AnaptysBio, Inc. — Form 10-Q Summary
Business context and reporting period
AnaptysBio is a clinical-stage biotechnology company developing antibody product candidates for inflammatory diseases using its proprietary antibody discovery platform. The filing covers the quarter and six months ended June 30, 2018. The company had no approved products or product sales and generated revenue primarily from collaboration milestones, research funding and licensing arrangements.
- Lead programs included etokimab for atopic dermatitis, eosinophilic asthma and chronic rhinosinusitis with nasal polyps, and ANB019 for generalized pustular psoriasis and palmoplantar pustulosis.
- Collaborators included TESARO and Celgene; no collaboration revenue was recognized in the 2018 periods.
Financial performance and liquidity
| Metric | Three months ended June 30, 2018 | Three months ended June 30, 2017 | Six months ended June 30, 2018 | Six months ended June 30, 2017 |
|---|---|---|---|---|
| Collaboration revenue | $0 | $7.0 million | $0 | $7.0 million |
| Research and development expense | $10.6 million | $7.2 million | $22.4 million | $15.1 million |
| General and administrative expense | $3.8 million | $2.4 million | $7.8 million | $4.4 million |
| Net loss | $13.6 million | $2.7 million | $28.7 million | $14.1 million |
| Net loss per share | $0.57 | $0.13 | $1.20 | $0.79 |
| Net cash used in operating activities | Not separately provided | Not separately provided | $21.4 million | $10.7 million |
- Operating loss was $14.4 million for the quarter and $30.2 million for the six months ended June 30, 2018. Profit margins are not meaningful because the company had no revenue in the 2018 periods.
- Interest income was $1.3 million for the quarter and $2.5 million for the six months, reflecting the company’s substantial investment portfolio. Interest expense was $0.4 million and $0.9 million, respectively.
- Cash, cash equivalents and investments totaled approximately $300.6 million at June 30, 2018, compared with $324.3 million at December 31, 2017.
- Cash, cash equivalents and restricted cash declined by $24.1 million during the first six months of 2018.
- Notes payable had a carrying value of $11.6 million, including $7.5 million classified as current. The loans bear interest at 8.69% as of June 30, 2018, have an effective interest rate of 13.08%, and mature in January 2020. The company was in compliance with its debt covenants.
- Accumulated deficit was $113.7 million at June 30, 2018, and stockholders’ equity was $285.0 million.
Material changes versus the prior comparable period
- Revenue declined by $7.0 million in both the quarter and year-to-date periods because TESARO milestone revenue recognized in 2017 did not recur.
- Research and development expense increased 47% for the quarter and 48% year to date, driven primarily by higher clinical, preclinical, manufacturing, salary and stock-based compensation costs.
- General and administrative expense increased 63% for the quarter and 77% year to date, primarily due to higher personnel, professional, legal, audit and compliance costs associated with operating as a public company.
- Net loss more than quadrupled for the quarter and approximately doubled year to date, reflecting the loss of collaboration revenue and increased operating spending.
- Operating cash use nearly doubled year to date, while 2017 financing cash flow benefited from the company’s $80.2 million IPO proceeds. No public offering proceeds were received in the 2018 period.
- Interest income increased materially as a result of larger cash and investment balances following the 2017 public offerings.
Guidance, outlook, commentary and risks
- Management expected research and development expense to increase as clinical programs advance and additional trials begin. General and administrative expense was also expected to rise because of public-company compliance, legal, audit, insurance and intellectual-property costs.
- Management stated that existing cash, cash equivalents and investments were expected to fund the current operating plan through the end of 2019, although actual spending could exceed expectations and additional financing may be required.
- Top-line data were anticipated during the third quarter of 2018 for the approximately 24-patient etokimab Phase 2a eosinophilic asthma trial.
- The 300-patient ATLAS Phase 2b atopic dermatitis trial was underway, with data expected in the second half of 2019. The company also planned the ECLIPSE Phase 2 trial in chronic rhinosinusitis with nasal polyps by the end of 2018, with data expected in the second half of 2019.
- ANB019 was advancing into Phase 2 studies for generalized pustular psoriasis and palmoplantar pustulosis, with certain data expected in early 2019 or the second half of 2019.
- The company deprioritized company-sponsored development of etokimab in peanut allergy because of market-adoption concerns regarding the peanut oral food challenge.
- Key risks include clinical-trial failure or delay, limited human safety and efficacy data, regulatory setbacks, manufacturing and third-party contractor dependence, competition, intellectual-property challenges, uncertain collaborator decisions and the need for additional capital.
- The company reported no material pending legal proceedings, no off-balance-sheet arrangements and effective disclosure controls at June 30, 2018.
- Operating lease commitments totaled approximately $3.0 million through 2021, including a new three-year sublease for additional office space.
Important facts for investors to verify
- Whether upcoming clinical readouts support continued development of etokimab and ANB019, particularly the larger ATLAS study following small early-stage trials.
- The rate of cash burn relative to the projected funding runway through the end of 2019.
- The timing and probability of future milestone payments from TESARO and Celgene, which remain uncertain and are generally constrained from revenue recognition until achievement is sufficiently probable.
- Whether rising clinical, manufacturing and public-company costs require additional equity, debt or partnering transactions and the resulting dilution or obligations.
- The company’s ability to meet the remaining debt payments through the January 2020 maturity while funding its clinical pipeline.
- Potential impact of the Australian tax incentive compliance review and the company’s continued eligibility for the refundable research and development tax credit.