Inmune Bio, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; filed August 5, 2020. Inmune Bio is a clinical-stage biotechnology company developing therapies targeting innate immune dysfunction. It reported no revenue and has no commercialized products.
Financial performance and liquidity
- Revenue: $0 for both Q2 and the first six months of 2020 and comparable 2019 periods. With no revenue, gross margin is not applicable.
- Q2 results: Operating expenses were $2.107 million and net loss was $2.108 million, or $0.20 per share, versus expenses of $0.428 million and net loss of $0.392 million, or $0.04 per share, in Q2 2019.
- First-half results: Operating expenses were $4.200 million and net loss was $4.178 million, or $0.39 per share, compared with expenses of $2.340 million and net loss of $2.293 million, or $0.23 per share, in the first half of 2019.
- Expense mix: First-half R&D expense increased to $1.696 million from $1.247 million; G&A decreased to $2.504 million from $2.634 million. The 2019 comparative includes a $1.542 million expense reversal from a consultant’s waiver of shares, which did not recur in 2020.
- Cash flow: Cash used in operations was $2.853 million in the first half, versus $3.006 million in 2019. Financing provided $0.655 million, versus $12.209 million in 2019, when the company raised substantially more equity capital. Cash declined by $2.179 million to $4.817 million; the cash-flow statement separately reports a $0.019 million favorable currency effect.
- Balance sheet at June 30: Current assets were $6.359 million and current liabilities $1.217 million, yielding working capital of $5.142 million. Total liabilities were $1.363 million, including $0.152 million of operating lease liabilities; no conventional borrowings are reported. Accumulated deficit was $25.454 million.
- Subsequent financing: In July, the company sold 2.5 million shares at $10 per share, raising approximately $23.1 million net of approximately $1.9 million in underwriting discounts, commissions and expenses. It also reported approximately $0.1 million net proceeds from subsequent ATM sales.
Changes, outlook and risks
- Management attributed higher R&D costs to increased spending to advance drug platforms. Lower G&A largely reflected reduced investor-relations expense, partly offset by higher salaries, benefits and insurance.
- The company expects continued and increasing losses as it advances clinical and preclinical programs; it does not expect products to be commercially available for at least several years, if ever. Management believes cash at June 30, together with the July offering proceeds, will fund projected operations for at least 12 months after filing.
- Programs described include INB03 for HER2-positive breast cancer, XPro1595 for Alzheimer’s disease and other research, LIVNate for NASH, a planned DN-TNF program for COVID-19 complications, and INKmune for cancer. The filing describes trials and studies as ongoing or planned; development timing, costs and success remain uncertain.
- Management said COVID-19 had not materially adversely affected results or financial position at June 30, but a prolonged outbreak could disrupt clinical-trial timing and development. The company also cited foreign-exchange exposure, reliance on additional funding, and the significant uncertainty and cost of drug development.
- Disclosure controls and procedures were deemed not effective at June 30 because of the company’s small size and limited segregation of duties. No material change in internal control over financial reporting was reported for the quarter.
- Unusual or relevant items include the 2019 share-waiver reversal, a $1.012 million January 2020 share repurchase, a $0.216 million capital contribution from forgiveness of amounts owed to a related party, and a $0.300 million ALS Association grant advance recorded as deferred liabilities pending research costs.
Important facts for investors to verify
- Whether the July offering proceeds and remaining financing facilities provide adequate runway as clinical spending rises.
- Clinical-trial enrollment, milestones and results across the programs, including INKmune’s stated Phase I timing and the planned COVID-19 study.
- How grant funding, tax-credit receivables and related-party balances are collected, used or settled.
- Potential dilution from future equity sales, options and warrants; the filing reports 13,447,948 common shares outstanding as of August 5, 2020.
- Remediation of the ineffective disclosure controls and any subsequent changes in control effectiveness.