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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, 2021
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: 001-37985
ANAPTYSBIO, INC.
(Exact name of registrant as specified in its charter)
Delaware20-3828755
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value ANABThe 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 FilerAccelerated Filer
Non-accelerated FilerSmaller 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 Act).    Yes      No  



As of August 5, 2021, there were 27,433,359 shares of the Registrant’s Common Stock outstanding.



AnaptysBio, Inc.
Table of Contents
 
Page Number
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION



PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
AnaptysBio, Inc.
Consolidated Balance Sheets
(in thousands, except par value data)
(unaudited)
June 30, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$332,254 $250,456 
Receivable from collaborative partners642  
Short-term investments58,597 143,197 
Prepaid expenses and other current assets6,508 2,908 
Restricted cash60  
Total current assets398,061 396,561 
Property and equipment, net2,488 1,783 
Operating lease right-of-use assets20,278 344 
Long-term investments5,484 17,546 
Other long-term assets258 258 
Restricted cash 60 
Total assets$426,569 $416,552 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$4,103 $4,217 
Accrued expenses15,958 15,262 
Current portion of operating lease liability555 342 
Total current liabilities20,616 19,821 
Operating lease liability, net of current portion20,222  
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares, issued or outstanding at June 30, 2021 and December 31, 2020, respectively
  
Common stock, $0.001 par value, 500,000 shares authorized, 27,433 shares and 27,356 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively
27 27 
Additional paid in capital668,429 660,665 
Accumulated other comprehensive loss(176)(4)
Accumulated deficit(282,549)(263,957)
Total stockholders’ equity385,731 396,731 
Total liabilities and stockholders’ equity $426,569 $416,552 
 See accompanying notes to unaudited consolidated financial statements.
1


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,
2021202020212020
Collaboration revenue$30,027 $ $41,274 $15,000 
Operating expenses:
Research and development25,314 17,948 49,499 38,916 
General and administrative5,246 4,687 10,669 8,972 
Total operating expenses30,560 22,635 60,168 47,888 
Loss from operations(533)(22,635)(18,894)(32,888)
Other income, net:
Interest income104 1,061 299 2,958 
Other income, net 26 3 120 
Total other income, net104 1,087 302 3,078 
Net loss(429)(21,548)(18,592)(29,810)
Unrealized (loss) income on available for sale securities(65)(392)(172)415 
Comprehensive loss$(494)$(21,940)$(18,764)$(29,395)
Net loss per common share:
      Basic and diluted$(0.02)$(0.79)$(0.68)$(1.09)
Weighted-average number of shares outstanding:
      Basic and diluted27,391 27,279 27,377 27,271 
 See accompanying notes to unaudited consolidated financial statements.

2


AnaptysBio, Inc.
Consolidated Statement of Stockholders’ Equity
(in thousands)
(unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance, December 31, 202027,356 $27 $660,665 $(4)$(263,957)$396,731 
Shares issued under employee stock plans
11 — 167 — — 167 
Stock-based compensation
— — 3,315 — — 3,315 
Comprehensive loss, net— — — (107)— (107)
Net loss
— — — — (18,163)(18,163)
Balance, March 31, 202127,367 27 664,147 (111)(282,120)381,943 
Shares issued under employee stock plans
66 — 592 — — 592 
Stock-based compensation
— — 3,690 — — 3,690 
Comprehensive loss, net
— — — (65)— (65)
Net loss
— — — — (429)(429)
Balance, June 30, 202127,433 $27 $668,429 $(176)$(282,549)$385,731 
See accompanying notes to unaudited consolidated financial statements.
3

AnaptysBio, Inc.
Consolidated Statement of Stockholders’ Equity
(in thousands)
(unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive (Loss) IncomeAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance, December 31, 201927,255 $27 $648,669 $338 $(244,026)$405,008 
Shares issued under employee stock plans
22 — 36 — — 36 
Stock-based compensation
— — 2,975 — — 2,975 
Comprehensive income, net
— — — 807 — 807 
Net loss
— — — — (8,262)(8,262)
Balance, March 31, 202027,277 27 651,680 1,145 (252,288)400,564 
Shares issued under employee stock plans
10 — 71 — — 71 
Stock-based compensation
— — 2,741 — — 2,741 
Comprehensive loss, net— — — (392)— (392)
Net loss
— — — — (21,548)(21,548)
Balance, June 30, 202027,287 $27 $654,492 $753 $(273,836)$381,436 
See accompanying notes to unaudited consolidated financial statements.
4

AnaptysBio, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
June 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(18,592)$(29,810)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization285 277 
Stock-based compensation7,005 5,716 
Accretion/amortization of investments, net293 61 
Amortization of right-of-use assets – operating
751 382 
Changes in operating assets and liabilities:
Receivable from collaborative partners(642) 
Prepaid expenses and other assets(3,235)(2,860)
Accounts payable and other liabilities772 (8,068)
Operating lease liabilities(250)(420)
Net cash used in operating activities(13,613)(34,722)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments(9,734)(86,947)
Sales and maturities of investments105,604 173,262 
Purchases of property and equipment(1,180)(170)
Net cash provided by investing activities94,690 86,145 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, upon the exercise of stock options721 107 
Payments on notes payable (1,375)
Net cash provided by (used in) financing activities721 (1,268)
Net increase in cash, cash equivalents, and restricted cash81,798 50,155 
Cash, cash equivalents and restricted cash, beginning of period250,516 171,077 
Cash, cash equivalents and restricted cash, end of period$332,314 $221,232 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid$ $4 
Non-cash investing and financing activities:
Leased assets obtained in exchange for operating lease liabilities$20,685 $ 
Amounts accrued for property and equipment$89 $25 
Receivable related to issuance of common stock, upon exercise of stock options$38 $ 
See accompanying notes to unaudited consolidated financial statements.
5

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 developing first-in-class immunology therapeutic product candidates focused on emerging immune control mechanisms applicable to inflammation and immuno-oncology indications. We develop our product candidates using our proprietary antibody discovery technology platform, which is based upon a breakthrough understanding of the natural process of antibody generation, known as somatic hypermutation, and replicates this natural process of antibody generation in vitro. We currently generate revenue from milestones and royalties achieved under our collaborative research and development arrangements.
    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 and preferred stock, 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. Our 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. 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. Also, certain reclassifications have been made to 2020 financial information to conform to the current year presentation of other long-term assets, operating lease right-of-use, or “ROU” asset, and operating lease liabilities on the Consolidated Balance Sheets and Consolidated Statements of Cash Flows. Operating results for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Interim results are not necessarily indicative of results for a full year, particularly in light of the novel coronavirus (“COVID-19”) pandemic, and its impact on domestic and global economies. To limit the spread of COVID-19, governments have taken various actions, including the issuance of stay-at-home orders and social distancing guidelines, which have resulted in some businesses suspending operations or experiencing a reduction in demand for many products from direct or ultimate customers. Accordingly, businesses have adjusted, reduced or suspended operating activities. The effects of the stay-at-home orders and our work-from-home policies may negatively impact productivity, disrupt our business, and delay our development programs and regulatory and commercialization timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. Our future research and development expenses and general and administrative expenses may vary significantly if we experience an increased impact from the COVID-19 pandemic on the costs and timing associated with the conduct of our clinical trials and other related business activities, to date there has not been any material delays in clinical operations. The financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K.
6

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. We evaluate our estimates and assumptions on an ongoing basis. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, and financial condition, including expenses, reserves and allowances, manufacturing, clinical trials, research and development costs, and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international markets. Our actual results could differ from these estimates under different assumptions or conditions.
Revenue Recognition
Revenue is recognized in accordance with revenue recognition accounting guidance, which utilizes five basic steps to determine whether revenue can be recognized and to what extent: (i) identify the contract with a customer; (ii) identify the performance obligation; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) determine the recognition period.
Performance Obligations. We evaluate deliverables on a contract-by-contract basis to determine whether each deliverable represents a good or service that is distinct or has the same pattern of transfer as other deliverables. A deliverable is considered distinct if the customer can benefit from the good or service independently of other goods/services either in the contract or that can be obtained elsewhere, without regard to contract exclusivity, and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contact. If the deliverable is not considered distinct, we combine such deliverables and account for them as a single performance obligation. We allocate the consideration to each deliverable at the inception of the arrangement based on the transaction price.
Our performance obligations may include the following:
License Arrangements. The performance obligations under our collaboration and license agreements generally include exclusive or nonexclusive licenses to one or more products generated using our technologies. Licenses for multiple antibodies within a single contract are generally combined as they have substantially the same pattern of transfer to the customer. Historically, our licenses have held no value to the customer, as the antibodies were in the discovery phase and required our expertise for further development. Accordingly, licenses are not considered distinct.
Research and Development Services. The performance obligations under our collaboration and license agreements generally include research and development services we perform on behalf of or with our collaborators. As discussed within license arrangements above, our licenses have historically held no value without the research and development services we provide. As we generally only provide research and development services for internally generated antibodies that require a license to be utilized by a third party, our research and development services are not considered distinct.
Steering Committee Meetings. The performance obligations under our collaboration and license agreements may also include our participation on steering committees, which allows us to direct the progression of our discovery programs. As these steering committees would not occur or benefit the customer without the use of our licenses, these are not considered distinct.
7

We recognize consideration allocated to a performance obligation as the performance obligation is satisfied, and the determination as to whether consideration is recognized over time or at a point in time is made upon contract inception. For our collaboration agreements, this is generally over the period in which research and development services have been performed.
Transaction Price. Our collaboration and license agreements generally include both fixed and variable consideration. Fixed payments, such as those for upfront fees are included in the transaction price at contract value, while variable consideration such as reimbursement for research and development services, milestone and royalty payments are estimated and then evaluated for constraints upon inception of the contract and evaluated on a quarterly basis thereafter. Research and development services are updated for actual invoices. Given the nature of our agreements, milestones are estimated using the most likely amount and are evaluated on a quarterly basis. Upon commercialization, royalty payments will be recognized in the period incurred.
Royalty Revenue
We receive royalty revenue on sales by our partners of products covered by patents or contract rights that we own and net sales of their approved drugs, where we have concluded the license is the predominant item to which the royalties relate. We do not have future performance obligations under these license arrangements. We generally satisfy our obligation to grant intellectual property rights on the effective date of the contract. However, we apply the royalty recognition constraint required under the guidance for sales-based royalties which requires a sales-based royalty to be recorded when the underlying sale occurs. Therefore, royalties on sales of products commercialized by our partners are recognized in the quarter the product is sold. Our partners generally report sales information to us on a one quarter lag. Thus, we estimate the expected royalty proceeds based on an analysis of our partners’ historical experience including their publicly announced sales. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known, typically the following quarter. As of June 30, 2021, there have not been material differences between actual and estimated royalty revenues.
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)2021202020212020
Options to purchase common stock3,800 2,838 3,624 2,930 
8

3. Balance Sheet Accounts and Supplemental Disclosures
Property and Equipment, net
Property and equipment, net consist of the following:
(in thousands)June 30, 2021December 31, 2020
Laboratory equipment$5,660 $5,225 
Office furniture and equipment1,508 976 
Leasehold improvements548 527 
Property and equipment, gross7,716 6,728 
Less: accumulated depreciation and amortization(5,228)(4,945)
Total property and equipment, net$2,488 $1,783 
 
Accrued Expenses
Accrued expenses consist of the following:
(in thousands)June 30, 2021December 31, 2020
Accrued compensation and related expenses$3,103 $3,688 
Accrued professional fees447 408 
Accrued research, development and manufacturing expenses11,922 10,936 
Other486 230 
Total accrued expenses$15,958 $15,262 
4. Collaborative Research and Development Agreements
GlaxoSmithKline 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 GlaxoSmithKline (Tesaro and GlaxoSmithKline are hereinafter referred to, collectively, as “GSK”). Under the terms of the GSK Agreement, we agreed to perform certain discovery and early preclinical development of therapeutic antibodies with the goal of generating immunotherapy antibodies for subsequent preclinical, clinical, regulatory, and commercial development to be performed by GSK. Under the terms of the GSK Agreement, GSK paid an upfront license fee of $17.0 million in March 2014 and agreed to provide funding to us for research and development services related to antibody discovery programs for three specific targets. In November 2014, Amendment No. 1 to the GSK Agreement was agreed by both parties to add an antibody discovery program against an undisclosed fourth target for an upfront license fee of $2.0 million.
For each development program, we are eligible to receive milestone payments of up to $18.0 million if certain preclinical and clinical trial events are achieved by GSK, up to an additional $90.0 million if certain U.S. and European regulatory submissions and approvals in multiple indications are achieved, and up to an additional $165.0 million upon the achievement of specified levels of annual worldwide net sales. We will also be eligible to receive tiered single-digit royalties related to worldwide net sales of products developed under the collaboration. 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. Prior to the adoption of ASC 606, Revenue from Contracts with Customers, we determined that the upfront license fees and research funding under the GSK Agreement, as amended, should be accounted for as a single unit of accounting and that the upfront license fees should be deferred and recognized as revenue over the same period that the research and development services are performed. In February 2016, Amendment No. 2 to the GSK Agreement was agreed by both parties to define the effective dates of the development programs of the GSK Agreement. We determined that the research and development services would be extended
9

through December 31, 2016. As a result, the period over which the unrecognized license fees and discovery milestones were recognized was extended through December 31, 2016 and have since been recognized in full.
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 relating to six discovery programs (four targets) 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, GSK’s inability to sub-license, 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 license 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.
On October 23, 2020, Amendment No. 3 to the GSK Agreement (the “Amendment”) was agreed to by both parties to permit GSK to conduct development and commercialization of Zejula, an oral, once-daily poly (ADP-ribose) polymerase (PARP) inhibitor, which has received U.S. approval for the maintenance treatment of adult patients with advanced epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to first-line platinum-based chemotherapy, and is under development for additional cancer indications. In addition, under the Amendment, we were granted increased royalties upon sales of JEMPERLI (dostarlimab), an anti-PD-1 antagonist antibody under development by GSK for multiple oncological disorders. The Amendment also provided for a one-time, non-refundable cash payment of $60.0 million that we received and recognized as revenue in the fourth quarter of 2020. GSK also agreed, starting January 1, 2021, to pay us a 1% royalty less third-party royalty deductions on all GSK net sales of Zejula. The $1.1 billion in cash milestone payments due under the GSK Agreement remain unchanged. Additionally, under the terms of the Amendment, GSK has agreed to certain diligence commitments with respect to the future development of JEMPERLI, and the parties have agreed to review such commitments under regular joint review committee meetings going forward.
We assessed this Amendment in accordance with ASC 606 and concluded the Amendment was a contract modification to the GSK Agreement. Based on our assessment, we identified the terms of the Amendment to be interrelated to the GSK Agreement’s single performance obligation, noting completion and delivery of terms under the Amendment were satisfied by both parties with the execution of the Amendment.
As of June 30, 2021, the transaction price for the GSK Agreement and Amendment includes the upfront payment, research reimbursement revenue, one-time payment associated with the Amendment, and milestones earned to date, which are allocated in their entirety to the single performance obligation.
We earned and recognized $1.3 million in royalty revenue during the six months ended June 30, 2021 related to GSK net sales of Zejula and JEMPERLI during the period based on estimates of GSK’s sales historical experience. 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.
We earned and recognized three clinical milestones totaling $40.0 million during the six months ended June 30, 2021. 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 recognized through June 30, 2021 under the GSK Agreement are as follows:
10

Anti-PD-1
(JEMPERLI/Dostarlimab)
Anti-TIM-3
(GSK4069889A/Cobolimab)
Anti-LAG-3
(GSK40974386)
Milestone EventAmountQuarter RecognizedAmountQuarter RecognizedAmountQuarter Recognized
Initiated in vivo toxicology studies using good laboratory practices (GLPs)
$1.0MQ2'15$1.0MQ4'15$1.0MQ3'16
IND clearance from the FDA$4.0MQ1'16$4.0MQ2'16$4.0MQ2'17
Phase 2 clinical trial initiation$3.0MQ2'17$3.0MQ4'17$3.0MQ4'19
Phase 3 clinical trial initiation - first indication$5.0MQ3'18
Phase 3 clinical trial initiation - second indication$5.0MQ2'19
Filing of the first BLA - first indication$10.0MQ1'20
Filing of the first MAA - first indication$5.0MQ1'20
Filing of the first BLA - second indication
$10.0MQ1'21
First BLA approval - first indication$20.0MQ2'21
First MAA approval - first indication
$10.0MQ2'21
Milestones achieved during the discovery period were recognized as revenue pro-rata through December 31, 2016. Milestones achieved during fiscal 2017 were recognized as revenue in the period earned, while milestones after December 31, 2017 are recognized upon determination that a significant reversal of revenue would not be probable. Cash is generally received within 30 days of milestone achievement.
We recognized $30.0 million and $41.3 million in revenue under the GSK Agreement during the three and six months ended June 30, 2021, respectively, and $0 and $15.0 million during the three and six months ended June 30, 2020, respectively.
Antibody Generation Agreement with Bristol-Myers Squibb
In December 2011, we entered into a license and collaboration agreement (the “BMS Agreement”) with Celgene, now a part of Bristol-Myers Squibb (Celgene and Bristol-Myers Squibb are hereinafter referred to, collectively, as “BMS”), to develop therapeutic antibodies against multiple targets. We granted BMS the option to obtain worldwide commercial rights to antibodies generated against each of the targets under the agreement, which option was triggered on a target-by-target basis by our delivery of antibodies meeting certain pre-specified parameters pertaining to each target under the agreement.
The BMS Agreement provided for an upfront payment of $6.0 million from BMS, which we received in 2011 and recognized through 2014, milestone payments of up to $53.0 million per target, low single-digit royalties on net sales of antibodies against each target, and reimbursement of specified research and development costs.
We assessed this arrangement in accordance with ASC Topic 606 and concluded that the contract counterparty, BMS, is a customer. We identified the following material promises under the BMS Agreement: (1) the licenses under certain patent rights relating to four targets and transfer of certain development and regulatory information, (2) R&D services, (3) a written report documenting findings, and (4) steering committee meetings. We considered the research and discovery capabilities of BMS, BMS’s inability to sub-license the four targets, 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 report of findings and steering committee participation would not have been provided without the R&D services and license 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 the arrangement.
As of June 30, 2021, the transaction price of the BMS Agreement includes the upfront payment, success fees, expense reimbursement, and milestones earned to date, which are allocated in their entirety to the single performance obligation. None of the 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 and BMS’s efforts. Any consideration related to sales-based milestones, including royalties, will be recognized when the related sales occur as they were
11

determined to relate predominantly to the intellectual property license granted to BMS and therefore have also been excluded from the transaction price. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
Milestones achieved through June 30, 2021 under the BMS Agreement are as follows:
Anti-PD-1
(CC-90006)
Milestone EventAmountQuarter Recognized
Completion of first in vivo toxicology studies using GLPs
$0.5MQ2'16
Phase 1 clinical trial initiation$1.0MQ4'16
Revenue from future contingent milestone payments will be recognized when it is more likely than not that the revenue will not be reversed in future periods. Cash is generally received within 30 days of milestone achievement.
There was no revenue recognized under this agreement during the three and six months ended June 30, 2021 and 2020.
5. Fair Value Measurements and Available for Sale Investments
Fair Value Measurements
Our financial instruments consist principally of cash, cash equivalents, restricted cash, 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.
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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, 2021
Money market funds(1)
$305,162 $305,162 $ $ 
Mutual funds(1)
26,928 26,928   
U.S. Treasury securities(2)
45,714 45,714   
Certificates of deposit(2)
1,591  1,591  
Agency securities(2)
4,997  4,997  
Commercial and corporate obligations(2)
11,779  11,779  
At December 31, 2020
Money market funds(1)
$188,297 $188,297 $ $ 
Mutual funds(1)
57,153 57,153   
U.S. Treasury securities(2)
107,697 107,697   
Certificates of deposit(2)
2,436  2,436  
 Agency securities(2)
21,169  21,169  
Commercial and corporate obligations(2)
29,441  29,441  
(1)    Included in cash and cash equivalents or restricted cash 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, accrued expenses, and receivables approximate fair value due to their short-term nature.
13

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 cash equivalents, short-term and long-term investments as of June 30, 2021 are as follows:
(in thousands)Amortized
Cost
 Gross
Unrealized Gains
 Gross
Unrealized Losses
 Total
Fair Value
Agency securities(1)
$5,003 $ $(6)$4,997 
Certificates of deposit(2)
1,589 2  1,591 
Commercial and corporate obligations(3)
11,778 1  11,779 
U.S. Treasury securities(4)
45,680 34  45,714 
     Total available-for-sale investments$64,050 $37 $(6)$64,081 
(1)    Of our outstanding agency securities, none have maturity dates of less than one year and $5.0 million have a maturity date of between one to two years as of June 30, 2021.
(2)    Of our outstanding certificates of deposit, $1.1 million have maturity dates of less than one year and $0.5 million have a maturity date of between one to two years as of June 30, 2021.
(3)    All of our outstanding commercial and corporate obligations have maturity dates of less than one year as of June 30, 2021.
(4)    All of our outstanding U.S. Treasury securities have maturity dates of less than one year as of June 30, 2021.
The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in cash equivalents, short-term and long-term investments as of December 31, 2020 are as follows:
(in thousands)Amortized
Cost
 Gross
Unrealized Gains
 Gross
Unrealized Losses
 Total
Fair Value
Agency securities(1)
$21,169 $1 $(1)$21,169 
Certificates of deposit(2)
2,427 9  2,436 
Commercial and corporate obligations(3)
29,414 28 (1)29,441 
US Treasury securities(4)
107,530 170 (3)107,697 
     Total available-for-sale investments$160,540 $208 $(5)$160,743 
(1)    Of our outstanding agency securities, $10.0 million have maturity dates of less than one year and $11.2 million have a maturity date of between one to two years as of December 31, 2020.
(2)     Of our outstanding certificates of deposit, $1.1 million have a maturity date of less than one year and $1.3 million have a maturity date of between one to two years as of December 31, 2020.
(3)     Of our outstanding commercial and corporate obligations, $29.4 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, 2020.
(4)     Of our outstanding U.S. Treasury securities, $102.7 million have maturity dates of less than one year and $5.0 million have a maturity date of between one to two years as of December 31, 2020.
The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2021 and December 31, 2020, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:
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June 30, 2021
Less than 12 Months12 Months or GreaterTotal
(in thousands)
Fair Value
Gross
Unrealized Losses
Fair Value
Gross
Unrealized Losses
Fair Value
Gross
Unrealized Losses
Agency securities$4,997 $(6)$ $ $4,997 $(6)
Commercial and corporate obligations3,262    3,262  
Total
$8,259 $(6)$ $ $8,259 $(6)
December 31, 2020
Less than 12 Months12 Months or GreaterTotal
(in thousands)
Fair Value
Gross
Unrealized Losses
Fair Value
Gross
Unrealized Losses
Fair Value
Gross
Unrealized Losses
Agency securities$4,999 $(1)$ $ $4,999 $(1)
Commercial and corporate obligations6,503 (1)2,399  8,902 (1)
US Treasury Securities35,211 (3)  35,211 (3)
Total
$46,713 $(5)$2,399 $ $49,112 $(5)
As of June 30, 2021 and 2020, unrealized losses on available-for-sale investments were not material, and accordingly, no allowance for credit losses were recorded.
6. Stockholders’ Equity
Common Stock
Of the 500,000,000 shares of common stock authorized, 27,432,609 shares were issued and outstanding as of June 30, 2021. Common stock reserved for future issuance upon the exercise, issuance or conversion of the respective equity instruments at June 30, 2021 are as follows:
 
Issued and Outstanding:
Stock options3,731,808 
Shares Reserved For:
2017 Equity Incentive Plan
3,192,182 
2017 Employee Stock Purchase Plan1,271,237 
Total8,195,227 
7. Equity Incentive Plans
2017 Equity Incentive Plan
On January 12, 2017, our board of directors and stockholders approved and adopted the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan became effective upon the execution and delivery of the underwriting agreement for our initial public offering on January 26, 2017 and replaced our existing 2006 Equity Incentive 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 will be automatically increased each January 1, beginning on January 1, 2018, by 4% of the aggregate number of
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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 1,094,223 shares as of January 1, 2021.
Employee Stock Purchase Plan
On January 12, 2017, our board of directors and stockholders approved and adopted the 2017 Employee Stock Purchase Plan or the ESPP. The ESPP became effective upon the execution and delivery of the underwriting agreement for our initial public offering on January 26, 2017. 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 273,555 shares as of January 1, 2021. The initial offering period for the ESPP began in May 2021.
Stock Options
Stock options granted to employees and non-employees generally vest over a four-year period while stock options granted to directors 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, 2021 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, 20212,920,700 $26.67 
Granted1,037,374 $29.52 
Exercises(77,034)$9.86 
Forfeitures and cancellations(149,232)$29.47 
Outstanding at June 30, 20213,731,808 $27.70 7.51$24,823 
Exercisable at June 30, 20211,744,975 $27.82 5.76$17,109 
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 to employees 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,
20212020
Risk-free interest rate0.7%1.2%
Expected volatility93.1%91.8%
Expected dividend yield % %
Expected term (in years)6.186.25
Weighted-average grant date fair value per share$22.39$11.97
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
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non-employee stock-based awards reflects the application of the simplified method, which defines the life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. Estimated volatility for 2021 incorporates the historical volatility of our stock price, and volatility for 2020 incorporates our stock price as well as similar entities whose share prices are publicly available. 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)2021202020212020
Research and development$1,435 $958 $2,629 $2,104 
General and administrative2,255 1,783 4,376 3,612 
Total$3,690 $2,741 $7,005 $5,716 
 
At June 30, 2021, there was $36.8 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 2.71 years. At June 30, 2021, there was $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.
8. Commitments and Contingencies
Operating Leases
On November 11, 2020, we entered into an agreement to terminate our sublease (the “Sublease Termination”) with Trex Enterprises Corporation, with respect to facilities in the building at 10455 Pacific Center Court in San Diego, California (the “10455 Building”). The terms of the original sublease with Trex provided for a November 12, 2021 lease expiration. Under the Sublease Termination, we agreed to terminate the sublease agreement on December 15, 2020 with no associated penalty. We recorded a non-cash gain of approximately $0.1 million as other income, in connection with the write-off of the lease liability and corresponding ROU asset. As of June 30, 2021, there was no lease liability and corresponding ROU asset related to the 10455 Building Lease.
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 our ROU assets and lease liabilities. The monthly base rent will be $4.20 per rentable square foot and will be 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, 2021, we have recorded $0.3 million as a security deposit in accordance with the terms of the Lease Agreement. As of June 30, 2021, we also maintain the non-cancellable office lease for our facilities at 10421 Pacific Center Court in San Diego, California, which expires on August 31, 2021.
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 leases do not provide an implicit rate, we used our incremental borrowing rate based on the information available at effective date of adoption in determining the present value of future payments. The weighted-average discount rate used was 4%.
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The following non-cancellable office lease costs are included in our consolidated statements of cash flow (in thousands):
Six Months Ended
June 30,
LeasesClassification on the Cash Flow20212020
Operating lease costOperating$886 $440 
Cash paid for amounts included in the measurement of lease liabilitiesOperating465 478 
At June 30, 2021, the future minimum annual obligations for the Company’s operating lease liabilities are as follows (in thousands):
Years Ending December 31,
2021$239 
20222,316 
20232,386 
20242,457 
20252,531 
Thereafter15,846 
Total minimum payments required25,775 
Less imputed interest(4,998)
Total$20,777 

Shareholder Litigation
On March 25, 2020, a putative securities class action was filed in the United States District Court for the Southern District of California naming the Company and certain of its current or former officers as defendants. The complaint purports to assert claims under Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Exchange Act Rule 10b-5, and Section 20(a) of the Exchange Act, on behalf of persons and entities who acquired our common stock between October 10, 2017 and November 7, 2019 (the “Class Period”). An amended complaint was filed on September 30, 2020 alleging that, during the Class Period, the defendants made material misrepresentations or omissions regarding our etokimab product candidate that artificially inflated our stock price. The plaintiff seeks, among other things, damages in an unspecified amount, as well as costs and expenses. We believe that the plaintiff’s allegations are without merit and intend to vigorously defend against the claims. On May 3, 2021, a shareholder derivative complaint was filed in the same Court based on allegations substantially similar to those in the class action, and purporting to assert claims on the Company’s behalf against current or former officers and directors for alleged violation of Sections 14(a) and 20(a) of the Exchange Act, breach of fiduciary duties, unjust enrichment, waste of corporate assets and insider selling. Because the Company is in the early stages of these litigation matters, we are unable to estimate a reasonably possible loss or range of loss, if any, that may result from these matters.
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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 lead product candidate: imsidolimab for patients with generalized pustular psoriasis (“GPP”), skin toxicities associated with treatments with inhibitors of epidermal growth factor, ichthyosis, hidradenitis suppurativa, and acne;
the impact of the coronavirus (“COVID-19”) pandemic on our business and the United States (“U.S.”) and global economies;
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 timing and ability of our collaborators to develop and commercialize our partnered product candidates;
the potential benefits and advantages of our product candidates and approaches versus those of our competitors;
our ability to execute on our strategy, including advancing our lead product candidates, identifying emerging opportunities in key therapeutic areas, continuing to expand our wholly-owned pipeline, and retaining rights to strategic products in key commercial markets;
our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;
the timing of and our ability to obtain and maintain regulatory approvals for imsidolimab and our other product candidates;
our ability to develop our product candidates;
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., the United Kingdom, Australia, and other foreign countries;
the success of competing therapies that are or may become available;
our ability to attract and retain key scientific or management personnel;
our use of the net proceeds from our public offerings;
our ability to identify additional products or product candidates with significant commercial potential that are consistent with our commercial objectives; 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
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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,” “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.
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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, 2021, 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, 2020 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 developing first-in-class immunology therapeutic product candidates focused on emerging immune control mechanisms applicable to inflammation and immuno-oncology indications. We develop our product candidates using our proprietary antibody discovery technology platform, which is based upon a breakthrough understanding of the natural process of antibody generation, known as somatic hypermutation (“SHM”), and replicates this natural process of antibody generation in vitro. Our strategy is to advance the development of our proprietary product candidates, and where applicable, establish partnerships with leading biopharmaceutical companies where we retain certain development and commercialization rights. Our most advanced wholly-owned antibody programs, imsidolimab, rosnilimab, previously referred to as ANB030, and ANB032, are designed to modulate therapeutic targets that are genetically associated with human inflammatory disorders.
Imsidolimab, our IL-36R antibody previously referred to as ANB019, inhibits the interleukin-36 receptor (“IL-36R”), and is being developed for the treatment of multiple dermatological inflammatory diseases. 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 by all subjects, no dose-limiting toxicities were observed, and no serious adverse events were reported among any subjects in the clinical trial. In July 2020, the U.S. Food and Drug Administration (the “FDA”) granted Orphan Drug Designation for imsidolimab for the treatment of patients with GPP. We completed an open-label, multi-dose, single-arm Phase 2 clinical trial of imsidolimab in 8 GPP patients, also referred to as the GALLOP clinical trial, where we announced positive topline data in October 2020. Six of 8 (75%) patients treated with imsidolimab monotherapy achieved the primary endpoint of improvement in the clinical global impression scale (“CGI”) on Day 29. Two of 8 (25%) patients were considered to have not met the primary endpoint because they dropped out of the clinical trial prior to Day 29. The modified Japanese Dermatology Association Severity Index (“mJDA-SI”) score, which incorporates both dermatological and systemic aspects of GPP, decreased on average by 29% on Day 8 and 54% on Day 29. Erythema with skin pustules, which clinically defines GPP, decreased by 60% on Day 8 and 94% on Day 29. Serum c-reactive protein (“CRP”), which is an indicator of systemic inflammation, was normal (less than 5 mg/L) for 5 of the 6 patients achieving the primary endpoint on Day 29. Genotypic testing indicated homozygous wild-type IL-36RN, CARD14 and AP1S3 alleles for all tested patients. We believe this suggests that imsidolimab may be broadly applicable to pustular diseases irrespective of genetic drivers. Anti-drug antibodies were not detected as of Day 29 in any patient. Imsidolimab was generally well-tolerated, and most treatment-emergent adverse events were mild to moderate in severity and resolved without sequelae. No infusion or injection site reactions were observed. One patient dropped out of the clinical trial due to a diagnosis of Staphylococcal aureus bacteremia in the first week, which was a serious adverse event deemed to be possibly drug-related. Because the patient was symptomatic prior to dosing and had a prior medical history of bacteremia, a common comorbidity of GPP, we do not believe this event is likely attributable to imsidolimab. Another patient dropped out of the study on Day 22 due to investigator reported inadequate efficacy. One patient contracted COVID-19 during the course of the clinical trial, which was mild, unrelated to imsidolimab, and did not lead to study discontinuation. Data from the first two patients to have completed the Day 113 treatment period under this clinical trial, which we announced in September 2019, indicated sustained efficacy in these two patients through Day 113. We plan to report full data from the GALLOP clinical trial at the European Academy of Dermatology and Venereology (EADV) Congress in October 2021. While initial GPP epidemiology studies suggested at least 3,000 GPP patients in the United States, medical claims analyses conducted by IQVIA indicate approximately 37,000 unique patients were diagnosed with GPP at least once, and approximately 15,000 unique patients were diagnosed with GPP at least twice, by a physician between 2017 and 2019 using the International Classification of Diseases 10th Revision (ICD-10) billing code pertaining to GPP (L40.1).
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We have most recently met with the FDA during the second quarter of 2021 for an end-of-Phase 2 meeting to review an orphan disease registration plan for imsidolimab for the treatment of GPP. We anticipate initiating our Phase 3 registrational trials for imsidolimab for GPP, called GEMINI-1 and GEMINI-2, in the third quarter of 2021. GEMINI-1 will enroll approximately 45 moderate-to-severe GPP patients, each undergoing an active flare at baseline, which will be randomized equally to receive a single dose of 750mg intravenous (IV) imsidolimab, 300mg IV imsidolimab or placebo. The primary endpoint of the Phase 3 program is the proportion of patients achieving clear or almost clear skin as determined by a Generalized Pustular Psoriasis Physician’s Global Assessment (GPPPGA) score of zero or 1 at week 4 of GEMINI-1. Patients completing the GEMINI-1 trial will subsequently be enrolled in GEMINI-2, where they will receive monthly doses of 200mg subcutaneous imsidolimab or placebo depending upon whether they are responders, partial responders or non-responders to treatment under GEMINI-1. The objective of GEMINI-2 is to assess the efficacy and safety of imsidolimab after 6 months of monthly dosing.
We are conducting a global registry of GPP patients, also referred to as the RADIANCE study, which we anticipate will improve understanding of the patient journey and assist in enrollment of future GPP clinical trials.
We are conducting clinical development of imsidolimab in acne, which is the most common skin disorder in the United States, with approximately 7 million patients diagnosed with moderate-to-severe disease. Moderate-to-severe acne typically presents with painful papules, pustules, nodules, cysts and scarring. A key contributing factor to the pathogenesis of acne is the immune response to p. acnes, which is associated with upregulated IL-36 cytokine activity, localized inflammation and neutrophil infiltration of the skin. Existing therapies, including isotretinoin and systemic antibiotics, provide variable efficacy for moderate-to-severe acne patients and have practical limitations to their use given potential for clinically meaningful side effects. We are conducting a Phase 2 clinical trial of imsidolimab, called ACORN, where 120 patients will be randomized equally between two dose levels of imsidolimab and placebo, for the treatment of moderate-to-severe acne, and we anticipate top-line data during the first half of 2022.
We are conducting clinical development of imsidolimab in hidradenitis suppurativa, also known as acne inversa, which is a chronic inflammatory skin disease characterized by painful nodules in intertriginous areas that can progress to abscesses, sinus tracks and scarring. Current treatment options for hidradenitis suppurativa, including antibiotics, corticosteroids and anti-TNF therapy, have variable efficacy in moderate-to-severe patients, which often leads to surgery for removal of hidradenitis suppurativa nodules. Human translational studies have demonstrated elevated IL-36 cytokine expression in hidradenitis suppurativa skin biopsies, and we believe treatment of moderate-to-severe hidradenitis suppurativa with imsidolimab may lead to therapeutic benefit for this patient population. Moderate-to-severe hidradenitis suppurativa affects approximately 150,000 adults in the United States. We are conducting a Phase 2 clinical trial of imsidolimab in hidradenitis suppurativa, called HARP, where 120 patients will be randomized equally between two dose levels of imsidolimab and placebo, and we anticipate top-line data during the second half of 2022.
We are conducting clinical development of imsidolimab for the treatment of skin toxicities associated with treatments with inhibitors of epidermal growth factor (“EGFRi”) and MAPK/ERK kinase (“MEKi”). Treatment of solid tumors with EGFRi and/or MEKi is frequently limited by the occurrence of skin toxicities, including acneiform or papulopustular rash. Recent translational data has suggested that these skin toxicities are mediated by excess IL-36 signaling, leading to IL-8-mediated cutaneous neutrophilia and acneiform rash. Based on existing claims data, approximately 60,000 patients are prescribed EGFRi and/or MEKi treatments annually, and the vast majority of these patients experience skin toxicity, which in some cases leads to dose reduction and/or discontinuation of treatment. Current standard-of-care treatments are generally ineffective in patients with the most severe grades of EGFRi and/or MEKi mediated skin toxicity. We are conducting a Phase 2 clinical trial, called EMERGE, of imsidolimab in combination with EGFRi inhibitors, for the treatment of patients diagnosed with a certain baseline severity of skin toxicity, where 45 patients are randomized 2:1 between imsidolimab and placebo arms, to assess the efficacy of imsidolimab in the treatment of this indication where we anticipate an interim analysis by the end of 2021.
We are also conducting clinical development of imsidolimab in ichthyosis, which is a family of rare, inherited, dermatological disorders characterized by dry, scaling and thickened skin. Recent human translational studies have suggested that the underlying skin inflammation responsible for ichthyosis is mediated by dysregulated IL-36 signaling, and we believe that imsidolimab treatment may be efficacious in treatment of this condition. Approximately 6,000 patients in the United States are affected with moderate-to-severe levels of ichthyosis, and no approved therapies are available for this disease. We are conducting a Phase 2 clinical trial, called INSPIRE, of imsidolimab in patients with certain baseline severity of ichthyosis, where 24 patients are randomized 2:1 between imsidolimab and placebo arms, and we anticipate interim top-line data in 2022.
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Our second wholly-owned program, rosnilimab, previously referred to as ANB030, is an anti-PD-1 agonist antibody program designed to augment PD-1 signaling through rosnilimab treatment to suppress T-cell driven human inflammatory diseases. Genetic mutations in the PD-1 pathway are known to be associated with increased susceptibility to human inflammatory diseases, and hence we believe that rosnilimab is applicable to diseases where PD-1 checkpoint receptor function may be under-represented. We presented preclinical data for rosnilimab at the Festival of Biologics Annual Meeting in March 2020, including translational data demonstrating in vitro activity of rosnilimab in alopecia areata patient samples. We initiated a Phase 1 healthy volunteer clinical trial in the first half of 2020, which is designed to assess the safety, pharmacokinetics and pharmacodynamics of rosnilimab in single and multiple ascending dose cohorts. We anticipate top-line safety, pharmacokinetic and receptor occupancy data from this Phase 1 clinical trial during the fourth quarter of 2021. We plan to initiate a Phase 2 clinical trial of rosnilimab in alopecia areata in the fourth quarter of 2021. We continue to assess clinical development opportunities for rosnilimab in additional indications, including vitiligo and rheumatoid arthritis, and will make decisions in 2022 pending additional data.
Our third wholly-owned program is an anti-BTLA modulator antibody, known as ANB032, which is broadly applicable to human inflammatory diseases associated with lymphoid and myeloid immune cell dysregulation. Mutations in the BTLA signaling pathway are associated with human inflammatory disease, and we believe ANB032 silences pro-inflammatory signaling by modulating BTLA binding to HVEM. We are conducting a healthy volunteer Phase 1 trial of ANB032, under an Australian Clinical Trial Notification (“CTN”) and anticipate top-line data from this trial during the first half of 2022. We presented preclinical data regarding ANB032 at the 2020 Federation of Clinical Immunology Societies (FOCIS) Virtual Annual Meeting in October 2020.
In addition to our wholly-owned antibody programs, multiple Company-developed antibody programs have been advanced to preclinical and clinical milestones under our collaborations. We have received to date approximately $205.3 million in cash receipts from collaborations. Our collaborations include an immuno-oncology-focused collaboration with GlaxoSmithKline, Inc. (“GSK”) and an inflammation-focused collaboration with Bristol-Myers Squibb (“BMS”). A Biologics License Application (“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”). This is the first AnaptysBio-generated antibody, of eight currently under clinical development, to obtain FDA approval. We earned a $20.0 million milestone payment as a result of this FDA 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, which approval makes JEMPERLI the first anti-PD-1 therapy available for endometrial cancer in Europe. We earned a $10.0 million milestone payment as a result of this approval. A second BLA submitted by GSK was accepted by the FDA during the first quarter of 2021 for JEMPERLI in pan-deficient mismatch repair tumors (“PdMMRT”). We received a $10.0 million cash milestone payment upon the FDA acceptance of GSK’s second FDA BLA for JEMPERLI and anticipate an additional $20.0 million cash milestone payment upon FDA approval of this second FDA BLA of JEMPERLI during the second half of 2021. We anticipate an additional $15.0 million and $165.0 million in milestone payments upon achievement of certain JEMPERLI regulatory and commercial milestones, respectively. JEMPERLI is currently in clinical development for various solid tumor indications, including dMMREC, PdMMRT, colorectal cancer, ovarian cancer, non-small cell lung cancer, cervical cancer, rectal cancer, clear cell sarcoma and head-and-neck squamous cell carcinoma. In June 2021, GSK disclosed peak year annual sales estimates of £1-£2 billion for JEMPERLI. In October 2020, we amended our GSK collaboration to increase royalties on global net sales of JEMPERLI to 8% on annual global net sales below $1 billion and 12-25% of annual global net sales above $1 billion, add a 1% royalty rate on GSK’s global net sales of Zejula and received a one-time cash payment of $60.0 million. For more information about these collaborations, see Note 4 — Collaborative Research and Development Agreements in the accompanying notes to the consolidated financial statements.
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The following table summarizes certain key information about our wholly-owned and partnered product candidates:
https://cdn.kscope.io/d7da29e956e4fe540d873b7b1dafd449-anab-20210630_g1.jpg
COVID-19
We are continuing to proactively monitor and assess the coronavirus (“COVID-19”) global pandemic. The full impact of the COVID-19 pandemic is inherently uncertain at the time of this Quarterly Report. Our ongoing clinical trials have been, and may continue to be, affected by the closure of offices, or country borders, among other measures being put in place around the world.
The COVID-19 pandemic has caused us to modify our business practices (including but not limited to curtailing or modifying employee travel, moving to full remote work, and cancelling physical participation in meetings, events, and conferences). While we have begun to re-open our offices, we continue to allow remote work, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, patients, and business partners.
The extent of the impact of the COVID-19 pandemic on our future liquidity and operational performance will depend on certain developments, including the duration and spread of the outbreak, including its variants, the availability and effectiveness of vaccines, the impact on our clinical trials, patients, and collaboration partners, and the effect on our suppliers.
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Components of Operating Results
Collaboration Revenue
We have not generated any revenue from product sales. 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, 2021, we have received $205.3 million in cash in non-dilutive funding from our collaborators.
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 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, drug product manufacturing, and clinical trials.
We have completed Phase 1 clinical trials and have ongoing Phase 2 clinical trials for imsidolimab and ongoing Phase 1 clinical trials for rosnilimab and ANB032. We expect our research and development expenses to be higher for th