AnaptysBio, Inc. Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2017. The filing is an annual Form 10-K rather than a standalone fourth-quarter filing; fourth-quarter results are included in the quarterly data.
Business context
AnaptysBio is a clinical-stage biotechnology company developing antibody therapies for inflammatory diseases using its proprietary somatic hypermutation antibody-discovery platform. Its lead wholly owned programs are ANB020, an anti-IL-33 antibody targeting atopic dermatitis, peanut allergy and eosinophilic asthma, and ANB019, an anti-IL-36R antibody targeting generalized pustular psoriasis and palmoplantar pustular psoriasis. The company also has partnered programs with TESARO and Celgene.
- ANB020 Phase 2a atopic dermatitis study in 12 patients was completed; management reported proof-of-concept results.
- ANB020 peanut allergy Phase 2a enrollment was completed in 20 patients, with top-line data expected in March 2018.
- ANB020 eosinophilic asthma Phase 2a enrollment was ongoing in 24 patients, with data anticipated in the second quarter of 2018.
- ANB019 Phase 1 results showed favorable safety, pharmacokinetics and pharmacodynamics; Phase 2 studies in GPP and PPP were planned for 2018.
Financial performance and liquidity
| Metric | 2017 | 2016 | Change |
|---|---|---|---|
| Collaboration revenue | $10.0 million | $16.7 million | Down $6.7 million |
| Research and development expense | $29.4 million | $15.4 million | Up $14.0 million |
| General and administrative expense | $9.3 million | $4.3 million | Up $5.0 million |
| Loss from operations | $(28.8) million | $(3.0) million | Loss increased |
| Net loss | $(30.1) million | $(4.3) million | Loss increased |
| Net loss per share | $(1.52) | $(1.62) | Not directly comparable due to IPO and share-count increase |
| Net cash used in operating activities | $(19.4) million | $(9.0) million | Use increased |
- The company generated no product sales revenue. All revenue came from collaboration and license arrangements, including $10.0 million of TESARO milestone revenue in 2017.
- Total operating expenses were $38.8 million, compared with $19.7 million in 2016. The filing does not present a meaningful operating margin because the company remains development-stage and collaboration revenue is milestone-driven.
- Cash, cash equivalents and investments totaled $324.3 million at December 31, 2017, compared with $51.2 million at December 31, 2016.
- Cash provided by financing activities was $292.5 million, primarily from the January 2017 IPO and October-November 2017 follow-on offering. Net IPO proceeds were $80.2 million; net follow-on proceeds were $212.3 million.
- Debt carrying value was $14.4 million, including $6.9 million classified as current. The term loans mature in January 2020, bear interest at the greater of three-month LIBOR plus 6.37% or 7.3%, and had a 7.86% rate at year-end.
- Accumulated deficit was $85.0 million, and stockholders’ equity was $307.6 million at year-end.
Fourth-quarter 2017 data
| Metric | Fourth quarter 2017 |
|---|---|
| Operating loss | $(7.2) million |
| Net loss | $(6.9) million |
| Basic and diluted loss per share | $(0.30) |
Material changes versus the prior comparable period
- Collaboration revenue declined 40% year over year because TESARO research funding and upfront-fee amortization ended after completion of related services in 2016. The 2017 revenue consisted of TESARO milestones; no Celgene revenue was recognized in 2017.
- Research and development expense rose approximately 91%, reflecting higher clinical expenses, preclinical and manufacturing services, personnel costs, and lower Australian tax incentives.
- General and administrative expense more than doubled, primarily due to increased personnel, stock compensation, professional fees and public-company compliance costs.
- Net loss increased substantially as the company expanded clinical development and incurred higher public-company and financing-related costs.
- Cash and investments increased sharply following the IPO and follow-on offering, while preferred stock converted into common stock upon the IPO. Shares outstanding increased to 23.8 million at December 31, 2017 from 2.7 million at December 31, 2016.
- The company adopted accounting guidance affecting stock compensation and restricted cash. It planned to adopt the new revenue standard using the modified retrospective method on January 1, 2018 and did not expect a cumulative catch-up adjustment.
Outlook, commentary and risks
- Management expected research and development expenses and general and administrative expenses to continue increasing as clinical programs advance and public-company obligations expand.
- Existing cash, cash equivalents and investments were expected to fund the current operating plan through the end of 2019, although management cautioned that actual cash usage could be higher than projected and additional financing may be required.
- Development plans depended on regulatory clearances, patient enrollment, clinical results, manufacturing availability and the ability to obtain future funding or collaboration payments.
- ANB020 and ANB019 remained investigational and had not received regulatory approval. Early-stage clinical results may not predict later-stage efficacy or safety.
- The company relied on third-party contract research organizations, clinical sites and manufacturers and had not yet produced cGMP batches of its product candidates.
- Clinical trials conducted outside the United States, particularly in Australia, may not be accepted by the FDA or other regulators without additional studies.
- The company faced substantial competition in atopic dermatitis, asthma, food allergy, psoriasis and antibody therapeutics from larger pharmaceutical and biotechnology companies.
- Collaboration revenue was expected to fluctuate based on the timing of milestones, and collaborators could discontinue or deprioritize partnered programs.
- Intellectual property protection remained uncertain. As of December 31, 2017, the portfolio included 42 issued patents and 84 pending applications, but patents could be challenged, narrowed or invalidated.
- The company had approximately $60.1 million of federal NOL carryforwards and $57.2 million of state NOL carryforwards, which may be limited by ownership changes and Section 382 or 383 restrictions.
- No material legal proceedings were pending, and management reported effective disclosure controls and internal control over financial reporting at year-end.
Important facts for investors to verify
- Whether follow-on clinical data validate the small Phase 2a ANB020 atopic dermatitis results in larger, controlled studies.
- Results and regulatory implications of the ANB020 peanut allergy and eosinophilic asthma trials.
- Timing, enrollment and outcomes of ANB019 Phase 2 studies in GPP and PPP.
- Actual quarterly cash burn and whether the projected funding runway through 2019 remains valid.
- Future milestone timing and the continuing commitment of TESARO, Celgene and other collaborators.
- Debt repayment requirements beginning February 2018 and the effect of variable interest rates.
- Manufacturing scale-up, cGMP readiness and regulatory acceptance of foreign clinical data.
- Potential dilution from equity financings, stock options and warrants, and any limitations on use of tax attributes.