Business Context and Reporting Period
Company: AnaptysBio, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2016
Business Overview: AnaptysBio is a clinical-stage biotechnology company developing first-in-class antibody product candidates focused on unmet medical needs in inflammation. The company utilizes a proprietary antibody discovery platform based on somatic hypermutation (SHM). Its lead wholly-owned programs are ANB020 (anti-IL-33 for atopic diseases) and ANB019 (anti-IL-36R for rare inflammatory diseases). The company also maintains strategic collaborations with TESARO (immuno-oncology) and Celgene (inflammation).
Key Financial Metrics
| Metric (in thousands) | 2016 | 2015 |
|---|---|---|
| Collaboration Revenue | $16,684 | $17,571 |
| Research & Development Expenses | $15,419 | $17,304 |
| General & Administrative Expenses | $4,290 | $3,589 |
| Net Loss | $(4,259) | $(5,405) |
| Cash and Cash Equivalents (Year End) | $51,232 | $51,684 |
| Total Assets | $62,180 | $56,280 |
| Notes Payable (Long-term) | $13,809 | $4,903 |
| Accumulated Deficit | $(54,923) | $(50,664) |
Note: The company had no product sales revenue in 2016. Revenue is derived from collaboration agreements, milestone payments, and amortization of upfront fees.
Material Changes vs. Prior Period
- Revenue Composition: Total collaboration revenue decreased slightly by $0.9 million (5%) compared to 2015. This was driven by a significant decrease in amortization of upfront payments from TESARO ($6.8 million decrease) and R&D funding ($3.2 million decrease), partially offset by a $7.6 million increase in milestone payments recognized from TESARO and Celgene.
- Operating Expenses: R&D expenses decreased by $1.9 million, primarily due to the recognition of a $7.2 million Australian Research and Development Tax Incentive. This reduction was offset by increased costs for outside services, clinical expenses, and personnel.
- Debt Financing: In December 2016, the company drew an additional $10.0 million in term loans (Term B and Term C), increasing total notes payable from $4.9 million in 2015 to $13.8 million in 2016.
- Warrant Liability: The fair value of preferred stock warrant liabilities increased from $1.5 million to $3.2 million, resulting in a non-cash expense of $0.8 million for the year.
Guidance, Outlook, and Risks
Outlook and Milestones
- ANB020: Phase 1 trials in healthy volunteers are complete. Phase 2a trials in severe adult peanut allergy (US) and atopic dermatitis (UK) are enrolling, with top-line data expected in H2 2017. A Phase 2a trial for eosinophilic asthma is planned for initiation in H1 2017.
- ANB019: Phase 1 trials in Australia are planned for initiation in H1 2017, with data expected in H2 2017. Phase 2 studies for GPP and PPP are targeted for 2018.
- Liquidity: As of December 31, 2016, the company held $51.2 million in cash. Management projected that existing cash and collaboration revenue would fund operations through 2018. Subsequent Event: The company completed an IPO on January 31, 2017, raising approximately $80.2 million in net proceeds.
Risks and Contingencies
- Development Risk: Product candidates are in early clinical stages; failure in clinical trials or inability to obtain regulatory approval would materially harm the business.
- Capital Needs: The company has a history of losses and an accumulated deficit of $54.9 million. Continued funding is required for clinical development.
- Collaboration Dependence: Revenue is heavily dependent on milestones and funding from TESARO and Celgene. Delays in partner programs could impact revenue recognition.
- Regulatory Uncertainty: The company relies on data from Australian clinical trials for US/UK regulatory filings; acceptance of this data by the FDA/MHRA is not guaranteed.
Investor Verification Checklist
- Revenue Recognition: Verify the timing and substance of milestone payments recognized from TESARO and Celgene, as these are contingent on partner performance.
- Cash Runway: Confirm the impact of the January 2017 IPO proceeds on the company's liquidity and ability to fund the planned 2017-2018 clinical milestones.
- Tax Incentive: Validate the collectability and accounting treatment of the $7.2 million Australian R&D tax incentive that significantly reduced 2016 R&D expenses.
- Debt Covenants: Review the terms of the amended Loan and Security Agreement, specifically the interest rates (LIBOR + 6.37% or 7.3%) and repayment schedule starting in 2018.
- Preferred Stock Conversion: Note that all convertible preferred stock was converted to common stock upon the IPO closing in January 2017.