10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2024

OR

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

For the transition period from to

Commission File Number 001-39402

ANNEXON, INC.

(Exact name of Registrant as specified in its Charter)

 

Delaware

27-5414423

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

 

1400 Sierra Point Parkway, Bldg C, Suite 200

Brisbane, California 94005

(Address of principal executive offices including zip code)

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

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

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ANNX

The Nasdaq Stock Market LLC

 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

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

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

 


 

The number of shares of the Registrant’s Common Stock outstanding as of August 8, 2024 was 105,653,962. This number does not include 41,283,052 shares of Common Stock issuable upon the exercise of pre-funded warrants (which are immediately exercisable at an exercise price of $0.001 per share of Common Stock, subject to beneficial ownership limitations). See Note 6—Stockholders’ Equity to the Registrant’s unaudited condensed consolidated financial statements.

 

 


 

Table of Contents

 

 

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

 

Condensed Consolidated Balance Sheets

1

 

 

Condensed Consolidated Statements of Operations

2

 

 

Condensed Consolidated Statements of Comprehensive Loss

3

 

 

Condensed Consolidated Statements of Stockholders’ Equity

4

 

 

Condensed Consolidated Statements of Cash Flows

6

 

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

 

 

PART II—OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

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

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.

 


 

ANNEXON, INC.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

June 30,
2024

 

 

December 31,
2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

157,304

 

 

$

225,110

 

Short-term investments

 

 

211,395

 

 

 

34,606

 

Prepaid expenses and other current assets

 

 

5,270

 

 

 

4,144

 

Total current assets

 

 

373,969

 

 

 

263,860

 

Restricted cash

 

 

1,032

 

 

 

1,032

 

Property and equipment, net

 

 

13,702

 

 

 

14,773

 

Operating lease right-of-use assets

 

 

17,382

 

 

 

18,009

 

Total assets

 

$

406,085

 

 

$

297,674

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,126

 

 

$

5,487

 

Accrued liabilities

 

 

10,657

 

 

 

10,235

 

Operating lease liabilities, current

 

 

2,345

 

 

 

2,165

 

Other current liabilities

 

 

20

 

 

 

41

 

Total current liabilities

 

 

17,148

 

 

 

17,928

 

Operating lease liabilities, non-current

 

 

27,858

 

 

 

29,190

 

Total liabilities

 

 

45,006

 

 

 

47,118

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

106

 

 

 

78

 

Additional paid-in capital

 

 

988,347

 

 

 

823,029

 

Accumulated other comprehensive loss

 

 

(89

)

 

 

(52

)

Accumulated deficit

 

 

(627,285

)

 

 

(572,499

)

Total stockholders’ equity

 

 

361,079

 

 

 

250,556

 

Total liabilities and stockholders’ equity

 

$

406,085

 

 

$

297,674

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

1


 

ANNEXON, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

25,026

 

 

$

30,251

 

 

$

45,989

 

 

$

62,596

 

General and administrative

 

 

8,554

 

 

 

7,440

 

 

 

16,163

 

 

 

16,337

 

Total operating expenses

 

 

33,580

 

 

 

37,691

 

 

 

62,152

 

 

 

78,933

 

Loss from operations

 

 

(33,580

)

 

 

(37,691

)

 

 

(62,152

)

 

 

(78,933

)

Interest and other income, net

 

 

3,970

 

 

 

2,503

 

 

 

7,366

 

 

 

5,069

 

Net loss

 

$

(29,610

)

 

$

(35,188

)

 

$

(54,786

)

 

$

(73,864

)

Net loss per share, basic and diluted

 

$

(0.23

)

 

$

(0.47

)

 

$

(0.43

)

 

$

(0.99

)

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

 

 

130,132,960

 

 

 

75,230,003

 

 

 

126,403,081

 

 

 

74,546,995

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

2


 

ANNEXON, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

 

$

(29,610

)

 

$

(35,188

)

 

$

(54,786

)

 

$

(73,864

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

1

 

 

 

(1

)

 

 

(11

)

 

 

(6

)

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

 

 

12

 

 

 

47

 

 

 

(26

)

 

 

207

 

Comprehensive loss

 

$

(29,597

)

 

$

(35,142

)

 

$

(54,823

)

 

$

(73,663

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

ANNEXON, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Cost

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances as of December 31, 2023

 

 

78,369,099

 

 

$

78

 

 

$

823,029

 

 

$

(52

)

 

$

(572,499

)

 

$

250,556

 

Exercise of stock options

 

 

105,526

 

 

 

 

 

 

217

 

 

 

 

 

 

 

 

 

217

 

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

 

 

6,639,348

 

 

 

7

 

 

 

32,191

 

 

 

 

 

 

 

 

 

32,198

 

Exercise of pre-funded warrants

 

 

5,243,400

 

 

 

5

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

Restricted stock vested in the period

 

 

124,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,660

 

 

 

 

 

 

 

 

 

4,660

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

 

 

 

(50

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,176

)

 

 

(25,176

)

Balances as of March 31, 2024

 

 

90,482,068

 

 

 

90

 

 

 

860,092

 

 

 

(102

)

 

 

(597,675

)

 

 

262,405

 

Exercise of stock options

 

 

35,914

 

 

 

 

 

 

171

 

 

 

 

 

 

 

 

 

171

 

Issuance of common stock per Employee
  Stock Purchase Plan purchase

 

 

98,534

 

 

 

1

 

 

 

214

 

 

 

 

 

 

 

 

 

215

 

Issuance of common stock, net of issuance
 costs of $
480

 

 

936,719

 

 

 

1

 

 

 

6,125

 

 

 

 

 

 

 

 

 

6,126

 

Issuance of common stock and pre-funded
  warrants, net of issuance costs of $
8,183

 

 

13,001,120

 

 

 

13

 

 

 

116,804

 

 

 

 

 

 

 

 

 

116,817

 

Exercise of pre-funded warrants

 

 

965,427

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Exercise of common warrants

 

 

19,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,942

 

 

 

 

 

 

 

 

 

4,942

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,610

)

 

 

(29,610

)

Balances as of June 30, 2024

 

 

105,539,683

 

 

$

106

 

 

$

988,347

 

 

$

(89

)

 

$

(627,285

)

 

$

361,079

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


 

ANNEXON, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Cost

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances as of December 31, 2022

 

 

47,722,995

 

 

$

48

 

 

$

669,780

 

 

$

(372

)

 

$

(438,262

)

 

$

231,194

 

Exercise of stock options

 

 

55,605

 

 

 

 

 

 

111

 

 

 

 

 

 

 

 

 

111

 

Exercise of pre-funded warrants

 

 

2,582,557

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

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

 

 

2,646,458

 

 

 

2

 

 

 

17,468

 

 

 

 

 

 

 

 

 

17,470

 

Restricted stock vested in the period

 

 

73,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,607

 

 

 

 

 

 

 

 

 

4,607

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

155

 

 

 

 

 

 

155

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,676

)

 

 

(38,676

)

Balances as of March 31, 2023

 

 

53,080,673

 

 

 

53

 

 

 

691,963

 

 

 

(217

)

 

 

(476,938

)

 

 

214,861

 

Exercise of stock options

 

 

283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock per Employee
  Stock Purchase Plan purchase

 

 

70,155

 

 

 

 

 

 

345

 

 

 

 

 

 

 

 

 

345

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,660

 

 

 

 

 

 

 

 

 

4,660

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

46

 

 

 

 

 

 

46

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,188

)

 

 

(35,188

)

Balances as of June 30, 2023

 

 

53,151,111

 

 

$

53

 

 

$

696,968

 

 

$

(171

)

 

$

(512,126

)

 

$

184,724

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

ANNEXON, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2024

 

 

2023

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(54,786

)

 

$

(73,864

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

1,075

 

 

 

1,072

 

Accretion of discount on available-for-sale securities

 

 

(2,932

)

 

 

(1,695

)

Stock-based compensation

 

 

9,602

 

 

 

9,267

 

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

 

 

627

 

 

 

538

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,126

)

 

 

818

 

Accounts payable

 

 

(1,457

)

 

 

(152

)

Accrued liabilities

 

 

194

 

 

 

(4,495

)

Operating lease liabilities

 

 

(1,152

)

 

 

(844

)

Other current liabilities

 

 

(21

)

 

 

(19

)

Net cash used in operating activities

 

 

(49,976

)

 

 

(69,374

)

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(167

)

Purchases of available-for-sale securities

 

 

(266,183

)

 

 

(69,875

)

Proceeds from maturities of available-for-sale securities

 

 

92,300

 

 

 

95,090

 

Net cash (used in) provided by investing activities

 

 

(173,883

)

 

 

25,048

 

Financing activities:

 

 

 

 

 

 

Proceeds from the exercise of common stock options

 

 

388

 

 

 

111

 

Proceeds from Employee Stock Purchase Plan purchases

 

 

215

 

 

 

345

 

Proceeds from the issuance of common stock, including related party of zero and $17,995 for the
    six months ended June 30, 2024 and 2023, respectively

 

 

39,737

 

 

 

17,995

 

Proceeds from the issuance of common stock and pre-funded warrants, net of commissions

 

 

117,500

 

 

 

 

Payment of financing costs

 

 

(1,776

)

 

 

(525

)

Net cash provided by financing activities

 

 

156,064

 

 

 

17,926

 

Decrease in cash, cash equivalents and restricted cash

 

 

(67,795

)

 

 

(26,400

)

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

 

 

(11

)

 

 

(6

)

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

Beginning of period

 

 

226,142

 

 

 

141,052

 

End of period

 

$

158,336

 

 

$

114,646

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liability

 

$

2,432

 

 

$

2,350

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Deferred offering costs included in accounts payable and accrued liabilities

 

$

320

 

 

$

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

6


 

ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Organization

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

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

Liquidity

Since inception, the Company has been involved primarily in performing research and development activities, conducting clinical trials, hiring personnel, and raising capital to support and expand these activities. The Company has experienced losses and negative cash flows from operations since its inception and, as of June 30, 2024, had an accumulated deficit of $627.3 million and cash and cash equivalents and short-term investments of $368.7 million.

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

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

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

The condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations, comprehensive loss, stockholders’ equity for the three and six months ended June 30, 2024 and 2023 and the condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 are unaudited. These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the interim period presented. The financial data and the other financial information contained in these notes to the condensed consolidated financial statements related to the three-month periods are also unaudited. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 26, 2024.

Use of Estimates

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

7


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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

Principles of Consolidation

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

Summary of Significant Accounting Policies

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

Recently Issued Accounting Pronouncements

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

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

3. Fair Value Measurements

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

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

8


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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

 

 

 

 

 

June 30, 2024

 

 

 

Valuation
Hierarchy

 

Amortized
Cost

 

 

Gross
Unrealized
Holding
Gains

 

 

Gross
Unrealized
Holding
Losses

 

 

Aggregate
Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

36,226

 

 

$

 

 

$

 

 

$

36,226

 

Government bonds

 

Level 2

 

 

118,139

 

 

 

1

 

 

 

(1

)

 

 

118,139

 

Total cash equivalents

 

 

 

 

154,365

 

 

 

1

 

 

 

(1

)

 

 

154,365

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government bonds

 

Level 2

 

 

211,402

 

 

 

4

 

 

 

(11

)

 

 

211,395

 

Total short-term investments

 

 

 

 

211,402

 

 

 

4

 

 

 

(11

)

 

 

211,395

 

 

 

 

 

$

365,767

 

 

$

5

 

 

$

(12

)

 

$

365,760

 

 

 

 

 

 

December 31, 2023

 

 

 

Valuation
Hierarchy

 

Amortized
Cost

 

 

Gross
Unrealized
Holding
Gains

 

 

Gross
Unrealized
Holding
Losses

 

 

Aggregate
Fair Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

143,933

 

 

$

 

 

$

 

 

$

143,933

 

Government bonds

 

Level 2

 

 

72,689

 

 

 

 

 

 

 

 

 

72,689

 

Total cash equivalents

 

 

 

 

216,622

 

 

 

 

 

 

 

 

 

216,622

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government bonds

 

Level 2

 

 

34,596

 

 

 

10

 

 

 

 

 

 

34,606

 

Total short-term investments

 

 

 

 

34,596

 

 

 

10

 

 

 

 

 

 

34,606

 

 

 

 

 

$

251,218

 

 

$

10

 

 

$

 

 

$

251,228

 

 

For the three and six months ended June 30, 2024 and 2023, the Company recognized no material realized gains or losses on financial instruments.

4. Balance Sheet Components

Cash, Cash Equivalents and Restricted Cash

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

Restricted cash as of June 30, 2024 relates to the letters of credit established for the Company’s office leases.

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

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Cash

$

2,939

 

 

$

8,488

 

Cash equivalents

 

154,365

 

 

 

216,622

 

Cash and cash equivalents

 

 

157,304

 

 

 

225,110

 

Restricted cash

 

1,032

 

 

 

1,032

 

Cash, cash equivalents and restricted cash

$

158,336

 

 

$

226,142

 

 

9


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Prepaid Expenses and Other Current Assets

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

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Prepaid research and development costs

 

$

4,130

 

 

$

2,617

 

Prepaid insurance

 

 

309

 

 

 

704

 

Other prepaid expenses

 

 

831

 

 

 

760

 

Other current assets

 

 

 

 

 

63

 

Total prepaid expenses and other current assets

 

$

5,270

 

 

$

4,144

 

Property and Equipment, Net

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

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Leasehold improvements

 

$

17,245

 

 

$

17,245

 

Laboratory equipment

 

 

1,832

 

 

 

1,832

 

Furniture and fixtures

 

 

692

 

 

 

692

 

Computer equipment and software

 

 

33

 

 

 

33

 

Construction in progress

 

 

4

 

 

 

 

Total property and equipment, gross

 

 

19,806

 

 

 

19,802

 

Less: accumulated depreciation

 

 

(6,104

)

 

 

(5,029

)

Total property and equipment, net

 

$

13,702

 

 

$

14,773

 

The Company recognized depreciation for property and equipment of $0.5 million for each of the three months ended June 30, 2024 and 2023, and $1.1 million for each of the six months ended June 30, 2024 and 2023.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Accrued research and development expenses

 

$

6,538

 

 

$

4,027

 

Accrued compensation

 

 

2,766

 

 

 

5,607

 

Accrued professional services

 

 

1,240

 

 

 

501

 

Other accrued expenses

 

 

113

 

 

 

100

 

Total accrued liabilities

 

$

10,657

 

 

$

10,235

 

 

5. Commitments and Contingencies

Leases

The Company leases its offices and laboratory in Brisbane, California, or the Brisbane Lease, under a ten-year noncancelable lease agreement that ends in October 2031 with a ten-year renewable option. In November 2021, the Company subleased unoccupied space from December 2021 through November 2023, for aggregate sublease payments of $3.4 million. The sublease income, while it reduces the rent expense, is not considered in the value of the right-of-use assets or lease liabilities. The Company’s sublease income was zero and $0.6 million for the three months ended June 30, 2024 and 2023, respectively, and zero and $1.1 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, the operating lease right-of-use assets were $17.4 million and lease liabilities were $30.2 million on the condensed consolidated balance sheet. The weighted-average remaining lease term is 7.3 years.

10


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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

Operating lease costs were $1.0 million and $0.5 million for the three months ended June 30, 2024 and 2023, respectively, and $1.9 million and $1.1 million for the six months ended June 30, 2024 and 2023, respectively. Variable lease payments were $0.6 million and $0.4 million for the three months ended June 30, 2024 and 2023, respectively, and $1.2 million and $0.7 million for the six months ended June 30, 2024 and 2023, respectively.

Future minimum lease payments and related lease liabilities as of June 30, 2024, were as follows:

 

 

 

(in thousands)

 

2024 (remaining six months)

 

$

2,461

 

2025

 

 

5,065

 

2026

 

 

5,242

 

2027

 

 

5,425

 

2028 and thereafter

 

 

22,600

 

Total undiscounted lease payments

 

 

40,793

 

Less: Imputed interest

 

 

(10,590

)

Total

 

$

30,203

 

Guarantees and Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of June 30, 2024, the Company did not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.

6. Stockholders’ Equity

2024 Financing

In June 2024, the Company raised net proceeds of approximately $116.8 million after deducting underwriting discounts and offering expenses through the sale of 13,001,120 shares of the Company’s common stock, par value $0.001 per share at a price of $6.25 per share and pre-funded warrants to purchase an aggregate of 7,000,000 shares of common stock at a price of $6.249 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each pre-funded warrant. The pre-funded warrants are immediately exercisable, subject to certain beneficial ownership limitations. The warrants meet the criteria for equity classification and were therefore recorded at fair value as of the grant date as a component of stockholders’ equity within additional paid-in capital in the amount of $43.7 million.

2023 Financing

In December 2023, the Company raised net proceeds of approximately $117.0 million after deducting underwriting discounts and offering expenses through the sale of 25,035,000 shares of the Company’s common stock, par value $0.001 per share at a price of $2.880 per share and pre-funded warrants to purchase an aggregate of 18,379,861 shares of common stock at a price of $2.879 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each pre-funded warrant. An entity related to one of the Company’s directors participated in the public offering and purchased 350,000 shares of common stock for an aggregate price of approximately $1.0 million. The pre-funded warrants are immediately exercisable, subject to certain beneficial ownership limitations. The warrants meet the criteria for equity classification and were therefore recorded at fair value as of the grant date as a component of stockholders’ equity within additional paid-in capital in the amount of $52.9 million. The Company issued an aggregate of 5,243,400 shares and 965,427 shares of common stock upon the cashless and cash exercise of these pre-funded warrants in February 2024 and April 2024, respectively.

2022 Financing

In July 2022, the Company raised net proceeds of approximately $122.5 million after deducting fees and expenses through the sale of an aggregate of 9,013,834 shares of common stock, pre-funded warrants to purchase up to 24,696,206 shares of its common

11


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

stock and accompanying common warrants to purchase up to 8,427,508 shares of its common stock. The offering price per share and accompanying common warrant was $3.87125 per share and the offering price per pre-funded warrant and accompanying common warrant was $3.87025 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each such pre-funded warrant. The pre-funded warrants remain exercisable until exercised in full. The common warrants have an exercise price of $5.806875 per share and expire on June 30, 2025. Both the pre-funded and common warrants are immediately exercisable, subject to beneficial ownership limitations. The warrants meet the criteria for equity classification and were therefore recorded at fair value as of the grant date as a component of stockholders’ equity within additional paid-in capital. The Company issued an aggregate of 2,582,557 shares of common stock upon the cashless exercise of the pre-funded warrants in March 2023. The Company issued an aggregate of 19,901 shares of common stock upon the cashless exercise of the common warrants in June 2024.

Pre-Funded and Common Warrants

The following summarizes warrant activity during the six months ended June 30, 2024 and 2023:

 

 

 

Number of Common Warrants

 

 

Number of Pre-funded Warrants

 

 

Weighted-Average Exercise Price

 

Balances as of December 31, 2023

 

 

8,427,508

 

 

 

40,492,923

 

 

 

 

Issued

 

 

 

 

 

7,000,000

 

 

$

0.001

 

Exercised

 

 

(322,893

)

 

 

(6,209,871

)

 

$

0.307

 

Balances as of June 30, 2024

 

 

8,104,615

 

 

 

41,283,052

 

 

 

 

 

 

 

Number of Common Warrants

 

 

Number of Pre-funded Warrants

 

 

Weighted-Average Exercise Price

 

Balances as of December 31, 2022

 

 

8,427,508

 

 

 

24,696,206

 

 

 

 

Exercised

 

 

 

 

 

(2,583,144

)

 

$

0.001

 

Balances as of June 30, 2023

 

 

8,427,508

 

 

 

22,113,062

 

 

 

 

2024 ATM Program

In March 2024, the Company entered into a sales agreement with TD Cowen, as sales agent, or 2024 ATM program, pursuant to which the Company may issue and sell shares of its common stock for an aggregate maximum offering of $100.0 million. TD Cowen is entitled to compensation up to 3% of the aggregate gross proceeds for the common stock sold through the 2024 ATM program. As of June 30, 2024, the Company has not made any sales under the 2024 ATM program.

2021 At-the-Market (ATM) Program

In August 2021, the Company entered into a sales agreement with Cowen and Company LLC, or TD Cowen, as sales agent, pursuant to which the Company may issue and sell shares of its common stock for an aggregate maximum offering of $100.0 million under an at-the-market offering program, or 2021 ATM program. TD Cowen is entitled to compensation up to 3% of the aggregate gross proceeds for the common stock sold through the 2021 ATM program. During the six months ended June 30, 2024 and 2023, the Company sold 7,576,067 shares and 2,646,458 shares of common stock, respectively, under the 2021 ATM program for net proceeds of approximately $38.4 million and $17.5 million, respectively, after deducting commissions paid to TD Cowen. As of June 30, 2024 and December 31, 2023, approximately $42.3 million and $82.0 million, respectively, remained available for the offer and sale of shares of common stock under the 2021 ATM program. The Form S-3 registration statement pursuant to which the 2021 ATM Program is registered will expire on August 15, 2024, and no shares of common stock may be sold under the 2021 ATM Program after that date.

12


ANNEXON, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Common Stock

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

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Stock options issued and outstanding

 

 

11,937,414

 

 

 

9,208,970

 

Stock options reserved for 2020 Incentive Award Plan

 

 

1,861,959

 

 

 

1,988,340

 

Unvested restricted stock units outstanding

 

 

867,298

 

 

 

495,579

 

Common stock reserved for 2021 ATM program

 

 

25,043,404