted of a net loss of $73.9 million and a net change of $4.7 million in our operating assets and liabilities, partially offset by $9.2 million in non-cash charges. The non-cash charges consisted of stock-based compensation of $9.3 million, depreciation and amortization of $1.1 million, reduction in the carrying amount of right-of-use assets of $0.5 million, partially offset by accretion of discount on available-for-sale securities of $1.7 million. Cash Flows from Investing Activities Cash used in investing activities for the six months ended June 30, 2024 was $173.9 million, which consisted of $266.2 million of purchases of available-for-sale securities, partially offset by $92.3 million of proceeds from maturities of available-for-sale securities. Cash provided by investing activities for the six months ended June 30, 2023 was $25.0 million, which consisted of $95.1 million of proceeds from maturities of available-for-sale securities, partially offset by $69.9 million of purchases of available-for-sale securities and $0.2 million of equipment purchases. Cash Flows from Financing Activities Cash provided by financing activities for the six months ended June 30, 2024 was $156.1 million, which consisted of $116.8 million of net proceeds from the issuance of common stock and pre-funded warrants under our 2024 financing, $38.4 million of net proceeds from the issuance of common stock under our 2021 ATM program and $0.6 million of proceeds from the exercise of common stock options and employee stock purchase plan purchases. 22 Cash provided by financing activities for the six months ended June 30, 2023 was $17.9 million, which consisted of $17.5 million of net proceeds from the issuance of common stock to a related party under our at-the-market offering program and $0.4 million of proceeds from the exercise of common stock options and employee stock purchase plan purchases. 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 future research and development expenses to vary substantially for the foreseeable future as we continue to prioritize our pipeline opportunities, advance our product candidates through clinical trials, invest in next generation development, pursue regulatory approval of our product candidates, and hire additional personnel to support our research and development efforts. In addition, we expect our general and administrative expenses for the foreseeable future to remain relatively flat as we continue to advance our research and development activities, grow our business, advance our product candidates toward regulatory approval and commercialization activities, and operate as a public company. 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 feedback from regulators on our clinical trials and 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; • 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 and short-term investments will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2026. We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. 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. 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. 23 2024 Financing In June 2024, we raised net proceeds of approximately $116.8 million after deducting underwriting discounts and offering expenses through the sale of 13,001,120 shares of our common stock, par value $0.001 per share at a price of $6.25 per share and pre-funded warrants to purchase an aggregate of 7,000,000 shares of common stock at a price of $6.249 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each pre-funded warrant. 2023 Financing In December 2023, we raised net proceeds of approximately $117.0 million after deducting underwriting discounts and offering expenses through the sale of 25,035,000 shares of our common stock, par value $0.001 per share at a price of $2.880 per share and pre-funded warrants to purchase an aggregate of 18,379,861 shares of common stock at a price of $2.879 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each pre-funded warrant. We issued an aggregate of 5,243,400 and 965,427 shares of common stock upon cashless and cash exercise of these pre-funded warrants in February 2024 and April 2024, respectively. 2022 Financing In July 2022, we raised net proceeds of approximately $122.5 million after deducting fees and expenses through the sale of an aggregate of 9,013,834 shares of common stock, pre-funded warrants to purchase up to 24,696,206 shares of our common stock and accompanying common warrants to purchase up to 8,427,508 shares of our common stock. The offering price per share and accompanying common warrant was $3.87125 per share and the offering price per pre-funded warrant and accompanying common warrant was $3.87025 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each such pre-funded warrant. The pre-funded warrants remain exercisable until exercised in full. The common warrants have an exercise price of $5.806875 per share and expire on June 30, 2025. Both the pre-funded and common warrants are immediately exercisable, subject to beneficial ownership limitations. We issued an aggregate of 2,582,557 shares of common stock upon the cashless exercise of the pre-funded warrants in March 2023. We issued an aggregate of 19,901 shares of common stock upon the cashless exercise of the common warrants in June 2024. Pre-Funded and Common Warrants The following summarizes warrant activity during the six months ended June 30, 2024 and 2023: Number of Common Warrants Number of Pre-funded Warrants Weighted-Average Exercise Price Balances as of December 31, 2023 8,427,508 40,492,923 Issued — 7,000,000 $ 0.001 Exercised (322,893 ) (6,209,871 ) $ 0.307 Balances as of June 30, 2024 8,104,615 41,283,052 Number of Common Warrants Number of Pre-funded Warrants Weighted-Average Exercise Price Balances as of December 31, 2022 8,427,508 24,696,206 Exercised — (2,583,144 ) $ 0.001 Balances as of June 30, 2023 8,427,508 22,113,062 2024 ATM Program In March 2024, we entered into a sales agreement with TD Cowen, as sales agent, or 2024 ATM program, pursuant to which we may issue and sell shares of our common stock for an aggregate maximum offering of $100.0 million. TD Cowen is entitled to compensation up to 3% of the aggregate gross proceeds for the common stock sold through the 2024 ATM program. As of June 30, 2024, we have not made any sales under the 2024 ATM program. 2021 At-the-Market (ATM) Program In August 2021, we entered into a sales agreement with Cowen and Company LLC, or TD Cowen, as sales agent, pursuant to which we may issue and sell shares of our common stock for an aggregate maximum offering of $100.0 million under an at-the-market offering program, or 2021 ATM program. TD Cowen is entitled to compensation up to 3% of the aggregate gross proceeds for the 24 common stock sold through the 2021 ATM program. During the six months ended June 30, 2024 and 2023, we sold 7,576,067 shares and 2,646,458 shares of common stock, respectively, under the 2021 ATM program for net proceeds of approximately $38.4 million and $17.5 million, respectively, after deducting commissions paid to TD Cowen. As of June 30, 2024 and December 31, 2023, approximately $42.3 million and $82.0 million, respectively, remained available for the offer and sale of shares of common stock under the 2021 ATM program. The Form S-3 registration statement pursuant to which the 2021 ATM Program is registered will expire on August 15, 2024, and no shares of common stock may be sold under the 2021 ATM Program after that date. Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. During the quarter ended June 30, 2024, 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 on Form 10-K for the year ended December 31, 2023. 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. Item 3. Quantitative and Qualitat ive Disclosures About Market Risk Not applicable.