Annexon, Inc. annual report, FY2022

Annexon, Inc. — Fiscal 2022 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2022. The filing is an annual Form 10-K rather than a standalone fourth-quarter report; quarterly Q4 results are not separately presented in the supplied text.

Business context

Annexon is a clinical-stage biopharmaceutical company developing complement-pathway medicines targeting C1q or related components of the classical complement pathway. The company has no approved products and has not generated product revenue. Its programs address autoimmune, neurodegenerative and ophthalmic diseases, led by ANX005 for Guillain-Barré syndrome and Huntington’s disease, ANX007 for geographic atrophy, and ANX1502 for autoimmune indications.

Financial performance and liquidity

Metric	2022	2021	Change
Revenue	$0	$0	No product revenue
Research and development expense	$112.5 million	$100.1 million	Up 12%
General and administrative expense	$33.1 million	$30.6 million	Up 8%
Total operating expenses	$145.6 million	$130.7 million	Up 11%
Interest and other income, net	$3.7 million	$0.4 million	Up $3.3 million
Net loss	$141.9 million	$130.3 million	Loss increased 9%
Net loss per share	$2.60	$3.40	Improved due primarily to higher share count
Net cash used in operating activities	$116.3 million	$106.1 million	Use increased $10.2 million

Because Annexon has no revenue, gross margin and operating margin are not meaningful. The company reported an operating loss of $145.6 million and an accumulated deficit of $438.3 million at December 31, 2022.

Cash and cash equivalents: $140.0 million.
Short-term investments: $102.6 million.
Cash, cash equivalents and short-term investments: approximately $242.7 million.
Total assets: $285.1 million; total liabilities: $53.9 million; stockholders’ equity: $231.2 million.
Operating lease liabilities totaled $32.9 million, including $1.3 million current and $31.5 million non-current.
Management expects existing capital resources to fund planned operating expenses and capital requirements into 2025, although the estimate depends on assumptions that may change.
The company had no traditional debt financing disclosed; its principal financing has been equity-based.

Cash flow and financing

Operating cash use increased to $116.3 million from $106.1 million, reflecting higher research and development spending and continued clinical development.
Investing activities provided $58.4 million, primarily because maturities of available-for-sale securities exceeded purchases; the company also spent $6.5 million on property and equipment.
Financing activities provided $122.9 million, primarily from the July 2022 private placement.
The July 2022 private placement generated approximately $122.5 million of net proceeds from common stock, pre-funded warrants and common warrants.
As of December 31, 2022, 24.7 million pre-funded warrants and 8.4 million common warrants remained outstanding. The common warrants have a $5.806875 exercise price and expire June 30, 2025.
In February 2023, a director-related entity purchased 2.65 million shares through the company’s ATM program, generating approximately $17.5 million of net proceeds.

Material changes versus 2021

Research and development expense rose $12.4 million, primarily from higher clinical and nonclinical outside services across multiple programs. Contract manufacturing expense declined $4.2 million after completion of prior-year ANX005 production runs.
Research and development personnel-related expense increased $5.3 million, reflecting higher headcount. General and administrative personnel-related expense increased $3.5 million, including a $2.0 million increase in stock-based compensation.
Interest and other income increased substantially because of higher cash and investment balances and higher interest rates.
Common shares outstanding increased to 47.7 million from 38.6 million, while weighted-average shares used for loss per share increased to 54.7 million from 38.3 million, reflecting the private placement and inclusion of pre-funded warrants in the per-share calculation.
Stockholders’ equity remained broadly stable at $231.2 million versus $231.9 million despite the larger annual loss, primarily because of the private placement.

Clinical outlook, commentary and risks

ANX005 in GBS: Phase 3 enrollment was expected to increase to approximately 220 patients, with enrollment completion anticipated in the second half of 2023 and data anticipated in the first half of 2024. ANX005 has FDA Orphan Drug and Fast Track designations for GBS.
ANX005 in Huntington’s disease: The company reported generally favorable Phase 2 results and planned to advance into a randomized, placebo-controlled Phase 2/3 trial in 2023. The reported benefit was particularly observed in patients with higher baseline complement activity; the study was open-label and relatively small.
ANX007 in geographic atrophy: Phase 2 enrollment of approximately 270 patients was completed in early 2022. Treatment-period data were expected in mid-2023, with additional data after the six-month off-treatment period expected by year-end 2023. ANX007 has FDA Fast Track designation for GA.
ANX1502: The Phase 1 SAD/MAD program in healthy volunteers was ongoing. The company planned a CAD proof-of-concept study in 2023 and potential expansion into multifocal motor neuropathy in the first half of 2024.
Additional programs: Phase 2a ALS enrollment, Phase 1b lupus nephritis enrollment and Phase 1 ANX105 enrollment were ongoing, with data expected during 2023. Preliminary ALS data from eight patients showed reduced NfL and slower progression during treatment, followed by increased progression off treatment.
The company expects research and development and general and administrative expenses to increase substantially as programs advance, trials expand and regulatory activities continue.
Key risks include clinical-trial failure or delay, uncertain translation of preliminary biomarker results into clinical benefit, adverse events from novel upstream complement inhibition, regulatory requirements, reliance on contract manufacturers and clinical research organizations, competition, intellectual-property challenges, dilution from future equity issuance and the need for additional financing.
The Phase 3 GBS trial is being conducted outside the United States, creating additional risks concerning patient enrollment, trial execution and possible regulatory acceptance of foreign clinical data.
The company has no material legal proceedings disclosed and no off-balance-sheet arrangements.

Most important facts for investors to verify

Whether the company’s cash runway remains sufficient to reach 2025 after incorporating subsequent financing, clinical-trial costs and changes to operating plans.
Enrollment progress, protocol details and eventual results of the pivotal ANX005 GBS trial.
Whether the planned ANX005 HD Phase 2/3 trial proceeds and whether the small, open-label Phase 2 findings are confirmed in a controlled study.
ANX007 GA treatment-period and off-treatment results, including evidence of clinically meaningful slowing of lesion growth rather than biomarker-only effects.
Whether preliminary ALS findings are replicated in the full dataset and whether off-treatment disease progression affects the risk-benefit assessment.
The potential dilution from 24.7 million pre-funded warrants, 8.4 million common warrants, stock options, restricted stock units and future ATM or other equity offerings.
Manufacturing capacity, supply continuity and regulatory compliance of third-party suppliers as programs move toward larger trials.
Patent scope and expiration, including the licensed Stanford patents that expire between 2026 and 2030 and company-owned patents with stated expirations generally extending into 2034–2043.