Annexon(ANNX) - 2022 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements The company reported a Q1 2022 net loss of $35.4 million, with total assets decreasing to $250.6 million Condensed Consolidated Balance Sheets Total assets decreased to $250.6 million as of March 31, 2022, driven by lower short-term investments Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $112,828 | $74,843 | | Short-term investments | $93,831 | $167,872 | | Total current assets | $211,254 | $247,693 | | Total assets | $250,569 | $287,040 | | Liabilities & Equity | | | | Total current liabilities | $17,053 | $21,744 | | Total liabilities | $49,955 | $55,131 | | Total stockholders' equity | $200,614 | $231,909 | | Total liabilities and stockholders' equity | $250,569 | $287,040 | Condensed Consolidated Statements of Operations The company's net loss increased to $35.4 million in Q1 2022, driven by higher R&D and G&A expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Operating Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 (As restated) | | :--- | :--- | :--- | | Research and development | $26,998 | $20,696 | | General and administrative | $8,428 | $5,506 | | Total operating expenses | $35,426 | $26,202 | | Loss from operations | ($35,426) | ($26,202) | | Net loss | ($35,373) | ($26,060) | | Net loss per share, basic and diluted | ($0.92) | ($0.68) | Condensed Consolidated Statements of Comprehensive Loss Comprehensive loss for Q1 2022 was $35.6 million, including the net loss and unrealized investment losses Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 (As restated) | | :--- | :--- | :--- | | Net loss | ($35,373) | ($26,060) | | Unrealized loss on available-for-sale securities | ($196) | ($25) | | Comprehensive loss | ($35,566) | ($26,086) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity declined to $200.6 million as of March 31, 2022, primarily due to the quarterly net loss - Stockholders' equity decreased to $200.6 million as of March 31, 2022, mainly due to a net loss of $35.4 million, which was partially offset by $4.3 million in stock-based compensation and $19,000 from stock option exercises[16] Condensed Consolidated Statements of Cash Flows Net cash used in operations was $30.3 million, while investing activities provided $68.3 million in Q1 2022 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 (As restated) | | :--- | :--- | :--- | | Net cash used in operating activities | ($30,288) | ($23,440) | | Net cash provided by (used in) investing activities | $68,251 | ($37,581) | | Net cash provided by financing activities | $19 | $268 | | Increase (decrease) in cash, cash equivalents and restricted cash | $37,982 | ($60,753) | Notes to Condensed Consolidated Financial Statements The company has a history of losses and an accumulated deficit of $331.7 million but has sufficient cash for 12 months - The company is a clinical-stage biopharmaceutical firm that has experienced losses since inception, with an accumulated deficit of $331.7 million as of March 31, 2022[23][24] - Management projects that cash, cash equivalents, and short-term investments of $206.7 million are sufficient to support operations for at least the next 12 months[24] - As of March 31, 2022, no shares have been sold under the $100.0 million at-the-market (ATM) offering program established in August 2021[70] - Total unrecognized stock-based compensation cost was $50.7 million for unvested stock options and $2.3 million for unvested RSUs as of March 31, 2022[76][78] Management's Discussion and Analysis of Financial Condition and Results of Operations Operating expenses rose 35% YoY to $35.4 million in Q1 2022, with sufficient capital to fund operations into 2024 - The company is advancing a pipeline of five product candidates (ANX005, ANX009, ANX007, ANX105, ANX1502) targeting the classical complement pathway for various diseases[99][101] - The company believes its existing cash and cash equivalents of $206.7 million will be sufficient to fund operating expenses and capital requirements into 2024[130][151] - The COVID-19 pandemic has caused interruptions in clinical trial activities, including staff shortages and longer site initiation timelines, and its ongoing impact remains uncertain[104] Q1 2022 vs Q1 2021 Operating Results (in thousands) | Metric | Q1 2022 | Q1 2021 (restated) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $26,998 | $20,696 | $6,302 | 30% | | General and administrative | $8,428 | $5,506 | $2,922 | 53% | | Total operating expenses | $35,426 | $26,202 | $9,224 | 35% | | Net loss | ($35,373) | ($26,060) | ($9,313) | 36% | Results of Operations Q1 2022 operating expenses increased 35% to $35.4 million, driven by higher R&D and G&A costs - R&D expenses increased by $6.3 million (30%) YoY, mainly due to a $4.2 million rise in direct clinical outside services for trials in GBS, wAIHA, HD, ALS, and GA, and planning for ANX105 and ANX1502 trials[117] - G&A expenses increased by $2.9 million (53%) YoY, primarily from a $1.4 million increase in compensation (including $0.9 million in stock-based compensation) due to higher headcount, and a $1.1 million increase in consulting, professional services, and D&O insurance[118] Liquidity and Capital Resources The company holds $206.7 million in cash and investments, sufficient to fund operations into 2024 - As of March 31, 2022, the company had $206.7 million in cash, cash equivalents, and short-term investments and an accumulated deficit of $331.7 million[121] - The company expects its existing capital resources will fund planned operating expenses into 2024, but acknowledges this is based on assumptions that may prove wrong[130][151] - Net cash used in operating activities was $30.3 million for Q1 2022, compared to $23.4 million in Q1 2021, reflecting a higher net loss and changes in operating assets and liabilities[122][123] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency and interest rate fluctuations on its investment portfolio - The company's primary market risks are foreign currency exchange risk (due to operations in the U.S. and Australia) and interest rate risk on its investment portfolio[138][139] - Management has determined that a hypothetical 10% change in foreign currency exchange rates or interest rates would not have a material impact on the company's historical financial statements[138][139] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022 - The CEO and CFO concluded that as of the end of the period, the company's disclosure controls and procedures are effective[140] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[141] PART II—OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently party to any material legal proceedings[144] Risk Factors Key risks include a history of losses, need for financing, reliance on clinical trials, and third-party suppliers - The company is a clinical-stage entity with a limited operating history, significant losses since inception, and anticipates continued losses, making future viability difficult to assess[146] - Substantial additional financing is required to achieve goals, and failure to obtain it could force delays or termination of development programs[146] - The business is heavily dependent on the successful development, regulatory approval, and commercialization of its product candidates, which are in early clinical stages[146] - Public health crises like pandemics could materially and adversely affect preclinical and clinical trials, business, and financial condition[146] - The company relies on third-party suppliers for manufacturing, and the loss of these suppliers or their failure to comply with regulations would materially harm the business[146] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered securities were sold, and the planned use of IPO proceeds remains unchanged - There were no sales of unregistered securities in the reported period[401] - There has been no material change in the planned use of proceeds from the company's IPO[401] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[401] Mine Safety Disclosures This item is not applicable to the company - Not applicable[401] Other Information The company reported no other information for this item - None[401] Exhibits This section indexes exhibits filed with the Form 10-Q, including officer certifications - The exhibit index lists documents filed with the report, including officer certifications and Inline XBRL data files[405][406]