ANAPTYSBIO, INC [ANAB] Filings

10-Q 1 anab-20240630.htm 10-Q anab-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2024


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission File Number: 001-37985

ANAPTYSBIO, INC.

(Exact name of registrant as specified in its charter)


Delaware						20-3828755
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

10770 Wateridge Circle, Suite 210

San Diego, CA 92121

(Address of principal executive offices and zip code)

(858) 362-6295

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	ANAB	The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

☒

Smaller Reporting Company

☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2024, there were 27,449,316 shares of the Registrant’s Common Stock outstanding.

AnaptysBio, Inc.

Table of Contents


		Page Number
	PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of June 3 0 , 2024 and December 31, 2023	1
	Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 3 0 , 2024 and 2023	2
	Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 3 0 , 2024	3
	Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 3 0 , 2023	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 , 2024 and 2023	5
	Notes to the Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	65
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	67
	Exhibit Index	67
	Signatures	69

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)

AnaptysBio, Inc.

Consolidated Balance Sheets

(in thousands, except par value data)

(unaudited)


	June 30, 2024		December 31, 2023


ASSETS
Current assets:
Cash and cash equivalents	$	71,821	$	35,965
Receivables from collaborative partners	9,007		6,851
Short-term investments	278,983		354,939
Prepaid expenses and other current assets	7,539		9,080

Total current assets	367,350		406,835
Property and equipment, net	1,833		2,098
Operating lease right-of-use assets	15,291		16,174
Long-term investments	42,646		27,026
Other long-term assets	256		256


Total assets	$	427,376	$	452,389
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,890	$	4,698
Accrued expenses	33,680		30,967

Current portion of operating lease liability	1,850		1,777
Total current liabilities	40,420		37,442

Liability related to sale of future royalties	361,981		310,807
Operating lease liability, net of current portion	15,096		16,037






Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares, issued or outstanding at June 30, 2024 and December 31, 2023, respectively	—		—
Common stock, $0.001 par value, 500,000 shares authorized, 27,434 shares and 26,597 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	27		27
Additional paid in capital	714,959		702,969
Accumulated other comprehensive loss	(415)		(797)
Accumulated deficit	(704,692)		(614,096)
Total stockholders’ equity	9,879		88,103
Total liabilities and stockholders’ equity	$	427,376	$	452,389

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Collaboration revenue	$	10,971	$	3,460	$	18,150	$	4,834


Operating expenses:
Research and development	41,997		32,923		79,039		67,880
General and administrative	9,295		10,680		21,633		21,498
Total operating expenses	51,292		43,603		100,672		89,378
Loss from operations	(40,321)		(40,143)		(82,522)		(84,544)
Other (expense) income, net:


Interest income	4,623		4,653		9,207		9,139
Non-cash interest expense for the sale of future royalties	(10,953)		(4,358)		(17,270)		(8,694)
Other (expense) income, net	—		3		(2)		(1)
Total other (expense) income, net	(6,330)		298		(8,065)		444
Loss before income taxes	(46,651)		(39,845)		(90,587)		(84,100)
Provision for income taxes	(9)		—		(9)		—

Net loss	(46,660)		(39,845)		(90,596)		(84,100)


Unrealized gain (loss) on available for sale securities	209		(344)		382		1,635

Comprehensive loss	$	(46,451)	$	(40,189)	$	(90,214)	$	(82,465)
Net loss per common share:
Basic and diluted	$	(1.71)	$	(1.50)	$	(3.35)	$	(3.08)

Weighted-average number of shares outstanding:
Basic and diluted	27,356		26,629		27,079		27,288

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Consolidated Statement of Stockholders’ Equity

(in thousands)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2023	26,597	$	27	$	702,969	$	(797)	$	(614,096)	$	88,103



Issuance of common stock from exercises of options and employee stock purchase plan	53	—		811		—		—		811
Issuance of common stock upon vesting of restricted stock units	1,014	—		—		—		—		—
Net share settlement of restricted stock units	(347)	—		(7,504)		—		—		(7,504)


Stock-based compensation	—	—		10,131		—		—		10,131
Comprehensive gain, net	—	—		—		173		—		173
Net loss	—	—		—		—		(43,936)		(43,936)
Balance, March 31, 2024	27,317	$	27	$	706,407	$	(624)	$	(658,032)	$	47,778
Issuance of common stock from exercises of options and employee stock purchase plan	75	—		1,008		—		—		1,008
Issuance of common stock upon vesting of restricted stock units	42	—		—		—		—		—
Stock-based compensation	—	—		7,544		—		—		7,544
Comprehensive gain, net	—	—		—		209		—		209
Net loss	—	—		—		—		(46,660)		(46,660)
Balance, June 30, 2024	27,434	$	27	$	714,959	$	(415)	$	(704,692)	$	9,879

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Consolidated Statement of Stockholders’ Equity

(in thousands)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2022	28,513	$	29	$	717,797	$	(5,246)	$	(450,477)	$	262,103



Issuance of common stock from exercises of options and employee stock purchase plan	55	—		1,222		—		—		1,222
Issuance of common stock upon vesting of restricted stock units	39	—		—		—		—		—
Repurchases and retirements of common stock	(1,589)	(2)		(38,814)		—		—		(38,816)


Stock-based compensation	—	—		8,860		—		—		8,860
Comprehensive gain, net	—	—		—		1,979		—		1,979
Net loss	—	—		—		—		(44,255)		(44,255)
Balance, March 31, 2023	27,018	$	27	$	689,065	$	(3,267)	$	(494,732)	$	191,093
Issuance of common stock from exercises of options and employee stock purchase plan	48	—		775		—		—		775
Repurchases and retirements of common stock	(535)	—		(11,656)		—		—		(11,656)
Stock-based compensation	—	—		8,427		—		—		8,427
Comprehensive loss, net	—	—		—		(344)		—		(344)
Net loss	—	—		—		—		(39,845)		(39,845)
Balance, June 30, 2023	26,531	$	27	$	686,611	$	(3,611)	$	(534,577)	$	148,450

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(90,596)	$	(84,100)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	317		329
Stock-based compensation	17,675		17,287

Accretion/amortization of investments, net	(5,445)		(4,374)
Amortization of right-of-use assets – operating	883		851
Non-cash interest expense	17,270		8,694

Changes in operating assets and liabilities:
Receivables from collaborative partners	(2,156)		(1,763)

Prepaid expenses and other assets	1,499		(1,241)
Accounts payable and other liabilities	2,846		15,138

Operating lease liabilities	(868)		(798)

Net cash used in operating activities	(58,575)		(49,977)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments	(208,149)		(167,564)
Sales and maturities of investments	274,383		232,870

Purchases of property and equipment	(60)		(365)
Net cash provided by investing activities	66,174		64,941
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	1,790		2,048

Repurchase and retirements of common stock	—		(50,000)
Proceeds from the sale of future royalties	50,000		—
Payment for net share settlement of equity awards	(7,504)		—
Repayment of liability for sale of future royalties	(15,993)		(3,071)

Payments for debt issuance costs	(36)		(43)
Net cash provided by (used in) financing activities	28,257		(51,066)
Net increase (decrease) in cash and cash equivalents	35,856		(36,102)
Cash and cash equivalents, beginning of period	35,965		71,308
Cash and cash equivalents, end of period	$	71,821	$	35,206
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Non-cash investing and financing activities:
Amounts accrued for property and equipment	$	—	$	52
Amounts accrued for issuance costs related to the sale of future royalties	$	67	$	—
Amounts accrued for repurchases of common stock	$	—	$	472
Receivable related to issuance of common stock, upon exercise of stock options	$	29	$	(51)

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Description of the Business

AnaptysBio, Inc. (“we,” “us,” “our,” or the “Company”) was incorporated in the state of Delaware in November 2005. We are a clinical-stage biotechnology company focused on delivering innovative immunology therapeutics. We are developing immune cell modulating antibodies, including two wholly owned checkpoint agonists in clinical-stage development, for autoimmune and inflammatory diseases: rosnilimab, our PD-1 agonist in a Phase 2b trial for the treatment of moderate-to-severe rheumatoid arthritis (“RA”) and a Phase 2 trial for the treatment of moderate-to-severe ulcerative colitis (“UC”); and ANB032, our BTLA agonist, in a Phase 2b trial for the treatment of moderate-to-severe atopic dermatitis (“AD”). We also have other immune cell modulator candidates in our portfolio, including ANB033, an anti-CD122 antagonist antibody, entering a Phase 1 trial and ANB101, a BDCA2 modulator antibody, in preclinical development. In addition, we have developed two cytokine antagonists that we are exploring options for out-licensing: imsidolimab, our anti-IL-36R antibody, that has completed Phase 3 trials for the treatment of generalized pustular psoriasis (“GPP”), and etokimab, our anti-IL-33 antagonist that is Phase 2/3 ready. We have also discovered multiple therapeutic antibodies licensed to GlaxoSmithKline, Inc. (“GSK”) in a financial collaboration for immuno-oncology, including an anti-PD-1 antagonist antibody (Jemperli (dostarlimab-gxly) or “Jemperli”) and an anti-TIM-3 antagonist antibody (cobolimab, GSK4069889). We currently recognize revenue from milestones and royalties achieved under our immuno-oncology collaboration with GSK.

Since our inception, we have devoted our primary effort to research and development activities. Our financial support has been provided primarily from the sale of our common stock, royalty monetizations, as well as through funds received under our collaborative research and development agreements. Going forward, as we continue our expansion, we may seek additional financing and/or strategic investments. However, there can be no assurance that any additional financing or strategic investments will be available to us on acceptable terms, if at all. If events or circumstances occur such that we do not obtain additional funding, we will most likely be required to reduce our plans and/or certain discretionary spending, which could have a material adverse effect on our ability to achieve our intended business objectives. AnaptysBio management believes our currently available resources will provide sufficient funds to enable us to meet our operating plans for at least the next twelve months from the issuance of our consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been omitted. The accompanying unaudited consolidated financial statements include all known adjustments necessary for a fair presentation of the results of interim periods as required by U.S. GAAP. These adjustments consist primarily of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K.

Basis of Consolidation

The accompanying consolidated financial statements include us and our wholly owned Australian subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. We operate in one reportable segment, and our functional and reporting currency is the U.S. dollar.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during

the reporting periods. Actual results could differ from those estimates. We base our estimates and assumptions on historical experience when available and on various factors that we believe to be reasonable under the circumstances. Significant estimates relied upon in preparing these financial statements include estimates related to revenue recognition, accrued research and development expenses, stock-based compensation, and the liability related to the sale of future royalties. We evaluate our estimates and assumptions on an ongoing basis. Our actual results could differ from these estimates under different assumptions or conditions.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common equivalent shares outstanding for the period, as well as any dilutive effect from outstanding stock options and warrants using the treasury stock method. For each period presented, there is no difference in the number of shares used to calculate basic and diluted net loss per share.

The following table sets forth the weighted-average outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive (in common stock equivalent shares):


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	2024	2023	2024	2023

Options to purchase common stock	6,148	4,332	6,113	4,443

Restricted Stock Units	249	413	655	425
Total	6,397	4,745	6,768	4,868

Accounting Pronouncements

We have implemented all new accounting pronouncements that are in effect and may have an impact on our consolidated financial statements. Unless otherwise discussed, we believe the impact of any recently issued and not yet effective pronouncements will not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosure of significant segment expenses on an annual and interim basis. The guidance will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning December 15, 2024, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. We are currently assessing the impact that this standard will have on our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures Income Taxes, which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning after December 15, 2024. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. We are currently assessing the impact that this standard will have on our consolidated financial statements.

3. Balance Sheet Accounts and Supplemental Disclosures

Property and Equipment, Net

Property and equipment, net consist of the following:


(in thousands)	June 30, 2024		December 31, 2023
Laboratory equipment	$	6,489	$	6,473
Office furniture and equipment	1,654		1,640
Leasehold improvements	203		203
Property and equipment, gross	8,346		8,316
Less: accumulated depreciation and amortization	(6,513)		(6,218)
Total property and equipment, net	$	1,833	$	2,098

Accrued Expenses

Accrued expenses consist of the following:


(in thousands)	June 30, 2024		December 31, 2023
Accrued compensation and related expenses	$	5,421	$	7,201
Accrued professional fees and other expenses	988		1,412
Accrued research, development and manufacturing expenses	26,815		21,898
Accrued for repurchases of common stock	456		456

Total accrued expenses	$	33,680	$	30,967

4. Collaborative Research and Development Agreements

GSK Collaboration

In March 2014, we entered into a Collaboration and Exclusive License Agreement (the “GSK Agreement”) with TESARO, Inc. (“Tesaro”), an oncology-focused biopharmaceutical company now a part of GSK (Tesaro and GSK are hereinafter referred to, collectively, as “GSK”). Currently, under the GSK Agreement, GSK is developing Jemperli as a monotherapy for various solid tumor indications. In addition, GSK is developing dostarlimab in combination with additional therapies under the collaboration, including with another development program from the GSK Agreement: cobolimab, an anti-TIM-3 antibody, in 2L NSCLC. In October 2023, Amendment No. 5 to the GSK Agreement (the “GSK Amendment No. 5”) was agreed by both parties to terminate the anti-LAG-3 antagonist antibody development program under the GSK Agreement. In accordance with the GSK Agreement and the GSK Amendment No. 5, we have regained full global rights to the anti-LAG-3 antagonist antibody development program.

For each remaining development program under the GSK Agreement, we are eligible to receive milestone payments if certain preclinical and clinical trial events are achieved by GSK, if certain U.S. and European regulatory submissions and approvals in multiple indications are achieved, and upon the achievement of specified levels of annual worldwide net sales. We will also be eligible to receive tiered 4-8% royalties related to worldwide net sales of products developed under the collaboration. On October 23, 2020, Amendment No. 3 to the GSK Agreement (the “GSK Amendment No. 3”) was agreed to by both parties to permit GSK to conduct development and commercialization in combination with any third-party molecules of Zejula, an oral, once-daily poly (ADP-ribose) polymerase (PARP) inhibitor (“Zejula”). Under GSK Amendment No. 3, we were granted increased royalties upon sales of Jemperli, equal to 8% of Net Sales (as defined in the GSK Agreement) below $1.0 billion and from 12% up to 25% of Net Sales above $1.0 billion. Unless earlier terminated by either party upon specified circumstances, the GSK Agreement will terminate, with respect to each specific developed product, upon the later of the 12th anniversary of the first commercial sale of the product or the expiration of the last to expire of any patent.

We assessed these arrangements in accordance with ASC 606 and concluded that the contract counterparty, GSK, is a customer. We identified the following material promises under the GSK Agreement: (1) the licenses under certain patent rights and transfer of certain development and regulatory information, (2) research and development (“R&D”) services, and (3) joint

steering committee meetings. We considered the research and discovery capabilities of GSK for these specific programs and the fact that the discovery and optimization of these antibodies is proprietary and could not, at the time of contract inception, be provided by other vendors, to conclude that the license does not have stand-alone functionality and is therefore not distinct. Additionally, we determined that the joint steering committee participation would not have been provided without the R&D services and GSK Agreement. Based on these assessments, we identified all services to be interrelated and therefore concluded that the promises should be combined into a single performance obligation at the inception of the arrangement.

As of June 30, 2024, the transaction price for the GSK Agreement and its associated amendments includes the upfront payment, research reimbursement revenue and milestones and royalties earned to date, which are allocated in their entirety to the single performance obligation.

We recognized $11.0 million and $18.2 million in royalty revenue during the three and six months ended June 30, 2024, respectively, related to GSK’s net sales of Jemperli and Zejula during the period, which we estimate based on either GSK’s prior sales experience or actuals. Of the royalty revenue recognized during the three and six months ended June 30, 2024, $10.1 million and $16.3 million, respectively, is Jemperli non-cash revenue related to the Jemperli Royalty Monetization Agreement and $0.9 million and $1.9 million, respectively, is Zejula non-cash revenue related to the Zejula Royalty Monetization Agreement, each of such agreements as described in Note 5. We recognized $3.5 million and $4.8 million in royalty revenue during the three and six months ended June 30, 2023, respectively, related to GSK’s net sales of Zejula and Jemperli during the period based on GSK’s prior sales experience or actuals. Of the royalty revenue recognized during the three and six months ended June 30, 2023, $2.8 million and $3.3 million is Jemperli non-cash revenue related to the Jemperli Royalty Monetization Agreement and $0.7 million and $1.5 million is Zejula non-cash revenue related to the Zejula Royalty Monetization Agreement. GSK reports sales information to us on a one quarter lag and differences between actual and estimated royalty revenues will be adjusted in the following quarter. All royalty revenue related to Zejula global net sales starting July 2022 will be paid directly to a wholly owned subsidiary of DRI Healthcare Trust (“DRI”) pursuant to the Zejula Royalty Monetization Agreement, as described in Note 5.

No clinical milestones were recognized during the three and six months ended June 30, 2024 and 2023. No other future clinical or regulatory milestones have been included in the transaction price, as all milestone amounts were subject to the revenue constraint. As part of the constraint evaluation, we considered numerous factors including the fact that the receipt of milestones is outside of our control and contingent upon success in future clinical trials, an outcome that is difficult to predict, and GSK’s efforts. Any consideration related to sales-based milestones, including royalties, will be recognized when the related sales occur as they were determined to relate predominantly to the intellectual property license granted to GSK and therefore have also been excluded from the transaction price. We will re-evaluate the variable transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Milestones under the GSK Agreement are as follows:

Anti-PD-1

(Jemperli/Dostarlimab)

Anti-TIM-3
(GSK4069889A/Cobolimab)

Milestone Event

Amount

Quarter Recognized

Amount

Quarter Recognized

Initiated in vivo toxicology studies using good laboratory practices (GLPs)

$1.0M

Q2'15

$1.0M

Q4'15

IND clearance from the FDA

$4.0M

Q1'16

$4.0M

Q2'16

Phase 2 clinical trial initiation

$3.0M

Q2'17

$3.0M

Q4'17

Phase 3 clinical trial initiation - first indication

$5.0M

Q3'18

$5.0M

Q4'22

Phase 3 clinical trial initiation - second indication

$5.0M

Q2'19

$5.0M

—

Filing of the first BLA(1) - first indication

$10.0M

Q1'20

$10.0M

—

Filing of the first MAA(2) - first indication

$5.0M

Q1'20

$5.0M

—

Filing of the first BLA - second indication

$10.0M

Q1'21

$10.0M

—

First BLA approval - first indication

$20.0M

Q2'21

$20.0M

—

First MAA approval - first indication

$10.0M

Q2'21

$10.0M

—

First BLA approval - second indication

$20.0M

Q3'21

$20.0M

—

Filing of the first MAA - second indication(3)

$5.0M

—

$5.0M

—

First MAA approval - second indication(3)

$10.0M

—

$10.0M

—

First commercial sales milestone(3)

$15.0M

—

$15.0M

—

Second commercial sales milestone(3)

$25.0M

—

$25.0M

—

Third commercial sales milestone(3)

$50.0M

—

$50.0M

—

Fourth commercial sales milestone

$75.0M

—

$75.0M

—

Milestones recognized through June 30, 2024

$93.0M

—

$13.0M

—

Milestones that may be recognized in the future

$180.0M

—

$260.0M

—

(1)Biologics License Application (“BLA”)

(2)Marketing Authorization Application (“MAA”)

(3)For Jemperli, the filing and approval of the first MAA for a second indication and first three commercial sales milestones are included as part of the royalty monetization agreement with Sagard (as defined below), see Note 5. Cash is generally received within 30 days of milestone achievement.

Centessa

On November 24, 2023, we entered into an exclusive license agreement (as amended, the “Centessa Agreement”) with Centessa Pharmaceuticals (UK) Limited (“Centessa”), pursuant to which we acquired the exclusive global development and commercialization rights to a blood dendritic cell antigen 2 (BDCA2) modulator antibody portfolio, including lead asset CBS004 (renamed ANB101), CBS008 (renamed ANB102) and the related family of backup antibodies, for the treatment of autoimmune and inflammatory diseases.

In connection with the Centessa Agreement, we paid Centessa an upfront cash payment of $4.0 million and an additional cash payment of $3.0 million as reimbursement to Centessa for manufacturing costs incurred. There were $0.3 million in transaction costs incurred. The total transaction amount of $7.3 million was expensed as in-process research and development and classified as an operating activity in the statement of cash flows. We accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business.

Under the terms of the agreement, Centessa may be entitled to receive potential future payments of up to $10.0 million upon the achievement of a certain event-based milestone and would be entitled to receive on a product-by-product and country-by-country basis, a royalty of low single digits on annual net sales of any product in the territory in each calendar year. As of

June 30, 2024, achievement of the milestone is not probable and, therefore, we have not recognized a liability for the associated $10.0 million contingent consideration.

5. Sale of Future Royalties

Jemperli Royalty Monetization Agreement

In October 2021, we signed a royalty monetization agreement (“Jemperli Royalty Monetization Agreement”) with Sagard Healthcare Royalty Partners, LP (“Sagard”). Under the terms of the Jemperli Royalty Monetization Agreement, we received $250.0 million in exchange for royalties and milestones payable to us under our GSK collaboration on annual global net sales of Jemperli below $1.0 billion starting in October 2021 (not including any combination products that contain both Jemperli and another Development Antibody (as defined in the Jemperli Royalty Monetization Agreement)).

In May 2024, we entered into an amendment to the Jemperli Royalty Monetization Agreement, Amendment No. 1 (the “Jemperli Amendment”) under which we sold additional receivables to Sagard in exchange for $50.0 million. The Jemperli Amendment now includes all Jemperli sales, expands the definition of Jemperli to include any product containing Jemperli, whether or not such product constitutes a combination product, and increases the threshold amounts of aggregate Jemperli royalties and milestones to be received by Sagard under the Jemperli Royalty Monetization Agreement to either $600.0 million if received by the end of March 31, 2031, or $675.0 million if received thereafter. Once either of these thresholds are met, the Jemperli Royalty Monetization Agreement will expire, resulting in us regaining all subsequent Jemperli royalties and milestones. As of June 30, 2024, Sagard has received a total of $24.5 million in royalties and milestones.

The proceeds received from Sagard of $250.0 million and $50.0 million were recorded as a liability, net of transaction costs of $0.4 million and $0.1 million, which will be amortized over the estimated life of the arrangement using the effective interest rate method. The aggregate future estimated payments, less the $299.5 million, net of proceeds, will be recognized as non-cash interest expense over the life of the agreement. Royalty and milestone revenue will be recognized as earned on net sales of Jemperli, and these payments to Sagard will be recorded as a reduction of the liability when paid. As such payments are made to Sagard, the balance of the liability will be effectively repaid over the life of the Jemperli Royalty Monetization Agreement.

We estimate the effective interest rate used to record non-cash interest expense under the Jemperli Royalty Monetization Agreement based on the estimate of future royalty payments to be received by Sagard. As of June 30, 2024, the estimated effective rate under the agreement was 17.2%. Over the life of the arrangement, the actual effective interest rate will be affected by the amount and the timing of the royalty payments received by Sagard and changes in our forecasted royalties. At each reporting date, we will reassess our estimate of total future royalty payments to be received and if such payments are materially different than our prior estimates, we will prospectively adjust the imputed interest rate and the related amortization of the royalty obligation.

We recognized Jemperli non-cash royalty revenue of approximately $10.1 million and $16.3 million during the three and six months ended June 30, 2024 and approximately $2.8 million and $3.3 million during the three and six months ended June 30, 2023, respectively.

We recognized non-cash interest expense of approximately $10.7 million and $16.8 million during the three and six months ended June 30, 2024 and $4.2 million and $8.1 million during the three and six months ended June 30, 2023, respectively. The interest and amortization of issuance costs are reflected as non-cash interest expense for the sale of future royalties in the Consolidated Statements of Operations.

The following table shows the activity within the liability account for the six months ended June 30, 2024:


(in thousands)	June 30, 2024
Liability related to sale of future Jemperli royalties and milestones – balance at 12/31/2023	$	278,090
Proceeds from sale of future royalties	50,000
Issuance costs related to the sale of future royalties	(103)
Amortization of issuance costs	28
Royalty and milestone payments to Sagard	(14,099)
Non-cash interest expense recognized	16,801
Liability related to sale of future royalties and milestones – ending balance	$	330,717

Zejula Royalty Monetization Agreement

In October 2020, in connection with GSK Amendment No. 3, GSK agreed, under the terms of a settlement agreement (the “GSK Settlement Agreement”), to pay us a royalty of 0.5% on all GSK net sales of Zejula starting January 1, 2021.

In September 2022, we signed a purchase and sale agreement (the “Zejula Royalty Monetization Agreement”) with a wholly owned subsidiary of DRI to monetize all of our future royalties on global net sales of Zejula under the GSK Settlement Agreement. Under the terms of the Zejula Royalty Monetization Agreement, we received $35.0 million in exchange for all royalties payable by GSK to us under the GSK Settlement Agreement on global net sales of Zejula starting in July 2022. In addition, under the Zejula Royalty Monetization Agreement, we are entitled to receive an additional $10.0 million payment from DRI if Zejula is approved by the U.S. Food and Drug Administration for the treatment of endometrial cancer on or prior to December 31, 2025.

The proceeds received from DRI of $35.0 million were recorded as a liability, net of transaction costs of $0.2 million, which will be amortized over the estimated life of the arrangement using the effective interest rate method. Royalty revenue will be recognized as earned on net sales of Zejula, and these royalty payments to DRI will be recorded as a reduction of the liability when paid. The aggregate future estimated payments, less the $34.8 million, of net proceeds, will be recorded as non-cash interest expense over the life of the agreement. As such payments are made to DRI, the balance of the liability will be effectively repaid over the life of the Zejula Royalty Monetization Agreement.

We recognized Zejula non-cash royalty revenue of approximately $0.9 million and $1.9 million during the three and six months ended June 30, 2024 and $0.7 million and $1.5 million during the three and six months ended June 30, 2023, respectively.

We recognized non-cash interest expense of approximately $0.2 million and $0.4 million during the three and six months ended June 30, 2024 and $0.2 million and $0.6 million six months ended June 30, 2023, respectively. The interest and amortization of issuance costs is reflected as non-cash interest expense for the sale of future royalties in the Consolidated Statements of Operations.

The following table shows the activity within the liability account for the six months ended June 30, 2024:


(in thousands)	June 30, 2024
Liability related to sale of future Zejula royalties and milestones – balance at 12/31/2023	$	32,717


Amortization of issuance costs	15
Royalty and milestone payments to DRI	(1,894)
Non-cash interest expense recognized	426
Liability related to sale of future royalties and milestones – ending balance	$	31,264

6. Fair Value Measurements and Available for Sale Investments

Fair Value Measurements

Our financial instruments consist principally of cash, cash equivalents, short-term and long-term investments, receivables, and accounts payable. Certain of our financial assets and liabilities have been recorded at fair value in the consolidated balance sheet in accordance with the accounting standards for fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3 – Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes our assets and liabilities that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy:


	Fair Value Measurements at End of Period Using:
(in thousands)	Fair Value		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At June 30, 2024
Money market funds(1)	$	59,280	$	59,280	$	—	$	—
Mutual funds(1)	2,737		2,737		—		—
U.S. Treasury securities(2)	296,797		296,797		—		—

Agency securities(2)	5,066		—		5,066		—
Commercial and corporate obligations(2)	19,766		—		19,766		—

At December 31, 2023
Money market funds(1)	$	27,789	$	27,789	$	—	$	—
Mutual funds(1)	6,286		6,286		—		—
U.S. Treasury securities(2)	325,714		325,714		—		—
Certificates of deposit(2)	244		—		244		—
Agency securities(2)	20,253		—		20,253		—
Commercial and corporate obligations(2)	35,754		—		35,754		—

(1) Included in cash and cash equivalents in the accompanying consolidated balance sheets.

(2) Included in short-term or long-term investments in the accompanying consolidated balance sheets depending on the respective maturity date.

The following methods and assumptions were used to estimate the fair value of our financial instruments for which it is practicable to estimate that value:

Marketable Securities. For fair values determined by Level 1 inputs, which utilize quoted prices in active markets for identical assets, the level of judgment required to estimate fair value is relatively low. For fair values determined by Level 2 inputs, which utilize quoted prices in less active markets for similar assets, the level of judgment required to estimate fair value is also considered relatively low.

Fair Value of Other Financial Instruments

The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts payable, and accrued expenses approximate fair value due to their short-term nature.

Available for Sale Investments

We invest our excess cash in agency securities, debt instruments of financial institutions and corporations, commercial obligations, and U.S. Treasury securities, which we classify as available-for-sale investments. These investments are carried at fair value and are included in the tables above. The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in short-term and long-term investments as of June 30, 2024 are as follows:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities(1)	$	5,074	$	—	$	(8)	$	5,066


Commercial and corporate obligations(2)	19,778		—		(12)		19,766
U.S. Treasury securities(3)	296,985		27		(215)		296,797
Total available for sale investments	$	321,837	$	27	$	(235)	$	321,629

(1) Of our outstanding agency securities, $5.1 million have maturity dates of less than one year and $0.0 million have maturity dates between one to two years as of June 30, 2024.

(2) Of our outstanding commercial and corporate obligations, $19.8 million have maturity dates of less than one year and $0.0 million have a maturity date of between one to two years as of June 30, 2024.

(3) Of our outstanding U.S. Treasury securities, $254.2 million have maturity dates of less than one year and $42.6 million have a maturity date of between one to two years as of June 30, 2024.

The aggregate market value, cost basis, and gross unrealized gains and losses of available for sale investments by security type, classified in short-term and long-term investments as of December 31, 2023 are as follows:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities(1)	$	20,322	$	—	$	(69)	$	20,253
Certificates of deposit(2)	246		—		(2)		244
Commercial and corporate obligations(3)	35,760		77		(83)		35,754
U.S. Treasury securities(4)	326,227		122		(635)		325,714
Total available for sale investments	$	382,555	$	199	$	(789)	$	381,965

(1) Of our outstanding agency securities, $20.3 million have maturity dates of less than one year and $0.0 million have a maturity date of between one to two years as of December 31, 2023.

(2) Of our outstanding certificates of deposit, $0.2 million have a maturity date of less than one year and $0.0 million have a maturity date of between one to two years as of December 31, 2023.

(3) Of our outstanding commercial and corporate obligations, $25.8 million have maturity dates of less than one year and $10.0 million have a maturity date of between one to two years as of December 31, 2023.

(4) Of our outstanding U.S. Treasury securities, $308.6 million have maturity dates of less than one year and $17.1 million have a maturity date of between one to two years as of December 31, 2023.

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2024 and December 31, 2023, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:


	June 30, 2024
	Less than 12 Months				12 Months or Greater				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Agency securities	$	—	$	—	$	5,066	$	(8)	$	5,066	$	(8)
Commercial and corporate obligations	14,258		(10)		3,804		(2)		18,062		(12)

U.S. Treasury Securities	182,460		(119)		52,401		(96)		234,861		(215)
Total	$	196,718	$	(129)	$	61,271	$	(106)	$	257,989	$	(235)


	December 31, 2023
	Less than 12 Months				12 Months or Greater				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Agency securities	$	2,530	$	(1)	$	17,723	$	(68)	$	20,253	$	(69)
Certificates of Deposit	—		—		244		(2)		244		(2)
Commercial and corporate obligations	5,160		(9)		15,200		(74)		20,360		(83)
U.S. Treasury Securities	98,840		(110)		99,000		(525)		197,840		(635)
Total	$	106,530	$	(120)	$	132,167	$	(669)	$	238,697	$	(789)

As of June 30, 2024 and December 31, 2023, unrealized losses on available-for-sale investments were $0.2 million and $0.8 million, respectively, with unrealized losses of $0.1 million, on available for sale investments that were in an unrealized loss position for greater than 12 months as of June 30, 2024. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, accordingly, no allowance for credit losses was recorded.

7. Stockholders’ Equity

Common Stock

Of the 500,000,000 shares of common stock authorized, 27,434,033 shares were issued and outstanding as of June 30, 2024.

Stock Repurchase Program

In January 2023, our Board of Directors authorized a stock repurchase program (the “Repurchase Program”) to repurchase up to $50.0 million of our outstanding common stock, par value $0.001 per share. The Repurchase Program was completed in May 2023.

The following table presents the repurchase activity from January 1, 2023 through May 5, 2023, the end date of the Repurchase Program:


	Total number of shares purchased	Average price paid per share		Approximate dollar value of shares purchased (in thousands)
First Quarter 2023	1,589,424	$	24.19	$	38,456
Second Quarter 2023	534,790	21.59		11,544
Total	2,124,214			$	50,000

The repurchased common stock was subsequently retired after the repurchase and the par value of the shares was charged to common stock. The excess of the repurchase price over the par value was applied against additional paid in capital.

Open Market Sales Agreement

In November 2022, we entered into the Cowen Sales Agreement with Cowen, through which we may offer and sell shares of our common stock, having an aggregate offering of up to $150.0 million through Cowen as our sales agent. As of June 30, 2024, we had sold no shares under this agreement.

8. Equity Incentive Plans

2017 Equity Incentive Plan

In January 2017, our Board of Directors and stockholders approved and adopted the 2017 Equity Incentive Plan (the “2017 Plan”). Under the 2017 Plan, we may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then our employees, officers, directors or consultants. In addition, the number of shares of stock available for issuance under the 2017 Plan were to be automatically increased each January 1, beginning on January 1, 2018, by 4% of the aggregate number of outstanding shares of our common stock as of the immediately preceding December 31 or such lesser number as determined by our Board of Directors. The 2017 Plan automatically increased by 1,063,871 shares as of January 1, 2024. At our annual stockholder meeting on June 12, 2024, the 2017 Plan was amended, eliminating the automatic annual share increase and number of shares available for issuance was increased by 2,700,000 shares. All future share increases will require stockholder approval. As of June 30, 2024, 3,653,227 shares were available for future issuance.

Employee Stock Purchase Plan

In January 2017, our Board of Directors and stockholders approved and adopted the 2017 Employee Stock Purchase Plan (“ESPP”). In addition, the number shares of stock available for issuance under the ESPP will be automatically increased each January 1, beginning on January 1, 2018, by 1% of the aggregate number of outstanding shares of our common stock as of the immediately preceding December 31 or such lesser number as determined by our Board of Directors. The ESPP automatically increased by 265,967 shares as of January 1, 2024. As of June 30, 2024, 151,842 shares have been issued under the ESPP and 1,946,965 shares were available for future issuance.

Stock Options

Stock options granted to employees and non-employees generally vest over a four-year period while stock options granted to directors generally vest over a one-year period. Each stock option award has a maximum term of 10 years from the date of grant, subject to earlier cancellation prior to vesting upon cessation of service to us. A summary of the activity related to stock option awards during the six months ended June 30, 2024 is as follows:


	Shares Subject to Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2024	4,225,615	$	27.36	7.42	$	5,827
Granted	2,159,889	$	21.45
Exercised	(74,908)	$	15.57
Forfeitures and cancellations	(207,690)	$	33.88
Outstanding at June 30, 2024	6,102,906	$	25.19	7.89	$	19,526
Exercisable at June 30, 2024	2,636,860	$	28.98	6.30	$	8,469

Total cash received from the exercise of stock options was approximately $1.1 million during the six months ended June 30, 2024.

Time-Based Restricted Stock Units

Each Restricted Stock Unit (“RSU”) represents one equivalent share of our common stock to be issued after satisfying the applicable continued service-based vesting criteria over a specified period. The fair value of these RSUs is based on the closing price of our common stock on the date of the grant. We measure compensation expense over the expected vesting period on a

straight-line basis. The RSUs do not entitle the participants to the rights of holders of common stock, such as voting rights, until the shares are issued.


	Number of Restricted Stock Units	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2024	1,481,572	$	24.80	0.73	$	31,735
Granted	786,108	$	21.45
Released	(1,055,959)	$	25.94
Forfeitures and cancellations	(7,372)	$	22.18
Outstanding at June 30, 2024	1,204,349	$	21.63	1.82	$	30,181
RSU expected to vest at June 30, 2024	1,204,349	$	21.63	1.82	$	30,181

Stock-Based Compensation Expense

We recognize stock-based compensation expense for awards issued to employees and non-employees over the requisite service period based on the estimated grant-date fair value of such awards. We record the expense for stock-based compensation awards subject to performance-based milestone vesting over the requisite service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions at each reporting date. The estimated fair values of stock option awards granted were determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions:


	Six Months Ended June 30,

		2024	2023
Risk-free interest rate				4.0	%		3.7	%
Expected volatility				78.3	%		86.1	%
Expected dividend yield				—	%		—	%
Expected term (in years)				6.28			5.75
Weighted-average grant date fair value per share			$	15.28		$	16.50

We determine the appropriate risk-free interest rate, expected term for employee stock-based awards, contractual term for non-employee stock-based awards, and volatility assumptions. The weighted-average expected option term for employee and non-employee stock-based awards reflects the historical option term. Expected volatility incorporates the historical volatility of our stock price. The risk-free interest rate is based upon U.S. Treasury securities with remaining terms similar to the expected or contractual term of the stock-based payment awards. The assumed dividend yield is based on our expectation of not paying dividends in the foreseeable future.

Total non-cash stock-based compensation expense for all stock awards that was recognized in the consolidated statements of operations and comprehensive loss is as follows:


	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2024		2023			2024			2023
Research and development	$	3,534	$	2,683		$	6,988		$	5,453
General and administrative	4,010		5,744		(1)	10,687		(2)	11,834		(3)
Total	$	7,544	$	8,427		$	17,675		$	17,287

(1) Includes $2.9 million related to 2 year RSU initially issued to our new CEO in March 2022 and now fully recognized.

(2) Includes $2.6 million related to 2 year RSU initially issued to our new CEO in March 2022 and now fully recognized.

(3) Includes $5.8 million related to 2 year RSU initially issued to our new CEO in March 2022 and now fully recognized.

At June 30, 2024, there was $51.2 million of unrecognized compensation cost related to unvested stock option awards, which is expected to be recognized over a remaining weighted-average vesting period of 3.03 years and $22.1 million of unrecognized cost related to unvested RSU awards, which is expected to be recognized over a period of 3.10 years and $0.2 million of unrecognized compensation cost related to the ESPP, which is expected to be recognized over a remaining weighted-average vesting period of 0.38 years.

9. Commitments and Contingencies

Operating Leases

On May 4, 2020, we entered into a lease agreement with Wateridge Property Owner, LP, with respect to facilities in the building at 10770 Wateridge Circle, San Diego, California 92121 (the “Lease Agreement”). Under the Lease Agreement, we agreed to lease approximately 45,000 square feet of space for a term of 124 months, beginning on April 5, 2021. The terms of the Lease Agreement provide us with an option to extend the term of the lease for an additional five years, as well as a one-time option to terminate the lease after seven years with the payment of a termination fee. The exercise of the lease option is at our sole discretion, which we currently do not anticipate exercising and as such was not recognized as part of the right-of-use asset (the “ROU asset”) and lease liability. The monthly base rent was initially $4.20 per rentable square foot and is increased by 3% annually. Under the Lease Agreement, we are also responsible for our pro rata share of real estate taxes, building insurance, maintenance, direct expenses, and utilities. Upon lease commencement, on April 5, 2021, we recognized an ROU asset of $20.6 million, with a corresponding lease liability of $20.7 million on the consolidated balance sheets. The ROU asset includes adjustments for prepayments, initial direct costs, and lease incentives. As of June 30, 2024, we have recorded $0.3 million as a security deposit in accordance with the terms of the Lease Agreement.

Our lease payments are fixed, and we recognize lease expense for leases on a straight-line basis over the lease term. Operating lease ROU assets and lease liabilities are recorded based on the present value of the future minimum lease payments over the lease term at commencement date. As our lease does not provide an implicit rate, we used our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The weighted-average discount rate used was 4.0% and the weighted-average remaining lease term is approximately 7.2 years.

The following non-cancellable office lease costs are included in our consolidated statements of cash flow (in thousands):


		Six Months Ended June 30,
Leases	Classification on the Cash Flow	2024		2023
Operating lease cost	Operating	$	1,239	$	1,239
Cash paid for amounts included in the measurement of lease liabilities	Operating	1,217		1,181

At June 30, 2024, the future minimum annual obligations for the Company’s operating lease liabilities are as follows (in thousands):


Years Ending December 31,
2024	$	1,241
2025	2,531
2026	2,607
2027	2,685
2028	2,766
Thereafter	7,788
Total minimum payments required	19,618
Less imputed interest	(2,672)
Total	$	16,946

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and section 27A of the Securities Act of 1933, as amended (the “Securities Act”). The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” and “expect,” and similar expressions that convey uncertainty of future events or outcomes, are intended to identify forward-looking statements.

The forward-looking statements in this report include, among other things, statements about:

•the success, cost, and timing of our product candidate development activities and ongoing and planned clinical trials;

•our plans to develop and commercialize antibodies, including our two checkpoint agonists in clinical-stage development: rosnilimab and ANB032;

•our ability to develop our product candidates;

•the likelihood that the clinical data generated in any study we performed, are performing, or plan to perform in a non-U.S. jurisdiction will be subsequently accepted by the U.S. Food and Drug Administration (“FDA”) and/or by foreign regulatory authorities outside of the jurisdiction where the study was being performed;

•the potential benefits and advantages of our product candidates and approaches versus those of our competitors;

•the success of competing therapies that are or may become available;

•the timing of and the ability to obtain and maintain regulatory approvals for our product candidates, partnered product candidates and/or product candidates for which we may receive royalties;

•the rate and degree of market acceptance and clinical utility of any approved product candidates;

•the size and growth potential of the markets for any approved product candidates, and our ability to serve those markets;

•our commercialization, marketing, and manufacturing capabilities and strategy;

•our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;

•regulatory developments in the U.S. and foreign countries;

•the impact of political, economic or public health events on our business and the United States (“U.S.”) and global economies;

•our ability to attract and retain key scientific or management personnel;

•general macro-economic factors, including volatility in equity markets, and fluctuations in interest rates and foreign exchange rates;

•our ability to obtain funding for our operations on favorable terms or at all, including funding necessary to complete further development and commercialization of our product candidates;

•our ability to find a licensing partner for imsidolimab and etokimab;

•the timing and ability of our collaborators to develop and commercialize our partnered product candidates;

•our use of the net proceeds from our public offerings and other financing transactions; and

•our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing.

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report

may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements to conform these statements to actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

Unless the context indicates otherwise, as used in this Quarterly Report, the terms “AnaptysBio,” “Anaptys,” “company,” “we,” “us” and “our” refer to AnaptysBio, Inc., a Delaware corporation, and its subsidiaries taken as a whole, unless otherwise noted. AnaptysBio is our common law trademark. This Quarterly Report contains additional trade names, trademarks, and service marks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and related notes for the six months ended June 30, 2024, included in Part I, Item 1 of this report and with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K. This discussion and other sections of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included in Part II, Item 1A of this Quarterly Report. You should also carefully read “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biotechnology company focused on delivering innovative immunology therapeutics. We are developing immune cell modulating antibodies, including two wholly owned checkpoint agonists in clinical-stage development, for autoimmune and inflammatory diseases: rosnilimab, our PD-1 agonist in a Phase 2b trial for the treatment of moderate-to-severe rheumatoid arthritis (“RA”) and a Phase 2 trial for the treatment of moderate-to-severe ulcerative colitis (“UC”); and ANB032, our BTLA agonist, in a Phase 2b trial for the treatment of moderate-to-severe atopic dermatitis (“AD”). We also have other immune cell modulator candidates in our portfolio, including ANB033, an anti-CD122 antagonist antibody, entering a Phase 1 trial and ANB101, a BDCA2 modulator antibody, in preclinical development. In addition, we have developed two cytokine antagonists that we are exploring options for out-licensing: imsidolimab, our anti-IL-36R antibody, that has completed Phase 3 trials for the treatment of generalized pustular psoriasis (“GPP”), and etokimab, our anti-IL-33 antagonist that is Phase 2/3 ready. We have also discovered multiple therapeutic antibodies licensed to GlaxoSmithKline, Inc. (“GSK”) in a financial collaboration for immuno-oncology, including an anti-PD-1 antagonist antibody (Jemperli (dostarlimab-gxly) or “Jemperli”) and an anti-TIM-3 antagonist antibody (cobolimab, GSK4069889). We currently recognize revenue from milestones and royalties achieved under our immuno-oncology collaboration with GSK.

Our Wholly Owned Product Candidate Pipeline

Our immune cell modulating antibodies, including checkpoint agonists for PD-1 and BTLA, treat inflammatory disorders by down regulating immune responses mediated by multiple immune cell types including T cells, B cells, and dendritic cells. T cells require both antigen presentation to the T cell receptor and co-stimulation to be activated. When these interactions are inhibited, T cells can’t be effectively primed to expand and differentiate into inflammatory T cells. Inhibition of at least one of these signals is the basis of checkpoint agonism.

We believe these molecules have potential applicability across a broad range of autoimmune and inflammatory diseases including dermatology, rheumatology, gastroenterology, respiratory, and neurology therapeutic areas.

Rosnilimab

PD-1, or programmed cell death protein 1, is an inhibitory checkpoint receptor that regulates T cell proliferation, and cytokine secretion. It is expressed preferentially on activated T cells, reducing the potential for off-target activity by rosnilimab. Genetic mutations in the PD-1 pathway are known to be associated with increased susceptibility to human inflammatory diseases which leads us to believe that rosnilimab is applicable to diseases where PD-1 checkpoint receptor function may be insufficient to maintain immune homeostasis.

Rosnilimab is an IgG1 antibody that directly targets PD-1+ T cells, resulting in their agonism or depletion, broadly impacting pathogenic drivers of autoimmune and inflammatory diseases. An IgG1 PD-1 agonist acts through three distinct mechanisms; depletion of PD-1high effector T cells, depletion of PD-1high Tfh and Tph cells, and agonism of PD-1int T cells. This drives specific immunological outcomes in both inflamed tissue and the periphery, such as reduction in T cell proliferation, migration, and cytokine secretion, and reduction of plasma cell generation and autoantibody levels. Rosnilimab is designed to enable formation of a tight immune synapse by binding to the PD-1 checkpoint receptor on a membrane-proximal epitope, and simultaneously anchoring to an Fc receptor, on an opposing cell, supporting crosslinking and excluding activating phosphatases such as CD45. Rosnilimab also facilitates depletion by bringing effector cells into closer proximity to pathogenically activated PD-1high T cells.

In in vitro studies, when PD-1+ T cells were cocultured in the presence of NK cells, rosnilimab demonstrated potent depletion of PD-1+ T cells. In separate in vitro studies, in which T cells were stimulated in the presence of only dendritic cells (in the absence of any cells capable of mediating depletion), rosnilimab demonstrated potent agonism properties such as a reduction in PD-1+T cell proliferation and reduction in secretion of inflammatory cytokines.

We announced positive top-line data from a healthy volunteer Phase 1 trial of rosnilimab in November 2021. A total of 144 subjects were enrolled in the randomized, double-blind, placebo-controlled healthy volunteer Phase 1 trial, where single ascending dose (“SAD”) cohorts received subcutaneous or intravenous (“IV”) single doses of rosnilimab up to 600mg or placebo, while multiple ascending dose (“MAD”) cohorts received four weekly subcutaneous doses of rosnilimab ranging up to 400mg or placebo. Rosnilimab was generally well-tolerated and no dose limiting toxicities were observed. Two serious adverse events (“SAEs”) were reported in single dose cohorts, including obstructive pancreatitis in a placebo-dosed subject and COVID-19 infection in a rosnilimab-dosed subject leading to discontinuation. The COVID-19 infection was deemed unrelated to treatment. No SAEs were reported in subjects receiving multiple doses of rosnilimab or placebo.

Rosnilimab demonstrated a favorable pharmacokinetic (“PK”) profile with an estimated two-week half-life for subcutaneous and IV routes of administration. Full PD-1 receptor occupancy was observed rapidly and was maintained for at least 30 days. Potent and sustained reduction was observed in peripheral PD-1+ T cells for >30 days, including >90% reduction of PD-1high T cells and a >50% reduction of PD-1+ T cells bringing the overall T cell composition to a less activated state, without meaningfully reducing overall T cell numbers.

We are conducting a randomized placebo-controlled global Phase 2b trial assessing three dose levels of subcutaneously administrated rosnilimab in moderate-to-severe RA for up to 28 weeks on well-established endpoints including ACR20/50/70 and DAS28-CRP. We anticipate reporting top-line data on the primary endpoint in the RA trial in the first quarter of 2025. We are also conducting a randomized placebo-controlled 130-patient, global Phase 2 trial assessing two dose levels of subcutaneously administered rosnilimab in moderate-to-severe UC for up to 24 weeks on well-established endpoints including clinical remission on the modified Mayo score (“mMS”), clinical response on the mMS and endoscopic remission. We anticipate reporting top-line data on the primary endpoint in the UC trial in the first quarter of 2026.

ANB032

BTLA, or B and T lymphocyte attenuator, is an inhibitory checkpoint receptor that regulates T cells, B cells, and dendritic cell function. BTLA is expressed only on immune cells and preferentially on activated immune cells, potentially enabling a broad mechanism of action while avoiding off-target activity.

ANB032 is an IgG4 non-depleting antibody that binds to BTLA, and is anticipated to down-modulate the activity of T cells, B cells and dendritic cells both in inflamed tissue and the periphery via: agonism resulting in inhibition of T cell expansion and migration, broad reduction of inflammatory Th1, Th2, Th17 and Th22 cytokines, and modulation of dendritic cells including inhibition of dendritic cell maturation, reduction in costimulatory molecule expression, and enhanced inducement of Tregs.

In in vitro studies, ANB032 demonstrated potent agonism and, in a murine model of GvHD, demonstrated superior disease-modification compared to control antibodies.

We announced positive top-line data from a healthy volunteer Phase 1 trial of ANB032, under a CTN, in April 2022. A total of 96 subjects were enrolled in the randomized, double-blind, placebo-controlled healthy volunteer Phase 1 trial, where SAD cohorts received subcutaneous or IV single doses of ANB032 or placebo, while MAD cohorts received four weekly subcutaneous doses of ANB032 or placebo. ANB032 was generally well-tolerated and no dose limiting toxicities were observed. No SAEs were reported. ANB032 demonstrated a favorable PK profile with an estimated two-week half-life for subcutaneous and IV routes of administration. Full BTLA receptor occupancy was observed rapidly and was maintained for at least 30 days.

While Th2 targeted therapies provide benefit to patients with chronic moderate-to-severe atopic dermatitis (“AD”), there is compelling evidence that AD is broader than a Th2 driven disease, as Th1, Th17, Th22 and other cell types, including dendritic cells, contribute significantly to the pathogenesis. ANB032 inhibition of inflammatory Th1, Th2, Th17 and Th22 activity, and modulation of additional cell types such as B cells and dendritic cells, creates the potential for broader, deeper and more durable responses than more narrowly targeted interventions.

We have completed enrollment of a randomized, placebo-controlled global Phase 2b trial assessing three dose levels of subcutaneously administered ANB032 in moderate-to-severe AD for 12 weeks on well-established endpoints including

EASI75, EASI90 and IGA 0/1 measured at week 14. Patients will be followed for an additional 24 weeks after the final dose at week 12 to understand longer term safety as well as the potential for prolonged and sustained efficacy. We anticipate reporting top-line data on the primary endpoint from this trial in December 2024.

ANB033

ANB033 targets CD122, the common beta subunit shared by the IL-15 and IL-2 receptors. IL-15 and IL-2 signaling mediate the proliferation and survival of NK cells and certain CD8 T cell subsets. ANB033 is an antibody designed with an affinity to CD122 that inhibits IL-15 and IL-2 signaling through the low affinity IL-2 receptor (comprised of CD122 and the common gamma subunit, CD132) while sparing IL-2 signaling through the high affinity IL-2 receptor (comprised of CD122, CD132 and the alpha receptor subunit for IL-2, CD25) expressed by regulatory T cells. This leads to the potential to achieve and maintain remission of inflammation through the reduction of disease-causing NK cells and certain CD8 T cell subsets, while sparing regulatory T cells. By preventing the consumption of IL-2 by pathogenic cells that express the low affinity IL-2 receptor, circulating levels of IL-2 may increase, potentially enhancing regulatory T cell numbers that express the high affinity IL-2 receptor in the setting of inflammation. We anticipate starting the Phase 1 trial in the fourth quarter of 2024.

ANB101

Blood dendritic cell antigen 2 (“BDCA2”) is a molecule specifically expressed on plasmacytoid dendritic cells (“pDCs”), a class of immune cells which, while found in relatively small numbers in healthy patients, are enriched in patients with a variety of inflammatory diseases, that is critical to the regulation of toll-like receptor signaling and interferon secretion. pDCs are a key upstream node in the inflammatory cascade that serve as a bridge between innate and adaptive immunity. They have been shown to be prolific secretors of type I interferons, which drive activation of a variety of downstream cell types including T cells and monocytes. Together with their ability to present antigens to the adaptive immune system, this creates a pro-inflammatory environment for the establishment and perpetuation of autoimmune pathology. BDCA2 has been implicated in the pathophysiology of systemic lupus erythematosus (“SLE”), where there exists mechanistic clinical proof of concept for pDC modulation. ANB101 is a BDCA2 modulator antibody that targets pDCs and potently inhibits interferon secretion and modulates antigen presentation for the treatment of autoimmune and inflammatory diseases. We anticipate submitting an IND for a Phase 1 clinical trial with ANB101 in the fourth quarter of 2024.

Imsidolimab

Imsidolimab is an IgG4 antibody that inhibits the function of the interleukin-36-receptor, or IL-36R, that is being developed for the treatment of GPP. We completed a Phase 1 clinical trial in healthy volunteers, which was presented at the European Academy of Allergy and Clinical Immunology in 2018, where imsidolimab was well-tolerated, no dose-limiting toxicities were observed, and no SAEs were reported. In July 2020, the FDA granted Orphan Drug Designation for imsidolimab for the treatment of patients with GPP.

We completed two Phase 3 clinical trials for imsidolimab in GPP. The first randomized placebo-controlled trial, called GEMINI-1, in 45 patients, assessed two, single dose levels of intravenous (IV)-administered imsidolimab. As of October 2023, of the patients who received a single dose of 750mg IV imsidolimab, 53% achieved GPP Physician Global Assessment (“GPPPGA”) 0/1 (clear or almost clear) at Week 4, our primary endpoint, compared to 13% of patients on placebo (p=0.0131). Of the 15 patients who received a single dose of 300mg IV imsidolimab, 53% achieved GPPPGA 0/1 at Week 4.

The GPPPGA assessment, representing a stringent and comprehensive characterization of disease severity, required satisfying an overall clinical response score of 0/1 collectively across each GPP disease attribute, including pustulation, erythema and scaling.

Patients completing the GEMINI-1 trial were eligible to be subsequently enrolled in GEMINI-2, our second Phase 3 trial for imsidolimab in GPP, where they received monthly doses of 200mg subcutaneous (“SC”) imsidolimab or placebo. The objective of GEMINI-2 was to assess the safety and efficacy of imsidolimab for maintenance of response, and the prevention of GPP flares with monthly SC dosing.

Sixteen GPPPGA 0/1 responder patients from GEMINI-1 were subsequently re-randomized to monthly maintenance dosing of either 200mg SC imsidolimab or placebo in the GEMINI-2 Phase 3 trial. Patients were followed for at least 24 weeks and up to a maximum of 92 weeks. Of the eight responding patients from GEMINI-1 who were re-randomized to monthly 200mg SC imsidolimab maintenance therapy, 100% maintained a GPPPGA score of 0/1 and none of them experienced a flare. Of the remaining eight responding patients from GEMINI-1 who were re-randomized to placebo, 25% maintained a GPPPGA score of 0/1 and 63% experienced a flare.

Data from both trials demonstrate a consistent, favorable safety and tolerability profile with no treatment-related serious adverse events (“SAEs”) or SAEs leading to discontinuation reported in imsidolimab-treated patients. Additionally, the data demonstrated low incidence and no elevation of infections versus placebo; no cases reported of Drug Reaction with Eosinophilia and Systemic Symptoms (“DRESS”) or Guillain-Barre syndrome (“GBS”); no infusion reactions and overall incidence of anti-drug antibodies (“ADA”) was low and, when detected, determined to be non-neutralizing.

We intend to out-license imsidolimab in 2024.

Etokimab

Etokimab inhibits IL-33 function and acts upstream of key cell types involved in atopy and the subsequent release of Th2 cytokines. IL-33 is a pro-inflammatory cytokine that signals through the ST2 receptor, which multiple studies suggest serves as a central mediator of various immune responses leading to Th2-type inflammatory disorders, including asthma, COPD, atopic and other epithelial-driven diseases. Individuals with asthma symptoms express higher levels of IL-33 than healthy control subjects. IL-33 initiates a diverse array of cellular immune responses, including the activation of mast cells, basophils and eosinophils, leading to production of downstream cytokines, such as IL-4, IL-5 and IL-13, which are associated with atopic diseases. IL-33 also acts on Th2 effector cells and Innate Lymphoid Cell Type 2 (ILC2), two types of white blood cells that initiate and orchestrate atopic responses. We have no ongoing clinical trials of etokimab and etokimab is available to out-license.

The following table summarizes certain key information about our wholly owned product candidates:

Collaborative Programs

Multiple Company-discovered antibody programs have been advanced to preclinical and clinical milestones under our collaborations. Our collaborations include an immuno-oncology-focused collaboration with GSK.

Under the GSK Agreement, a BLA for our most advanced partnered program, which is an anti-PD-1 antagonist antibody called Jemperli (dostarlimab), was approved by the FDA in April 2021 for the treatment of advanced or recurrent deficient mismatch repair endometrial cancer (“dMMREC”). In February 2023, the FDA granted full approval for this indication (from an accelerated approval). In addition, in April 2021 the European Medicines Agency (“EMA”) granted conditional marketing

authorization in the European Union (“EU”) for Jemperli for use in women with mismatch repair deficient (“dMMR”)/microsatellite instability-high (“MSI-H”) recurrent or advanced endometrial cancer who have progressed on or following prior treatment with a platinum containing regimen. A second FDA approval was received in August 2021 for Jemperli in pan-deficient mismatch repair tumors (PdMMRT). In July 2023, the FDA approved Jemperli in combination with chemotherapy for the treatment of adult patients with dMMR MSI-H primary advanced or recurrent endometrial cancer. In December 2023, the EMA approved, in the EU, Jemperli plus chemotherapy for dMMR/MSI-H primary advanced or recurrent endometrial cancer.

Jemperli is in clinical trials for various solid tumor indications, including a Phase 3 trial in first-line ovarian cancer with top-line results expected in the second half of 2024.

In addition, under the collaboration, GSK is developing dostarlimab in combination with another development program from the GSK Agreement, including cobolimab, an anti-TIM-3 antibody. GSK is conducting a Phase 3 trial, COSTAR Lung, which is a randomized, open label 3-arm trial comparing cobolimab plus dostarlimab plus docetaxel to dostarlimab plus docetaxel to docetaxel alone in patients with advanced non-small-cell lung cancer (“NSCLC”) who have progressed on prior anti-PD-(L)1 therapy and chemotherapy with top-line results expected in 2025.

For more information about these collaborations, see Note 4 — Collaborative Research and Development Agreements in the accompanying notes to the consolidated financial statements.

Components of Operating Results

Collaboration Revenue

Our revenue has been derived from amortization of upfront license payments, research and development funding, milestone and royalty payments under collaboration and license agreements with our collaborators. From inception through June 30, 2024, we have recognized $273.4 million in revenue from our collaborators. We have not generated any revenue from product sales.

Research and Development Expense

Research and development expenses consist of costs associated with our research and development activities, including drug discovery efforts, preclinical and clinical development of our programs, and manufacturing. Our research and development expenses include:

•External research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”), consultants, members of our scientific and therapeutic advisory boards, and contract manufacturing organizations (“CMOs”);

•Employee-related expenses, including salaries, benefits, travel, and stock-based compensation;

•Facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment, and laboratory supplies; and

•License and sub-license fees.

We may also incur in-process research and development expenses as we acquire assets from other parties. Acquired in-process research and development costs that have no alternative future use are immediately expensed.

We expense research and development costs as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expense when the service has been performed or when the goods have been received.

We are conducting research and development activities primarily on inflammation programs. We have a research and development team that conducts antibody discovery, characterization, translational studies, IND-enabling preclinical studies, and clinical development. We conduct some of our early research and preclinical activities internally and plan to rely on third parties, such as CROs and CMOs, for the execution of certain of our research and development activities, such as in vivo toxicology and pharmacology studies, manufacturing, and clinical trials.

We expect our research and development expenses to be higher for the foreseeable future as we continue to advance our product candidates.

General and Administrative Expense

General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation for our executive, finance, legal, business development, human resource, and support functions. Other general and administrative expenses include allocated facility-related costs not otherwise included in research and development expenses, travel expenses, and professional fees for auditing, tax, and legal services.

Non-cash Interest Expense for the Sale of Future Royalties

Non-cash interest expense for the sale of future royalties consists of interest related to the liability for the sale of future royalties, as well as the amortization of debt issuance costs. We impute interest on the unamortized portion of the liability for the sale of future royalties using the effective interest method and record interest expense based on timing of the payments over the term of the Royalty Monetization Agreements. Our estimate of the interest rate under the arrangements is based on forecasted royalty and milestone payments expected to be made over the life of the agreements.

Interest Income

Interest income consists primarily of interest earned on our short-term and long-term investments and is recognized when earned.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. We believe there have been no significant changes in our critical accounting policies as discussed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2024.

Results of Operations – Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Collaboration Revenue

Collaboration revenue consists of both milestone payments under the collaborations, and royalty payments. We recognized $0 in milestone revenue during each of the three and six months ended June 30, 2024 and 2023. We expect that any collaboration revenue we generate will continue to fluctuate from period to period as a result of the timing and amount of milestones from our existing collaborations.

Royalty revenue is a function of our partners’ product sales and the applicable royalty rate. During the three months ended June 30, 2024 and 2023, we recognized $11.0 million and $3.5 million, respectively, related to the net sales of GSK’s Jemperli and Zejula, which we estimate based on either GSK’s prior sales experience or actuals. During the six months ended June 30, 2024 and 2023, we recognized $18.2 million and $4.8 million, respectively, of royalty revenue related to the net sales of GSK’s Jemperli and Zejula. All royalty revenue related to Zejula global net sales starting July 2022 is paid directly to a wholly owned subsidiary of DRI Healthcare Trust pursuant to the Zejula Royalty Monetization Agreement. For more information see Note 5 — Sale of Future Royalties in the accompanying notes to the consolidated financial statements.

Research and Development Expenses

Research and development expenses were $42.0 million during the three months ended June 30, 2024 compared to $32.9 million during the three months ended June 30, 2023 for an increase of $9.1 million, primarily due to a $12.1 million increase in clinical expenses, $3.2 million increase in salaries and related expenses, including stock-based compensation expense, and $0.4 million increase in other research and development expenses, offset by a decrease of $6.6 million in outside services for manufacturing expenses.

Research and development expenses were $79.0 million during the six months ended June 30, 2024 compared to $67.9 million during the six months ended June 30, 2023 for an increase of $11.1 million, primarily due to a $17.7 million increase in clinical expenses, $6.3 million increase in salaries and related expenses, including stock-based compensation expense, and $0.9 million increase in other research and development expenses, offset by a decrease of $13.8 million in outside services for manufacturing expenses.

We do not track fully burdened research and development costs separately for each of our product candidates. We review our research and development expenses by focusing on external development and internal development costs. External development expenses consist of costs associated with our external preclinical and clinical trials, including pharmaceutical development and manufacturing. Included in preclinical and other unallocated costs are external corporate overhead costs that are not specific to any one program. Internal costs consist of salaries and wages, share-based compensation and benefits, which are not tracked by product candidate as several of our departments support multiple product candidate research and development programs. The following table summarizes the external costs attributable to each program and internal costs:


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2024		2023		Increase/(Decrease)		2024		2023		Increase/(Decrease)
External Costs
Rosnilimab	$	12,926	$	5,780	$	7,146	$	22,965	$	8,385	$	14,580
ANB032	7,584		4,023		3,561		12,451		6,559		5,892
ANB033	2,982		2,546		436		5,645		5,093		552
ANB101	544		—		544		944		—		944
Imsidolimab	1,867		8,833		(6,966)		6,363		24,298		(17,935)
Preclinical and other unallocated costs	4,693		3,596		1,097		8,037		7,285		752
Total External Costs	30,596		24,778		5,818		56,405		51,620		4,785
Internal Costs	11,401		8,145		3,256		22,634		16,260		6,374
Total Costs	$	41,997	$	32,923	$	9,074	$	79,039	$	67,880	$	11,159

General and Administrative Expenses

General and administrative expenses were $9.3 million during the three months ended June 30, 2024 compared to $10.7 million during the three months ended June 30, 2023 for a decrease of $1.4 million, primarily due to a $1.5 million decrease in personnel costs, including stock-based compensation expense, offset by an increase of $0.1 million increase in legal and other general and administrative expenses.

General and administrative expenses were $21.6 million during the six months ended June 30, 2024 compared to $21.5 million during the six months ended June 30, 2023 for an increase of $0.1 million, primarily due to a $0.4 million increase in legal and other general and administrative expenses, and a $0.1 million increase in personnel costs, including stock-based compensation expense, offset by a decrease of $0.4 million in market research cost and insurance expense.

We expect that our general and administrative expenses will increase for the foreseeable future as we incur costs associated with being a publicly traded company, including stock compensation expense, legal, auditing and filing fees, additional insurance premiums, investor relations expenses and general compliance and consulting expenses. We also expect our intellectual property related legal expenses, including those related to preparing, filing, prosecuting and maintaining patent applications, to increase as our intellectual property portfolio expands.

Non-Cash Interest Expense for the Sale of Future Royalties

Non-cash interest expense was $11.0 million and $4.4 million during the three months ended June 30, 2024 and 2023, respectively. The increase of $6.6 million in non-cash interest expense is primarily due to the Jemperli Amendment which increased the threshold amounts of aggregate Jemperli royalties and milestones to be received by Sagard.

Non-cash interest expense was $17.3 million and $8.7 million during the six months ended June 30, 2024 and 2023, respectively. The increase of $8.6 million in non-cash interest expense is primarily due to the Jemperli Amendment which increased the threshold amounts of aggregate Jemperli royalties and milestones to be received by Sagard.

Interest Income

Interest income was $4.6 million and $4.7 million during the three months ended June 30, 2024 and 2023, respectively, which primarily related to our short-term and long-term investments. The slight decrease in interest income is primarily due to the timing of sales, maturities and purchases of our investments.

Interest income was $9.2 million and $9.1 million during the six months ended June 30, 2024 and 2023, respectively, which primarily related to our short-term and long-term investments. The slight increase in interest income is primarily due to the timing of sales, maturities and purchases of our investments.

Other (Expense) Income, Net

Other income, net was less than $0.1 million for both the three months ended June 30, 2024 and 2023, which primarily related to foreign exchange transactions with our foreign CROs and CMOs.

Other expense, net was less than $0.1 million for both the six months ended June 30, 2024 and 2023, which primarily related to foreign exchange transactions with our foreign CROs and CMOs.

Liquidity and Capital Resources

From our inception through June 30, 2024, we have received an aggregate of $1.2 billion to fund our operations, which included $639.1 million from the sale of equity securities, $335.0 million from the sale of future royalties, and $234.2 million from our collaboration agreements. As of June 30, 2024, we had $393.5 million in cash, cash equivalents and investments.

In addition to our existing cash, cash equivalents and investments, we are eligible to earn milestone and other contingent payments for the achievement of defined collaboration objectives and certain nonclinical, clinical, regulatory and sales-based events, and royalty payments under our collaboration agreements, including the GSK Agreement and the GSK Settlement Agreement. Our ability to earn these milestone and contingent payments and the timing of achieving these milestones is primarily dependent upon the outcome of our collaborators’ research and development activities. Our rights to payments under our collaboration agreements are our only committed external source of funds.

In November 2022, we entered into a Sales Agreement (the “Cowen Sales Agreement”) with Cowen and Company, LLC (“Cowen”), through which we may offer and sell shares of our common stock, having an aggregate offering of up to $150.0 million through Cowen as our sales agent. As of June 30, 2024, we had sold no shares under this agreement.

Funding Requirements

We may seek to obtain additional financing in the future through equity or debt financings or through collaborations or partnerships with other companies. If we are unable to obtain additional financing on commercially reasonable terms, our business, financial condition and results of operations will be materially adversely affected.

Our primary uses of capital are, and we expect will continue to be, third-party clinical and preclinical research and development services, including manufacturing, laboratory and related supplies, compensation and related expenses, legal, patent and other regulatory expenses, and general overhead costs. We have entered into agreements with certain vendors for the provision of services, including services related to commercial manufacturing, that we are unable to terminate for convenience. Under such agreements, we are contractually obligated to make certain minimum payments to the vendors with the amounts to be based on the timing of the termination and the specific terms of the agreement.

Cash, cash equivalents and investments totaled $393.5 million as of June 30, 2024, compared to $417.9 million as of December 31, 2023. We believe that our existing cash, cash equivalents and investments will fund our current operating plan for at least the next twelve months from the issuance of our consolidated financial statements. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Additionally, the

process of testing product candidates in clinical trials and seeking regulatory approval is costly, and the timing of progress and expenses in these trials is uncertain.

Cash Flows

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:


	Six Months Ended June 30,
(in thousands)	2024		2023
Net cash (used in) provided by:
Operating activities	$	(58,575)	$	(49,977)
Investing activities	66,174		64,941
Financing activities	28,257		(51,066)
Net increase (decrease) in cash and cash equivalents	$	35,856	$	(36,102)

Operating Activities

Net cash used in operating activities during the six months ended June 30, 2024 of $58.6 million was primarily due to our net loss of $90.6 million, adjusted for addbacks for non-cash expenses of $30.7 million, which includes stock-based compensation, amortization of operating ROU assets, non-cash interest expense, income from marketable securities and net increases in working capital of $1.3 million.

Net cash used in operating activities during the six months ended June 30, 2023 of $50.0 million was primarily due to our net loss of $84.1 million, adjusted for addbacks for non-cash expenses of $22.8 million, which includes stock-based compensation, amortization of operating ROU assets, non-cash interest expense, income from marketable securities and net increases in working capital of $11.3 million.

Investing Activities

Net cash provided by investing activities during the six months ended June 30, 2024 and 2023 of $66.2 million and $64.9 million, respectively, primarily relates to the timing of sales, maturities and purchases of our investments.

Financing Activities

The net cash provided by financing activities during the six months ended June 30, 2024 of $28.3 million was primarily related to $50.0 million received for the sale of future royalties, $1.8 million of cash received for the issuance of common stock, offset by $16.0 million for repayments of the liability for the sale of future royalties and $7.5 million for net share settlement of equity awards.

The net cash used in financing activities during the six months ended June 30, 2023 of $51.1 million was primarily related to $50.0 million paid for repurchases and retirements of common stock, $3.1 million for repayments of the liability for the sale of future royalties, offset by $2.0 million of cash received for the issuance of common stock.

Contractual Obligations

We have entered into agreements with certain vendors for the provision of goods and services, which includes manufacturing services with contract manufacturing organizations and development services with contract research organizations. These agreements may include certain provisions for purchase obligations and termination obligations that could require payments for the cancellation of committed purchase obligations or for early termination of the agreements. The amount of the cancellation or termination payments vary and are based on the timing of the cancellation or termination and the specific terms of the agreement and therefore are cancellable contracts.

For further information related to our operating lease and future minimum annual obligations, see Note 9 — Commitments and Contingencies in the accompanying notes to the consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2024, there have been no material changes surrounding our market risk, including interest rate risk, inflation risk, and foreign currency exchange risk from the discussion provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K filed with the SEC on March 11, 2024.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. As of June 30, 2024, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective at a reasonable assurance level.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. We investigate these claims as they arise and accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, and other factors.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this report, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment.

Summary of Risk Factors

An investment in our common stock involves various risks, and prospective investors are urged to carefully consider the matters discussed in the section titled “Risk Factors” prior to making an investment in our common stock. These risks include, but are not limited to, the following:

•Our product candidates are in early stages of development and may fail in development or suffer delays that adversely affect their commercial viability. Results from our initial clinical trials may not be representative of the results we will experience in later clinical trials. If we or our collaborators are unable to complete development of or commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

•We have only limited data regarding the safety profile of our product candidates when dosed in humans. Our ongoing and planned clinical trials or those of our collaborators may reveal significant adverse events, toxicities or other side effects and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

•We and/or our collaborators may be unable to obtain, or may be delayed in obtaining, required regulatory approvals in the United States or in foreign jurisdictions, which would materially impair our ability to commercialize and generate revenue from our product candidates.

•Even if our product candidates receive regulatory approval, they will be subject to significant post-marketing regulatory requirements.

•We may not be successful in our efforts to expand our pipeline of product candidates and develop marketable products.

•We have recently commenced clinical development of rosnilimab and ANB032 , and have no history of commercializing biotechnology products, which may make it difficult to evaluate the prospects for our future viability.

•We face significant competition, and if our competitors develop and market products that are more effective, safer or less expensive than our product candidates, our commercial opportunities will be negatively impacted.

•Our product candidates may not achieve adequate market acceptance among physicians, patients, health care payors and others in the medical community necessary for commercial success.

•We currently have no marketing and sales force. If we are unable to establish effective sales or marketing capabilities or enter into agreements with third parties to sell or market our product candidates, we may not be able to effectively sell or market our product candidates, if approved, or generate product revenue.

•The manufacture of biologics is complex, and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials, our ability to obtain marketing approval, or our ability to provide supply of our products for patients, if approved, could be delayed or stopped.

•Political, economic or public health events may have a material impact on the U.S. and global economies and could have a material adverse impact on our employees, contractors and patients, which could adversely and materially impact our business,

ANAPTYSBIO, INC [ANAB] Filings
10-Q	[2024-08-05]
10-Q	[2024-05-09]
10-K	[2024-03-11]
10-Q	[2023-11-02]
10-Q	[2023-08-07]
10-Q	[2023-05-11]
10-K	[2023-03-01]
10-Q	[2022-11-08]
10-Q	[2022-08-08]
10-Q	[2022-05-04]
10-K	[2022-03-07]
10-Q	[2021-11-04]
10-Q	[2021-08-09]
10-Q	[2021-05-04]
10-K	[2021-02-25]
10-Q	[2020-11-04]
10-Q	[2020-08-10]
10-Q	[2020-05-06]
10-K	[2020-03-02]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-07]
10-K	[2019-02-28]
10-Q	[2018-11-08]
10-Q	[2018-08-07]
10-Q	[2018-05-08]
10-K	[2018-03-05]
10-Q	[2017-11-07]
S-1	[2017-10-10]
10-Q	[2017-08-10]
10-Q	[2017-05-12]
10-K	[2017-03-08]
S-1	[2015-09-09]