10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2023

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: 001-41331

 

AN2 Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-0606654

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)


1800 El Camino Real, Suite D

Menlo Park, California

94027

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 331-9090

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

ANTX

 

The Nasdaq Global Select Market

 

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

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

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

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

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

As of November 2, 2023, the registrant had 29,741,445 shares of common stock, $0.00001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

 

Special Note Regarding Forward Looking Statements

1

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Balance Sheets

3

 

Condensed Statements of Operations and Comprehensive Loss

4

 

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity

5

 

Condensed Statements of Cash Flows

7

 

Notes to Unaudited Condensed Financial Statements

8

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

37

 

 

 

PART II.

OTHER INFORMATION

39

 

 

 

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

96

Item 3.

Defaults Upon Senior Securities

97

Item 4.

Mine Safety Disclosures

97

Item 5.

Other Information

97

Item 6.

Exhibits

98

Signatures

100

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q (“Form 10-Q”), including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical and nonclinical studies and clinical trials, results of preclinical and nonclinical studies, clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Form 10-Q include, but are not limited to, statements about:

the initiation, timing, progress, and results of our preclinical and nonclinical studies and clinical trials, and our research and development programs, including the manufacture of clinical trial material and drug product for launch;
the sufficiency of our existing cash to fund our future operating expenses and capital expenditure requirements;
the accuracy of our estimates regarding expenses, capital requirements and needs for additional financing;
our use of the net proceeds from financing activities;
the ability of our pivotal Phase 2/3 clinical trial in treatment-refractory Mycobacterium avium complex (“MAC”) lung disease to be sufficient for regulatory approval in the United States and Japan and potentially other territories;
the translation of our preclinical results and data and early clinical trial results, in particular relating to safety, efficacy and durability, into future clinical trial results;
our ability to retain the continued service of our key professionals and to identify, hire, and retain additional qualified professionals;
our ability to advance our initial product candidate and any other product candidates we may develop into, and successfully complete, clinical trials;
the timing of and our ability to obtain and maintain regulatory approvals for our initial product candidate and any other product candidates we may develop;
the commercialization of our initial product candidate and any other product candidates we may develop, if approved;
the ability of epetraborole, if approved, to successfully compete with other therapies, including therapies currently in development;
the size of the market opportunity for epetraborole or any other product candidates we may develop in each of the diseases we target;
the pricing, coverage, and reimbursement of epetraborole, if approved;
the implementation of our business model, strategic plans for our business, and our initial product candidate and any other product candidates we may develop;
the scope of protection we are able to establish and maintain for intellectual property rights covering epetraborole;

 

 

1

 

 


 

the expected post-approval marketing exclusivity granted to epetraborole by certain regulatory designations in the United States and Japan;
our ability to identify additional product candidates and advance them into clinical development;
our financial performance;
developments relating to our competitors and our industry;
our expectations regarding the impact of inflation, macroeconomic conditions and geopolitical conflicts on our business and operations, including on our manufacturing suppliers, collaborators, CROs and employees; and
our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Form 10-Q and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this Form 10-Q, whether as a result of any new information, future events, or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

 

 

2

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AN2 THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

September 30,

 

 

December 31,

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,616

 

 

$

27,219

 

Short-term investments

 

 

91,202

 

 

 

68,840

 

Prepaid expenses and other current assets

 

 

2,591

 

 

 

2,509

 

Right-of-use asset, net

 

 

 

 

 

53

 

Total current assets

 

 

126,409

 

 

 

98,621

 

Long-term investments

 

 

26,356

 

 

 

3,219

 

Other assets, long-term

 

 

1,043

 

 

 

720

 

Total assets

 

$

153,808

 

 

$

102,560

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,877

 

 

$

2,122

 

Accrued compensation

 

 

2,196

 

 

 

2,168

 

Accrued liabilities

 

 

6,790

 

 

 

2,837

 

Other current liabilities

 

 

973

 

 

 

 

Operating lease liabilities

 

 

 

 

 

53

 

Options subject to repurchase, short-term

 

 

3

 

 

 

6

 

Total current liabilities

 

 

14,839

 

 

 

7,186

 

Options subject to repurchase, long-term

 

 

 

 

 

2

 

Total liabilities

 

 

14,839

 

 

 

7,188

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.00001 par value; 10,000,000 shares authorized at September 30, 2023 and December 31, 2022; no shares issued and outstanding at September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.00001 par value; 500,000,000 shares authorized at September 30, 2023 and December 31, 2022; 29,741,445 and 19,402,658 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

276,648

 

 

 

185,469

 

Accumulated other comprehensive loss

 

 

(122

)

 

 

(374

)

Accumulated deficit

 

 

(137,557

)

 

 

(89,723

)

Total stockholders’ equity

 

 

138,969

 

 

 

95,372

 

Total liabilities and stockholders’ equity

 

$

153,808

 

 

$

102,560

 

 

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

 

 

3

 

 


 

AN2 THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

14,429

 

 

$

7,428

 

 

$

39,952

 

 

$

19,759

 

Research and development—related party

 

 

 

 

 

1,000

 

 

 

 

 

 

1,000

 

General and administrative

 

 

3,751

 

 

 

3,342

 

 

 

10,868

 

 

 

9,027

 

Total operating expenses

 

 

18,180

 

 

 

11,770

 

 

 

50,820

 

 

 

29,786

 

Loss from operations

 

 

(18,180

)

 

 

(11,770

)

 

 

(50,820

)

 

 

(29,786

)

Other income, net

 

 

1,473

 

 

 

431

 

 

 

2,986

 

 

 

672

 

Net loss

 

 

(16,707

)

 

 

(11,339

)

 

 

(47,834

)

 

 

(29,114

)

Accretion to redemption value and cumulative dividends on preferred stock

 

 

 

 

 

 

 

 

 

 

 

(1,820

)

Net loss attributable to common stockholders

 

$

(16,707

)

 

$

(11,339

)

 

$

(47,834

)

 

$

(30,934

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.65

)

 

$

(0.59

)

 

$

(2.22

)

 

$

(2.21

)

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

 

 

25,645,421

 

 

 

19,347,148

 

 

 

21,532,537

 

 

 

13,987,862

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investments

 

 

(3

)

 

 

(181

)

 

 

252

 

 

 

(514

)

Comprehensive loss

 

$

(16,710

)

 

$

(11,520

)

 

$

(47,582

)

 

$

(29,628

)

 

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

 

 

4

 

 


 

AN2 THERAPEUTICS, INC.

CONDENSED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

(unaudited)

 

 

Redeemable
Convertible
Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2022

 

 

 

 

$

 

 

 

 

19,402,658

 

 

$

 

 

$

185,469

 

 

$

(374

)

 

$

(89,723

)

 

$

95,372

 

Issuance of common stock under the ESPP

 

 

 

 

 

 

 

 

 

23,794

 

 

 

 

 

 

199

 

 

 

 

 

 

 

 

 

199

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,068

 

 

 

 

 

 

 

 

 

2,068

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

199

 

 

 

 

 

 

199

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,323

)

 

 

(15,323

)

Balances at March 31, 2023

 

 

 

 

 

 

 

 

 

19,426,452

 

 

 

 

 

 

187,738

 

 

 

(175

)

 

 

(105,046

)

 

 

82,517

 

Issuance of common stock in the “at the market” offering, net of commissions and offering costs of $0.9 million

 

 

 

 

 

 

 

 

 

2,502,000

 

 

 

 

 

 

19,050

 

 

 

 

 

 

 

 

 

19,050

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,943

 

 

 

 

 

 

 

 

 

1,943

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56

 

 

 

 

 

 

56

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,804

)

 

 

(15,804

)

Balances at June 30, 2023

 

 

 

 

 

 

 

 

 

21,928,452

 

 

 

 

 

 

208,733

 

 

 

(119

)

 

 

(120,850

)

 

 

87,764

 

Issuance of common stock in the Underwritten Offering, net of underwriter's commission and offering costs of $4.5 million

 

 

 

 

 

 

 

 

 

7,777,778

 

 

 

 

 

 

65,479

 

 

 

 

 

 

 

 

 

65,479

 

Issuance of common stock under the ESPP

 

 

 

 

 

 

 

 

 

20,215

 

 

 

 

 

 

167

 

 

 

 

 

 

 

 

 

167

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

15,000

 

 

 

 

 

 

99

 

 

 

 

 

 

 

 

 

99

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,169

 

 

 

 

 

 

 

 

 

2,169

 

Unrealized loss on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,707

)

 

 

(16,707

)

Balances at September 30, 2023

 

 

 

 

$

 

 

 

 

29,741,445

 

 

$

 

 

$

276,648

 

 

$

(122

)

 

$

(137,557

)

 

$

138,969

 

 

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

 

 

5

 

 


 

AN2 THERAPEUTICS, INC.

CONDENSED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

(unaudited)

 

 

Redeemable
Convertible
Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2021

 

 

11,409,488

 

 

$

109,319

 

 

 

 

2,730,298

 

 

$

 

 

$

 

 

$

(27

)

 

$

(47,384

)

 

$

(47,411

)

Accretion to redemption value and cumulative dividends on preferred stock

 

 

 

 

 

1,820

 

 

 

 

 

 

 

 

 

 

(437

)

 

 

 

 

 

(1,383

)

 

 

(1,820

)

Conversion of convertible preferred stock into common stock

 

 

(11,409,488

)

 

 

(111,139

)

 

 

 

11,409,488

 

 

 

 

 

 

111,139

 

 

 

 

 

 

 

 

 

111,139

 

Issuance of common stock upon initial public offering, net of underwriters' commissions and offering costs of $8.1 million

 

 

 

 

 

 

 

 

 

4,600,000

 

 

 

 

 

 

60,836

 

 

 

 

 

 

 

 

 

60,836

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Repurchase of early exercised stock options

 

 

 

 

 

 

 

 

 

(27,128

)

 

 

 

 

 

(11

)

 

 

 

 

 

 

 

 

(11

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

449

 

 

 

 

 

 

 

 

 

449

 

Unrealized loss on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(131

)

 

 

 

 

 

(131

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,655

)

 

 

(7,655

)

Balances at March 31, 2022

 

 

 

 

 

 

 

 

 

18,712,658

 

 

 

 

 

 

171,990

 

 

 

(158

)

 

 

(56,422

)

 

 

115,410

 

Issuance of common stock upon exercise of the underwriter's option to purchase common stock in connection with the initial public offering, net of underwriters' commissions and offering costs of $0.8 million

 

 

 

 

 

 

 

 

 

690,000

 

 

 

 

 

 

9,530

 

 

 

 

 

 

 

 

 

9,530

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,242

 

 

 

 

 

 

 

 

 

1,242

 

Unrealized loss on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(202

)

 

 

 

 

 

(202

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,120

)

 

 

(10,120

)

Balances at June 30, 2022

 

 

 

 

 

 

 

 

 

19,402,658

 

 

 

 

 

 

182,765

 

 

 

(360

)

 

 

(66,542

)

 

 

115,863

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,228

 

 

 

 

 

 

 

 

 

1,228

 

Unrealized loss on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(181

)

 

 

 

 

 

(181

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,339

)

 

 

(11,339

)

Balances at September 30, 2022

 

 

 

 

$

 

 

 

 

19,402,658