Instil Bio, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Instil Bio is a clinical-stage biopharmaceutical company developing autologous tumor-infiltrating lymphocyte (TIL) cancer therapies. It had no approved products and generated no product revenue.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Research and development expense | $39.7 million | $29.1 million | $120.3 million | $64.7 million |
| General and administrative expense | $17.0 million | $14.0 million | $49.3 million | $37.1 million |
| Total operating expenses / operating loss | $56.6 million | $43.0 million | $169.7 million | $101.8 million |
| Net loss | $56.2 million | $43.0 million | $169.3 million | $101.4 million |
| Net loss per share, basic and diluted | $0.43 | $0.33 | $1.31 | $1.03 |
- Cash and investments: At September 30, 2022, cash and cash equivalents were $41.1 million, restricted cash was $0.5 million, and marketable securities were $262.2 million, totaling $303.8 million in cash, restricted cash, and marketable securities.
- Cash flow: Nine-month operating cash use was $143.2 million, compared with $79.3 million in 2021. Investing activities provided $81.7 million, principally reflecting net maturities of marketable securities, while financing activities provided $65.7 million, mainly from construction-loan proceeds. Cash, cash equivalents and restricted cash increased $4.2 million over the period.
- Debt and liquidity: The Tarzana construction loan had $65.6 million principal outstanding ($63.0 million net of issuance costs) at September 30. It bears interest at one-month SOFR plus 5.25%, matures in July 2025 with an extension option to July 2027, and is secured by the property. The company reported compliance with its covenants, including minimum net-worth and liquid-asset requirements of $85 million each.
- Assets and equity: Total assets were $532.7 million, total liabilities $122.2 million, and stockholders’ equity $410.6 million. Property, plant and equipment, net, increased to $185.1 million from $122.0 million at year-end 2021, reflecting facility investment.
Changes versus the prior comparable period
- Nine-month net loss widened by $67.9 million year over year. R&D expense increased $55.7 million, primarily due to higher headcount, clinical and research activity, expanded clinical manufacturing, and facility and overhead costs. G&A expense rose $12.2 million, primarily due to increased headcount and personnel costs.
- Operating cash use increased $63.8 million year over year. Nine-month capital expenditure on property and equipment was $71.6 million, versus $39.4 million in 2021.
- Interest income rose as funds generated investment income; interest expense began with the 2022 construction loan. Marketable securities fell from $416.5 million at December 31, 2021 to $262.2 million at September 30, 2022, largely reflecting their use and maturity as funds supported operations and construction.
Outlook, developments and risks
- Management estimated existing cash, cash equivalents and marketable securities, together with expected proceeds from an anticipated sale-leaseback of the Tarzana manufacturing site, would fund operating expenses and capital requirements into 2025. This estimate depends on assumptions that may prove incorrect; the sale-leaseback was not presented as completed.
- In October 2022, after manufacturing failures in DELTA-1, the company voluntarily paused enrollment in DELTA-1 (Phase 2 ITIL-168), DELTA-2 (Phase 1 ITIL-168 with pembrolizumab), and the Phase 1 ITIL-306 trial. Its investigation identified a central source of contamination in cell media. Management said it was evaluating process improvements and planned to discuss next steps with regulators; trials could be modified, delayed, or restarted. DELTA-2 enrollment was deferred to prioritize other programs.
- An unplanned review of early ITIL-168 patient data was inconclusive because response data were immature. The prespecified Data Safety Monitoring Board review found no safety concerns. Management planned an ITIL-168 program update in Q1 2023. Initial ITIL-306 data had been expected in 2023, but the trial pause creates timing uncertainty.
- The company expects continued substantial losses and additional financing needs; it cautioned that funding may not be available on acceptable terms. Key risks include clinical and regulatory uncertainty, manufacturing reliability and contamination, facility construction and sale-leaseback execution, and dependence on future funding. It had approximately $48.8 million of future clinical-trial services commitments, contingent in part on milestones, and $16.4 million contractually committed to the Tarzana development project at quarter-end.
- After quarter-end, Chief Medical Officer Zachary Roberts resigned effective November 11, 2022. The separation agreement provides for $200,000 in cash payments, subject to its terms, and an extension of the exercise period for vested options.
Important facts for investors to verify
- Progress and findings from the cell-media contamination investigation, corrective actions, and regulatory discussions, including whether and when paused trials resume.
- Actual cash burn and remaining runway, and whether the anticipated Tarzana sale-leaseback closes on expected terms and timing.
- Construction-loan balance, variable interest exposure, covenant compliance, and remaining facility construction commitments.
- Clinical-trial spending commitments, future financing requirements, and any resulting dilution or restrictions.
- Whether clinical results, manufacturing comparability, and regulatory feedback support continued development of ITIL-168 and ITIL-306.