ANGN BIOM You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and the related notes appearing elsewhere in this Quarterly Report on
Form 10-Q and in our Annual Report on Form 10-K for the year ended
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel small molecule therapeutics to address chronic and progressive fibrotic diseases. Our goal is to transform the treatment paradigm for patients suffering from these potentially life-threatening conditions for which there are no approved medicines or where existing approved medicines have limitations. Our lead product candidate, ANG-3070, is a highly selective oral tyrosine kinase receptor inhibitor (TKI) in development as a treatment for fibrotic diseases, particularly in the kidney and lung. Enrollment is ongoing in "JUNIPER," a dose-finding Phase 2 trial of ANG-3070 in primary proteinuric kidney diseases (PPKD) and we expect to file an IND in idiopathic pulmonary fibrosis (IPF) by the end of 2022. We are also continuing to develop our preclinical programs. Our ROCK2 program is targeted towards the treatment of fibrotic diseases. Our CYP11B2 program is targeted towards diseases related to aldosterone synthase dysregulation.
Prior to
On
We do not have any products approved for sale and have not generated any revenue
from product sales since our inception and do not expect to generate revenue
from product sales unless we successfully develop, and we or our collaborators,
commercialize our product candidates, which we do not expect to occur for
several years, if ever. Our net losses were
In addition, if we seek regulatory approval for any of our wholly-owned product candidates or those for which we retain the right to commercialize in the future, we would need to incur additional expenses as we expand our clinical, regulatory, quality, manufacturing and commercialization capabilities, incur significant commercialization expenses for marketing, sales, manufacturing and distribution if we obtain marketing approval for such product candidates.
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We rely on third parties in the conduct of our preclinical studies and clinical trials and for manufacturing and supply of our product candidates. We have no internal manufacturing capabilities, and we expect to continue to rely on third parties, many of whom are single-source suppliers, for our preclinical study and clinical trial materials. In addition, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, we will incur significant expenses to develop a marketing and sales organization and commercial infrastructure in advance of generating any product sales of wholly-owned product candidates or those for which we retain the right to commercialize.
Furthermore, we will need to make continued investment in development studies, registration activities and the development of commercial support functions including quality assurance and safety pharmacovigilance before we will be in a position to sell any of our product candidates, if approved.
The Initial Public Offering and Concurrent Private Placement
The Initial Public Offering ("IPO") and Concurrent Private Placement, which both
closed on
Reduction in Force
On
COVID-19 Update
The COVID-19 pandemic has placed strains on the providers of healthcare services, including the healthcare institutions where we conduct our clinical trials. These strains have resulted in institutions prohibiting the initiation of new clinical trials and enrollment in existing trials and restricting the on-site monitoring of clinical trials. We also follow FDA guidance on clinical trial conduct during the COVID-19 pandemic, including the remote monitoring of clinical data.
The global pandemic of COVID-19 continues to rapidly evolve. The extent to which
COVID-19 may continue impact our business, including our clinical trials, and
financial condition will depend on future developments, which are highly
uncertain due to the continuing emergence of new variants and cannot be
predicted with confidence, such as the ultimate duration of the pandemic and the
effectiveness of actions taken in
At this time, we do not expect any disruption in our supply chain of drugs necessary to conduct our clinical trials, and we believe we will be able to supply the drug needs of our clinical trials in 2022. However, we are continuing to evaluate our clinical supply chain in light of the COVID-19 pandemic.
License, Collaboration and Grant Agreements
License Agreement with Vifor Pharma
In
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Pursuant to the Vifor License and specifically based upon the clinical
development plan for ANG-3777 set forth in the Vifor License, we are entitled to
receive
We are also eligible to receive post-approval milestones of up to approximately
On
Components of Results of Operations
The following discussion summarizes the key factors our management believes are necessary for an understanding of our financial statements.
Revenue
We do not have any products approved for sale and have not generated any revenue
from product sales. Our revenue to date primarily has been derived from
government funding consisting of
Grant Revenue
Our grants and contracts reimburse us for direct and indirect costs relating to the grant projects and also provide us with a pre-negotiated profit margin on total direct and indirect costs of the grant award, excluding subcontractor costs, after giving effect to directly attributable costs and allowable overhead costs. Funds received from grants and contracts are generally deemed to be earned and recognized as revenue as allowable costs are incurred during the grant or contract period and the right to payment is realized.
Contract Revenue
Our license agreements comprise elements of upfront license fees, milestone payments based on development and royalties based on net product sales. The timing of our operating cash flows may vary significantly from the recognition of the related revenue. Income from upfront payments is recognized when we satisfy the performance obligations in the contract, which can result in recognition at either a point in time or over the period of continued involvement. Other revenue, such as milestone payments, are recognized when achieved.
Our revenue to date has been generated from payments received pursuant to the Vifor License Agreement. We recognize revenue from upfront payments over the term of our estimated period of performance using a cost-based input method under Topic 606, Revenue from Contracts with Customers.
In addition to receiving an upfront payment, we may also be entitled to milestones and other contingent payments upon achieving predefined objectives. If a milestone is considered probable of being reached, and if it is probable that a significant revenue reversal would not occur, the associated milestone amount would also be included in the transaction price. We expect any license revenue we generate from any future collaboration partners, will fluctuate in the future as a result of the timing and amount of upfront, milestones and other collaboration agreement payments and other factors.
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Table of Contents Operating Expenses Cost of Grant Revenue
Our cost of grant revenue primarily relates to personnel-related costs and expenses for grant projects.
Research and Development Expenses
To date, our research and development expenses have primarily related to discovery efforts and preclinical and clinical development of our product candidates. We recognize research and development expenses as they are incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Our research and development expenses consist primarily of:
?personnel costs, including salaries, payroll taxes, employee benefits and stock-based compensation, for personnel in research and development functions;
?costs associated with medical affairs activities;
?fees paid to consultants, clinical testing sites and contract research organizations (CROs), including in connection with our preclinical studies and clinical trials, and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation, analysis and reporting;
?contracted research and license agreement fees with no alternative future use;
?costs related to acquiring, manufacturing and maintaining clinical trial materials and laboratory supplies;
?depreciation of equipment and facilities;
?legal expenses related to clinical trial agreements and material transfer agreements; and
?costs related to preparation of regulatory submissions and compliance with regulatory requirements.
Other than with respect to reimbursable expenses required to be recorded under
our government grants and contracts, we do not allocate our expenses by product
candidates. A significant amount of our direct research and development expenses
include payroll and other personnel expenses for our departments supporting
multiple product candidate research and development programs and, other than as
specified above, we do not record research and development expenses by product.
However, research and development expenses were primarily driven by expenses
relating to the development of ANG-3070 and ANG-3777 during the three months
ended
We expect our research and development expenses to be slightly lower in the near term even though we will continue the development of our product candidates and continue to invest in research and development activities. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts necessary to complete the remainder of the development of any of our clinical or preclinical product candidates or the period, if any, in which material net cash inflows from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
?the scope, rate of progress and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;
?future preclinical and clinical trial results;
?obtaining market access and reimbursement approvals; and
?the timing and receipt of any regulatory approvals.
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A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct preclinical or clinical trials beyond those we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our preclinical or clinical trials, we could be required to expend significant additional financial resources and time on the completion of our clinical development programs.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related
expenses, such as salaries, payroll taxes, employee benefits and stock-based
compensation, for personnel in executive, operational, finance and human
resources functions. Other significant general and administrative expenses
include facilities costs, insurance costs, and accounting and legal services and
expenses associated with obtaining and maintaining patents. A portion of the
general and administrative expenses are reimbursed through the overhead rates
contained in our grants with the
We expect our general and administrative expenses to be generally consistent in
the near term to support our continued research and development activities. We
also expect to generally maintain our current level of expenses associated with
operating as a public company, including expenses related to audit, legal,
regulatory, and tax-related services associated with maintaining compliance with
the rules and regulations of the
Other Income (Expense)
Convertible Notes Recorded at Fair Value
We elected the fair value option for recognition of our convertible notes. Our convertible notes were subject to re-measurement each reporting period with gains and losses reported through our condensed consolidated statements of operations. All of our convertible notes were converted into shares of our common stock upon the closing of our IPO.
Liability Classified Series C Convertible Preferred Stock Recorded at Fair Value
Our Series C convertible preferred stock included settlement features resulting in classification as a liability. The initial carrying value of the Series C convertible preferred stock was accreted to the settlement value, the fair value of the securities to be issued upon the conversion of the Series C Preferred Stock. The discount to the settlement value was accreted to interest expense using the effective interest method. During 2020, certain of the convertible notes were exchanged for Series C convertible preferred stock. As the exchange was accounted for as a modification, the Series C convertible preferred stock exchanged for the convertible notes (the Exchanged Series C Shares) was recorded at fair value. The Exchanged Series C Shares were subject to re-measurement each reporting period with gains and losses reported through our condensed consolidated statements of operations. All shares of our Series C convertible preferred stock converted into common stock upon the closing of our IPO.
Warrant Liability
We have accounted for certain of our freestanding warrants to purchase shares of our common stock as liabilities measured at fair value, in accordance with ASC 815, Derivatives and Hedging. The warrants are subject to re-measurement at each reporting period with gains and losses reported through our condensed consolidated statements of operations.
Foreign Exchange Transaction Gain
Foreign currency transaction gains, primarily related to intercompany loans, are recorded as a component of other income (expense) in our condensed consolidated statements of operations.
Earnings in
Earnings in equity method investment represents our 10% interest in NovaPark accounted for under the equity method.
Interest Income
Interest income consists of interest earned on our cash and cash equivalents.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods
indicated:
Three Months Ended March 31,
2022 2021 $ Change % Change
(In thousands, except percentages)
Revenue:
Contract revenue $ 1,648 $ 371 $ 1,277 344%
Total revenue 1,648 371 1,277 344%
Operating expenses:
Research and development 11,667 14,298 (2,631) (18)%
General and administrative 4,466 6,012 (1,546) (26)%
Total operating expenses 16,133 20,310 (4,177) (21)%
Loss from operations (14,485) (19,939) 5,454 (27)%
Other income (expense), net 245 (16,748) 16,993 101%
Net loss $ (14,240) $ (36,687) $ 22,447
Contract Revenue
Contract revenue increased by
We do not expect to receive any further substantial revenues under the Vifor License and we expect the remaining unearned revenue under the Vifor License to be recognized by the end of 2022.
Research and Development Expenses
Research and development expenses decreased by
General and Administrative Expenses
General and administrative expenses decreased by
Other Income (Expense)
Other income (expense) increased by
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Liquidity and Capital Resources
Sources and Uses of Liquidity
We have incurred losses and negative cash flows from operations since inception,
and we anticipate we will incur losses for at least the next several years. To
date, we have not generated any revenue from product sales. We have funded our
operations primarily through the receipt of grants, the sale of debt and equity
securities, and proceeds from license agreements. As of
Future Cash Needs and Funding Requirements
Based on our current operating plan, we believe our cash and cash equivalents will be sufficient to fund our planned operations for at least 12 months following the issuance date of our condensed consolidated financial statements and well into 2023. However, we have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. The amount and timing of our future funding requirements will depend on many factors, including, but not limited to:
?the scope, progress, results and costs of researching and developing ANG-3070 or any other product candidates, and conducting preclinical studies and clinical trials;
?the outcome of our ongoing and future clinical trials, including our Phase 2 clinical trial of ANG-3070 in patients with PPKD;
?whether we are able to take advantage of any FDA expedited development and approval programs for any of our product candidates;
?the extent to which COVID-19 may impact our business, including our clinical trials and financial condition;
?the willingness of the FDA and foreign regulatory authorities to accept the results of our completed, ongoing, and planned clinical trials and preclinical studies and other work, as the basis for review and approval of ANG-3070;
?the outcome, costs and timing of seeking and obtaining and maintaining FDA and any foreign regulatory approvals;
?the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development;
?the ability of our product candidates to progress through clinical development successfully;
?our need to expand our research and development activities, including to conduct additional clinical trials;
?market acceptance of our product candidates, including physician adoption, market access, pricing and reimbursement;
?the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;
?our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
?our need and ability to hire additional personnel, including management, clinical development, medical and commercial personnel;
?the effect of competing technological, market developments and government policy;
?the costs associated with being a public company, including our need to implement additional internal systems and infrastructure, including financial and reporting systems;
?the costs associated with securing and establishing commercialization and manufacturing capabilities, as well as those associated with packaging, warehousing and distribution;
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?the costs associated with being a commercial company with approved products for sale, including our obligation to meet applicable healthcare laws and regulations and implement robust compliance programs;
?the economic and other terms, timing of and success of our existing licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future and timing and amount of payments thereunder; and
?the timing, receipt and amount of sales and general commercial success of any future approved products, if any.
Until such time as we or our collaborators can generate significant revenue from sales of ANG-3070 or any other product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings or other sources of capital, including collaborations, licenses, credit or loan facilities, receipt of research contributions or grants, tax credit revenue or a combination of one or more of these funding sources. Adequate funding may not be available to us on acceptable terms, or at all. To the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences adversely affecting the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
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