AnaptysBio, Inc. 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 revenue and debt. This unaudited report covers the three and nine months ended September 30, 2017, compared with the corresponding 2016 periods.
Financial Performance and Position
| Metric | Three Months Ended Sept. 30, 2017 | Nine Months Ended Sept. 30, 2017 |
|---|---|---|
| Collaboration revenue | $0.0 million | $7.0 million |
| Research and development expense | $6.7 million | $21.8 million |
| General and administrative expense | $2.4 million | $6.8 million |
| Loss from operations | $9.1 million | $21.6 million |
| Net loss | $9.1 million | $23.2 million |
| Net loss per common share | $0.45 | $1.24 |
| Net cash used in operating activities | Not separately provided | $14.6 million |
- At September 30, 2017, cash and cash equivalents were $26.7 million, investments were approximately $90.1 million, and total cash, cash equivalents and investments were $116.7 million.
- Total assets were $121.9 million and stockholders’ equity was $101.4 million. The accumulated deficit was $78.2 million.
- Notes payable had a carrying amount of $14.3 million, including $5.0 million classified as current. The debt bears interest at 7.69% as of September 30, 2017, with principal payments beginning February 2018 and final maturity in January 2020.
- Cash used in investing activities was $90.0 million, primarily reflecting purchases of investment securities after the IPO. Financing activities provided $80.1 million, primarily from IPO proceeds.
- Operating expenses exceeded collaboration revenue; consequently, operating and net margins were negative and not representative of a product-commercialization business.
Material Changes Versus the Prior Comparable Period
- Third-quarter collaboration revenue declined from $3.2 million to zero. Nine-month revenue declined from $13.9 million to $7.0 million, primarily because TESARO research funding and upfront-fee amortization ended in 2016 and milestone timing differed.
- Research and development expense increased from $3.3 million to $6.7 million in the quarter and from $10.4 million to $21.8 million for the nine-month period. Drivers included higher clinical, preclinical, manufacturing, personnel and recruiting costs, as well as lower Australian tax incentives.
- General and administrative expense increased from $1.0 million to $2.4 million in the quarter and from $3.4 million to $6.8 million for the nine-month period, reflecting higher personnel, stock-based compensation, public-company and compliance costs.
- The company shifted from nine-month net income of $0.3 million in 2016 to a net loss of $23.2 million in 2017.
- The January 2017 IPO generated $80.2 million of net proceeds, converted all outstanding preferred stock into common stock and reclassified preferred-stock warrant liabilities to equity.
- The company completed a one-for-seven reverse stock split in January 2017. Common shares outstanding increased to approximately 20.5 million at September 30, 2017 from 2.7 million at December 31, 2016, primarily due to the IPO and preferred-stock conversions.
Guidance, Outlook, Risks and Unusual Items
- Management expects research and development expenses and general and administrative expenses to increase as clinical programs advance and public-company obligations expand.
- The company expected its cash, investments and projected collaboration revenue to fund its operating plan through the end of 2019, including the October 2017 financing. Management cautioned that this estimate depends on assumptions that may prove incorrect and that capital could be consumed faster.
- After quarter-end, on October 17, 2017, the company completed a follow-on offering of 3.0 million shares at $68.50 per share, receiving $194.7 million in net proceeds. Underwriters also received an option for up to 450,000 additional shares.
- Development priorities included ANB020 trials in atopic dermatitis, peanut allergy and eosinophilic asthma, and ANB019 development for rare inflammatory diseases. The filing describes planned or anticipated trial milestones in 2018 and beyond, but these remain subject to clinical, regulatory, enrollment and manufacturing risks.
- Management reported interim ANB020 atopic-dermatitis data after the reporting date, including preliminary efficacy and tolerability findings. These were top-line interim results and may change after final analysis.
- Key risks include failure or delay of clinical trials, limited human safety and efficacy data, patient-enrollment constraints, regulatory uncertainty, dependence on third-party manufacturers and collaborators, intellectual-property challenges, competition, reliance on the Australian tax incentive, and the need for additional financing.
- The company stated that it was in compliance with debt covenants, had no material pending legal proceedings and had no off-balance-sheet arrangements.
Most Important Facts for Investors to Verify
- Reconcile the company’s projected cash runway with the pace of clinical spending and the October 2017 follow-on offering proceeds.
- Monitor collaboration milestone timing and the degree of dependence on TESARO and Celgene for future revenue.
- Verify enrollment, safety, efficacy and final data from ANB020 and ANB019 clinical programs against management’s stated timelines.
- Assess debt repayment requirements beginning in February 2018, including the effective interest rate and secured status of the term loans.
- Evaluate dilution from outstanding options, warrants, equity-plan increases and future financings.
- Review the sustainability and eligibility of the Australian research and development tax incentive.
- Consider whether the company’s preliminary clinical findings are confirmed in larger, randomized and later-stage studies.