AN2 Therapeutics, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The interim financial statements are unaudited. AN2 is a clinical-stage biopharmaceutical company with no approved products and no product revenue; its lead candidate, epetraborole, is being developed for treatment-refractory MAC lung disease.
Financial highlights
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $6.7 million for Q2; $12.3 million for six months | $4.1 million and $5.7 million, respectively, for 2021 |
| General and administrative expense | $3.6 million for Q2; $5.7 million for six months | $0.9 million and $1.3 million, respectively, for 2021 |
| Net loss | $10.1 million for Q2; $17.8 million for six months | $5.0 million and $7.1 million, respectively, for 2021 |
| Net loss per share | $(0.53) for Q2; $(1.74) for six months | $(2.62) and $(3.70), respectively, for 2021 |
| Operating cash used | $16.3 million for six months | $6.8 million for six months in 2021 |
| Cash, cash equivalents and short-term investments | $113.4 million | $58.6 million at December 31, 2021 |
| Total assets / total liabilities | $120.0 million / $4.2 million | $65.3 million / $3.4 million at December 31, 2021 |
Margins are not meaningful because the company has no revenue. No borrowings or material debt are reported. Cash, cash equivalents and investments including long-term investments totaled $115.8 million at June 30. Management stated available cash and investments should fund its current operating plan for at least 12 months from the filing date.
Changes and financing
- Q2 operating expenses rose 107% year over year; six-month expenses rose 156%. Higher clinical, nonclinical and preclinical activity, increased headcount, and public-company and professional-service costs were the main drivers.
- Six-month net loss increased to $17.8 million from $7.1 million. Operating cash use increased to $16.3 million from $6.8 million.
- The March 2022 IPO and April overallotment generated approximately $70.4 million in net proceeds. Preferred stock converted into common stock immediately before the IPO; shares outstanding were 19.4 million at June 30.
- Investment purchases and maturities resulted in $25.5 million of net investing cash outflow; financing provided $70.4 million. Cash and cash equivalents increased by $28.5 million over the six months.
Outlook, risks and notable items
- Patient enrollment in the Phase 2/3 pivotal trial for treatment-refractory MAC began in June 2022. Management anticipated Phase 2 topline results in mid-2023 and Phase 3 topline results in mid-2024; Phase 3 timing and sample size may change based on Phase 2 results.
- FDA Fast Track and Qualified Infectious Disease Product designations and FDA orphan drug designation were reported. Management believes the pivotal trial design may support U.S. approval, but the filing cautions that FDA may require additional trials; a single pivotal study is not assured to be sufficient.
- Development and financing remain high risk: AN2 expects continued losses and substantial future capital needs, and additional funding may not be available on acceptable terms. Clinical uncertainty includes efficacy, patient enrollment, long-duration safety, and potential bacterial resistance. Prior studies observed dose-related changes in red-blood-cell measures; significance in patients and with longer dosing is uncertain.
- The company relies on third parties for clinical research and manufacturing, including single-source providers. COVID-19 has slowed some preclinical and clinical activities; the Russia-Ukraine conflict could affect shipping costs and European site availability, although no affected trials in Russia or Ukraine were reported.
- Management concluded disclosure controls were not effective at June 30 due to previously identified material weaknesses in staffing, financial close and complex-transaction controls, and IT general controls. Remediation efforts were underway; management said full remediation could extend beyond December 31, 2022. The filing states the presented financial statements fairly represent the company’s condition and results.
- No material legal proceedings were reported. In July 2022, AN2 extended its Menlo Park office lease for 12 months, with renewal options through August 2025.
Important facts for investors to verify
- Trial enrollment, protocol and sample-size changes, safety monitoring, and whether Phase 2/3 results meet regulatory requirements and management’s stated timelines.
- Cash runway assumptions and the pace of operating cash use as clinical and manufacturing costs increase; potential need, timing, and terms of additional financing.
- Progress and independent confirmation of remediation of the disclosed internal-control material weaknesses.
- Epetraborole’s licensing, patent protection and remaining patent term, plus potential milestone, royalty, and global-health obligations.
- The cover page marks “No” for having filed all required Exchange Act reports during the preceding 12 months; verify the reason and any implications for reporting history.