AnaptysBio, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2017. The company is a clinical-stage biotechnology company developing antibody product candidates for inflammation and immuno-oncology. It has no approved products and generates revenue primarily from collaboration agreements with TESARO and Celgene. The filing was signed August 10, 2017.
Financial Position and Key Metrics
| Metric | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2017 |
|---|---|---|
| Collaboration revenue | $7.0 million | $7.0 million |
| Research and development expense | $7.2 million | $15.1 million |
| General and administrative expense | $2.4 million | $4.4 million |
| Operating loss | $2.6 million | $12.5 million |
| Net loss | $2.7 million | $14.1 million |
| Net loss per diluted share | $0.13 | $0.79 |
- Cash, cash equivalents and investments totaled $120.3 million at June 30, 2017, compared with $51.2 million in cash and cash equivalents at December 31, 2016.
- Cash and cash equivalents were $30.8 million; short-term and long-term investments were $89.5 million in aggregate.
- Net cash used in operating activities was $10.7 million for the first six months, compared with $0.4 million used in the prior-year period.
- Net cash used in investing activities was $89.5 million, primarily reflecting purchases of marketable investments following the IPO.
- Net cash provided by financing activities was $79.8 million, principally from $80.2 million of net IPO proceeds.
- Total assets were $130.4 million and stockholders’ equity was $109.2 million at June 30, 2017.
- Notes payable had a carrying value of $14.1 million, including $3.1 million classified as current. The loans bear interest at 7.58% as of June 30, 2017, with principal payments beginning February 2018 and final maturity in January 2020.
- The company was in compliance with its debt covenants. Debt is secured by a first-priority interest in most assets, excluding intellectual property.
- Accumulated deficit was $69.1 million. Management expects continuing operating losses for at least the next several years.
Material Changes Versus the Prior Comparable Period
- Second-quarter revenue increased $1.2 million from $5.9 million to $7.0 million, driven by two TESARO milestones: a $3.0 million registration-program milestone and a $4.0 million IND-clearance milestone.
- Six-month revenue decreased $3.7 million from $10.7 million to $7.0 million because TESARO upfront-fee amortization and research funding were substantially completed in 2016. Milestone revenue increased modestly but did not offset the decline.
- Research and development expense increased $4.9 million in the quarter and $8.0 million for the six-month period, reflecting higher clinical, preclinical, manufacturing, outside-service, personnel and stock-based compensation costs, as well as lower Australian tax incentives.
- General and administrative expense increased $1.2 million in the quarter and $2.0 million for the six months, primarily because of higher personnel, stock compensation and public-company costs.
- The company completed its IPO on January 31, 2017, selling 5.75 million shares at $15.00 per share and receiving $80.2 million net proceeds. All outstanding convertible preferred stock converted into common stock.
- Preferred stock warrant liabilities were reclassified to additional paid-in capital upon the IPO, eliminating subsequent fair-value remeasurement. The six-month results nonetheless included a $1.4 million pre-IPO warrant-liability expense.
- Shares outstanding increased substantially following the IPO and preferred-stock conversion, reaching approximately 20.3 million at June 30, 2017.
Business Outlook, Commentary and Risks
- Management expects research and development expenses to increase as ANB020 and ANB019 advance through clinical development, including additional Phase 2 studies and related manufacturing activities.
- Top-line data from ANB020 Phase 2a atopic dermatitis and peanut-allergy studies and ANB019 Phase 1 testing were expected during the second half of 2017. Top-line data for an ANB020 asthma study were expected during the first half of 2018.
- The company expected existing cash, investments and projected collaboration revenue to fund its operating plan through 2018, but cautioned that actual cash usage could be faster than projected and additional financing may be required.
- Future collaboration revenue is expected to fluctuate materially based on the timing and achievement of milestones. Milestone and royalty payments remain uncertain and depend substantially on collaborator development activities.
- The company remains dependent on TESARO and Celgene for partnered-program progress and related potential payments. No Celgene revenue was recognized in the first six months of 2017.
- Key risks include clinical-trial failure or delay, patient enrollment difficulties, adverse safety findings, regulatory non-approval, manufacturing and supply-chain problems, dependence on third parties, intellectual-property challenges, competition, reimbursement uncertainty and the need for additional capital.
- The Australian tax incentive receivable was $5.6 million. The Australian Taxation Office selected the fiscal 2016 tax-credit application for further review, delaying receipt of the refund.
- No material legal proceedings were pending. Management concluded that disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Whether ANB020 and ANB019 clinical studies produced the anticipated safety, pharmacodynamic and efficacy results and progressed on schedule.
- The timing and probability of additional TESARO or Celgene milestones, regulatory events, royalties or other collaboration payments.
- Cash burn relative to the company’s estimate that available resources will fund operations through 2018.
- The status and collectability of the $5.6 million Australian tax incentive receivable.
- Debt repayment requirements beginning in 2018 and the company’s continued compliance with loan covenants.
- Potential dilution from 2.64 million outstanding stock options, 198,009 common-stock warrants and future equity financing.
- The impact of the 14.5 million shares released from IPO-related lockups on July 25, 2017.
- Whether the company can advance candidates through clinical development without substantial additional capital or unfavorable strategic partnerships.