AnaptysBio(ANAB) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Consolidated Financial Statements (unaudited) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed notes Consolidated Balance Sheets The consolidated balance sheets provide a snapshot of the company's financial position, showing assets, liabilities, and stockholders' equity as of September 30, 2024, compared to December 31, 2023 | ASSETS (in thousands) | September 30, 2024 | December 31, 2023 | | :-------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $191,581 | $35,965 | | Short-term investments | $238,536 | $354,939 | | Total current assets | $448,681 | $406,835 | | Total assets | $493,418 | $452,389 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | | | | Total current liabilities | $43,880 | $37,442 | | Liability related to sale of future royalties | $350,564 | $310,807 | | Total stockholders' equity | $84,367 | $88,103 | | Accumulated deficit | $(737,543) | $(614,096) | Consolidated Statements of Operations and Comprehensive Loss The consolidated statements of operations and comprehensive loss detail the company's revenues, operating expenses, and net loss for the three and nine months ended September 30, 2024, compared to the same periods in 2023 | (in thousands, except per share data) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Collaboration revenue | $30,017 | $3,318 | $48,167 | $8,152 | | Research and development | $42,212 | $30,878 | $121,251 | $98,758 | | General and administrative | $10,562 | $10,172 | $32,195 | $31,670 | | Loss from operations | $(22,757) | $(37,732) | $(105,279) | $(122,276) | | Non-cash interest expense for the sale of future royalties | $(15,413) | $(4,431) | $(32,683) | $(13,125) | | Net loss | $(32,851) | $(37,308) | $(123,447) | $(121,408) | | Net loss per common share: Basic and diluted | $(1.14) | $(1.41) | $(4.46) | $(4.49) | Consolidated Statements of Stockholders' Equity The consolidated statements of stockholders' equity show changes in common stock, additional paid-in capital, accumulated other comprehensive gain (loss), and accumulated deficit for the nine months ended September 30, 2024 and 2023 | (in thousands) | Balance, Dec 31, 2023 | Issuance of common stock from exercises of options and ESPP | Issuance of common stock upon vesting of restricted stock units | Net share settlement of restricted stock units | Stock-based compensation | Comprehensive gain, net | Net loss | Balance, Sep 30, 2024 | | :------------- | :-------------------- | :---------------------------------------------------------- | :------------------------------------------------------------- | :-------------------------------------------- | :----------------------- | :---------------------- | :------- | :-------------------- | | Common Stock Shares | 26,597 | 196 | 48 | (347) | — | — | — | 30,429 | | Common Stock Amount | $27 | $— | $— | $— | $— | $— | $— | $30 | | Additional Paid-in Capital | $702,969 | $4,099 | $— | $(7,504) | $8,189 | — | — | $821,121 | | Accumulated Other Comprehensive Gain (Loss) | $(797) | — | — | — | — | $1,174 | — | $759 | | Accumulated Deficit | $(614,096) | — | — | — | — | — | $(32,851) | $(737,543) | | Total Stockholders' Equity | $88,103 | $4,099 | $— | $(7,504) | $8,189 | $1,174 | $(32,851) | $84,367 | - Total stockholders' equity decreased from $88.1 million at December 31, 2023, to $84.4 million at September 30, 2024, primarily due to a net loss of $32.9 million, partially offset by proceeds from common stock issuance and stock-based compensation[8] Consolidated Statements of Cash Flows The consolidated statements of cash flows present the cash generated from or used in operating, investing, and financing activities for the nine months ended September 30, 2024, and 2023 | (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(68,665) | $(86,451) | | Net cash provided by investing activities | $124,794 | $95,576 | | Net cash provided by (used in) financing activities | $99,487 | $(54,138) | | Net increase (decrease) in cash and cash equivalents | $155,616 | $(45,013) | | Cash and cash equivalents, end of period | $191,581 | $26,295 | Notes to the Unaudited Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the unaudited consolidated financial statements, covering business description, accounting policies, and specific financial accounts Note 1. Description of the Business AnaptysBio, Inc. is a clinical-stage biotechnology company focused on immunology therapeutics for autoimmune and inflammatory diseases with a diverse pipeline - AnaptysBio is a clinical-stage biotechnology company focused on immunology therapeutics for autoimmune and inflammatory diseases[14] - Key pipeline programs include rosnilimab (Phase 2b RA, Phase 2 UC), ANB032 (Phase 2b AD), ANB033 (Phase 1), and ANB101 (entering clinical development)[14] - The company completed an underwritten public offering on August 15, 2024, selling 2,750,498 shares of common stock at $36.50 per share, generating $93.9 million in net proceeds[15] Note 2. Summary of Significant Accounting Policies This note outlines the significant accounting policies, including the basis of presentation, use of estimates, net loss per common share, and recent accounting pronouncements - The financial statements are prepared in accordance with U.S. GAAP, requiring management estimates for revenue recognition, R&D expenses, stock-based compensation, and future royalty liabilities[16][18] | (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Options to purchase common stock | 6,065 | 4,043 | 6,097 | 4,308 | | Restricted Stock Units | 974 | 557 | 809 | 468 | | Total potentially dilutive securities | 7,039 | 4,600 | 6,906 | 4,776 | - The company is assessing the impact of new FASB ASUs 2023-07 (Segment Reporting) and 2023-09 (Income Taxes), effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively[22] Note 3. Balance Sheet Accounts and Supplemental Disclosures This note provides a breakdown of property and equipment, net, and accrued expenses, showing changes from December 31, 2023, to September 30, 2024 | Property and equipment, net (in thousands) | September 30, 2024 | December 31, 2023 | | :--------------------------------------- | :----------------- | :---------------- | | Laboratory equipment | $6,497 | $6,473 | | Office furniture and equipment | $1,498 | $1,640 | | Leasehold improvements | $203 | $203 | | Property and equipment, gross | $8,198 | $8,316 | | Less: accumulated depreciation and amortization | $(6,470) | $(6,218) | | Total property and equipment, net | $1,728 | $2,098 | | Accrued expenses (in thousands) | September 30, 2024 | December 31, 2023 | | :------------------------------ | :----------------- | :---------------- | | Accrued compensation and related expenses | $7,911 | $7,201 | | Accrued professional fees and other expenses | $1,117 | $1,412 | | Accrued research, development and manufacturing expenses | $28,917 | $21,898 | | Accrued for repurchases of common stock | $456 | $456 | | Total accrued expenses | $38,401 | $30,967 | Note 4. Collaborative Research and Development Agreements This note details the company's collaboration agreements, primarily with GSK for immuno-oncology programs and a recent exclusive license agreement with Centessa Pharmaceuticals - Under the GSK Agreement, the anti-LAG-3 antagonist antibody development program was terminated in October 2023, with AnaptysBio regaining full global rights[25] - AnaptysBio is eligible for tiered 4-8% royalties on worldwide net sales of products developed under the GSK collaboration, with increased royalties (8% to 25%) for Jemperli sales above $1.0 billion[25] | Milestone Event | Jemperli Amount | Quarter Recognized | | :-------------- | :-------------- | :----------------- | | First commercial sales milestone | $15.0M | Q3'24 | | Milestones recognized through September 30, 2024 | $108.0M | — | | Milestones that may be recognized in the future | $165.0M | — | - In November 2023, AnaptysBio acquired exclusive global development and commercialization rights to a BDCA2 modulator antibody portfolio (including ANB101) from Centessa Pharmaceuticals for an upfront cash payment of $4.0 million and $3.0 million for manufacturing costs, expensed as in-process R&D[29] Note 5. Sale of Future Royalties This note details the monetization agreements for future royalties from Jemperli and Zejula, outlining proceeds, accounting treatment, and non-cash interest expense - In May 2024, an amendment to the Jemperli Royalty Monetization Agreement provided an additional $50.0 million, increasing the aggregate Jemperli royalties and milestones threshold to $600.0 million (by March 31, 2031) or $675.0 million (thereafter)[32] | (in thousands) | Nine Months Ended Sep 30, 2024 | | :------------- | :----------------------------- | | Jemperli non-cash royalty revenue | $30,100 | | Jemperli non-cash interest expense | $32,000 | | Zejula non-cash royalty revenue | $3,100 | | Zejula non-cash interest expense | $700 | - The estimated effective interest rate under the Jemperli Royalty Monetization Agreement was 20.3% as of September 30, 2024[32] Note 6. Fair Value Measurements and Available for Sale Investments This note describes the company's fair value measurements for financial instruments and provides details on available-for-sale investments, including market value and unrealized gains/losses | (in thousands) At September 30, 2024 | Quoted Market Prices for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | | :----------------------------------- | :-------------------------------------------------- | :-------------------------------------------- | | Money market funds | $181,132 | — | | Mutual funds | $6,592 | — | | U.S. Treasury securities | $244,051 | — | | Agency securities | — | $5,015 | | Commercial and corporate obligations | — | $17,384 | | (in thousands) Available for Sale Investments at Sep 30, 2024 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Total Fair Value | | :---------------------------------------------------------- | :------------- | :--------------------- | :---------------------- | :--------------- | | Agency securities | $5,018 | $— | $(3) | $5,015 | | Commercial and corporate obligations | $17,357 | $28 | $(1) | $17,384 | | U.S. Treasury securities | $243,109 | $948 | $(6) | $244,051 | | Total available for sale investments | $265,484 | $976 | $(10) | $266,450 | - As of September 30, 2024, unrealized losses on available-for-sale investments were less than $0.1 million, with no intent to sell before recovery of amortized cost basis, thus no allowance for credit losses was recorded[44] Note 7. Stockholders' Equity This note details the company's common stock, including shares authorized and outstanding, the completion of a stock repurchase program, and proceeds from a recent underwriting agreement - As of September 30, 2024, there were 30,428,682 shares of common stock issued and outstanding[45] - The $50.0 million stock repurchase program authorized in January 2023 was completed in May 2023, repurchasing 2,124,214 shares at an average price of $23.54 per share[46] - In August 2024, the company completed an underwriting agreement, issuing and selling 2,750,498 shares of common stock at $36.50 per share, generating approximately $93.9 million in net proceeds[48] Note 8. Equity Incentive Plans This note provides information on the company's equity incentive plans, including stock options, restricted stock units, performance stock units, and recognized stock-based compensation expense - The 2017 Equity Incentive Plan was amended in June 2024, eliminating the automatic annual share increase and increasing available shares by 2,700,000, with 3,067,332 shares available for future issuance as of September 30, 2024[49] | Stock Option Activity (Nine Months Ended Sep 30, 2024) | Shares Subject to Options | Weighted-Average Exercise Price per Share | | :------------------------------------- | :------------------------ | :---------------------------------------- | | Outstanding at January 1, 2024 | 4,225,615 | $27.36 | | Granted | 2,228,915 | $21.88 | | Exercised | (271,210) | $19.42 | | Forfeitures and cancellations | (225,904) | $36.43 | | Outstanding at September 30, 2024 | 5,957,416 | $25.33 | | Exercisable at September 30, 2024 | 2,648,111 | $28.86 | | Stock-Based Compensation Expense (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $3,959 | $2,222 | $10,947 | $7,675 | | General and administrative | $4,230 | $5,585 | $14,917 | $17,419 | | Total | $8,189 | $7,807 | $25,864 | $25,094 | Note 9. Commitments and Contingencies This note outlines the company's operating lease commitments for its San Diego facilities, including lease terms, rent increases, and future minimum annual obligations - The company leases approximately 45,000 square feet of space in San Diego for a term of 124 months, beginning April 5, 2021, with monthly base rent increasing by 3% annually[65] - As of September 30, 2024, the weighted-average remaining lease term is approximately 6.9 years, with a weighted-average discount rate of 4.0%[65] | Future Minimum Annual Operating Lease Obligations (in thousands) | Amount | | :------------------------------------------------------------- | :----- | | 2024 | $620 | | 2025 | $2,531 | | 2026 | $2,607 | | 2027 | $2,685 | | 2028 | $2,766 | | Thereafter | $7,788 | | Total minimum payments required | $18,997| | Less imputed interest | $(2,503)| | Total | $16,494| Note 10. Subsequent Event This note discloses a subsequent event where the company entered into a new open market sales agreement in November 2024 - In November 2024, the company entered into a new sales agreement with TD Securities (USA) LLC to offer and sell up to $100.0 million of common stock, replacing a prior agreement with Cowen[68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, discussing its pipeline, collaborations, and liquidity Overview AnaptysBio is a clinical-stage biotechnology company focused on developing innovative immunology therapeutics for autoimmune and inflammatory diseases with a diverse pipeline - The company is a clinical-stage biotechnology company focused on immunology therapeutics for autoimmune and inflammatory diseases[74] - Key pipeline programs include rosnilimab (PD-1 agonist), ANB032 (BTLA agonist), ANB033 (anti-CD122 antagonist), and ANB101 (BDCA2 modulator)[74] - The company also has two cytokine antagonists, imsidolimab and etokimab, available for out-licensing, and recognizes revenue from an immuno-oncology collaboration with GSK[74] Our Wholly Owned Product Candidate Pipeline This section provides detailed updates on AnaptysBio's wholly-owned product candidates, including their mechanisms of action, clinical trial progress, and anticipated data readouts - Rosnilimab (PD-1 agonist) is in Phase 2b for rheumatoid arthritis (RA) with top-line data expected in February 2025, and Phase 2 for ulcerative colitis (UC) with top-line data expected in Q1 2026[77] - ANB032 (BTLA agonist) is in Phase 2b for atopic dermatitis (AD) with top-line data expected in December 2024[79] - ANB033 (anti-CD122 antagonist) initiated a Phase 1 clinical trial in October 2024, and ANB101 (BDCA2 modulator) plans Phase 1 initiation in Q1 2025[80][81] - Imsidolimab (anti-IL-36R antagonist) completed Phase 3 trials for generalized pustular psoriasis (GPP) with positive efficacy and safety data, and the company intends to out-license it in 2024[82][83] - Etokimab (anti-IL-33 antagonist) is Phase 2/3 ready and available for out-licensing, with no ongoing clinical trials[84] Collaborative Programs This section highlights the progress of the company's collaborative programs, primarily with GSK, focusing on the development and regulatory approvals of Jemperli and cobolimab - Jemperli (dostarlimab) received full FDA approval in February 2023 for dMMREC and additional approvals in August 2021 for pan-deficient mismatch repair tumors (PdMMRT) and in July 2023 in combination with chemotherapy for dMMR MSI-H primary advanced or recurrent endometrial cancer[87][88] - Jemperli is in a Phase 3 trial for first-line ovarian cancer, with top-line results expected in Q4 2024[88] - GSK is developing cobolimab (anti-TIM-3 antibody) in a Phase 3 trial (COSTAR Lung) for advanced non-small-cell lung cancer, with top-line results expected in H1 2025[88] Components of Operating Results This section defines the key components of the company's operating results, including collaboration revenue, research and development expense, general and administrative expense, and non-cash interest expense - Collaboration revenue is derived from amortization of upfront license payments, R&D funding, and milestone and royalty payments, totaling $303.4 million since inception through September 30, 2024[89] - Research and development expenses include external costs (CROs, CMOs), employee-related expenses, facilities, and license fees, expensed as incurred[90] - Non-cash interest expense for the sale of future royalties is imputed using the effective interest method based on forecasted royalty and milestone payments[92] Critical Accounting Policies and Use of Estimates This section reaffirms that the company's financial statements are prepared in accordance with U.S. GAAP and highlights the reliance on management's judgments and estimates for various financial reporting aspects - Financial statements are prepared in accordance with U.S. GAAP, requiring management to make significant judgments and estimates[94] - Key estimates include revenue recognition, accrued R&D expenses, stock-based compensation, and the liability related to the sale of future royalties[18] - No significant changes in critical accounting policies have occurred since the Annual Report on Form 10-K filed on March 11, 2024[94] Results of Operations – Comparison of the Three and Nine Months Ended September 30, 2024 and 2023 This section provides a detailed comparison of the company's financial performance for the three and nine months ended September 30, 2024, versus 2023, highlighting significant changes | (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Change (YoY) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change (YoY) | | :------------- | :------------------------------ | :------------------------------ | :----------- | :----------------------------- | :----------------------------- | :----------- | | Collaboration Revenue | $30,017 | $3,318 | +$26,699 | $48,167 | $8,152 | +$40,015 | | R&D Expenses | $42,212 | $30,878 | +$11,334 | $121,251 | $98,758 | +$22,493 | | G&A Expenses | $10,562 | $10,172 | +$390 | $32,195 | $31,670 | +$525 | | Non-Cash Interest Expense | $15,413 | $4,431 | +$10,982 | $32,683 | $13,125 | +$19,558 | | Interest Income | $5,324 | $4,854 | +$470 | $14,531 | $13,993 | +$538 | - Collaboration revenue significantly increased due to the recognition of a $15.0 million Jemperli sales milestone in Q3 2024, with all recognized revenue being non-cash[95] - Research and development expenses increased primarily due to higher clinical expenses ($26.4 million for nine months) and salaries, partially offset by a decrease in manufacturing expenses[96][97] Liquidity and Capital Resources This section discusses the company's funding sources, future capital requirements, and cash flow activities, emphasizing its reliance on equity sales, royalty monetizations, and collaboration agreements - As of September 30, 2024, the company had $458.0 million in cash, cash equivalents, and investments, and believes these resources will fund its operating plan for at least the next 12 months[104][106] - Total funding since inception through September 30, 2024, includes $738.6 million from equity sales, $335.0 million from royalty monetizations, and $234.2 million from collaboration agreements[104] | Cash Flows (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(68,665) | $(86,451) | | Net cash provided by investing activities | $124,794 | $95,576 | | Net cash provided by (used in) financing activities | $99,487 | $(54,138) | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the company's market risk exposures, including interest rate risk, inflation risk, and foreign currency exchange risk, since the last annual report - No material changes in market risk, including interest rate, inflation, and foreign currency exchange risk, have occurred as of September 30, 2024, compared to the Annual Report on Form 10-K filed on March 11, 2024[114] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of September 30, 2024, and reports no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of September 30, 2024[115] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended September 30, 2024[116] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings This section states that the company may be involved in routine legal proceedings and accrues estimates for probable and estimable losses, acknowledging the potential adverse impact of litigation - The company may be involved in legal proceedings in the ordinary course of business and accrues estimates for resolution of legal contingencies when losses are probable and estimable[118] Item 1A. Risk Factors This section outlines various risks associated with investing in the company's common stock, covering product development, financial position, dependence on third parties, regulatory approvals, intellectual property, operational growth, and stock ownership Summary of Risk Factors This summary provides a high-level overview of the significant risks associated with investing in the company, including early-stage product development, safety concerns, regulatory hurdles, and intense competition - Key risks include product candidates being in early development stages, potential for significant adverse events, difficulties in obtaining regulatory approvals, and intense competition[120] - Financial risks involve limited operating revenue, a history of losses, and the need for additional capital, which may not be available on acceptable terms[121] - Operational and external risks include dependence on third-party manufacturers and collaborators, challenges in protecting intellectual property, and the volatility of the company's stock price[121] Risks Related to Discovery and Development of Our Product Candidates This section details the inherent risks in developing product candidates, such as high failure rates in clinical trials, the potential for unexpected adverse events, and delays or inability to obtain regulatory approvals - Product candidates are in early development stages and face a high failure rate due to scientific feasibility, safety, efficacy, and other variables; preclinical or early clinical results may not predict later-stage outcomes[122] - Ongoing and planned clinical trials may reveal significant adverse events or toxicities, potentially inhibiting regulatory approval or market acceptance, and requiring development delays or abandonment[124][125] - Delays in obtaining regulatory approvals can stem from lengthy, expensive, and uncertain processes, including clinical holds, manufacturing challenges, patient enrollment difficulties, and changing regulatory policies[128] Risks Related to Our Financial Position and Capital Needs This section addresses the company's financial vulnerabilities, including a history of operating losses, dependence on collaboration revenue, and the need for substantial additional capital - The company has a limited operating history, no approved products, and has incurred significant operating losses, with an accumulated deficit of $737.5 million as of September 30, 2024[146] - Significant additional capital will be required to finance operations, including clinical trials, commercialization, and R&D, and there is no guarantee that future financing will be available on acceptable terms, if at all[148] - Raising additional capital through equity or convertible debt securities may dilute existing stockholders' ownership, and adverse macroeconomic conditions could hinder fundraising efforts[150] Risks Related to Our Dependence on Third Parties This section highlights the risks associated with the company's reliance on third parties, including the success and maintenance of its collaboration with GSK, and the performance of CROs and CMOs - The existing collaboration with GSK is critical, and its termination or lack of success could adversely affect the business, as demonstrated by the termination of the anti-LAG-3 program[152] - Failure to establish and maintain additional development and commercialization collaborations, including out-licensing legacy product candidates, could delay development and increase financial burden[153] - Reliance on third-party CROs, CMOs, and clinical investigators for discovery, manufacturing, and clinical trials means less control over timing and quality, and potential delays if they fail to perform or meet regulatory requirements[155] - The company relies completely on third parties for manufacturing drug supplies, and any disruptions could lead to delays, increased costs, or termination of clinical trials[156] Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters This section addresses the extensive regulatory landscape impacting the company, including challenges of obtaining international marketing approvals, unfavorable reimbursement practices, and product liability risks - Failure to obtain regulatory approval in international jurisdictions would prevent marketing product candidates outside the United States, reducing target market and commercial potential[159] - Product candidates may be subject to unfavorable third-party reimbursement practices and pricing regulations, which are essential for market acceptance and profitability[160][161] - Healthcare legislative reforms, such as the ACA and IRA, may increase the difficulty and cost of obtaining marketing approval and affect product pricing, potentially limiting revenue generation[163] - The business entails significant product liability risks and is subject to extensive anti-kickback, fraud and abuse, transparency, and data privacy laws, with non-compliance potentially leading to criminal sanctions, civil penalties, and reputational harm[165][166][169] Risks Related to Intellectual Property This section details the critical importance and inherent uncertainties of intellectual property (IP) protection, including challenges in obtaining and enforcing patents globally and the potential for costly IP litigation - Success depends on establishing, maintaining, and protecting patents and other intellectual property rights, which is expensive, time-consuming, and uncertain, with no guarantee that pending applications will result in issued patents[173][174] - Changes in patent law, such as the Leahy-Smith America Invents Act (AIA) and U.S. Supreme Court decisions, increase uncertainties and costs surrounding patent prosecution and enforcement, potentially diminishing patent value[177][178] - Reliance on third parties requires sharing trade secrets, increasing the risk of misappropriation or disclosure, which could impair the company's competitive position[180] - The company may become involved in costly and time-consuming lawsuits to protect or enforce its intellectual property, or defend against infringement claims, with uncertain outcomes that could adversely affect the business[182][185] Risks Related to Managing Growth, Operations and Macroeconomic Conditions This section outlines risks related to the company's growth management, operational vulnerabilities, and the impact of external macroeconomic and geopolitical factors, including challenges in attracting and retaining skilled employees - The company must attract and retain highly skilled clinical, scientific, technical, and management personnel to succeed, facing significant competition for experienced individuals[190][191] - Anticipated growth in employees and operations may lead to difficulties in managing expansion, requiring improved systems and additional personnel, which could disrupt operations[192] - Operations are vulnerable to system failures, natural disasters (e.g., earthquakes, wildfires in San Diego), power loss, and health epidemics, which could cause disruptions, data loss, and harm the business[193][194] - The macroeconomic and geopolitical environment, including inflation, interest rate volatility, and global banking instability, may adversely impact global economic conditions and the company's ability to raise capital[145] Risks Related to Ownership of Our Common Stock This section details risks pertinent to common stock ownership, including stock price volatility, potential dilution from future equity sales, the absence of dividends, exposure to securities litigation, and the impact of corporate governance provisions and tax limitations on net operating loss (NOL) carryforwards - The market price of the company's stock has been and may continue to be volatile, influenced by various factors including competitive products, regulatory actions, clinical trial results, and general economic uncertainty[197] - Future sales and issuances of common stock or rights to purchase common stock, including under equity incentive plans and new sales agreements (e.g., $100.0 million with TD Cowen), could result in additional dilution for existing stockholders[203] - The company does not intend to pay dividends on its common stock, limiting returns to stock appreciation, and its ability to use federal and state net operating loss (NOL) carryforwards to offset taxable income could be limited by ownership changes (Section 382 of the Code)[206][213] - Provisions in the company's organizational documents and Delaware law might discourage, delay, or prevent a change in control or management, potentially depressing the market price of common stock[209][210] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities This section states that there are no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report for the period - This item is not applicable for the reporting period[215] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - This item is not applicable for the reporting period[216] Item 4. Mine Safety Disclosures This section confirms that there are no mine safety disclosures required for the reporting period - This item is not applicable for the reporting period[218] Item 5. Other Information This section discloses a new open market sales agreement entered into in November 2024 and details a director's Rule 10b5-1 trading arrangement - In November 2024, the company entered into a new sales agreement with TD Securities (USA) LLC to offer and sell up to $100.0 million of common stock, replacing a prior agreement with Cowen & Company, LLC[219] - On August 30, 2024, director John Schmid entered into a Rule 10b5-1 trading plan for the potential sale of up to 42,337 shares of common stock, intended to satisfy affirmative defense conditions[220] Item 6. Exhibits This section lists all exhibits filed or furnished as part of the Quarterly Report on Form 10-Q, including certifications and XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Sarbanes-Oxley Act Sections 302 and 906) and Inline XBRL documents[222]