Inmune Bio, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Inmune Bio is a clinical-stage biotechnology company developing therapies that target innate immune dysfunction. It reported no revenue and has no commercialized products.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 or comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $792,787 | $612,708 |
| General and administrative expense | $1,299,474 | $1,298,379 |
| Total operating expenses | $2,092,261 | $1,911,087 |
| Net loss | $2,070,407 | $1,901,045 |
| Basic and diluted loss per share | $0.19 | $0.20 |
| Net cash used in operating activities | $1,034,896 | $1,387,702 |
| Cash and cash equivalents, March 31 | $5,930,536 | $6,048,922 |
Operating expenses increased about 9.5% year over year, primarily reflecting increased R&D spending; G&A was essentially flat. Net loss increased by $169,362. R&D expense rose by $180,079, partly because Q1 2019 included a $300,000 grant offset to R&D expense, compared with no grant recognized as an expense reduction in Q1 2020. Stock-based compensation was $681,705, down from $974,699.
Cash declined $1,064,989 during the quarter, including a $20,737 foreign-currency translation impact. Financing activities used net cash of $9,356: $1,002,644 in proceeds from Lincoln Park share sales was largely offset by $1,012,000 spent repurchasing and retiring 220,000 shares. Working capital was $5,864,407; total liabilities were $1,271,235, including operating lease liabilities. The filing reports no interest expense or cash paid for interest; it does not identify borrowings or other material debt.
Material changes and funding
- R&D expense increased while G&A remained nearly unchanged; operating cash use was lower than in Q1 2019.
- The accumulated deficit was $23,346,588 at March 31, 2020. Management stated that available cash was expected to meet anticipated requirements only into the third quarter of 2020 and that substantial doubt existed about the company’s ability to continue as a going concern for the 12 months after issuance of the financial statements.
- After quarter-end, the company established an at-the-market offering of up to $6,678,000. By May 13, 2020, it had sold 74,205 shares for gross proceeds of $364,952, leaving approximately $6.3 million available. The sales agent receives a 3% commission.
- The company also had up to $18.7 million of potential purchases remaining under its Lincoln Park arrangement at March 31, subject to the agreement’s conditions and limits. These facilities do not assure that capital can be raised on favorable terms or in sufficient amounts.
Business outlook, risks, and other notable matters
The company described four development programs: INKmune, INB03, XPro1595, and LivNate; it also referred to Quellor as the DN-TNF candidate for COVID-19 complications. It reported an ongoing Phase I study of XPro1595 in Alzheimer’s disease, a completed open-label dose-escalation trial of INB03, and plans for additional studies in cancer, NASH, ALS, and COVID-19. These programs remain in development, and the filing provides no product revenue or assurance of regulatory approval. Management expects R&D spending and operating losses to rise as programs advance; it said it could not reasonably estimate the timing or cost of completing development.
Management reported no material adverse COVID-19 impact on financial position or results as of March 31, but warned that the pandemic could disrupt clinical trials and operations and impede access to capital. Foreign-exchange movements are another risk; the company did not hedge currencies. Cash held by foreign subsidiaries in non-U.S. currencies was approximately $0.3 million.
The company received $300,000 of a $500,000 ALS Association grant during the quarter and recorded it as deferred grant funding. Its $16.5 million acquired in-process R&D intangible asset remained unchanged. The La Jolla office sublease is with a related party; Q1 lease expense was $13,107. Management concluded disclosure controls and procedures were not effective at March 31, 2020, citing the company’s small size and limited segregation of duties. It reported no material change in internal control over financial reporting and no pending legal proceedings believed likely to have a material adverse effect.
Important facts for investors to verify
- Cash runway and cash burn assumptions, particularly the stated runway into Q3 2020, and progress in obtaining additional funding.
- Actual ATM and Lincoln Park issuance terms, proceeds net of fees, dilution, and remaining availability.
- Clinical-trial enrollment, timelines, results, and COVID-19-related disruptions across the development programs.
- Grant conditions and timing of recognition, including the deferred ALS grant balance and remaining Alzheimer’s Association grant proceeds.
- Related-party arrangements and the company’s plans to address ineffective disclosure controls.