Immuron Limited — FY2019 Form 20-F
Reporting period: Fiscal year ended June 30, 2019; audited consolidated statements are prepared under IFRS and presented in Australian dollars (A$). Despite the request metadata referring to 2018 Q4, this filing is an annual report, not a quarterly filing.
Business context
Immuron is an Australian commercial- and clinical-stage biopharmaceutical company developing oral polyclonal antibody products derived from hyperimmune bovine colostrum. Travelan is its marketed product; IMM-124E and IMM-529 are its lead clinical candidates. The company reports that its prescription candidates have not generated product-sale revenue.
Financial performance and liquidity
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue from customer contracts | A$2.387 million | A$1.843 million |
| Gross profit | A$1.720 million | A$1.424 million |
| Gross margin | 72.1% | 77.3% |
| Operating loss | A$4.633 million | A$2.988 million |
| Net loss | A$4.633 million | A$3.011 million |
| Net cash used in operating activities | A$1.799 million | A$3.505 million |
| Cash and cash equivalents at year-end | A$5.120 million | A$4.727 million |
Revenue grew 30%, mainly from Travelan sales. Travelan FY2019 sales were reported as A$2.3 million net, up 28.5%; the filing separately reports A$1.163 million of Australian Travelan revenue and A$1.016 million in the United States. Cost of goods sold was A$0.667 million, equal to 27.9% of revenue. Gross profit increased, but gross margin declined year over year.
The net loss widened 54%, principally alongside higher general and administrative costs. Those costs rose A$1.602 million, including A$1.344 million of share-based payment expense; A$1.139 million related to options granted to the CEO and a director. R&D expense fell A$1.213 million to A$1.045 million, reflecting the changed development focus; selling and marketing expense rose A$0.178 million.
Operating cash outflow improved by A$1.706 million, reflecting lower operating payments after the NASH Phase II trial and higher customer receipts. Financing provided A$2.069 million net, primarily from the May 2019 ADS offering. Current assets were A$6.682 million and current liabilities A$1.196 million. Total liabilities were A$1.211 million; the company reported no borrowings at June 30, 2019 and no credit facilities. Management said available cash was expected to fund capital requirements for at least 12 months from issuance of the financial statements, while also stating that longer-term objectives require additional funding.
Material changes and notable developments
- Travelan sales grew across Australia and North America, with U.S. revenue exceeding A$1 million for the first time. Canada distribution was relaunched in April 2019.
- Immuron discontinued development of IMM-124E specifically for NASH after the Phase II study did not show a significant reduction in liver fat, despite changes in certain biomarkers.
- The IMM-529 Phase I/II study in Israel enrolled only 9 of a planned 60 patients; the company closed the sites and planned a new FDA-directed development program focused on recurrent CDI.
- FY2019 included a May offering of 500,000 ADSs at US$4 each, for US$2.0 million gross proceeds. After year-end, the company completed another offering of 339,130 ADSs at US$4 each, raising US$1.357 million gross.
- After year-end, the company reported a US$3.7 million U.S. Department of Defense research agreement for a Campylobacter/ETEC product. This is a post-period announcement, not FY2019 revenue.
- Ordinary shares outstanding at June 30, 2019 were 163.2 million, versus 142.8 million a year earlier. The filing also reports 77.4 million options outstanding at year-end.
Outlook, risks and other items
- Management planned to seek FDA input on IMM-124E for prevention of travelers’ diarrhea, with a Phase III registration study targeted for 2020, subject to FDA feedback. The pediatric NAFLD study had randomized 24 of 40 planned patients; results were anticipated in 2020.
- The company expects continued losses and says additional financing will be needed to advance development. Funding availability, dilution, trial costs and the ability to secure collaborators are material risks.
- Key operating risks include uncertain clinical and regulatory outcomes, reliance on third parties for trials and manufacturing, and reliance on a sole manufacturer for IMM-124E drug substance. Commercial-scale manufacturing for prescription candidates was not established.
- Australian R&D tax incentive income fell to A$0.531 million from A$1.849 million. A$0.532 million of FY2019 other income included this incentive; eligibility and receipt remain subject to program requirements.
- The company reported no material legal proceedings or contingent liabilities. It does not anticipate dividends in the foreseeable future.
- Management concluded disclosure controls were effective and that the material weakness identified at June 30, 2018 had been remediated by June 30, 2019. The auditor did not provide an internal-control attestation, consistent with the company’s emerging-growth and non-accelerated filer status.
Important facts for investors to verify
- Reconcile reported loss per share: the filing’s selected financial data reports FY2018 basic/diluted loss per share of 2.25 cents, while a financial-statement note reports 2.30 cents.
- Confirm receipt and eligibility of the FY2019 Australian R&D tax incentive receivable, including the reported A$531,828 accrued amount.
- Track cash burn, subsequent financing, dilution from options and warrants, and whether the stated 12-month funding outlook remains valid.
- Verify FDA feedback, trial design, timing and funding for IMM-124E and IMM-529, and progress in the pediatric NAFLD study.
- Assess the sustainability and margins of Travelan growth, customer concentration, and manufacturing continuity, including the status of the Synlait supply agreement, which the filing said was under renegotiation.