What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-17 compared with 2020-11-16 · 49 added, 114 removed, 134 unchanged (55% of the section changed)

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 final prospectus, dated July 23, 2020, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Prospectus.

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, 2020, included in our Annual Report on Form 10-K, or Annual Report, filed with the Securities and Exchange Commission, or SEC, on March 25, 2021.

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, and Section 21E of the Securities Exchange Act of 1934, as amended, based upon current expectations that involve risks and uncertainties.

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These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements .

We are a clinical-stage biopharmaceutical company developing a pipeline of novel therapies for patients with classical complement-mediated disorders of the brain, body and eye.

We are a clinical-stage biopharmaceutical company developing a pipeline of novel therapies for patients with classical complement-mediated disorders of the body, brain and eye.

Our pipeline is based on our platform technology addressing well-researched classical complement-mediated autoimmune and neurodegenerative disease processes, both of which are triggered by aberrant activation of C1q, the initiating molecule of the classical complement pathway.

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Both ANX005 and ANX007 were well-tolerated and showed full inhibition of C1q and the classical complement pathway in the Phase 1b trials.

We are advancing ANX005 into multiple Phase 2 trials in 2020 and 2021 including in patients with GBS, warm autoimmune hemolytic anemia, Huntington’s disease and amyotrophic lateral sclerosis.

We plan to advance ANX007 into a Phase 2 trial in patients with GA in 2021.

We have advanced ANX005 into a Phase 2/3 trial in patients with GBS and a Phase 2 trial in patients with Huntington’s disease.

We plan to advance ANX005 into Phase 2 trials in patients with warm autoimmune hemolytic anemia and amyotrophic lateral sclerosis in 2021.

A Phase 2 trial of ANX007 is ongoing in patients with Geographic Atrophy (GA), and ANX009 is being evaluated in a first-in-human trial.

Based on learnings from our initial trials, we are evaluating additional orphan and large market indications that are driven by aberrant or excess classical complement activation.

Additionally, we are developing novel product candidates designed to inhibit C1q and other components of the early classical complement cascade with the goal of further broadening our portfolio.

Finally, we are leveraging our disciplined development strategy in early clinical trials utilizing established biomarkers to enhance patient selection, measure target engagement and assess our product candidates’ potential to meaningfully impact the disease process and improve the probability of technical success over shorter development timelines.

Finally, we are deploying a rigorous, biomarker-driven development strategy designed to improve the probability of technical success over shorter development timelines.

We hold worldwide development and commercialization rights, including through exclusive licenses, to all of our product candidates, which allows us to strategically maximize value from our product portfolio over time.

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We have incurred net losses each year since our inception.

Our net losses were $15.6 million and $10.2 million for the three months ended September 30, 2020 and 2019, respectively, and $40.2 million and $28.2 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, we had an accumulated deficit of $142.8 million and cash and cash equivalents of $370.7 million.

Recent Developments

On July 28, 2020, we completed an initial public offering, or IPO, of our common stock.

Our net losses were $26.0 million and $12.3 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, we had an accumulated deficit of $192.0 million and cash and cash equivalents and short-term investments of $326.7 million.

Initial Public Offering

On July 28, 2020, we completed an IPO of our common stock.

As part of the IPO, we issued and sold 14,750,000 shares of our common stock at a public offering price of $17.00 per share and 2,139,403 shares of our common stock to the underwriters of the IPO pursuant to the partial exercise of their option to purchase additional shares at a price of $17.00 per share less underwriting discounts and commissions.

We received net proceeds of approximately $262.4 million from the IPO, after deducting underwriting discounts and commissions of $20.1 million and offering costs of $4.6 million.

The global COVID-19 pandemic continues to rapidly evolve, and its ultimate impact is highly uncertain and subject to change.

Impact of COVID-19 Pandemic

The COVID-19 pandemic continues to rapidly evolve, and its ongoing impact is uncertain and subject to change.

For instance, we have experienced interruption in clinical trial activities in Bangladesh due to quarantines, shortages in clinical site staff, longer timelines for clinical site initiation and temporary shortages in lab kits and supplies.

We will continue to monitor the COVID-19 situation closely.

The extent of the impact of COVID-19 on our business, operations and clinical development timelines and plans remains uncertain, and will depend on the duration and spread of the outbreak and its impact on our clinical trial enrollment, trial sites, contract research organizations, or CROs, third-party manufacturers, regulatory authorities and other third parties with whom we do business.

The extent of the impact of the COVID-19 pandemic on our business, operations and clinical development timelines and plans remains uncertain, and will depend on the duration of the outbreak and its impact on our clinical trial enrollment, trial sites, contract research organizations, or CROs, third-party manufacturers, regulatory authorities and other third parties with whom we do business.

Components of Operating Results

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We also expect to increase the size of our administrative function to support the growth of our business.

Loss on Remeasurement of Redeemable Convertible Preferred Stock Liability

Loss on remeasurement of redeemable convertible preferred stock liability consists of gains and losses from the remeasurement to fair value of the redeemable convertible preferred stock liability related to our Series C redeemable convertible preferred stock.

We remeasured the liability each reporting period from the date of issuance (December 2018) until the second closing of our Series C redeemable convertible preferred stock which occurred in August 2019.

Other Income, Net

Other income, net, primarily consists of non-recurring income from research grants and interest income earned on our cash equivalents.

Other income, net, primarily consists of non-recurring income from research grants and interest income earned on our cash equivalents and short-term investments.

Results of Operations

Comparison of the Three Months Ended September 30, 2020 and 2019

Comparison of the Three Months Ended March 31, 2021 and 2020

The following tables summarize our results of operations for the periods presented.

Three Months Ended

September 30,

(in thousands)

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Loss from operations

Loss on remeasurement of redeemable convertible preferred

stock liability

Other (expense) income, net

Net loss before taxes

Provision for income taxes

Not meaningful

Other income, net

Research and Development Expenses

Three Months Ended

September 30,

(in thousands)

Direct costs:

Preclinical and clinical outside services

Professional services

Clinical and nonclinical outside services

Consulting and professional services

Contract manufacturing

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Indirect costs:

Compensation and personnel-related (including stock-

based compensation)

Compensation and personnel-related

(including stock-based compensation)

Facilities and depreciation

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Not meaningful

Research and development expenses increased by $4.7 million, or 66%, for the three months ended September 30, 2020 compared to the same period in 2019.

The increase was primarily due to an increase of $2.2 million in direct clinical outside services related to our ongoing and planned clinical trials.

Research and development expenses increased by $10.5 million, or 103%, for the three months ended March 31, 2021 compared to the same period in 2020.

The increase was primarily due to an increase of $3.9 million in direct clinical outside services related to our ongoing and planned clinical trials for ANX005, ANX007 and ANX009 as well as preclinical outside services to support pre-IND activities for our ANX105 and small molecule program.

Contract manufacturing expense increased by $2.2 million related to the production of ANX005 as well as pre-IND manufacturing activities to support ANX105.

Compensation and personnel-related expenses increased by $2.7 million due to an increase in headcount and related employee costs.

Direct professional services costs increased by $0.7 million related to external research and development during the three months ended September 30, 2020.

Direct consulting and professional services costs increased by $1.1 million related to external research and development during the three months ended March 31, 2021.

General and Administrative Expenses

Three Months Ended

September 30,

(in thousands)

Compensation and personnel-related (including stock-based

compensation)

Professional services

Compensation and personnel-related

(including stock-based compensation)

Consulting and professional services

Facilities and depreciation

Total general and administrative expenses

General and administrative expenses increased by $1.8 million, or 92%, for the three months ended September 30, 2020 compared to the same period in 2019.

The increase was primarily due to an increase of $0.9 million in compensation and personnel-related expenses and an increase of $0.8 million in professional services for public company readiness efforts including accounting, legal and audit fees and directors and officers liability insurance required for a public corporation.

Loss on Remeasurement of Redeemable Convertible Preferred Stock Liability

For the three months ended September 30, 2019, we recorded a $1.3 million loss on remeasurement of redeemable convertible preferred stock liability related to the change in the fair value of the liability.

The liability was recognized in connection with the initial closing of our Series C redeemable convertible preferred stock financing in December 2018 and was settled upon completion of the second closing in August 2019.

Other (Expense) Income, Net

Other (expense) income, net, decreased by $0.3 million for the three months ended September 30, 2020 compared to the same period in 2019.

The decrease in other income was primarily driven by $0.2 million grant received in 2019 and lower interest income in 2020.

Comparison of the Nine Months Ended September 30, 2020 and 2019

The following tables summarize our results of operations for the periods presented.

Nine Months Ended

September 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Loss on remeasurement of redeemable convertible preferred

stock liability

Other income, net

Net loss before taxes

Provision for income taxes

Not meaningful

Research and Development Expenses

Nine Months Ended

September 30,

(in thousands)

Direct costs:

Preclinical and clinical outside services

Professional services

Contract manufacturing

Laboratory supplies and materials

Indirect costs:

Compensation and personnel-related (including stock-

based compensation)

Facilities and depreciation

Total research and development expenses

Research and development expenses increased by $13.6 million, or 76%, for the nine months ended September 30, 2020 compared to the same period in 2019.

The increase was primarily due to an increase of $5.1 million in direct preclinical and clinical outside services primarily related to our ongoing and planned clinical trials and toxicology studies to support ANX009 and our next generation candidates.

Compensation and personnel-related expenses increased by $4.1 million due to an increase in headcount and related employee costs.

Contract manufacturing expenses increased by $2.9 million primarily related to the manufacturing of ANX005 and pre-IND activities for our next generation candidates.

In addition, professional services increased by $1.3 million due to an increase in external research and development.

General and Administrative Expenses

Nine Months Ended

September 30,

(in thousands)

Professional services

Compensation and personnel-related (including stock-based

compensation)

Facilities and depreciation

Total general and administrative expenses

General and administrative expenses increased by $3.3 million, or 59%, for the nine months ended September 30, 2020 compared to the same period in 2019.

The increase was primarily due to $2.1 million in professional services for public company readiness efforts including accounting, legal and audit fees and directors and officers liability insurance required for a public corporation.

Compensation and personnel-related expenses increased by $0.9 million primarily due to an increase in headcount and related employee costs.

Loss on Remeasurement of Redeemable Convertible Preferred Stock Liability

For the nine months ended September 30, 2019, we recorded a $5.7 million loss on remeasurement of redeemable convertible preferred stock liability related to the change in the fair value of the liability.

Other Income, Net

Other income, net, decreased by $0.8 million, or 92%, for the nine months ended September 30, 2020 compared to the same period in 2019.

In the nine months ended September 30, 2019, we had received $0.2 million under the Sponsored Research Agreement for a new therapeutic agent, ANX005, which was recorded as other income.

The remaining $0.6 million decrease was primarily driven by $0.2 million grant received in 2019 as well as lower interest income in 2020.

General and administrative expenses increased by $3.2 million, or 144%, for the three months ended March 31, 2021 compared to the same period in 2020.

The increase was primarily due to an increase of $1.6 million in compensation and personnel-related expenses due to an increase in headcount and an increase of $1.3 million in consulting and professional services for accounting, legal and audit fees, and directors and officers liability insurance.

Liquidity and Capital Resources

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We have funded our operations primarily through the sale of equity securities.

From our inception through September 30, 2020, we have raised net cash proceeds of $233.9 million from private placements of our redeemable convertible preferred stock and $262.4 million from the IPO of our common stock.

As of September 30, 2020, we had available cash and cash equivalents of $370.7 million and an accumulated deficit of $142.8 million.

From our inception through March 31, 2021, we have raised net cash proceeds of $233.9 million from private placements of our redeemable convertible preferred stock and $262.4 million from the IPO of our common stock.

As of March 31, 2021, we had available cash and cash equivalents and short-term investments of $326.7 million and an accumulated deficit of $192.0 million.

Historical Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

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Cash used in investing activities

Cash provided by financing activities

Net increase in cash and cash equivalents

Cash provided by (used in) financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash Flows from Operating Activities

Cash used in operating activities for the nine months ended September 30, 2020 was $33.8 million, which consisted of a net loss of $40.2 million, partially offset by $3.3 million in non-cash charges and a net change of $3.1 million in our net operating assets and liabilities.

Cash used in operating activities for the three months ended March 31, 2021 was $23.4 million, which consisted of a net loss of $26.0 million, partially offset by $3.7 million in non-cash charges and a net change of $1.1 million in our net operating assets and liabilities.

The non-cash charges consisted of stock-based compensation of $3.0 million, depreciation and amortization of $0.5 million, and accretion of discount on available-for sale securities of $0.2 million.

Cash used in operating activities for the three months ended March 3 1, 202 0 was $ 10.0 million, which consisted of a net loss of $ 12.3 million, partially offset by $ 0.8 million in non-cash charges and a net change of $ 1.5 million in our net operating assets and liabilities.

The non-cash charges consisted of stock-based compensation of $ 0.7 million and depreciation and amortization of $ 0.1 million.

Cash used in operating activities for the nine months ended September 30, 2019 was $19.6 million, which consisted of a net loss of $28.2 million, partially offset by $7.5 million in non-cash charges and a net change of $1.1 million in our net operating assets and liabilities.

The non-cash charges consisted of the loss on remeasurement of the redeemable convertible preferred stock liability of $5.7 million, stock-based compensation of $1.5 million and depreciation and amortization of $0.3 million.

Cash Flows from Investing Activities

Cash used in investing activities for the nine months ended September 30, 2020 and 2019 was $0.3 million and $0.2 million, respectively, related to purchases of property and equipment.

Cash used in investing activities for the three months ended March 31, 2021 was $37.6 million, which consisted of $42.5 million of purchases of available-for-sale securities and $5.0 million of maturities of available-for-sale securities.

There were no investing activities as of March 31, 2020.

Cash Flows from Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2020 was $360.9 million, which consisted of the net proceeds of $262.4 million from the IPO, net of underwriting discounts and expenses, the net proceeds received from sale and issuance of our Series D redeemable convertible preferred stock of approximately $96.8 million, and proceeds of $0.5 million from Paycheck Protection Program loan, partially offset by repayment of the $0.5 million Paycheck Protection Program loan.

Cash provided by financing activities for the nine months ended September 30, 2019 was $29.2 million, which consisted of net proceeds received from the second closing of our Series C redeemable convertible preferred stock of $30.0 million in August 2019, partially offset by payments for deferred offering costs of $0.8 million.

Cash provided by financing activities for the three months ended March 31, 2021 was $0.3 million, related to proceeds from issuance of common stock.

Cash used in financing activities for the three months ended March 31, 2020 was $0.6 million, related to payments for deferred offering costs.

Funding Requirements

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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, including our planned clinical trials of ANX005, ANX007, and ANX009;

the timing of, and the costs involved in, obtaining regulatory approvals for our lead product candidates or any future product candidates;

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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 su ch agreement;

any product liability or other lawsuits related to our products;

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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.

Contractual Obligations and Other Commitments

During the nine months ended September 30, 2020, there have been no material changes outside the ordinary course of business to our contractual obligations from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Prospectus.

Off-Balance Sheet Arrangements

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Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have elected to use this extended transition period to enable us to get comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

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Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

During the nine months ended September 30, 2020, there were no material changes to our critical accounting polici es 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 the Prospectus.

During the three months ended March 31, 2021, 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.

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.

Quantitative and Qualitat ive Disclosures About Market Risk

Not required for the Company as a smaller reporting company.

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-Q

Item 2. Management’s Discussion and Analysis