AnaptysBio(ANAB) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) The unaudited consolidated financial statements present the company's financial position, results of operations, and cash flows for the periods ended June 30, 2020, and December 31, 2019 Consolidated Balance Sheets As of June 30, 2020, total assets decreased to $401.7 million from $435.2 million at December 31, 2019, primarily due to a decrease in investments Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 (unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $221,172 | $171,017 | | Total current assets | $384,516 | $377,733 | | Total assets | $401,746 | $435,197 | | Liabilities & Equity | | | | Total current liabilities | $20,130 | $29,535 | | Total liabilities | $20,310 | $30,189 | | Accumulated deficit | $(273,836) | $(244,026) | | Total stockholders' equity | $381,436 | $405,008 | Consolidated Statements of Operations and Comprehensive Loss For the six months ended June 30, 2020, net loss decreased to $29.8 million from $46.0 million year-over-year, driven by higher collaboration revenue and lower R&D expenses Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $0 | $5,000 | $15,000 | $5,000 | | Research and development | $17,948 | $27,350 | $38,916 | $47,981 | | General and administrative | $4,687 | $4,307 | $8,972 | $8,448 | | Loss from operations | $(22,635) | $(26,657) | $(32,888) | $(51,429) | | Net loss | $(21,548) | $(23,962) | $(29,810) | $(46,040) | | Net loss per share (basic and diluted) | $(0.79) | $(0.89) | $(1.09) | $(1.70) | Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $381.4 million at June 30, 2020, primarily due to a net loss of $29.8 million for the six-month period - The accumulated deficit increased from $244.0 million at the end of 2019 to $273.8 million by June 30, 2020, reflecting ongoing net losses from operations[9] Consolidated Statements of Cash Flows For the six months ended June 30, 2020, net cash used in operating activities was $34.7 million, while net cash provided by investing activities was $86.1 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(34,722) | $(31,616) | | Net cash provided by investing activities | $86,145 | $67,533 | | Net cash used in financing activities | $(1,268) | $(2,961) | | Net increase in cash, cash equivalents, and restricted cash | $50,155 | $32,956 | Notes to the Unaudited Consolidated Financial Statements The notes detail the company's business as a clinical-stage biotechnology firm, its accounting policies, and the significant impact of COVID-19 on operations - The company is a clinical-stage biotechnology firm focused on first-in-class immunology therapeutic product candidates, developing its pipeline using a proprietary antibody discovery platform based on somatic hypermutation (SHM)[14] - Under the GSK collaboration, the company earned and recognized two clinical milestones totaling $15.0 million during the six months ended June 30, 2020, related to the filing of an NDA and MAA for dostarlimab[25][26][27] - No revenue was recognized under the BMS agreement during the three and six months ended June 30, 2020 and 2019[29] - On May 4, 2020, the company entered into a new 124-month lease for approximately 45,000 square feet of space, with the term beginning on March 1, 2021[51] - A putative securities class action lawsuit was filed against the company on March 25, 2020, alleging material misrepresentations regarding the etokimab drug, which the company believes are without merit[52] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing immunology therapeutic candidates, the impact of COVID-19, and its financial position, including $392.2 million in cash and investments as of June 30, 2020 Overview and Pipeline AnaptysBio is a clinical-stage biotech company focused on immunology, with lead candidates imsidolimab and etokimab, and partnered programs like dostarlimab with GSK - Imsidolimab (anti-IL-36R) is in a Phase 2 trial (GALLOP) for GPP with a regulatory update expected in Q4 2020, and a Phase 2 trial (POPLAR) for PPP with top-line data expected in Q1 2021[64][65][66][67] - Etokimab (anti-IL-33) is in a Phase 2 trial (ECLIPSE) for CRSwNP, with full 16-week data expected by year-end 2020 to determine next steps for the program[68] - Partnered program dostarlimab (anti-PD-1 with GSK) received FDA BLA acceptance and EMA MAA acceptance, triggering $10.0 million and $5.0 million milestone payments, respectively, with FDA approval anticipated in H2 2020[71] - The COVID-19 pandemic has caused the company to modify business practices, including remote work and curtailing travel, and has impacted clinical trial timelines, such as for the POPLAR trial[64][74][75] Results of Operations For the six months ended June 30, 2020, collaboration revenue increased to $15.0 million due to GSK milestones, while R&D expenses decreased by $9.1 million - Collaboration revenue for the six months ended June 30, 2020, was $15.0 million, related to two milestone payments from GSK for the dostarlimab program (NDA and MAA filings), compared to $5.0 million in the same period of 2019[83] R&D Expenses by Program (Six Months Ended June 30, in thousands) | Program | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Etokimab | $11,891 | $19,163 | $(7,272) | | Imsidolimab | $8,816 | $10,165 | $(1,349) | | ANB030 | $1,639 | $4,977 | $(3,338) | | Preclinical and other unallocated | $7,997 | $4,147 | $3,850 | | Total External Costs | $30,343 | $38,452 | $(8,109) | | Internal Costs | $8,573 | $9,529 | $(956) | | Total R&D Expenses | $38,916 | $47,981 | $(9,065) | - General and administrative expenses increased by $0.6 million to $9.0 million for the six months ended June 30, 2020, primarily due to higher legal and insurance expenses[87] Liquidity and Capital Resources As of June 30, 2020, the company had $392.2 million in cash, cash equivalents, and investments, which are expected to fund operations at least into 2023 - As of June 30, 2020, the company had $392.2 million in cash, cash equivalents and investments, which is expected to fund the current operating plan at least into 2023[92][94] Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(34,722) | $(31,616) | | Net cash provided by investing activities | $86,145 | $67,533 | | Net cash used in financing activities | $(1,268) | $(2,961) | - The company entered into a new lease agreement on May 4, 2020, for a 124-month term beginning March 1, 2021, for approximately 45,000 square feet of space[102] Item 3. Quantitative and Qualitative Disclosures About Market Risk As of June 30, 2020, there have been no material changes to the company's market risk from the disclosures provided in its 2019 Form 10-K - There have been no material changes surrounding the company's market risk from the discussion provided in the Fiscal 2019 Form 10-K[110] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2020, the Chief Executive Officer and Interim Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[111] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[113] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is facing a putative securities class action lawsuit filed on March 25, 2020, alleging material misrepresentations regarding the etokimab drug - A putative securities class action was filed on March 25, 2020, alleging material misrepresentations regarding the etokimab drug during the class period of October 10, 2017, to November 7, 2019[115] - The company believes the plaintiff's allegations are without merit and intends to vigorously defend against the claims, but cannot estimate a reasonably possible loss at this early stage[115] Item 1A. Risk Factors The company outlines extensive risks including early-stage product development, potential clinical trial failures, COVID-19 impacts, financial needs, third-party reliance, regulatory challenges, and intellectual property protection - Development Risk: Product candidates are in early development stages and may fail or suffer delays; results from early trials may not be predictive of later, larger trials[117][119][121] - COVID-19 Risk: The pandemic has impacted business practices and could materially delay clinical trials, disrupt supply chains (CROs, CMOs), and affect patient enrollment[129][131][132] - Financial Risk: The company has a history of operating losses and will require additional capital to fund operations, which may cause dilution or require relinquishing rights to product candidates on unfavorable terms[178][179][184] - Third-Party Reliance: The business depends on collaborations with GSK and BMS and relies completely on third parties for manufacturing; failure or termination of these relationships could adversely affect development and commercialization[205][212] - Regulatory and Commercial Risk: Obtaining regulatory approval is a lengthy and uncertain process, and even if approved, products face challenges with market acceptance, pricing pressure, and reimbursement from payors[142][168][226] - Intellectual Property Risk: Success depends on the ability to obtain and protect patents; the patent landscape is uncertain, and the company may become involved in expensive litigation to defend its IP rights[251][253][269] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[303] Item 3. Defaults Upon Senior Securities This item is not applicable for the reporting period - Not applicable[303] Item 4. Mine Safety Disclosures This item is not applicable for the reporting period - Not applicable[305] Item 5. Other Information There is no other information to report for this period - None[305] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002[306]