AN2 Therapeutics, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 29, 2024. This is an annual report, not a standalone fourth-quarter report. AN2 is a clinical-stage biopharmaceutical company with no approved products and no product revenue.
Business context and key developments
The company’s lead candidate, oral epetraborole, is being developed for treatment-refractory Mycobacterium avium complex (MAC) lung disease. In February 2024, after the reporting period, AN2 voluntarily paused new enrollment in the Phase 3 portion of its Phase 2/3 EBO-301 trial following a blinded aggregate analysis suggesting potentially lower-than-expected efficacy. The pause was not due to safety concerns. Existing participants continued treatment and assessments; topline Phase 2 data were expected in August 2024.
Other programs include AN2-502998 for chronic Chagas disease, epetraborole development for melioidosis, and research into tuberculosis and malaria. The company reported 41 full-time employees as of February 29, 2024.
Financial performance and liquidity
| Metric | FY2023 / Dec. 31, 2023 | FY2022 / Dec. 31, 2022 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $54.9 million | $29.5 million |
| General and administrative expense | $14.8 million | $12.8 million |
| Total operating expenses | $69.6 million | $42.3 million |
| Loss from operations | $(69.6) million | $(42.3) million |
| Other income, net | $4.9 million | $1.3 million |
| Net loss | $(64.7) million | $(41.0) million |
| Net loss per share, basic and diluted | $(2.74) | $(2.79) |
| Cash and cash equivalents | $15.6 million | $27.2 million |
| Short- and long-term investments | $118.8 million | $72.1 million |
| Cash, cash equivalents and investments | $134.5 million | $99.3 million |
| Total assets | $138.7 million | $102.6 million |
| Total liabilities | $14.0 million | $7.2 million |
| Stockholders’ equity | $124.7 million | $95.4 million |
Net cash used in operating activities was $53.3 million in 2023, versus $33.5 million in 2022. Investing activities used $43.3 million, primarily reflecting purchases of investments net of maturities; financing activities provided $85.0 million. The company reported no debt in the balance sheet figures presented. Gross and operating margins are not meaningful because AN2 had no product revenue.
Management said available cash and investments were expected to fund planned operations for at least 12 months following the filing date. The independent auditor’s report includes an emphasis-of-matter paragraph noting the need for additional financing.
Changes, outlook, risks and unusual items
- Net loss increased by $23.8 million, or 58%, year over year. R&D expense rose by $25.4 million, primarily due to higher Phase 2/3 trial costs, personnel, pre-registration manufacturing and consulting costs. Higher investment income partly offset the increased operating loss.
- AN2 raised $19.1 million net through its at-the-market program and $65.5 million net through an August 2023 underwritten offering. The offerings increased common shares outstanding from 19.4 million at year-end 2022 to 29.7 million at year-end 2023.
- Management expects substantial future losses and negative operating cash flows, and anticipates needing additional funding. Financing may not be available on acceptable terms; inability to raise capital could delay, reduce or end development programs.
- Key development uncertainty is the EBO-301 pause and the possibility that efficacy data, trial design or regulatory feedback may not support completion or approval. The company planned further data review and an FDA discussion in the months after filing; resumption of enrollment was not assured.
- Other risks include dependence on epetraborole, clinical and regulatory failure, patient enrollment, drug resistance and long-term safety, reliance on single-source contract research and manufacturing providers, competition, and substantial reliance on in-licensed intellectual property. The last-to-expire licensed epetraborole patent claim was disclosed as June 2028, subject to potential extensions and other exclusivities.
- Government and foundation funding partly offsets research costs: AN2 recognized $2.5 million of reimbursements/grant income as a reduction of operating expenses in 2023. NIAID had committed $5.0 million under a contract that could provide up to $17.8 million if options are exercised; the full amount was not committed.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2023 due to material weaknesses in staffing/control environment, period-end reporting and IT general controls. The complex-transaction accounting weakness was remediated; the remaining weaknesses were not, and full remediation was expected to extend beyond December 31, 2024. The auditor did not attest to internal control effectiveness.
- No material legal proceedings were reported. No income tax expense was recorded; deferred tax assets were fully offset by a valuation allowance.
Important facts for investors to verify
- Whether the EBO-301 Phase 2 data support further development, whether Phase 3 enrollment resumes, and what the FDA requires.
- Current cash, investment balances and cash-burn trajectory, including how the clinical pause or any revised trial plan affects runway and financing needs.
- Status and terms of future equity or other financing, including potential dilution.
- Progress in remediating the remaining internal-control weaknesses and whether subsequent filings report further deficiencies or adjustments.
- Reliability and continuity of outsourced clinical, manufacturing and supply arrangements, and the conditions and remaining availability of non-dilutive funding.