10-Q 1 annx-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

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 001-39402

ANNEXON, INC.

(Exact name of Registrant as specified in its Charter)

 

Delaware

27-5414423

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

 

1400 Sierra Point Parkway, Bldg C, Suite 200

Brisbane, California 94005

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (650) 822-5500

Former name, former address and former fiscal year, if changed since last report: Not applicable

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, par value $0.001 per share

ANNX

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, 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

 


 

The number of shares of the Registrant’s Common Stock outstanding as of May 8, 2024 was 92,412,866. This number does not include 34,283,052 shares of Common Stock issuable upon the exercise of pre-funded warrants (which are immediately exercisable at an exercise price of $0.001 per share of Common Stock, subject to beneficial ownership limitations). See Note 6—Stockholders’ Equity to the Registrant’s unaudited condensed consolidated financial statements.

 

 


 

Table of Contents

 

 

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

 

Condensed Consolidated Balance Sheets

1

 

 

Condensed Consolidated Statements of Operations

2

 

 

Condensed Consolidated Statements of Comprehensive Loss

3

 

 

Condensed Consolidated Statements of Stockholders’ Equity

4

 

 

Condensed Consolidated Statements of Cash Flows

6

 

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

 

 

PART II—OTHER INFORMATION

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

67

Item 3.

Defaults Upon Senior Securities

67

Item 4.

Mine Safety Disclosures

67

Item 5.

Other Information

67

Item 6.

Exhibits

68

SIGNATURES

69

 

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Annexon” and the “Company” refer to Annexon, Inc. and its consolidated subsidiary. Annexon, Annexon, Inc., the Annexon logo and other trade names, trademarks or service marks of Annexon are the property of Annexon, Inc. This report contains references to our trademarks and to trademarks belonging to other entities. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 


 

ANNEXON, INC.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

151,941

 

 

$

225,110

 

Short-term investments

 

 

113,007

 

 

 

34,606

 

Prepaid expenses and other current assets

 

 

5,792

 

 

 

4,144

 

Total current assets

 

 

270,740

 

 

 

263,860

 

Restricted cash

 

 

1,032

 

 

 

1,032

 

Property and equipment, net

 

 

14,235

 

 

 

14,773

 

Operating lease right-of-use assets

 

 

17,701

 

 

 

18,009

 

Other non-current assets

 

 

361

 

 

 

 

Total assets

 

$

304,069

 

 

$

297,674

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,972

 

 

$

5,487

 

Accrued liabilities

 

 

6,857

 

 

 

10,235

 

Operating lease liabilities, current

 

 

2,254

 

 

 

2,165

 

Other current liabilities

 

 

50

 

 

 

41

 

Total current liabilities

 

 

13,133

 

 

 

17,928

 

Operating lease liabilities, non-current

 

 

28,531

 

 

 

29,190

 

Total liabilities

 

 

41,664

 

 

 

47,118

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

90

 

 

 

78

 

Additional paid-in capital

 

 

860,092

 

 

 

823,029

 

Accumulated other comprehensive loss

 

 

(102

)

 

 

(52

)

Accumulated deficit

 

 

(597,675

)

 

 

(572,499

)

Total stockholders’ equity

 

 

262,405

 

 

 

250,556

 

Total liabilities and stockholders’ equity

 

$

304,069

 

 

$

297,674

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

1


 

ANNEXON, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

20,963

 

 

$

32,345

 

General and administrative

 

 

7,609

 

 

 

8,897

 

Total operating expenses

 

 

28,572

 

 

 

41,242

 

Loss from operations

 

 

(28,572

)

 

 

(41,242

)

Interest and other income, net

 

 

3,396

 

 

 

2,566

 

Net loss

 

$

(25,176

)

 

$

(38,676

)

Net loss per share, basic and diluted

 

$

(0.21

)

 

$

(0.52

)

Weighted-average shares used in computing net loss per share,
   basic and diluted

 

 

122,673,202

 

 

 

73,855,642

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

2


 

ANNEXON, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(25,176

)

 

$

(38,676

)

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(12

)

 

 

(5

)

Unrealized (loss) gain on available-for-sale securities

 

 

(38

)

 

 

160

 

Comprehensive loss

 

$

(25,226

)

 

$

(38,521

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

ANNEXON, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Cost

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances as of December 31, 2023

 

 

78,369,099

 

 

$

78

 

 

$

823,029

 

 

$

(52

)

 

$

(572,499

)

 

$

250,556

 

Exercise of stock options

 

 

105,526

 

 

 

 

 

 

217

 

 

 

 

 

 

 

 

 

217

 

Issuance of common stock, net of
  issuance costs of $
933

 

 

6,639,348

 

 

 

7

 

 

 

32,191

 

 

 

 

 

 

 

 

 

32,198

 

Exercise of pre-funded warrants

 

 

5,243,400

 

 

 

5

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

Restricted stock vested in the period

 

 

124,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,660

 

 

 

 

 

 

 

 

 

4,660

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

 

 

 

(50

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,176

)

 

 

(25,176

)

Balances as of March 31, 2024

 

 

90,482,068

 

 

$

90

 

 

$

860,092

 

 

$

(102

)

 

$

(597,675

)

 

$

262,405

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


 

ANNEXON, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Cost

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances as of December 31, 2022

 

 

47,722,995

 

 

$

48

 

 

$

669,780

 

 

$

(372

)

 

$

(438,262

)

 

$

231,194

 

Exercise of stock options

 

 

55,605

 

 

 

 

 

 

111

 

 

 

 

 

 

 

 

 

111

 

Exercise of pre-funded warrants

 

 

2,582,557

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

Issuance of common stock to a related
  party, net of issuance costs of $
525

 

 

2,646,458

 

 

 

2

 

 

 

17,468

 

 

 

 

 

 

 

 

 

17,470

 

Restricted stock vested in the period

 

 

73,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,607

 

 

 

 

 

 

 

 

 

4,607

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

155

 

 

 

 

 

 

155

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,676

)

 

 

(38,676

)

Balances as of March 31, 2023

 

 

53,080,673

 

 

$

53

 

 

$

691,963

 

 

$

(217

)

 

$

(476,938

)

 

$

214,861

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

ANNEXON, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(25,176

)

 

$

(38,676

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

538

 

 

 

536

 

Accretion of discount on available-for-sale securities

 

 

(1,137

)

 

 

(902

)

Stock-based compensation

 

 

4,660

 

 

 

4,607

 

Reduction in the carrying amount of right-of-use assets

 

 

308

 

 

 

264

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,629

)

 

 

1,070

 

Other non-current assets

 

 

(361

)

 

 

(12

)

Accounts payable

 

 

(1,531

)

 

 

3,035

 

Accrued liabilities

 

 

(3,378

)

 

 

(2,771

)

Operating lease liabilities

 

 

(570

)

 

 

(348

)

Other current liabilities

 

 

9

 

 

 

204

 

Net cash used in operating activities

 

 

(28,267

)

 

 

(32,993

)

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(137

)

Purchases of available-for-sale securities

 

 

(100,302

)

 

 

(31,435

)

Proceeds from maturities of available-for-sale securities

 

 

23,000

 

 

 

51,089

 

Net cash (used in) provided by investing activities

 

 

(77,302

)

 

 

19,517

 

Financing activities:

 

 

 

 

 

 

Proceeds from the exercise of common stock options

 

 

198

 

 

 

111

 

Proceeds from the issuance of common stock, including related party of zero and $17,995 for the
    three months ended March 31, 2024 and 2023, respectively

 

 

33,131

 

 

 

17,995

 

Payment of financing costs

 

 

(917

)

 

 

(525

)

Net cash provided by financing activities

 

 

32,412

 

 

 

17,581

 

(Decrease) increase in cash, cash equivalents and restricted cash

 

 

(73,157

)

 

 

4,105

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(12

)

 

 

(5

)

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

Beginning of period

 

 

226,142

 

 

 

141,052

 

End of period

 

$

152,973

 

 

$

145,152

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liability

 

$

1,216

 

 

$

1,175

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Deferred offering costs included in accounts payable and accrued liabilities

 

$

117

 

 

$

 

Purchases of property and equipment included in accounts payable and accrued liabilities

 

$

 

 

$

5

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

6


 

ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Organization

Annexon, Inc., or the Company, is a clinical-stage biopharmaceutical company pioneering a new class of complement medicines for people living with devasting inflammatory-related diseases. The Company is located in Brisbane, California and was incorporated in Delaware in March 2011.

The Company’s wholly-owned subsidiary, Annexon Biosciences Australia Pty Ltd, or the Subsidiary, is a proprietary limited company incorporated in 2016 and domiciled in Australia.

Liquidity

Since inception, the Company has been involved primarily in performing research and development activities, conducting clinical trials, hiring personnel, and raising capital to support and expand these activities. The Company has experienced losses and negative cash flows from operations since its inception and, as of March 31, 2024, had an accumulated deficit of $597.7 million and cash and cash equivalents and short-term investments of $264.9 million.

The Company has historically funded its operations through the issuance of shares of its common stock and warrants. Based on projected activities, management projects that existing cash and cash equivalents and short-term investments will enable the Company to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of these financial statements. The Company’s future viability beyond that point is dependent on its ability to achieve development milestones and obtain additional funding. Management expects to continue to incur losses and negative cash flows from operations for at least the next several years. There are uncertainties associated with the Company’s ability to (1) obtain additional equity or debt financing on terms that are favorable to the Company, (2) enter into collaborative agreements with strategic partners, and (3) succeed in its future operations. If the Company is not able to obtain the required funding for its operations or is not able to obtain funding on terms that are favorable to the Company, it could be forced to delay, reduce or eliminate its research and development programs and its business could be materially harmed.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP, and applicable rules and regulations of the SEC regarding interim financial reporting.

The condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations, comprehensive loss, stockholders’ equity for the three months ended March 31, 2024 and 2023 and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the interim period presented. The financial data and the other financial information contained in these notes to the condensed consolidated financial statements related to the three-month periods are also unaudited. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 26, 2024.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses during the reporting period. Management evaluates its estimates, including but not limited to the fair value of investments, operating lease right-of-use assets and liabilities, valuation of deferred tax assets and uncertain tax positions (including valuation allowance), clinical trial accruals and stock-based compensation. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and

7


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.

Principles of Consolidation

The condensed consolidated financial statements include the operations of Annexon, Inc. and its wholly-owned subsidiary and include the results of operations and cash flows of these entities. All intercompany balances and transactions have been eliminated in consolidation.

Summary of Significant Accounting Policies

Reference is made to Note 2, Summary of Significant Accounting Policies, in the Company’s 2023 Form 10-K filed on March 26, 2024 for a detailed description of significant accounting policies. There have been no significant changes to the Company’s accounting policies as disclosed in its 2023 Form 10-K.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company adopted annual requirements under ASU 2023-07 on January 1, 2024 and plans to adopt interim requirements under ASU 2023-07 on January 1, 2025. The Company will begin including financial statement disclosures in accordance with ASU 2023-07 in its Annual Report on Form 10-K for the year ended December 31, 2024. The Company is evaluating the impact of this guidance on its financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures, which requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its financial statements and related disclosures.

3. Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

8


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

On a recurring basis, the Company measures certain financial assets and liabilities at fair value. The following tables summarize the fair value of the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

 

 

 

March 31, 2024

 

 

 

Valuation
Hierarchy

 

Amortized
Cost

 

 

Gross
Unrealized
Holding
Gains

 

 

Gross
Unrealized
Holding
Losses

 

 

Aggregate
Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

40,150

 

 

$

 

 

$

 

 

$

40,150

 

Commercial paper

 

Level 2

 

 

13,980

 

 

 

 

 

 

 

 

 

13,980

 

Government bonds

 

Level 2

 

 

86,360

 

 

 

1

 

 

 

(1

)

 

 

86,360

 

Total cash equivalents

 

 

 

 

140,490

 

 

 

1

 

 

 

(1

)

 

 

140,490

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government bonds

 

Level 2

 

 

113,025

 

 

 

1

 

 

 

(19

)

 

 

113,007

 

Total short-term investments

 

 

 

 

113,025

 

 

 

1

 

 

 

(19

)

 

 

113,007

 

 

 

 

 

$

253,515

 

 

$

2

 

 

$

(20

)

 

$

253,497

 

 

 

 

 

 

December 31, 2023

 

 

 

Valuation
Hierarchy

 

Amortized
Cost

 

 

Gross
Unrealized
Holding
Gains

 

 

Gross
Unrealized
Holding
Losses

 

 

Aggregate
Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

143,933

 

 

$

 

 

$

 

 

$

143,933

 

Government bonds

 

Level 2

 

 

72,689

 

 

 

 

 

 

 

 

 

72,689

 

Total cash equivalents

 

 

 

 

216,622

 

 

 

 

 

 

 

 

 

216,622

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government bonds

 

Level 2

 

 

34,596

 

 

 

10

 

 

 

 

 

 

34,606

 

Total short-term investments

 

 

 

 

34,596

 

 

 

10

 

 

 

 

 

 

34,606

 

 

 

 

 

$

251,218

 

 

$

10

 

 

$

 

 

$

251,228

 

 

For the three months ended March 31, 2024 and 2023, the Company recognized no material realized gains or losses on financial instruments.

4. Balance Sheet Components

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid instruments with an original maturity of three months or less at time of purchase to be cash equivalents. Cash equivalents, which include amounts invested in money market funds, are stated at fair value.

Restricted cash as of March 31, 2024 relates to the letters of credit established for the Company’s office leases.

9


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Cash

$

11,451

 

 

$

8,488

 

Cash equivalents

 

140,490

 

 

 

216,622

 

Cash and cash equivalents

 

 

151,941

 

 

 

225,110

 

Restricted cash

 

1,032

 

 

 

1,032

 

Cash, cash equivalents and restricted cash

$

152,973

 

 

$

226,142

 

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid research and development costs

 

$

4,643

 

 

$

2,617

 

Prepaid insurance

 

 

418

 

 

 

704

 

Other prepaid expenses

 

 

708

 

 

 

760

 

Other current assets

 

 

23

 

 

 

63

 

Total prepaid expenses and other current assets

 

$

5,792

 

 

$

4,144

 

Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Leasehold improvements

 

$

17,246

 

 

$

17,245

 

Laboratory equipment

 

 

1,832

 

 

 

1,832

 

Furniture and fixtures

 

 

692

 

 

 

692

 

Computer equipment and software

 

 

33

 

 

 

33

 

Total property and equipment, gross

 

 

19,803

 

 

 

19,802

 

Less: accumulated depreciation

 

 

(5,568

)

 

 

(5,029

)

Total property and equipment, net

 

$

14,235

 

 

$

14,773

 

The Company recognized depreciation for property and equipment of $0.5 million for each of the three months ended March 31, 2024 and 2023.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Accrued research and development expenses

 

$

4,527

 

 

$

4,027

 

Accrued compensation

 

 

1,643

 

 

 

5,607

 

Accrued professional services

 

 

570

 

 

 

501

 

Other accrued expenses

 

 

117

 

 

 

100

 

Total accrued liabilities

 

$

6,857

 

 

$

10,235

 

 

10


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

5. Commitments and Contingencies

Leases

The Company leases its offices and laboratory in Brisbane, California, or the Brisbane Lease, under a ten-year noncancelable lease agreement that ends in October 2031 with a ten-year renewable option. In November 2021, the Company subleased unoccupied space from December 2021 through November 2023, for aggregate sublease payments of $3.4 million. The sublease income, while it reduces the rent expense, is not considered in the value of the right-of-use assets or lease liabilities. The Company’s sublease income was zero and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the operating lease right-of-use assets were $17.7 million and lease liabilities were $30.8 million on the condensed consolidated balance sheet. The weighted-average remaining lease term is 7.6 years.

The weighted-average incremental borrowing rate used to measure the operating lease liability is 8.4%.

Operating lease costs were $1.0 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively. Variable lease payments were $0.5 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.

Future minimum lease payments and related lease liabilities as of March 31, 2024, were as follows:

 

 

 

(in thousands)

 

2024 (remaining nine months)

 

$

3,677

 

2025

 

 

5,065

 

2026

 

 

5,242

 

2027

 

 

5,425

 

2028 and thereafter

 

 

22,600

 

Total undiscounted lease payments

 

 

42,009

 

Less: Imputed interest

 

 

(11,224

)

Total

 

$

30,785

 

Guarantees and Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of March 31, 2024, the Company did not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.

6. Stockholders’ Equity

2023 Financing

In December 2023, the Company raised net proceeds of approximately $117.0 million after deducting underwriting discounts and offering expenses through the sale of 25,035,000 shares of the Company’s common stock, par value $0.001 per share at a price of $2.880 per share and pre-funded warrants to purchase an aggregate of 18,379,861 shares of common stock at a price of $2.879 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each pre-funded warrant. An entity related to one of the Company’s directors participated in the public offering and purchased 350,000 shares of common stock for an aggregate price of approximately $1.0 million. The pre-funded warrants are immediately exercisable, subject to certain beneficial ownership limitations. The warrants meet the criteria for equity classification and were therefore recorded at fair value as of the grant date as a component of stockholders’ equity within additional paid-in capital in the amount of $52.9 million.

In February 2024, the Company issued an aggregate of 5,243,400 shares of common stock upon the cashless exercise of pre-funded warrants to purchase 5,244,444 shares of common stock. In April 2024, the Company issued an aggregate of 965,427 shares of common stock upon the exercise of pre-funded warrants. As of March 31, 2024, and as of the date of issuance of these interim condensed financial statements, pre-funded warrants to purchase up to 13,135,417 shares and 12,169,990 shares of common stock remained outstanding from the 2023 financing, respectively.

11


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

2022 Financing

In July 2022, the Company raised net proceeds of approximately $122.5 million after deducting fees and expenses through the sale of an aggregate of 9,013,834 shares of common stock, pre-funded warrants to purchase up to 24,696,206 shares of its common stock and accompanying common warrants to purchase up to 8,427,508 shares of its common stock. The offering price per share and accompanying common warrant was $3.87125 per share and the offering price per pre-funded warrant and accompanying common warrant was $3.87025 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each such pre-funded warrant. The pre-funded warrants remain exercisable until exercised in full. The common warrants have an exercise price of $5.806875 per share and expire on June 30, 2025. Both the pre-funded and common warrants are immediately exercisable, subject to beneficial ownership limitations. The warrants meet the criteria for equity classification and were therefore recorded at fair value as of the grant date as a component of stockholders’ equity within additional paid-in capital.

In March 2023, the Company issued an aggregate of 2,582,557 shares of common stock upon the cashless exercise of pre-funded warrants to purchase 2,583,144 shares of common stock. As of March 31, 2024, pre-funded warrants to purchase up to 22,113,062 shares of common stock and common warrants to purchase up to 8,427,508 shares of common stock remained outstanding from the 2022 financing.

2021 At-the-Market (ATM) Program

In August 2021, the Company entered into a sales agreement with Cowen and Company LLC, or TD Cowen, as sales agent, pursuant to which the Company may issue and sell shares of its common stock for an aggregate maximum offering of $100.0 million under an at-the-market offering program, or 2021 ATM program. TD Cowen is entitled to compensation up to 3% of the aggregate gross proceeds for the common stock sold through the 2021 ATM program. During 2023, the Company sold 2,646,458 shares of common stock at a price of $6.80 per share under the 2021 ATM program for net proceeds of approximately $17.5 million after deducting commissions paid to TD Cowen. During the three months ended March 31, 2024, the Company sold 6,639,348 shares of common stock under the 2021 ATM program for net proceeds of approximately $32.2 million. As of March 31, 2024, approximately $48.9 million remained available for the offer and sale of shares of common stock under the 2021 ATM program. Subsequent to March 31, 2024 and through the date of issuance of these interim condensed financial statements, net proceeds of approximately $6.4 million were raised as a result of the sale of shares of the Company’s common stock through the 2021 ATM program.

2024 ATM Program

In March 2024, the Company entered into a sales agreement with TD Cowen, as sales agent, or 2024 ATM program, pursuant to which the Company may issue and sell shares of its common stock for an aggregate maximum offering of $100.0 million. TD Cowen is entitled to compensation up to 3% of the aggregate gross proceeds for the common stock sold through the 2024 ATM program. As of March 31, 2024, the Company has not made any sales under the 2024 ATM program.

Common Stock

The Company reserved the following shares of common stock for issuance as follows:

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Stock options issued and outstanding

 

 

11,859,362

 

 

 

9,208,970

 

Stock options reserved for 2020 Incentive Award Plan

 

 

1,762,992

 

 

 

1,988,340

 

Unvested restricted stock units outstanding

 

 

915,861

 

 

 

495,579

 

Common stock reserved for 2021 ATM program

 

 

25,980,123

 

 

 

2,619,471

 

Common stock reserved for 2024 ATM program

 

 

25,000,000

 

 

 

 

Common stock reserved for Employee Stock Purchase
     Plan

 

 

2,122,071

 

 

 

1,338,381

 

Common stock reserved for 2022 Employment Inducement
    Award Plan

 

 

1,667,300

 

 

 

758,084

 

Common stock reserved for pre-funded warrants

 

 

35,248,479

 

 

 

40,493,510

 

Common stock reserved for common warrants

 

 

8,427,508

 

 

 

8,427,508

 

Total common stock reserved

 

 

112,983,696

 

 

 

65,329,843

 

 

12


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

7. Equity Incentive Plans

In July 2020, the Company’s board of directors and stockholders adopted and approved the 2020 Incentive Award Plan, or the 2020 Plan, and the Employee Stock Purchase Plan, or the ESPP, which became effective in connection with the Company’s initial public offering, or the IPO.

The Company may not grant any additional awards under the 2011 Equity Incentive Plan, or the 2011 Plan. The 2011 Plan will continue to govern outstanding equity awards granted thereunder.

2020 Equity Incentive Plan

The number of shares of common stock reserved for issuance under the 2020 Plan automatically increases on the first day of January, in an amount equal to 4% of the total number of shares of the Company’s capital stock outstanding on the last day of the preceding year, or a lesser number of shares determined by the Company’s board of directors.

Awards granted under the 2020 Plan expire no later than ten years from the date of grant. For Incentive Stock Options, or ISOs, and Nonstatutory Stock Options, or NSOs, the option price shall not be less than 100% of the estimated fair value on the date of grant. Options granted typically vest over a four-year period but may be granted with different vesting terms. As of March 31, 2024, there were 1,762,992 shares available for issuance under the 2020 Plan.

2022 Employment Inducement Award Plan

In July 2022, the Company’s board of directors adopted the Annexon, Inc. 2022 Employment Inducement Award Plan, or the Inducement Plan, and together with the 2011 Plan and the 2020 Plan, the Plans. The Inducement Plan was adopted by the Company’s board of directors without stockholder approval pursuant to Nasdaq Marketplace Rule 5635(c)(4), or Rule 5635(c)(4). In accordance with Rule 5635(c)(4), awards made under the Inducement Plan may only be granted to newly hired employees as an inducement material to the employees entering into employment with the Company. Awards granted under the Inducement Plan expire no later than ten years from the date of grant. An aggregate of 2,850,000 shares of common stock were reserved for issuance under the Inducement Plan. As of March 31, 2024, there were 1,667,300 shares available for issuance under the Inducement Plan.

Stock Options

The following table presents stock option activity under the Plans for the period:

 

 

 

Number of
Shares

 

 

Weighted-
Average
Exercise
Price Per
Share

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Balances as of December 31, 2023

 

 

9,208,970

 

 

$

10.31

 

 

 

7.53

 

 

$

2,930

 

Stock options granted

 

 

3,121,592

 

 

$

5.13

 

 

 

 

 

 

 

Stock options exercised

 

 

(105,526

)

 

$

2.06

 

 

 

 

 

 

 

Stock options forfeited

 

 

(365,674

)

 

$

9.15

 

 

 

 

 

 

 

Balances as of March 31, 2024

 

 

11,859,362

 

 

$

9.05

 

 

 

7.91

 

 

$

18,184

 

Exercisable as of March 31, 2024

 

 

5,469,398

 

 

$

12.11

 

 

 

6.49

 

 

$

5,860

 

The total intrinsic value of options exercised was $0.3 million for each of the three months ended March 31, 2024 and 2023. The intrinsic value is the difference between the fair value of the Company’s common stock at the time of exercise and the exercise price of the stock option.

The weighted-average grant date fair value of options granted to employees during the three months ended March 31, 2024 and 2023 was $4.06 and $4.35 per share, respectively.

13


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

As of March 31, 2024, the total unrecognized stock-based compensation cost related to outstanding unvested stock options was $29.8 million, which the Company expects to recognize over an estimated weighted-average period of 2.6 years.

Restricted Stock Units

RSUs are share awards that entitle the holder to receive freely tradeable shares of the Company’s common stock upon vesting. The RSUs cannot be transferred and the awards are subject to forfeiture if the holder’s employment terminates prior to the release of the vesting restrictions. The RSUs generally vest over a three-year period in equal amounts on an annual basis, provided the employee remains continuously employed with the Company. The fair value of the RSUs is equal to the closing price of the Company’s common stock on the grant date.

A summary of RSU activity under the Company’s equity incentive plan and related information is as follows:

 

 

 

Number of Shares

 

 

Weighted-Average Grant Date Fair Value Per Share

 

Unvested as of December 31, 2023

 

 

495,579

 

 

$

5.69

 

Granted

 

 

602,600

 

 

 

5.13

 

Vested

 

 

(124,695

)

 

 

6.44

 

Cancelled

 

 

(57,623

)

 

 

5.33

 

Unvested as of March 31, 2024

 

 

915,861

 

 

$

5.24

 

As of March 31, 2024, unrecognized stock-based compensation expense related to outstanding unvested RSUs was $4.3 million, which is expected to be recognized over a weighted-average period of 2.4 years.

Employee Stock Purchase Plan

The ESPP enables eligible employees to purchase shares of the Company’s common stock at the end of each offering period at a price equal to 85% of the fair market value of the shares on the first business day or the last business day of the offering period, whichever is lower. Eligible employees generally include all employees. Share purchases are funded through payroll deductions of at least 1%, and up to 15% of an employee’s eligible compensation for each payroll period. The number of shares reserved for issuance under the ESPP increase automatically on the first day of each fiscal year, by a number equal to, 1% of the shares of common stock outstanding on the last day of the immediately preceding fiscal year, or such number of shares determined by the Company’s board of directors. As of March 31, 2024, 2,122,071 shares were available for future purchase. The ESPP generally provides for six-month consecutive offering periods beginning on May 16th and November 16th of each year. The ESPP is a compensatory plan as defined by the authoritative guidance for stock compensation. As such, stock-based compensation expense has been recorded for the three months ended March 31, 2024.

The stock-based compensation expense related to the ESPP was $0.1 million for each of the three months ended March 31, 2024 and 2023.

Stock-Based Compensation Expense

The total stock-based compensation expense recognized was as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

2,282

 

 

$

2,251

 

General and administrative

 

 

2,378

 

 

 

2,356

 

Total stock-based compensation expense

 

$

4,660

 

 

$

4,607

 

To determine the value of stock option awards for stock-based compensation purposes, the Company uses the Black-Scholes option pricing model and the assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment.

14


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Fair Value of Common Stock—The fair value of each share of underlying common stock is based on the closing price of the Company’s common stock as reported on the date of grant on the Nasdaq Global Select Market.

Expected Term—The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term). The Company continues using the simplified method as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded.

Expected Volatility—Beginning in 2024, the expected volatility was estimated based on a weighted volatility using both the Company’s trading history for its common stock and the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants. Prior to 2024, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on the similar size, stage in life cycle or area of specialty.

Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

Dividend Yield—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

The fair value of each stock option issued was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

 

 

 

Three Months Ended
March 31,

 

 

2024

 

2023

Expected term (in years)

 

6.02 - 6.08

 

6.02 - 6.08

Expected volatility

 

95.90% - 96.20%

 

81.20% - 81.50%

Risk-free interest rate

 

4.29% - 4.33%

 

3.58% - 4.02%

Dividend yield

 

 

 

8. Net Loss Per Share

The Company calculates basic net loss per share by dividing net loss by the weighted-average number of shares of common stock outstanding, excluding restricted common stock. The weighted-average number of shares of common stock used in the basic and diluted net loss per share calculation include pre-funded warrants to purchase up to 35,248,479 shares of common stock, as the pre-funded warrants are exercisable at any time for nominal cash consideration. The Company has generated a net loss in all periods presented, so the basic and diluted net loss per share are the same, as the inclusion of the potentially dilutive securities would be anti-dilutive.

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Stock options to purchase common stock

 

 

11,859,362

 

 

 

9,389,106

 

Shares subject to Employee Stock Purchase Plan

 

 

79,748

 

 

 

87,983

 

Unvested restricted stock units

 

 

915,861

 

 

 

678,996

 

Common warrants

 

 

8,427,508

 

 

 

8,427,508

 

Total

 

 

21,282,479

 

 

 

18,583,593

 

 

15


 

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 in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes thereto for the year ended December 31, 2023, included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission, or the SEC, on March 26, 2024.

In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, based upon current expectations about us and our industry that involve substantial risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “position,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ from those anticipated. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Overview

We are a clinical-stage biopharmaceutical company pioneering a new class of complement medicines for people living with devastating inflammatory-related diseases. The classical complement pathway is a core component to the body’s immune system that activates a powerful inflammatory cascade. We believe that by stopping the classical complement pathway at its start by targeting C1q, the initiating molecule of the classical complement pathway, our approach may have the potential to provide more complete protection against complement-mediated disorders of the body, brain and eye.

Using our proprietary platform, we are identifying and characterizing the role of the classical complement pathway in three therapeutic areas—autoimmune, neurodegeneration and ophthalmology. In so doing, we are advancing a pipeline of product candidates designed to block the early classical cascade and all downstream pathway components and their tissue-damaging functions. Our goal is to suppress excessive or aberrant classical complement activity that contributes to chronic inflammation and tissue damage to slow or even halt disease progression, while preserving the beneficial immune functions of the lectin and alternative complement pathways involved in the clearance of pathogens and damaged cells. We have demonstrated robust target engagement in the body, brain and eye, and clinical proof of concept in multiple diseases, and have focused our resources on development of three priority programs:

Guillain-Barré Syndrome, or GBS: We are advancing our lead candidate, ANX005, an investigational, full-length monoclonal antibody, or mAb, formulated for intravenous administration in a pivotal Phase 3 clinical trial for the potential treatment of patients with GBS. GBS is a rare antibody-mediated autoimmune disease that is the most common cause of acute neuromuscular paralysis, with no therapies in the U.S. approved by the Food and Drug Administration, or FDA. We believe maximum suppression of C1q and the classical cascade early in the disease process may act to rapidly prevent complement-mediated nerve damage and irreversible neurological disability. In a prior placebo-controlled proof-of-concept trial, a single dose of ANX005 showed rapid and consistent improvement in muscle strength that translated into observable gains in health status, including a reduction in the need of mechanical ventilation, as well as a reduction in nerve damage and clinical function. We completed enrollment of 241 patients in our ongoing placebo-controlled Phase 3 GBS trial, and data are anticipated in the second quarter of 2024. We intend to establish comparability of the GBS patient population in our Phase 3 trial with patients from the International Guillain-Barré Syndrome Outcomes Study, or IGOS, a global, prospective, observational, multicenter cohort study that has enrolled 2,000 patients who were followed for one to three years. We have initiated a real-world evidence, or RWE, comparability protocol with IGOS with data anticipated in the first half of 2025 to support our Biologics License Applications, or BLA, submission. ANX005 has been granted Fast Track and orphan drug designation for the treatment of GBS from the FDA. ANX005 has also been granted orphan designation from the European Medicines Agency, or EMA.
Geographic Atrophy, or GA: We are advancing ANX007, an antigen-binding fragment, or Fab, formulated for intravitreal administration, into a pivotal Phase 3 program for the potential treatment of patients with GA. GA is the leading cause of vision loss in the elderly, that affects an estimated eight million people globally. ANX007 is designed to block C1q locally in the eye, to provide more complete protection against excess classical complement activity, a key driver of GA, and the

16


 

loss of photoreceptor neurons. In a randomized, multi-center, double-masked, sham-controlled Phase 2 ARCHER clinical trial of 270 patients with GA, ANX007 was the first and only program to show statistically significant and consistent protection against vision loss in a broad population of patients with GA, measured by best corrected visual acuity, or BCVA, ≥15-letter loss, the widely accepted and clinically meaningful functional endpoint. Significant protection from vision loss was also shown in multiple additional prespecified measures of BCVA and visual function, including low luminance visual acuity (LLVA) and low luminance visual deficit (LLVD). ANX007’s treatment effect increased over the course of the on-treatment portion of the study, suggesting that ANX007 may provide a growing and durable treatment effect over time. While benefit gained against vision lost was maintained during the subsequent six-month off-treatment period, the rate of decline for BCVA ≥ 15-letter vision began to parallel that of sham, providing additional support for the observed on-treatment protection. ANX007 was also shown to protect key retinal structures important for vision, including significant protection from photoreceptor loss, supported by slowing of loss of foveal retinal pigment epithelium (RPE). ANX007 was generally well-tolerated through month 12, with no increase in choroidal neovascularization (CNV) rates between the treated and sham arms and no events of retinal vasculitis reported. In December 2023, we announced FDA alignment on a Phase 3 registrational program for ANX007 in GA using, for the first-time, the prevention of ≥15-letter loss of BCVA as the primary outcome measure. We plan to initiate the Phase 3 ARCHER II trial in mid-2024, a global sham-controlled trial designed to confirm the results from the Phase 2 ARCHER trial. We also plan to initiate the Phase 3 ARROW trial in late 2024, an injection-controlled head-to-head study against SYFOVRE® (pegcetacoplan injection) with the potential to underscore ANX007’s unique mechanism of action and critical differentiation on visual function. ANX007 has been granted Fast Track designation from the FDA and is the first therapeutic candidate for the treatment of GA to receive Priority Medicine, or PRIME, designation by the EMA, which provides early and proactive support to developers of promising medicines that may offer a major therapeutic advantage over existing treatments or benefit to patients without treatment options.
ANX1502 for Autoimmune Indications: We are advancing ANX1502, a novel oral small molecule inhibitor of classical complement which we believe is first-in-kind. In a Phase 1 single-ascending dose, or SAD, and multiple-ascending dose, or MAD, clinical trial in healthy volunteers designed to evaluate the safety, tolerability, pharmacokinetics, or PK, and pharmacodynamics, or PD, ANX1502 was generally well tolerated across cohorts with no serious adverse events, achieved target levels of active drug and showed supportive impact on a PD biomarker of complement activity that support its advancement. We plan to advance a tablet formation of ANX1502 into a proof-of-concept study designed to assess PD and efficacy in patients with cold agglutinin disease, or CAD, in the first half of 2024, with data expected in the second half of 2024. Following the successful completion of the proof-of-concept study, we intend to evaluate ANX1502 in additional serious complement-mediated autoimmune diseases with the aim of providing enhanced efficacy and offering convenient dosing administration for long-term treatment of chronic conditions.

We were incorporated in March 2011 and commenced operations later that year. To date, we have focused primarily on performing research and development activities, hiring personnel and raising capital to support and expand these activities. We do not have any products approved for sale, and we have not generated any revenue from product sales. We have incurred net losses each year since our inception. Our net losses were $25.2 million and $38.7 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $597.7 million and cash and cash equivalents and short-term investments of $264.9 million.

Components of Operating Results

Revenue

Our product candidates are not approved for commercial sale. We have not generated any revenue from sales of our product candidates and do not expect to do so in the foreseeable future and until we complete clinical development, submit regulatory filings and receive approvals from applicable regulatory bodies for such product candidates, if ever.

Operating Expenses

Research and Development

Research and development expenses account for a significant portion of our operating expenses. Research and development expenses consist primarily of direct and indirect costs incurred for the development of our product candidates.

Direct expenses include:

preclinical and clinical outside service costs associated with discovery, preclinical and clinical testing of our product candidates;

17


 

professional services agreements with third party contract organizations, investigative clinical trial sites and consultants that conduct research and development activities on our behalf;
contract manufacturing costs to produce clinical trial materials and commercial materials to support any
biologics license applications (BLA) to the FDA; and
laboratory supplies and materials.

Indirect expenses include:

compensation and personnel-related expenses (including stock-based compensation);
allocated expenses for facilities and depreciation; and
other indirect costs.

We record research and development expenses as incurred. Payments made to other entities are under agreements that are generally cancelable by us. Advance payments for goods or services to be received in future periods for use in research and development activities are deferred as prepaid expenses. The prepaid amounts are then expensed as the related services are performed. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates.

We expect our future research and development expenses to vary substantially for the foreseeable future as we continue to prioritize our pipeline opportunities, advance our product candidates through clinical trials, invest in next generation development, pursue regulatory approval of our product candidates, and hire additional personnel to support our research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain.

General and Administrative

General and administrative expenses consist primarily of compensation and personnel-related expenses (including stock-based compensation) for our personnel in executive, finance and other administrative functions. General and administrative expenses also include professional fees paid for accounting, legal and tax services, allocated expenses for facilities and depreciation and other general and administrative costs.

We expect our general and administrative expenses for the foreseeable future to remain relatively flat as we continue to support our research and development activities, grow our business, advance our product candidates toward regulatory approval and commercialization activities, and operate as a public company.

Interest and Other Income, Net

Interest and other income, net, primarily consists of interest income earned on our cash equivalents and short-term investments.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following tables summarize our results of operations for the periods presented:

 

 

 

Three Months Ended
March 31,

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

Dollar
Change

 

 

%
Change

 

 

(in thousands)

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

20,963

 

 

$

32,345

 

 

$

(11,382

)