AnaptysBio, Inc. — Q1 2018 Form 10-Q Summary
Business context and reporting period
AnaptysBio is a clinical-stage biotechnology company developing antibody product candidates for inflammatory diseases using its proprietary antibody-discovery platform. The company has no approved products or product sales and primarily funds operations through equity financings, collaboration agreements and debt. This unaudited Form 10-Q covers the three months ended March 31, 2018, compared with the three months ended March 31, 2017.
Financial position and key metrics
| Metric | Q1 2018 | Q1 2017 | Change or commentary |
|---|---|---|---|
| Collaboration revenue | $0 | $0 | No revenue in either period |
| Research and development expense | $11.8 million | $7.9 million | Increased $3.9 million |
| General and administrative expense | $3.9 million | $2.1 million | Increased $1.8 million |
| Total operating expenses | $15.8 million | $10.0 million | Increased $5.8 million |
| Loss from operations | $15.8 million | $10.0 million | Operating margin is not meaningful because revenue was zero |
| Net loss | $15.1 million | $11.4 million | Loss increased $3.7 million |
| Comprehensive loss | $15.9 million | $11.4 million | Includes $0.8 million unrealized investment loss in 2018 |
| Basic and diluted loss per share | $0.63 | $0.75 | Loss per share improved due primarily to a larger share base |
| Cash used in operating activities | $12.5 million | $8.1 million | Higher spending and operating losses |
| Cash, cash equivalents and investments | $310.0 million | Not clearly provided in the filing text | Down from $324.3 million at December 31, 2017 |
| Notes payable carrying amount | $13.3 million | Not clearly provided in the filing text | $7.5 million classified as current |
| Accumulated deficit | $100.1 million | Not clearly provided in the filing text | Continued accumulated losses |
At March 31, 2018, total assets were $314.8 million and stockholders’ equity was $294.5 million. Cash and cash equivalents were $69.5 million, supplemented by $240.6 million of short- and long-term investments. Available-for-sale investments had a fair value of $242.6 million and an unrealized loss of $0.8 million.
Operating cash use was partly offset by $2.1 million of net investing cash inflow, primarily from investment maturities, while financing activities used $1.4 million, principally for term-loan principal repayments. Cash, cash equivalents and restricted cash declined by $11.7 million during the quarter.
Material changes versus the prior comparable period
- Research and development expense increased 49%, driven by higher outside services for preclinical and manufacturing activities, clinical expenses, employee compensation and stock-based compensation, partially offset by lower Australian tax incentives.
- General and administrative expense increased approximately 92%, reflecting higher salaries and stock compensation, consulting costs and legal expenses associated with operating as a public company and expanding the business.
- Net loss increased from $11.4 million to $15.1 million. The 2017 period included a $1.4 million unfavorable change in the fair value of preferred-stock warrant liabilities; no comparable expense occurred in 2018 after the warrants converted to equity in connection with the IPO.
- Interest income increased to $1.2 million from $0.1 million because of the substantially larger investment portfolio.
- Stock-based compensation increased to $2.3 million from $0.9 million, including $1.5 million in general and administrative expense and $0.8 million in research and development expense.
- The company adopted ASC Topic 606 using the modified retrospective method on January 1, 2018, with no adoption adjustment. No milestone or collaboration revenue was recognized in either quarter.
Guidance, outlook, management commentary and risks
- Management expects research and development expenses to increase as ANB020, ANB019 and other programs advance into additional clinical trials. General and administrative expenses are also expected to increase because of public-company compliance, legal, audit, insurance, investor-relations and intellectual-property costs.
- Management stated that existing cash, cash equivalents and investments are expected to fund the current operating plan through the end of 2019, although actual cash use may be higher than projected. The filing also states that currently available resources are expected to support operations for at least the next twelve months.
- ANB020 development milestones include a planned 300-patient Phase 2b atopic dermatitis study with data expected in 2019, continued development in adult peanut allergy, and top-line data from a 24-patient eosinophilic asthma Phase 2a trial anticipated in the third quarter of 2018.
- ANB019 was advancing toward Phase 2 studies in generalized pustular psoriasis and palmoplantar pustulosis. The company planned a 10-patient GPP study, an additional 50-patient PPP study subject to regulatory clearance, and potential expansion into U.S. sites.
- Reported early clinical findings for ANB020 were preliminary and based on small or interim analyses. The filing cautions that later-stage trials may produce different efficacy or safety results.
- The company remains dependent on successful clinical development, regulatory approvals, manufacturing, intellectual-property protection and potential collaboration or financing transactions. It has no product revenue and expects continuing operating losses.
- Term loans had an interest rate of 8.39% at March 31, 2018, an effective interest rate of 12.78%, 22 monthly principal and interest payments remaining, and final maturity in January 2020. The company was in compliance with loan covenants.
- Management disclosed no material legal proceedings, no off-balance-sheet arrangements and effective disclosure controls at a reasonable-assurance level.
Most important facts for investors to verify
- Whether ANB020 and ANB019 clinical trials meet enrollment, safety and efficacy objectives and whether stated 2018 and 2019 data timelines remain achievable.
- The rate of quarterly cash burn and whether the reported investment portfolio can fund operations through the end of 2019 without additional financing.
- The timing and probability of collaboration milestones and the extent to which TESARO or Celgene continue advancing partnered programs; future milestone payments remain uncertain and constrained from revenue recognition.
- Remaining term-loan maturities, interest-rate exposure and compliance with debt covenants.
- Potential dilution from 2.7 million outstanding stock options, additional reserved shares and any future equity financing.
- Whether preliminary clinical results translate into successful larger trials, regulatory approvals and eventual commercial products.