AN2 Therapeutics, Inc.

Previous wording

The following discussion and analysis of our financial condition as of September 30, 2024 and results of operations for the three and nine months ended September 30, 2024 and 2023 should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”) and our audited financial statements and the related notes thereto included as a part of our Annual Report on Form 10-K for the year ended December 31, 2023. Except as otherwise indicated herein or as the context otherwise requires, references in this Form 10-Q to “AN2” “the Company,” “we,” “us” and “our” refer to AN2 Therapeutics, Inc.

Current wording

The following discussion and analysis of our financial condition as of March 31, 2025 and results of operations for the three months ended March 31, 2025 and 2024 should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”) and our audited financial statements and the related notes thereto included as a part of our Annual Report on Form 10-K for the year ended December 31, 2024. Except as otherwise indicated herein or as the context otherwise requires, references in this Form 10-Q to “AN2” “the Company,” “we,” “us” and “our” refer to AN2 Therapeutics, Inc.

Previous wording

We are a biopharmaceutical company focused on discovering and developing novel small molecule therapeutics derived from our boron chemistry platform. AN2 has a pipeline of boron-based compounds in development for Chagas disease, non-tuberculous mycobacterial (“NTM”) and melioidosis, along with early-stage programs focused on targets in infectious diseases and oncology.

Current wording

We are a biopharmaceutical company focused on discovering and developing novel small molecule therapeutics derived from our boron chemistry platform. AN2 has a pipeline of boron-based compounds in development for Chagas disease, non-tuberculous mycobacterial (“NTM”) lung disease and melioidosis, along with early-stage programs focused on targets in infectious diseases and oncology. We are committed to delivering high-impact drugs to patients that address critical medical needs and improve health outcomes.

Previous wording

On August 8, 2024, we also announced a reduction of approximately 50% of our workforce, which was approved by the Board in connection with our planned restructuring following discontinuation of the EBO-301 study and to further extend our operating capital. In connection with the workforce reduction, we recognized severance and other charges of $2.2 million for each of the three and nine months ended September 30, 2024, primarily consisting of $2.6 million related to severance payments and other employee termination-related expenses, partially offset by a $0.4 million reduction in stock-based compensation expense as a result of applying modification accounting for consulting agreements entered into with certain terminated employees. We expect that the workforce reduction will be substantially complete by the end of 2024.

Current wording

In August 2024, we announced a reduction of approximately 50% of our workforce, which was approved by the Board in connection with our restructuring following discontinuation of the EBO-301 study and to further extend our operating capital. In connection with the workforce reduction, we recognized severance and other charges of $2.2 million, primarily consisting of severance payments and other employee termination-related expenses.

Previous wording

We do not have any products approved for sale and have not generated any revenue since inception. Our net losses were $43.8 million and $47.8 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $198.3 million. We have funded our operations from the sale and issuance of redeemable convertible preferred stock and proceeds from our initial public offering (“IPO”), “at-the-market” equity offering program (“ATM Offering”) and an underwritten offering (the “Underwritten Offering”). From November 2019 through October 2020, we raised an aggregate of $12.0 million from the sale of Series A redeemable convertible preferred stock. In March 2021, we raised an aggregate of $80.0 million from the sale of Series B redeemable convertible preferred stock. In March and April 2022, we completed our IPO, with gross proceeds of $79.4 million and net proceeds of $70.4 million, net of underwriting discounts, commissions and offering expenses. In June 2023, we raised gross proceeds of $20.0 million from the ATM Offering and net proceeds of $19.1 million, after deducting commissions and offering expenses. In August 2023, we raised gross proceeds of $70.0 million from the Underwritten Offering and net proceeds of $65.5 million, after deducting commissions and offering expenses.

Current wording

We do not have any products approved for sale and have not generated any revenue since inception. Our net losses were $10.6 million and $16.6 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had an accumulated deficit of $216.4 million. We have funded our operations from the sale and issuance of redeemable convertible preferred stock and proceeds from our initial public offering (“IPO”), “at-the-market” equity offering program (“ATM Offering”) and an underwritten offering (the “Underwritten Offering”). From November 2019 through October 2020, we raised an aggregate of $12.0 million from the sale of Series A redeemable convertible preferred stock. In March 2021, we raised an aggregate of $80.0 million from the sale of Series B redeemable convertible preferred stock. In March and April 2022, we completed our IPO, with gross proceeds of $79.4 million and net proceeds of $70.4 million, net of underwriting discounts, commissions and offering expenses. In June 2023, we raised gross proceeds of $20.0 million from the ATM Offering and net proceeds of $19.1 million, after deducting commissions and offering expenses. In August 2023, we raised gross proceeds of $70.0 million from the Underwritten Offering and net proceeds of $65.5 million, after deducting commissions and offering expenses.

Previous wording

As of September 30, 2024, we had cash, cash equivalents, and investments of $93.4 million. We believe that our available cash will be sufficient to fund our planned operations under the current operating plan through at least twelve months following the date of this Form 10-Q.

Current wording

As of March 31, 2025, we had cash, cash equivalents, and investments of $78.5 million. We believe that our available cash will be sufficient to fund our planned operations under our current operating plan through at least twelve months following the date of this Form 10-Q.

Previous wording

Our general and administrative expenses consist primarily of payroll and personnel-related expenses, including salaries and bonuses, payroll taxes, employee benefit costs, and non-cash stock-based compensation. Other general and administrative expenses include legal costs of pursuing patent protection of our intellectual property, and professional service fees for auditing, tax, general legal services, and other external consulting and vendor services. We expect our general and administrative expenses to continue to increase in the future, including expenses related to legal, accounting, regulatory, and tax-related services associated with maintaining compliance with requirements of The Nasdaq Stock Market LLC and the Securities and Exchange Commission ("SEC"), directors and officers liability insurance premiums, and investor relations activities.

Current wording

Our general and administrative expenses consist primarily of payroll and personnel-related expenses, including salaries and bonuses, payroll taxes, employee benefit costs, and non-cash stock-based compensation. Other general and administrative expenses include legal costs of pursuing patent protection of our intellectual property, and professional service fees for auditing, tax, general legal services, and other external consulting and vendor services. We expect our general and administrative expenses to continue to increase in the future, including expenses related to legal, accounting, regulatory, and tax-related services associated with maintaining compliance with requirements of the Nasdaq Global Select Market and the Securities and Exchange Commission ("SEC"), directors and officers liability insurance premiums, and investor relations activities.

Previous wording

Other income, net consists of interest income and investment income earned on our cash, cash equivalents, and investments.

Current wording

Interest income consists of interest income and investment income earned on our cash, cash equivalents, and investments.

Previous wording

Research and development expenses were $8.3 million for the three months ended September 30, 2024 compared to $14.4 million for the three months ended September 30, 2023. The decrease of $6.1 million was primarily due to decreases in clinical trial costs, personnel-related expenses, preclinical and research study expenses, consulting and outside services and other costs, partially offset by increases in chemistry manufacturing and controls (“CMC”) expenses. Clinical trials expenses decreased by $4.3 million primarily as a result of the termination of our EBO-301 trial. Personnel-related expenses decreased by $1.2 million primarily as a result of our restructuring activities. Preclinical and research study expenses decreased by $0.8 million primarily due to the timing of non-dilutive funding expense offsets and reprioritization of certain research programs. Other costs decreased by $0.3 million and consulting and outside services decreased by $0.1 million. These decreases were partially offset by an increase of $0.6 million in CMC costs due to increased CMC activities related to the Chagas and melioidosis programs, partially offset by lower costs due to completion of certain intermediate and registration batch manufacturing activities in 2023. During the three months ended September 30, 2024, a total reimbursement of $1.1 million of operating expenses was recognized related to our funding arrangements. During the three months ended September 30, 2023, a total of $0.4 million reimbursement of operating expenses was recognized related to our funding arrangements, primarily related to CMC activities and research studies.

Current wording

Research and development expenses were $7.7 million for the three months ended March 31, 2025 compared to $14.7 million for the three months ended March 31, 2024. The decrease of $7.0 million was primarily due to decreases in clinical trial costs, personnel-related expenses, consulting and outside services and other costs, and facilities and miscellaneous expenses, partially offset by increases in preclinical and research study expenses and chemistry manufacturing and controls (“CMC”) expenses. Clinical trials expenses decreased by $5.3 million primarily as a result of reduced expenses resulting from the termination of our EBO-301 trial in August 2024. Personnel-related expenses decreased by $2.3 million primarily as a result of our restructuring activities in 2024. Consulting and outside services costs decreased by $0.9 million primarily due to reduced activities related to the development of epetraborole and the timing of non-dilutive contract offsets. Other costs decreased by $0.5 million. These decreases were partially offset by an increase of $1.3 million in expenses associated with our preclinical and research programs. CMC costs increased by $0.5 million due to increased CMC activities related to the Chagas program, partially offset by lower costs related to epetraborole development and the timing of non-dilutive contract offsets. License fees increased by $0.2 million. During the three months ended March 31, 2025 a total reimbursement of $0.4 million of operating expenses was recognized related to our funding arrangements.

Previous wording

General and administrative expenses were $3.5 million for the three months ended September 30, 2024 compared to $3.8 million for the three months ended September 30, 2023. The decrease of $0.3 million was primarily attributable to a $0.3 million decrease in professional services expenses.

Current wording

General and administrative expenses were $3.8 million for the three months ended March 31, 2025 compared to $3.6 million for the three months ended March 31, 2024. The increase of $0.2 million was primarily attributable to a $0.5 million increase in professional services expenses, partially offset by a $0.2 million decrease in consulting and outside services and a $0.1 million decrease in personnel-related expenses.

Previous wording

Other income, net was $1.3 million for the three months ended September 30, 2024 compared to $1.5 million for the three months ended September 30, 2023. The decrease of $0.2 million was due to lower cash, cash equivalents, and investment balances in 2024 as compared to 2023.

Current wording

Interest income was $0.9 million for the three months ended March 31, 2025 compared to $1.7 million for the three months ended March 31, 2024. The decrease of $0.8 million was due to lower cash, cash equivalents, and investment balances and lower interest rates in 2025 as compared to 2024.

Previous wording

We have incurred net losses since our inception. For the nine months ended September 30, 2024 and 2023, we had net losses of $43.8 million and $47.8 million, respectively, and we expect to incur substantial additional losses in future periods. As of September 30, 2024, we had an accumulated deficit of $198.3 million. As of September 30, 2024, we had cash, cash equivalents, and investments of $93.4 million. Based on our current business plan, we believe that our available cash will be sufficient to fund our planned operations for at least 12 months following the date of this Form 10-Q.

Current wording

We have incurred net losses since our inception. For the three months ended March 31, 2025 and 2024, we had net losses of $10.6 million and $16.6 million, respectively, and we expect to incur substantial additional losses in future periods. As of March 31, 2025, we had an accumulated deficit of $216.4 million. As of March 31, 2025, we had cash, cash equivalents, short-term investments and long-term investments of $78.5 million. Based on our current plan, we believe that our available cash will be sufficient to fund our operations for at least 12 months following the date of this Form 10-Q.

Previous wording

We do not have any products approved for sale, and we have never generated any revenue from contracts with customers. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval for and commercialize any of our current and future product candidates and we do not know when, or if, those events will occur. Historically, we have incurred operating losses and negative cash flows as a result of ongoing efforts to develop our initial drug product candidate, epetraborole, including conducting ongoing preclinical and nonclinical studies, clinical trials, registration API and drug product materials manufacturing, and providing general and administrative support for these operations. We expect our negative cash flows to increase significantly over the next several years as we advance our product candidates through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, and continue our research and development efforts. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Moreover, we expect to continue to incur costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations, as we do not expect positive cash flows from operations in the foreseeable future.

Current wording

We do not have any products approved for sale, and we have never generated any revenue from contracts with customers. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval for and commercialize any of our current and future product candidates and we do not know when, or if, those events will occur. Historically, we have incurred operating losses and negative cash flows as a result of ongoing efforts to develop our initial drug product candidate, epetraborole, including conducting ongoing preclinical and nonclinical studies, clinical trials, API and drug product materials manufacturing, and providing general and administrative support for these operations. We expect our negative cash flows to increase significantly over the next several years as we advance our product candidates through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, and continue our research and development efforts. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Moreover, we expect to continue to incur costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations, as we do not expect positive cash flows from operations in the foreseeable future.

Previous wording

the timing of enrollment of our current and any future clinical trials;

Current wording

the timing of enrollment of any future clinical trials;

Previous wording

Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials or we may also be required to terminate rights to our current and future product candidates. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.

Current wording

Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials or we may also be required to terminate rights to future product candidates. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.

Previous wording

Net cash used in operating activities was $36.2 million for the nine months ended September 30, 2023, which consisted of a net loss of $47.8 million, due to the use of funds to develop our initial drug product candidate, partially offset by a net decrease of $6.9 million in our net operating assets and liabilities and $4.7 million in non-cash charges. The net decrease in our operating assets and liabilities was primarily due to an increase in accrued liabilities, accounts payable and other current liabilities. The non-cash charges consisted of stock-based compensation expense of $6.2 million, partially offset by net accretion of discounts on investments of $1.5 million.

Current wording

Net cash used in operating activities was $10.6 million for the three months ended March 31, 2025, which consisted of a net loss of $10.6 million, primarily due to the use of funds to develop our initial drug product candidate, and a net decrease of $1.6 million in our net operating assets and liabilities, offset by $1.6 million in non-cash charges. The net decrease in our operating assets and liabilities was primarily due to a decrease of $2.2 million in accrued liabilities, accrued compensation, accounts payable, and other current liabilities partially offset by a decrease of $0.6 million in prepaid expenses and other assets. The non-cash charges consisted of stock-based compensation expense of $2.0 million, partially offset by net accretion of discounts on investments of $0.4 million.

Previous wording

Net cash used in operating activities was $44.0 million for the nine months ended September 30, 2024, which consisted of a net loss of $43.8 million, primarily due to the use of funds to develop our initial drug product candidate, and a net decrease of $4.0 million in our net operating assets and liabilities, partially offset by $3.8 million in non-cash charges. The net decrease in our operating assets and liabilities was primarily due to a decrease in accrued liabilities, accrued compensation, and accounts payable, and an increase in other current liabilities. The non-cash charges consisted of stock-based compensation expense of $6.5 million, partially offset by net accretion of discounts on investments of $2.7 million.

Current wording

Net cash used in operating activities was $17.6 million for the three months ended March 31, 2024, which consisted of a net loss of $16.6 million, due to the use of funds to develop our initial drug product candidate, and a net decrease of $2.3 million in our net operating assets and liabilities, partially offset by $1.3 million in non-cash charges. The net decrease in our operating assets and liabilities was primarily due to an increase in accrued liabilities, accounts payable, and other current liabilities and a decrease in prepaid expenses and other assets. The non-cash charges consisted of stock-based compensation expense of $2.4 million, partially offset by net accretion of discounts on investments of $1.1 million.

Previous wording

Net cash provided by investing activities was $61.5 million for the nine months ended September 30, 2024, which primarily consisted of $83.8 million in proceeds from the maturity of investments, partially offset by $22.3 million in purchases of investments.

Current wording

Net cash provided by investing activities was $9.2 million for the three months ended March 31, 2025, which primarily consisted of $31.5 million in proceeds from the maturity of investments, partially offset by $22.3 million in purchases of investments.

Previous wording

Net cash used in investing activities was $43.7 million for the nine months ended September 30, 2023, which primarily consisted of $112.3 million in purchases of investments, partially offset by $68.6 million in proceeds from the maturity of investments.

Current wording

Net cash provided by investing activities was $26.3 million for the three months ended March 31, 2024, which primarily consisted of $26.3 million in proceeds from the maturity of investments.

Previous wording

Net cash provided by financing activities was $85.3 million for the nine months ended September 30, 2023, which consisted of $65.8 million in net proceeds from issuance of common stock under the Underwritten Offering, $19.1 million in net proceeds from issuance of common stock under the ATM Offering, $0.4 million in proceeds from the issuance of common stock under the employee stock purchase plan and exercise of stock options.

Current wording

Net cash provided by financing activities was $0.1 million for the three months ended March 31, 2025, which consisted of $0.05 million in proceeds from the issuance of common stock under the employee stock purchase plan and $0.05 million from the exercise of stock options.

Previous wording

Net cash provided by financing activities was $0.4 million for the nine months ended September 30, 2024, which consisted of $0.2 million in proceeds from the issuance of common stock under the employee stock purchase plan and $0.2 million from the exercise of stock options.

Current wording

Net cash provided by financing activities was $0.3 million for the three months ended March 31, 2024, which consisted of $0.1 million in proceeds from the issuance of common stock under the employee stock purchase plan and $0.2 million from the exercise of stock options.