AN2 Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited. AN2 is a clinical-stage biopharmaceutical company developing epetraborole, an oral candidate being studied in a pivotal Phase 2/3 trial for treatment-refractory MAC lung disease. The company has no approved products and has generated no product revenue.
Key financial metrics
| Metric | Q2 2023 | Six months 2023 | Comparable 2022 |
|---|---|---|---|
| Revenue | None reported | None reported | None reported |
| Research and development expense | $13.5 million | $25.5 million | $6.7 million / $12.3 million |
| General and administrative expense | $3.1 million | $7.1 million | $3.6 million / $5.7 million |
| Total operating expenses | $16.6 million | $32.6 million | $10.3 million / $18.0 million |
| Net loss | $15.8 million | $31.1 million | $10.1 million / $17.8 million |
| Net loss per share | $0.81 | $1.60 | $0.53 / $1.74 |
| Operating cash used | Not separately provided | $24.4 million | $16.3 million |
At June 30, cash and cash equivalents were $40.8 million and short-term investments were $54.4 million, totaling $95.3 million. Current assets were $98.2 million and current liabilities $11.2 million. Total liabilities were $11.2 million; the filing reports no debt balance. Stockholders’ equity was $87.8 million, and accumulated deficit was $120.9 million. No meaningful margin measure is applicable because the company had no revenue.
For the six months, investing activities provided $18.8 million net, primarily reflecting investment maturities, while financing activities provided $19.2 million, including $19.1 million net from the ATM offering. Cash and cash equivalents increased $13.6 million to $40.8 million.
Changes versus prior comparable periods
- Q2 operating expenses rose 61% year over year, and net loss increased 56%. For the first half, operating expenses rose 81% and net loss increased 75%.
- First-half R&D expense more than doubled, primarily reflecting increased pre-registration manufacturing, clinical-trial activity, and R&D personnel costs. Q2 R&D increased 102% year over year.
- First-half G&A increased 25%, mainly due to personnel and professional-services costs; Q2 G&A decreased 16%, chiefly reflecting lower D&O insurance premiums.
- Other income increased to $1.5 million for the first half, compared with $0.2 million in 2022, largely reflecting interest and investment income.
- The company sold 2.5 million shares through its ATM program in the first half, raising $19.1 million net. Shares outstanding increased from 19.4 million at December 31, 2022 to 21.9 million at June 30, 2023.
Outlook, commentary, risks, and unusual items
- Management said available cash, cash equivalents, and investments were expected to fund planned operations through the end of 2024. The filing also cautions that substantial additional funding will be needed and that financing may not be available on acceptable terms.
- The pivotal EBO-301 trial had more than 90 active sites. Management reported improved enrollment activity, said the screening pool was sufficient to complete Phase 2 enrollment and begin Phase 3 enrollment by the end of Q3 2023, and anticipated Phase 2 top-line data in summer 2024. These are forward-looking expectations, not reported outcomes.
- Management cited post-COVID clinical-site staffing shortages and earlier-than-projected slow U.S. enrollment, along with potential supply-chain, labor, inflation, interest-rate, currency, and geopolitical impacts.
- Manufacturing of epetraborole API registration batches had begun, with completion expected later in 2023. Enrollment was complete in the EBO-104 thorough-QT study; a hepatic-impairment study was anticipated the following year.
- In July 2023, after quarter-end, NIAID exercised an option adding $0.7 million to the contract, bringing total committed funding to $5.0 million. The overall contract allows up to $17.8 million, subject to options and conditions.
- Disclosure controls were deemed ineffective because previously identified material weaknesses in financial-reporting controls remained. Management described remediation efforts, including accounting hires, formalized controls, and an accounting-system upgrade; full remediation could extend beyond December 31, 2023. Management said the weaknesses had not resulted in adjustments to the periods presented.
- No material legal proceedings were reported. Key business risks include clinical-trial failure or delay, patient enrollment, long-term safety and potential bacterial resistance, reliance on single-source third parties, intellectual-property and licensing exposure, and the need for additional capital.
Important facts for investors to verify
- Progress and actual enrollment pace in EBO-301, Phase 2 results timing, and whether regulators will accept the single pivotal trial as sufficient for approval.
- Cash burn, investment balances, and runway relative to trial, manufacturing, and commercialization costs; whether further equity financing will be required and its dilution impact.
- Execution and cost of registration-batch manufacturing, and continued availability and performance of contract manufacturers and clinical vendors.
- Development of the NIAID-funded program and the timing and conditions of any additional contract options.
- Progress toward remediating the material weaknesses and improving disclosure controls.