annx-10q_20200930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2020

OR

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

For the transition period from              to             

Commission File Number 001-39402

 

ANNEXON, INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

27-5414423

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

180 Kimball Way, Suite 200

South San Francisco, California 94080

(Address of principal executive offices including zip code)

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

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ANNX

The Nasdaq Stock Market

 

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

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

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

 

Large accelerated filer

 

 

 

Accelerated filer

 

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

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

The number of shares of Registrant’s Common Stock outstanding as of October 31, 2020 was 38,157,618.

 


Table of Contents

 

 

 

 

Page

 

 

PART I—FINANCIAL INFORMATION

 

Item 1.

 

Condensed Consolidated Financial Statements (unaudited)

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

3

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019

4

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019

5

 

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2020 and 2019

6

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

8

 

 

Notes to the Condensed Consolidated Financial Statements

9

Item 2.

 

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

19

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

 

Controls and Procedures

27

 

 

 

 

 

 

PART II—OTHER INFORMATION

 

Item 1.

 

Legal Proceedings

28

Item 1A.

 

Risk Factors

28

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

69

Item 3.

 

Defaults Upon Senior Securities

69

Item 4.

 

Mine Safety Disclosures

69

Item 5.

 

Other Information

69

Item 6.

 

Exhibits

70

EXHIBIT INDEX

70

SIGNATURES

71

 

 

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

 

 

2


ANNEXON, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

370,686

 

 

$

43,931

 

Prepaid expenses and other current assets

 

 

2,889

 

 

 

1,475

 

Total current assets

 

 

373,575

 

 

 

45,406

 

Property and equipment, less accumulated depreciation of $1,695 and $1,304

   as of September 30, 2020, and December 31, 2019, respectively

 

 

2,039

 

 

 

2,138

 

Other long-term assets

 

 

 

 

 

2,354

 

Total assets

 

$

375,614

 

 

$

49,898

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity

   (Deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,954

 

 

$

2,371

 

Accrued liabilities

 

 

4,649

 

 

 

2,194

 

Deferred rent, current

 

 

385

 

 

 

366

 

Total current liabilities

 

 

8,988

 

 

 

4,931

 

Deferred rent

 

 

1,147

 

 

 

1,437

 

Total liabilities

 

 

10,135

 

 

 

6,368

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.001 par value; 0 and 119,155,472

   shares authorized as of September 30, 2020 and December 31, 2019, respectively; 0 and

   111,748,065 shares issued and outstanding as of September 30, 2020 and December 31,

   2019, respectively; liquidation preference of $0 and $137,814 as of September 30, 2020

   and December 31, 2019, respectively

 

 

 

 

 

143,984

 

Stockholders’ Equity (Deficit):

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 and 0 shares authorized as of

   September 30, 2020, and December 31, 2019, respectively; 0 issued and

   outstanding as of September 30, 2020, and December 31, 2019, respectively

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 and 150,000,000 shares authorized

   as of September 30, 2020, and December 31, 2019, respectively; 38,157,618 and

   433,749 shares issued and outstanding as of September 30, 2020, and December

   31, 2019, respectively

 

 

38

 

 

 

4

 

Additional paid-in capital

 

 

508,318

 

 

 

2,202

 

Accumulated other comprehensive loss

 

 

(78

)

 

 

(80

)

Accumulated deficit

 

 

(142,799

)

 

 

(102,580

)

Total stockholders’ equity (deficit)

 

 

365,479

 

 

 

(100,454

)

Total liabilities, redeemable convertible preferred stock and stockholders’

   equity (deficit)

 

$

375,614

 

 

$

49,898

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3


ANNEXON, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

11,775

 

 

$

7,089

 

 

$

31,279

 

 

$

17,729

 

General and administrative

 

 

3,810

 

 

 

1,981

 

 

 

8,999

 

 

 

5,660

 

Total operating expenses

 

 

15,585

 

 

 

9,070

 

 

 

40,278

 

 

 

23,389

 

Loss from operations

 

 

(15,585

)

 

 

(9,070

)

 

 

(40,278

)

 

 

(23,389

)

Loss on remeasurement of redeemable convertible preferred

   stock liability

 

 

 

 

 

(1,340

)

 

 

 

 

 

(5,670

)

Other (expense) income, net

 

 

(52

)

 

 

224

 

 

 

64

 

 

 

821

 

Net loss before taxes

 

 

(15,637

)

 

 

(10,186

)

 

 

(40,214

)

 

 

(28,238

)

Provision for income taxes

 

 

1

 

 

 

2

 

 

 

5

 

 

 

3

 

Net loss

 

 

(15,638

)

 

 

(10,188

)

 

 

(40,219

)

 

 

(28,241

)

Accretion on redeemable convertible preferred stock

 

 

(145

)

 

 

(281

)

 

 

(705

)

 

 

(815

)

Deemed dividend – beneficial conversion feature on redeemable

   convertible preferred stock

 

 

(6,219

)

 

 

 

 

 

(6,219

)

 

 

 

Net loss attributable to common stockholders

 

$

(22,002

)

 

$

(10,469

)

 

$

(47,143

)

 

$

(29,056

)

Net loss per share attributable to common stockholders, basic

   and diluted

 

$

(0.77

)

 

$

(24.14

)

 

$

(4.79

)

 

$

(67.04

)

Weighted-average shares used in computing net loss per share

   attributable to common stockholders, basic and diluted

 

 

28,465,156

 

 

 

433,749

 

 

 

9,845,754

 

 

 

433,406

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

4


ANNEXON, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(15,638

)

 

$

(10,188

)

 

$

(40,219

)

 

$

(28,241

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

4

 

 

 

(7

)

 

 

2

 

 

 

(17

)

Comprehensive loss

 

$

(15,634

)

 

$

(10,195

)

 

$

(40,217

)

 

$

(28,258

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5


 

ANNEXON, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

 

 

 

Redeemable Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Cost

 

 

 

Shares

 

 

Cost

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

Balances as of December 31, 2019

 

 

111,748,065

 

 

$

143,984

 

 

 

 

433,749

 

 

$

4

 

 

$

2,202

 

 

$

(80

)

 

$

(102,580

)

 

$

(100,454

)

Accretion on redeemable convertible

   preferred stock

 

 

 

 

 

279

 

 

 

 

 

 

 

 

 

 

(279

)

 

 

 

 

 

 

 

 

(279

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

663

 

 

 

 

 

 

 

 

 

663

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,341

)

 

 

(12,341

)

Balances as of March 31, 2020

 

 

111,748,065

 

 

 

144,263

 

 

 

 

433,749

 

 

 

4

 

 

 

2,586

 

 

 

(91

)

 

 

(114,921

)

 

 

(112,422

)

Issuance of Series D redeemable convertible

   preferred stock, net of issuance costs

   of $5,193

 

 

71,719,859

 

 

 

96,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beneficial conversion feature on Series D

   redeemable convertible preferred stock

 

 

 

 

 

(6,297

)

 

 

 

 

 

 

 

 

 

6,297

 

 

 

 

 

 

 

 

 

6,297

 

Accretion on redeemable convertible

   preferred stock

 

 

 

 

 

281

 

 

 

 

 

 

 

 

 

 

(281

)

 

 

 

 

 

 

 

 

(281

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

763

 

 

 

 

 

 

 

 

 

763

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,240

)

 

 

(12,240

)

Balances as of June 30, 2020

 

 

183,467,924

 

 

 

235,054

 

 

 

 

433,749

 

 

 

4

 

 

 

9,365

 

 

 

(82

)

 

 

(127,161

)

 

 

(117,874

)

Conversion of redeemable convertible

   preferred stock to common stock upon

   initial public offering

 

 

(183,467,924

)

 

 

(241,418

)

 

 

 

20,824,938

 

 

 

21

 

 

 

241,397

 

 

 

 

 

 

 

 

 

241,418

 

Deemed dividend of beneficial conversion

   feature on conversion of redeemable

   convertible preferred stock

 

 

 

 

 

6,219

 

 

 

 

 

 

 

 

 

 

(6,219

)

 

 

 

 

 

 

 

 

(6,219

)

Accretion on redeemable convertible

   preferred stock

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

 

(145

)

 

 

 

 

 

 

 

 

(145

)

Issuance of common stock in connection

   with initial public offering, net of issuance

   costs of $24.7 million

 

 

 

 

 

 

 

 

 

16,889,403

 

 

 

13

 

 

 

262,427

 

 

 

 

 

 

 

 

 

262,440

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,471

 

 

 

 

 

 

 

 

 

1,471

 

Stock option exercises

 

 

 

 

 

 

 

 

 

9,528

 

 

 

 

 

22

 

 

 

 

 

 

 

 

22

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

4

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,638

)

 

 

(15,638

)

Balances as of September 30, 2020

 

 

 

 

$

 

 

 

 

38,157,618

 

 

$

38

 

 

$

508,318

 

 

$

(78

)

 

$

(142,799

)

 

$

365,479

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

6


 

ANNEXON, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

 

 

 

Redeemable Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Cost

 

 

 

Shares

 

 

Cost

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

Balances as of December 31, 2018

 

 

89,525,848

 

 

$

102,082

 

 

 

 

432,309

 

 

$

4

 

 

$

1,257

 

 

$

(66

)

 

$

(65,397

)

 

$

(64,202

)

Accretion on redeemable convertible

   preferred stock

 

 

 

 

 

262

 

 

 

 

 

 

 

 

 

 

(262

)

 

 

 

 

 

 

 

 

(262

)

Stock option exercises

 

 

 

 

 

 

 

 

 

1,440

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

466

 

 

 

 

 

 

 

 

 

466

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,652

)

 

 

(8,652

)

Balances as of March 31, 2019

 

 

89,525,848

 

 

 

102,344

 

 

 

 

433,749

 

 

 

4

 

 

 

1,464

 

 

 

(72

)

 

 

(74,049

)

 

 

(72,653

)

Accretion on redeemable convertible

   preferred stock

 

 

 

 

 

272

 

 

 

 

 

 

 

 

 

 

(272

)

 

 

 

 

 

 

 

 

(272

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

437

 

 

 

 

 

 

 

 

 

 

437

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,401

)

 

 

(9,401

)

Balances as of June 30, 2019

 

 

89,525,848

 

 

 

102,616

 

 

 

 

433,749

 

 

 

4

 

 

 

1,629

 

 

 

(76

)

 

 

(83,450

)

 

 

(81,893

)

Issuance of Series C redeemable convertible

   preferred stock, net of issuance costs of $3

   and the value of the redeemable

   convertible preferred stock liability of

   $10,810

 

 

22,222,217

 

 

 

40,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion on redeemable convertible

   preferred stock

 

 

 

 

 

281

 

 

 

 

 

 

 

 

 

 

(281

)

 

 

 

 

 

 

 

 

(281

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

610

 

 

 

 

 

 

 

 

 

 

610

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,188

)

 

 

(10,188

)

Balances as of September 30, 2019

 

 

111,748,065

 

 

$

143,704

 

 

 

 

433,749

 

 

$

4

 

 

$

1,958

 

 

$

(83

)

 

$

(93,638

)

 

$

(91,759

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7


 

ANNEXON, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(40,219

)

 

$

(28,241

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

391

 

 

 

364

 

Stock-based compensation

 

 

2,897

 

 

 

1,513

 

Change in fair value of redeemable convertible preferred stock liability

 

 

 

 

 

5,670

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,414

)

 

 

491

 

Other long-term assets

 

 

96

 

 

 

 

Accounts payable

 

 

1,733

 

 

 

885

 

Accrued liabilities

 

 

2,956

 

 

 

3

 

Deferred rent

 

 

(271

)

 

 

(254

)

Net cash used in operating activities

 

 

(33,831

)

 

 

(19,569

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(292

)

 

 

(168

)

Net cash used in investing activities

 

 

(292

)

 

 

(168

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from the exercise common stock options

 

 

22

 

 

 

3

 

Proceeds from Paycheck Protection Program loan

 

 

500

 

 

 

 

Repayments of Paycheck Protection Program loan

 

 

(500

)

 

 

 

Proceeds from issuance of redeemable convertible preferred stock

 

 

102,000

 

 

 

29,997

 

Payments of issuance costs related to redeemable convertible preferred stock

 

 

(5,193

)

 

 

 

Proceeds from issuance of common stock upon initial public offering, net of

   underwriting discounts and commissions

 

 

267,021

 

 

 

 

Payments of offering costs related to initial public offering

 

 

(2,974

)

 

 

(759

)

Net cash provided by financing activities

 

 

360,876

 

 

 

29,241

 

Net increase in cash and cash equivalents

 

 

326,753

 

 

 

9,504

 

Effect of exchange rate changes on cash and cash equivalents

 

 

2

 

 

 

(17

)

Cash and cash equivalents at beginning of period

 

 

43,931

 

 

 

44,175

 

Cash and cash equivalents at end of period

 

$

370,686

 

 

$

53,662

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Reclassification of redeemable convertible preferred stock to common stock upon

   initial public offering

 

$

241,418

 

 

$

 

Reclassification of redeemable convertible preferred stock liability to redeemable

   convertible preferred stock

 

$

 

 

$

10,810

 

Accretion on redeemable convertible preferred stock

 

$

705

 

 

$

815

 

Deferred offering costs included in accounts payable and accrued liabilities

 

$

 

 

$

837

 

Purchase of property and equipment included in accounts payable

 

$

 

 

$

55

 

Beneficial conversion feature recognized upon issuance of redeemable convertible

   preferred stock