Annexon(ANNX) - 2022 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements Presents Annexon, Inc.'s unaudited condensed consolidated financial statements, highlighting $269.5 million in cash and investments, a $403.9 million accumulated deficit, and $122.6 million from a July 2022 private placement Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 ($) | December 31, 2021 ($) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $210,658 | $74,843 | | Short-term investments | $58,861 | $167,872 | | Total current assets | $274,777 | $247,693 | | Total assets | $312,722 | $287,040 | | Liabilities & Equity | | | | Total liabilities | $52,120 | $55,131 | | Total stockholders' equity | $260,602 | $231,909 | | Accumulated deficit | $(403,879) | $(296,315) | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2022 ($) | | :--- | :--- | :--- | | Research and development | $27,862 | $83,966 | | General and administrative | $8,207 | $24,938 | | Net loss | $(35,054) | $(107,564) | | Net loss per share | $(0.51) | $(2.21) | - The company has experienced losses since inception, with an accumulated deficit of $403.9 million as of September 30, 2022. Operations have been funded primarily through stock issuances[28] - In July 2022, the company closed a private placement of common stock and warrants, resulting in net proceeds of approximately $122.6 million. Management projects that current cash is sufficient to support operations for at least the next 12 months[29] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage biopharmaceutical business, pipeline progress, and financial performance, noting a net loss increase to $107.6 million and a liquidity boost from a $122.6 million private placement extending cash runway into H2 2025 - Annexon is a clinical-stage biopharmaceutical company focused on a new class of complement medicines targeting C1q for autoimmune, neurodegenerative, and ophthalmic disorders[105] - The company is advancing a pipeline of five product candidates: ANX005 (IV for GBS, wAIHA, HD, ALS), ANX007 (intravitreal for GA), ANX009 (subcutaneous for LN), ANX105 (monoclonal antibody), and ANX1502 (oral small molecule)[108][110] Financial Results Comparison (in thousands) | Metric | Nine Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2021 ($) | | :--- | :--- | :--- | | Research and development | $83,966 | $72,849 | | General and administrative | $24,938 | $20,406 | | Net loss | $(107,564) | $(92,952) | - As of September 30, 2022, the company had $269.5 million in cash, cash equivalents, and short-term investments, which is expected to fund operations into the second half of 2025[136][146] Results of Operations R&D expenses increased by $11.1 million (15%) to $84.0 million, driven by clinical trial and personnel costs, while G&A expenses rose by $4.5 million (22%) to $24.9 million due to personnel and professional services R&D Expense Breakdown - Nine Months Ended Sep 30 (in thousands) | Expense Category | 2022 ($) | 2021 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Clinical and nonclinical outside services | $39,640 | $30,608 | $9,032 | 30% | | Compensation and personnel-related | $21,740 | $18,031 | $3,709 | 21% | | Contract manufacturing | $12,553 | $14,464 | $(1,911) | (13%) | | Total R&D Expenses | $83,966 | $72,849 | $11,117 | 15% | G&A Expense Breakdown - Nine Months Ended Sep 30 (in thousands) | Expense Category | 2022 ($) | 2021 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Compensation and personnel-related | $12,579 | $9,622 | $2,957 | 31% | | Consulting and professional services | $9,653 | $8,673 | $980 | 11% | | Total G&A Expenses | $24,938 | $20,406 | $4,532 | 22% | Liquidity and Capital Resources The company's liquidity, primarily from equity sales, was boosted by a $122.6 million July 2022 private placement, bringing cash and investments to $269.5 million and extending funding into H2 2025, with a $100.0 million ATM program available - On July 11, 2022, the company completed a private placement of common stock and warrants, resulting in net proceeds of approximately $122.6 million after fees and expenses[148] - Based on the current operating plan, existing cash and investments are expected to fund operations and capital requirements into the second half of 2025[146] - The company has a $100.0 million at-the-market (ATM) offering program established in August 2021, but no shares have been sold under this program as of September 30, 2022[147] Historical Cash Flows (in thousands) | Activity | Nine Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2021 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(89,170) | $(77,789) | | Net cash provided by (used in) investing activities | $102,058 | $(121,933) | | Net cash provided by financing activities | $122,800 | $847 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency exchange and interest rate fluctuations, with foreign currency exposure deemed immaterial and interest rate risk on short-term investments not expected to materially impact financial results - The company's primary market risks are foreign currency exchange risk and interest rate risk[155][156] - Foreign currency risk from operations in Australia is not considered material[155] - Interest rate risk is associated with cash and cash equivalents ($210.7 million) and short-term investments ($58.9 million). However, due to the short-term nature of these holdings, a 10% change in interest rates is not expected to have a material impact[156] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[157] - There were no changes in internal control over financial reporting during the quarter ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[158] PART II—OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings, though it may become involved in ordinary course litigation - As of the filing date, the company is not party to any material legal proceedings[162] Risk Factors The company faces significant risks including its clinical-stage status, history of losses, need for substantial financing, dependence on product candidate success, clinical trial delays, supply chain reliance, competition, and public health crises - The company is a clinical-stage biopharmaceutical company with a limited operating history, significant losses since inception, and no products approved for commercial sale[164][165] - Substantial additional financing will be required to achieve goals, and failure to obtain it could force delays or termination of development programs[164][167] - The business is heavily dependent on the successful development, regulatory approval, and commercialization of its product candidates, which are in early stages of clinical development[164][181] - The company relies on third-party suppliers for manufacturing and intends to do so for commercial supplies, creating risk related to compliance, quality, and supply chain stability[164][255] - Public health crises like the COVID-19 pandemic have caused and could continue to cause interruptions in clinical trial activities, staff shortages, and supply chain issues[164][188] Unregistered Sales of Equity Securities and Use of Proceeds Details the July 11, 2022 private placement of common stock and warrants, and confirms no material change in the planned use of proceeds from the July 2020 IPO - On July 11, 2022, the company sold an aggregate of 9,013,834 shares of common stock, pre-funded warrants to purchase 24,696,206 shares, and common warrants to purchase 8,427,508 shares in a private placement[422] - There has been no material change in the planned use of proceeds from the company's IPO, which was declared effective on July 23, 2020[423] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[423] Mine Safety Disclosures This item is not applicable to the company - Not applicable[423] Other Information The company reports no other information for this period - None[423] Exhibits Lists exhibits filed with the Quarterly Report on Form 10-Q, including certifications from executive officers and Inline XBRL documents for financial reporting - The report includes required certifications from the Principal Executive Officer (31.1) and Principal Financial Officer (31.2) as exhibits[425] - Inline XBRL files (Instance, Schema, Calculation, Definition, Label, Presentation) are included as exhibits 101.INS through 101.PRE[425][427]