Inhibikase Therapeutics, Inc. — Q3 2021 Form 10-Q Summary
Business Context and Reporting Period
Inhibikase Therapeutics is a clinical-stage pharmaceutical company developing therapies for Parkinson’s disease, gastrointestinal complications associated with Parkinson’s disease, Multiple System Atrophy, and oncology. The filing covers the three and nine months ended September 30, 2021; financial statements are unaudited.
The company had no commercial product revenue. Revenue consisted of federal research grants, which represented more than 90% of total revenue during the quarter. As of November 10, 2021, 25,155,198 common shares were outstanding.
Financial Results and Key Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Grant revenue | $0.3 million in 2021 vs. $0.04 million in 2020 | $3.1 million vs. $0.5 million |
| Research and development expense | $3.2 million vs. $0.1 million | $8.0 million vs. $0.7 million |
| Selling, general and administrative expense | $1.6 million vs. $0.6 million | $4.9 million vs. $1.5 million |
| Loss from operations | $4.5 million vs. $0.7 million | $9.7 million vs. $1.6 million |
| Net loss | $4.5 million, or $0.18 per share, vs. $0.7 million, or $0.08 per share | $9.7 million, or $0.61 per share, vs. $1.6 million, or $0.20 per share |
| Net cash used in operating activities | $10.2 million for the nine months, vs. $0.2 million in 2020 |
Operating margins were substantially negative because grant revenue was insufficient to offset research and development and corporate costs. The filing does not provide a meaningful gross margin because the company reports grant revenue and operating expenses rather than product sales and cost of goods sold.
Cash was $44.8 million at September 30, 2021, compared with $14.0 million at December 31, 2020. Working capital was $43.2 million, and stockholders’ equity was $43.2 million. Current liabilities were $2.7 million, including $0.25 million of notes payable. The company had an accumulated deficit of $24.8 million.
Financing activities provided $41.1 million during the first nine months, primarily from the June 2021 offering of 15.0 million shares at $3.00 per share. Net proceeds were approximately $41.1 million after offering costs, discounts and commissions. The company also issued a warrant to underwriters for up to 750,000 shares, exercisable beginning June 15, 2022 at $3.75 per share.
Material Changes Versus the Prior Comparable Period
- Third-quarter grant revenue increased 772% to $328,459; nine-month grant revenue increased 487% to $3.1 million, reflecting greater grant-funded research activity.
- Third-quarter research and development expense increased 2,516% to $3.2 million, primarily due to the Phase 1 Parkinson’s disease clinical trial and grant-related research. Nine-month R&D expense increased 1,095% to $8.0 million.
- Third-quarter SG&A increased 183% to $1.6 million, driven by higher stock compensation, directors’ and officers’ insurance, legal, board, investor relations and consulting costs associated with being a public company.
- Nine-month net loss increased to $9.7 million from $1.6 million, while net cash used in operations increased to $10.2 million from $0.2 million.
- Cash increased by $30.9 million during the first nine months, primarily because the June 2021 equity offering more than offset operating cash usage.
- Common shares outstanding increased from 10.1 million at December 31, 2020 to 25.2 million at September 30, 2021, primarily from the June 2021 offering.
- Notes payable declined from $319,000 at December 31, 2020 to $249,000 at September 30, 2021. The PPP loan of $27,550 was forgiven, and the remaining balance principally represented the CEO note, expected to be repaid by the end of the first half of 2022.
Guidance, Outlook, Risks and Unusual Items
Management estimated that available working capital at September 30, 2021 was sufficient to fund normal operations into the first quarter of 2023. The company expects substantial additional losses and stated that it will likely require additional funding beyond that period through equity, debt, grants, licensing or collaboration arrangements. The financial statements were prepared on a going-concern basis.
Clinical development of IkT-148009 advanced following FDA agreement in July 2021. Dosing in Parkinson’s disease patients began October 19, 2021. Management expected to report Phase 1 results, complete chronic toxicology studies, conduct a Phase 1b extension and initiate a Phase 2 Parkinson’s efficacy study, subject to regulatory and clinical outcomes.
The company was preparing regulatory submissions for a potential Phase 2a Multiple System Atrophy study. Progress depended on favorable animal-model results; if those results were unsuccessful, the planned study would not proceed.
The IND for IkT-001Pro was delayed because an impurity level in the clinical batch exceeded the level in the toxicology batch. Management expected clinical batch manufacturing to finish in the fourth quarter of 2021 and anticipated an IND submission in the first quarter of 2022.
- Key risks include clinical-trial failure or delay, regulatory nonapproval, unfavorable toxicology or safety results, inability to enroll patients, manufacturing and supply-chain issues, intellectual-property challenges, competition and inability to raise additional capital.
- COVID-19 could affect patient enrollment, trial compliance, data integrity, manufacturing and distribution, although the company reported no material operational impact during the first nine months of 2021.
- Grant funding is concentrated: more than 90% of quarterly revenue came from the U.S. government. Active grants totaled $1.9 million, with $519,813 reportedly remaining available in U.S. Treasury accounts as of October 29, 2021.
- Non-cash expenses were material, including $1.3 million of stock-based compensation and $0.7 million of warrant expense during the first nine months.
- The company reported no legal proceedings, defaults, or off-balance-sheet arrangements. Management concluded disclosure controls were effective at a reasonable assurance level.
Facts Investors Should Verify
- Whether the company’s cash runway remains consistent with management’s estimate of funding operations into the first quarter of 2023.
- Actual timing and results of the IkT-148009 Parkinson’s disease trials, chronic toxicology studies and potential Phase 2 program.
- Whether the IkT-001Pro IND was submitted in the first quarter of 2022 following resolution of the impurity issue.
- Whether planned Multiple System Atrophy development proceeded after animal-model results and regulatory discussions.
- Future equity or debt financing needs, potential dilution and the effect of the 750,000-underwriter warrant and other outstanding options and warrants.
- The company’s ability to replace grant funding and ultimately generate product or licensing revenue, since no commercial product sales had begun.