You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and the related notes appearing elsewhere in this Quarterly Report on
Form 10-Q and in our Annual Report on Form 10-K for the year ended
2021
contains forward-looking statements involving risks, assumptions and
uncertainties, such as statements of our plans, objectives, expectations,
intentions, forecasts and projections. Our actual results and the timing of
selected events could differ materially from those discussed in these
forward-looking statements as a result of several factors, including those set
forth under the section of this Quarterly Report on Form 10-Q titled “Risk
Factors,” which you should carefully to gain an understanding of the important
factors that could cause actual results to differ materially from our
forward-looking statements. Please also see the section titled “Forward-Looking
Statements” at the beginning of this report.
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery,
development, and commercialization of novel small molecule therapeutics to
address chronic and progressive fibrotic diseases. Our goal is to transform the
treatment paradigm for patients suffering from these potentially
life-threatening conditions for which there are no approved medicines or where
existing approved medicines have limitations. Our lead product candidate,
ANG-3070, is a highly selective oral tyrosine kinase receptor inhibitor (TKI) in
development as a treatment for fibrotic diseases, particularly in the kidney and
lung. Enrollment is ongoing in “JUNIPER,” a dose-finding Phase 2 trial of
ANG-3070 in primary proteinuric kidney diseases (PPKD) and we expect to file an
IND in idiopathic pulmonary fibrosis (IPF) by the end of 2022. We are also
continuing to develop our preclinical programs. Our ROCK2 program is targeted
towards the treatment of fibrotic diseases. Our CYP11B2 program is targeted
towards diseases related to aldosterone synthase dysregulation.
Prior to
(HGF) mimetic we were evaluating in multiple indications of acute organ injury,
including delayed graft function (DGF) and for the treatment of AKI associated
with cardiac surgery involving cardiopulmonary bypass (CSA-AKI). In 2021, we
also studied ANG-3777 in patients with severe COVID-19 related pneumonia at high
risk for acute respiratory distress syndrome (ARDS). On
announced the Phase 3 trial of ANG-3777 in DGF did not achieve its primary
endpoint and the data were not expected to be sufficient evidence to support an
indication in the studied DGF population. On
Phase 2 trial of ANG-3777 in CSA-AKI did not achieve its primary endpoint. We do
not intend to continue the clinical development plan for ANG-3777 set forth in
the Vifor License, which had included a Phase 3 study in CSA-AKI and a Phase 4
confirmatory study in donor kidney transplant patients who were at risk for
developing DGF, given we do not believe the earlier Phase 2 and Phase 3 clinical
trial results in the respective indications support a regulatory approval. We
have no funds budgeted for additional clinical trials for ANG-3777.
On
of the acceptance of an Investigational New Drug (IND) application supporting
the clinical development of ANG-3070 in idiopathic pulmonary fibrosis (IPF) and
clearance to begin a Phase 1b study of ANG-3070 in patients with IPF. Topline
data from this Phase 1b study are expected in 2022.
We do not have any products approved for sale and have not generated any revenue
from product sales since our inception and do not expect to generate revenue
from product sales unless we successfully develop, and we or our collaborators,
commercialize our product candidates, which we do not expect to occur for
several years, if ever. Our net losses were
the three months ended
2022
incur net losses for the foreseeable future. As we seek to advance ANG-3070 in
clinical trials and our other product candidates through preclinical
development, our expenses and operating losses may increase over time.
In addition, if we seek regulatory approval for any of our wholly-owned product
candidates or those for which we retain the right to commercialize in the
future, we would need to incur additional expenses as we expand our clinical,
regulatory, quality, manufacturing and commercialization capabilities, incur
significant commercialization expenses for marketing, sales, manufacturing and
distribution if we obtain marketing approval for such product candidates.
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We rely on third parties in the conduct of our preclinical studies and clinical
trials and for manufacturing and supply of our product candidates. We have no
internal manufacturing capabilities, and we expect to continue to rely on third
parties, many of whom are single-source suppliers, for our preclinical study and
clinical trial materials. In addition, we do not yet have a marketing or sales
organization or commercial infrastructure. Accordingly, we will incur
significant expenses to develop a marketing and sales organization and
commercial infrastructure in advance of generating any product sales of
wholly-owned product candidates or those for which we retain the right to
commercialize.
Furthermore, we will need to make continued investment in development studies,
registration activities and the development of commercial support functions
including quality assurance and safety pharmacovigilance before we will be in a
position to sell any of our product candidates, if approved.
The Initial Public Offering and Concurrent Private Placement
The Initial Public Offering (“IPO”) and Concurrent Private Placement, which both
closed on
private placement fee and offering expenses payable by us.
Reduction in Force
On
of our employees. Our decision to engage in this reduction resulted from an
assessment of our internal resources needs, given the results of the Phase 3
study of ANG-3777 in patients at risk for DGF would likely not support a
regulatory approval in that population and the Phase 2 study in CSA-AKI would
not support a Phase 3 trial in that indication. This reduction was a
cost-cutting measure across the organization to support our 2022 primary focus
on the clinical development of our investigational asset ANG-3070, a highly
selective, oral tyrosine kinase receptor inhibitor in development as a treatment
for fibrotic diseases, particularly in the kidney and lung, as well as advancing
preclinical assets to IND-enabling studies. In connection with the reduction in
force, we incurred termination costs, which include severance, benefits and
related costs, of approximately
during the three months ended
COVID-19 Update
The COVID-19 pandemic has placed strains on the providers of healthcare
services, including the healthcare institutions where we conduct our clinical
trials. These strains have resulted in institutions prohibiting the initiation
of new clinical trials and enrollment in existing trials and restricting the
on-site monitoring of clinical trials. We also follow FDA guidance on clinical
trial conduct during the COVID-19 pandemic, including the remote monitoring of
clinical data.
The global pandemic of COVID-19 continues to rapidly evolve. The extent to which
COVID-19 may continue impact our business, including our clinical trials, and
financial condition will depend on future developments, which are highly
uncertain due to the continuing emergence of new variants and cannot be
predicted with confidence, such as the ultimate duration of the pandemic and the
effectiveness of actions taken in
contain and treat the disease.
At this time, we do not expect any disruption in our supply chain of drugs
necessary to conduct our clinical trials, and we believe we will be able to
supply the drug needs of our clinical trials in 2022. However, we are continuing
to evaluate our clinical supply chain in light of the COVID-19 pandemic.
License, Collaboration and Grant Agreements
License Agreement with Vifor Pharma
In
in all Renal Indications, beginning with DGF and CSA-AKI. The Vifor License also
grants Vifor Pharma exclusive rights, with a right to sublicense subject to our
consent for certain specified conditions, to develop and manufacture ANG-3777
for commercialization in Renal Indications worldwide (excluding
in cooperation with us or independently. We retain the right to develop and
commercialize combination therapy products combining ANG-3777 with our other
proprietary molecules, subject to Vifor Pharma’s right of first negotiation with
respect to global (excluding
products in the Renal Indications.
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Pursuant to the Vifor License and specifically based upon the clinical
development plan for ANG-3777 set forth in the Vifor License, we are entitled to
receive
including
subsequently converting into common stock with the IPO and
was received in the Concurrent Private Placement with our IPO.
We are also eligible to receive post-approval milestones of up to approximately
total potential deal value of up to
reductions and offsets), plus tiered royalties on net sales of ANG-3777 at
royalty rates of up to 40%. Under the Vifor License, we are responsible for
executing a pre-specified clinical development plan designed to obtain
regulatory approvals of ANG-3777 for DGF and CSA-AKI. For the three months ended
License of
deferred revenue, current on the condensed consolidated balance sheet related to
the Vifor License.
On
achieve its primary endpoint and the data were not expected to be sufficient
evidence to support an indication in the studied DGF population. On
2021
primary endpoint. The Vifor License includes additional milestone and royalty
objectives related to the clinical development plan for ANG-3777, which had
included a Phase 3 study for CSA-AKI and a Phase 4 confirmatory study in DGF. We
do not expect to receive any clinical, post-approval, or sales milestones, or
royalties, as we do not intend to continue to pursue the current clinical
development plan for ANG-3777. In 2022, we and Vifor Pharma continue to work to
complete the planned analyses of the results of the clinical trials announced in
the fourth quarter of 2021 and to discuss the future of the collaboration based
upon such analyses.
Components of Results of Operations
The following discussion summarizes the key factors our management believes are
necessary for an understanding of our financial statements.
Revenue
We do not have any products approved for sale and have not generated any revenue
from product sales. Our revenue to date primarily has been derived from
government funding consisting of
revenue under our license agreements, specifically the Vifor License.
Grant Revenue
Our grants and contracts reimburse us for direct and indirect costs relating to
the grant projects and also provide us with a pre-negotiated profit margin on
total direct and indirect costs of the grant award, excluding subcontractor
costs, after giving effect to directly attributable costs and allowable overhead
costs. Funds received from grants and contracts are generally deemed to be
earned and recognized as revenue as allowable costs are incurred during the
grant or contract period and the right to payment is realized.
Contract Revenue
Our license agreements comprise elements of upfront license fees, milestone
payments based on development and royalties based on net product sales. The
timing of our operating cash flows may vary significantly from the recognition
of the related revenue. Income from upfront payments is recognized when we
satisfy the performance obligations in the contract, which can result in
recognition at either a point in time or over the period of continued
involvement. Other revenue, such as milestone payments, are recognized when
achieved.
Our revenue to date has been generated from payments received pursuant to the
Vifor License Agreement. We recognize revenue from upfront payments over the
term of our estimated period of performance using a cost-based input method
under Topic 606, Revenue from Contracts with Customers.
In addition to receiving an upfront payment, we may also be entitled to
milestones and other contingent payments upon achieving predefined objectives.
If a milestone is considered probable of being reached, and if it is probable
that a significant revenue reversal would not occur, the associated milestone
amount would also be included in the transaction price. We expect any license
revenue we generate from any future collaboration partners, will fluctuate in
the future as a result of the timing and amount of upfront, milestones and other
collaboration agreement payments and other factors.
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Table of Contents Operating Expenses Cost of Grant Revenue
Our cost of grant revenue primarily relates to personnel-related costs and
expenses for grant projects.
Research and Development Expenses
To date, our research and development expenses have primarily related to
discovery efforts and preclinical and clinical development of our product
candidates. We recognize research and development expenses as they are incurred
and payments made prior to the receipt of goods or services to be used in
research and development are capitalized until the goods or services are
received.
Our research and development expenses consist primarily of:
?personnel costs, including salaries, payroll taxes, employee benefits and
stock-based compensation, for personnel in research and development functions;
?costs associated with medical affairs activities;
?fees paid to consultants, clinical testing sites and contract research
organizations (CROs), including in connection with our preclinical studies and
clinical trials, and other related clinical trial fees, such as for investigator
grants, patient screening, laboratory work, clinical trial database management,
clinical trial material management and statistical compilation, analysis and
reporting;
?contracted research and license agreement fees with no alternative future use;
?costs related to acquiring, manufacturing and maintaining clinical trial
materials and laboratory supplies;
?depreciation of equipment and facilities;
?legal expenses related to clinical trial agreements and material transfer
agreements; and
?costs related to preparation of regulatory submissions and compliance with
regulatory requirements.
Other than with respect to reimbursable expenses required to be recorded under
our government grants and contracts, we do not allocate our expenses by product
candidates. A significant amount of our direct research and development expenses
include payroll and other personnel expenses for our departments supporting
multiple product candidate research and development programs and, other than as
specified above, we do not record research and development expenses by product.
However, research and development expenses were primarily driven by expenses
relating to the development of ANG-3070 and ANG-3777 during the three months
ended
ended
three months ended
expenses were from external third-party sources and the remaining 41% and 46%,
respectively, were from internal sources.
We expect our research and development expenses to be slightly lower in the near
term even though we will continue the development of our product candidates and
continue to invest in research and development activities. The process of
conducting the necessary clinical research to obtain regulatory approval is
costly and time consuming, and successful development of our product candidates
is highly uncertain. At this time, we cannot reasonably estimate the nature,
timing or costs of the efforts necessary to complete the remainder of the
development of any of our clinical or preclinical product candidates or the
period, if any, in which material net cash inflows from these product candidates
may commence. This is due to the numerous risks and uncertainties associated
with developing drugs, including the uncertainty of:
?the scope, rate of progress and expense of our ongoing, as well as any
additional, clinical trials and other research and development activities;
?future preclinical and clinical trial results;
?obtaining market access and reimbursement approvals; and
?the timing and receipt of any regulatory approvals.
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A change in the outcome of any of these variables with respect to the
development of a product candidate could mean a significant change in the costs
and timing associated with the development of that product candidate. For
example, if the FDA or another regulatory authority were to require us to
conduct preclinical or clinical trials beyond those we currently anticipate will
be required for the completion of clinical development of a product candidate,
or if we experience significant delays in enrollment in any of our preclinical
or clinical trials, we could be required to expend significant additional
financial resources and time on the completion of our clinical development
programs.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related
expenses, such as salaries, payroll taxes, employee benefits and stock-based
compensation, for personnel in executive, operational, finance and human
resources functions. Other significant general and administrative expenses
include facilities costs, insurance costs, and accounting and legal services and
expenses associated with obtaining and maintaining patents. A portion of the
general and administrative expenses are reimbursed through the overhead rates
contained in our grants with the
We expect our general and administrative expenses to be generally consistent in
the near term to support our continued research and development activities. We
also expect to generally maintain our current level of expenses associated with
operating as a public company, including expenses related to audit, legal,
regulatory, and tax-related services associated with maintaining compliance with
the rules and regulations of the
listed on a national securities exchange, insurance expenses, investor relations
activities and other administrative and professional services.
Other Income (Expense)
Convertible Notes Recorded at Fair Value
We elected the fair value option for recognition of our convertible notes. Our
convertible notes were subject to re-measurement each reporting period with
gains and losses reported through our condensed consolidated statements of
operations. All of our convertible notes were converted into shares of our
common stock upon the closing of our IPO.
Liability Classified Series C Convertible Preferred Stock Recorded at Fair Value
Our Series C convertible preferred stock included settlement features resulting
in classification as a liability. The initial carrying value of the Series C
convertible preferred stock was accreted to the settlement value, the fair value
of the securities to be issued upon the conversion of the Series C Preferred
Stock. The discount to the settlement value was accreted to interest expense
using the effective interest method. During 2020, certain of the convertible
notes were exchanged for Series C convertible preferred stock. As the exchange
was accounted for as a modification, the Series C convertible preferred stock
exchanged for the convertible notes (the Exchanged Series C Shares) was recorded
at fair value. The Exchanged Series C Shares were subject to re-measurement each
reporting period with gains and losses reported through our condensed
consolidated statements of operations. All shares of our Series C convertible
preferred stock converted into common stock upon the closing of our IPO.
Warrant Liability
We have accounted for certain of our freestanding warrants to purchase shares of
our common stock as liabilities measured at fair value, in accordance with ASC
815, Derivatives and Hedging. The warrants are subject to re-measurement at each
reporting period with gains and losses reported through our condensed
consolidated statements of operations.
Foreign Exchange Transaction Gain
Foreign currency transaction gains, primarily related to intercompany loans, are
recorded as a component of other income (expense) in our condensed consolidated
statements of operations.
Earnings in
Earnings in equity method investment represents our 10% interest in NovaPark
accounted for under the equity method.
Interest Income
Interest income consists of interest earned on our cash and cash equivalents.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods
indicated:
Three Months Ended March 31,
2022 2021 $ Change % Change
(In thousands, except percentages)
Revenue:
Contract revenue $ 1,648 $ 371 $ 1,277 344%
Total revenue 1,648 371 1,277 344%
Operating expenses:
Research and development 11,667 14,298 (2,631) (18)%
General and administrative 4,466 6,012 (1,546) (26)%
Total operating expenses 16,133 20,310 (4,177) (21)%
Loss from operations (14,485) (19,939) 5,454 (27)%
Other income (expense), net 245 (16,748) 16,993 101%
Net loss $ (14,240) $ (36,687) $ 22,447
Contract Revenue
Contract revenue increased by
2022
continue the clinical development plan for ANG-3777 currently set forth in
Angion’s license agreement with
Phase 3 study in cardiac surgery associated with cardiopulmonary bypass
(CSA-AKI) and a Phase 4 confirmatory study in delayed graft function (DGF),
Angion performed a reassessment of the performance period and estimated costs
for the completion of the performance obligations. This accelerated the revenue
recognition related to the upfront payment received by Angion from Vifor Pharma
when the license agreement with Vifor Pharma was entered into in 2020.
We do not expect to receive any further substantial revenues under the Vifor
License and we expect the remaining unearned revenue under the Vifor License to
be recognized by the end of 2022.
Research and Development Expenses
Research and development expenses decreased by
three months ended
decrease in research and development expenses was primarily due to a net
decrease of
ended
decreased clinical trial activities, primarily related to the completion of
ANG-3777 trials, offset by severance-related charges of
to the condensed consolidated financial statements for additional information)
and an increase of
and non-clinical trial activities, primarily related to the development of
ANG-3070.
General and Administrative Expenses
General and administrative expenses decreased by
three months ended
decrease in general and administrative expenses was primarily due to a net
decrease of
ended
Note 1 to the condensed consolidated financial statements for additional
information) and an increase of
Other Income (Expense)
Other income (expense) increased by
due to a decrease in expense of
related to our warrant liability, convertible notes, and Series C convertible
preferred stock for which we elected the fair value option as most of these
instruments were no longer outstanding after our IPO. There was also a decrease
of
amortization of debt issuance costs from the issuance of Series C convertible
preferred stock issued during the three months ended
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Liquidity and Capital Resources
Sources and Uses of Liquidity
We have incurred losses and negative cash flows from operations since inception,
and we anticipate we will incur losses for at least the next several years. To
date, we have not generated any revenue from product sales. We have funded our
operations primarily through the receipt of grants, the sale of debt and equity
securities, and proceeds from license agreements. As of
accumulated deficit of
Future Cash Needs and Funding Requirements
Based on our current operating plan, we believe our cash and cash equivalents
will be sufficient to fund our planned operations for at least 12 months
following the issuance date of our condensed consolidated financial statements
and well into 2023. However, we have based our projections of operating capital
requirements on assumptions that may prove to be incorrect and we may use all
our available capital resources sooner than we expect. Because of the numerous
risks and uncertainties associated with research, development and
commercialization of biotechnology products, we are unable to estimate the exact
amount of our operating capital requirements. The amount and timing of our
future funding requirements will depend on many factors, including, but not
limited to:
?the scope, progress, results and costs of researching and developing ANG-3070
or any other product candidates, and conducting preclinical studies and clinical
trials;
?the outcome of our ongoing and future clinical trials, including our Phase 2
clinical trial of ANG-3070 in patients with PPKD;
?whether we are able to take advantage of any FDA expedited development and
approval programs for any of our product candidates;
?the extent to which COVID-19 may impact our business, including our clinical
trials and financial condition;
?the willingness of the FDA and foreign regulatory authorities to accept the
results of our completed, ongoing, and planned clinical trials and preclinical
studies and other work, as the basis for review and approval of ANG-3070;
?the outcome, costs and timing of seeking and obtaining and maintaining FDA and
any foreign regulatory approvals;
?the number and characteristics of product candidates that we pursue, including
our product candidates in preclinical development;
?the ability of our product candidates to progress through clinical development
successfully;
?our need to expand our research and development activities, including to
conduct additional clinical trials;
?market acceptance of our product candidates, including physician adoption,
market access, pricing and reimbursement;
?the costs of acquiring, licensing or investing in businesses, products, product
candidates and technologies;
?our ability to maintain, expand and defend the scope of our intellectual
property portfolio, including the amount and timing of any payments we may be
required to make, or that we may receive, in connection with the licensing,
filing, prosecution, defense and enforcement of any patents or other
intellectual property rights;
?our need and ability to hire additional personnel, including management,
clinical development, medical and commercial personnel;
?the effect of competing technological, market developments and government
policy;
?the costs associated with being a public company, including our need to
implement additional internal systems and infrastructure, including financial
and reporting systems;
?the costs associated with securing and establishing commercialization and
manufacturing capabilities, as well as those associated with packaging,
warehousing and distribution;
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?the costs associated with being a commercial company with approved products for
sale, including our obligation to meet applicable healthcare laws and
regulations and implement robust compliance programs;
?the economic and other terms, timing of and success of our existing licensing
arrangements and any collaboration, licensing or other arrangements into which
we may enter in the future and timing and amount of payments thereunder; and
?the timing, receipt and amount of sales and general commercial success of any
future approved products, if any.
Until such time as we or our collaborators can generate significant revenue from
sales of ANG-3070 or any other product candidate, if ever, we expect to finance
our operations through public or private equity offerings or debt financings or
other sources of capital, including collaborations, licenses, credit or loan
facilities, receipt of research contributions or grants, tax credit revenue or a
combination of one or more of these funding sources. Adequate funding may not be
available to us on acceptable terms, or at all. To the extent we raise
additional capital through the sale of equity or convertible debt securities,
the ownership interest of our stockholders will be or could be diluted, and the
terms of these securities may include liquidation or other preferences adversely
affecting the rights of our common stockholders. Debt financing and equity
financing, if available, may involve agreements that include covenants limiting
or restricting our ability to take specific actions, such as incurring
additional debt, making capital expenditures or declaring dividends. If we raise
funds through additional collaborations, or other similar arrangements with
third parties, we may have to relinquish valuable rights to our technologies,
future revenue streams, research programs or product candidates or grant
licenses on terms that may not be favorable to us and/or may reduce the value of
our common stock. If we are unable to raise additional funds through equity or
debt financings when needed, we may be required to delay, limit, reduce or
terminate our product development or commercialization efforts or grant rights
to develop and market our product candidates even if we would otherwise prefer
to develop and market such product candidates ourselves.
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