Inmune Bio, Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual filing, not a standalone fourth-quarter report. Inmune Bio is a clinical-stage immunotherapy company with no approved products and no product revenue.
Business context and development programs
The company aims to modify the innate immune system through four programs: INKmune for priming natural killer cells in cancer; INB03 for cancer-related immune suppression; XPro1595 for Alzheimer’s disease and other neurologic conditions; and LivNate for NASH. It also intends to supply GMP-grade umbilical-cord mesenchymal stem cells to third parties.
- INKmune: UK regulatory authorization for an ovarian-cancer trial had been received; Phase I trials in ovarian cancer and high-risk MDS were planned for 2020.
- INB03: The company reported completing a Phase I oncology study in 11 patients. It described the drug as tolerated without reported toxicity and observed a decrease in IL-6, but all patients stopped treatment due to disease progression. A biomarker-focused combination Phase II study was planned.
- XPro1595: The Alzheimer’s Phase I study began enrolling in November 2019; the first cohort passed its safety review, allowing enrollment of the next dose cohort in February 2020.
- LivNate: A proof-of-concept Phase II NASH study was planned; human efficacy remains unproven.
Financial results and liquidity
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $6.016 million | $9.085 million |
| Research and development expense | $3.282 million | $3.355 million |
| Net loss | $7.678 million | $12.440 million |
| Net loss per share, basic and diluted | $0.75 | $1.43 |
| Net cash used in operating activities | $5.385 million | $2.059 million |
| Cash and cash equivalents at year-end | $6.996 million | $0.186 million |
| Working capital at year-end | $7.064 million | Not stated |
Margins are not meaningful because the company had no revenue. FY2019 net loss improved by $4.762 million, primarily reflecting lower stock-based compensation and a $1.542 million gain from a consultant’s waiver of shares previously due. R&D expense included $850,000 of Alzheimer’s Association grant funding recorded as a reduction of R&D expense. Despite the lower net loss, operating cash use increased year over year.
Financing activities provided $12.209 million in FY2019, including $7.251 million of net IPO proceeds and proceeds from other stock sales. The company also had a Lincoln Park equity purchase facility for up to $20 million over 24 months, subject to conditions and at the company’s option; it is a potential financing source, not committed cash on hand. No conventional borrowings were reported. Year-end lease liabilities totaled $168,452, including $8,288 current and $160,164 long-term.
Management estimated existing cash would meet anticipated requirements into the third quarter of 2020. The auditor’s report and management disclosures nevertheless stated that recurring losses and the lack of operating revenue raised substantial doubt about the company’s ability to continue as a going concern for the following 12 months. The company said additional capital would be required, with no assurance it could be raised on acceptable terms.
Material changes, outlook, and risks
- G&A fell by $3.069 million, mainly because stock-based compensation was lower by about $5.5 million; higher public-company costs and salaries partly offset the decline. R&D was slightly lower as reported, but was higher excluding stock compensation and grant support.
- The company completed its IPO in February 2019 and sold additional shares in 2019. These financings increased cash but diluted existing shareholders. At March 3, 2020, 10,746,948 common shares were outstanding.
- Management expected substantial future R&D spending and operating losses. Product revenue was not expected for several years, if ever. Trial timing, clinical success, regulatory designations, partnerships, and commercialization plans are uncertain; expedited or orphan-drug pathways had not been assured.
- Key risks include the need for further financing, clinical and regulatory failure or delay, competition, dependence on third-party manufacturers and trial sites, and the ability to maintain licensed intellectual property. A license for the principal INKmune patents is held by an entity owned by company officers and the chief scientific officer; the filing discloses this potential conflict and license milestone requirements.
- Management disclosed ineffective disclosure controls and internal control over financial reporting, citing a material weakness from limited segregation of duties. The company intended to add accounting and finance resources when practical.
- The filing identified COVID-19 and Brexit as potential sources of trial, operating, currency, regulatory, and R&D-rebate disruption; it said no COVID-19 business disruption had yet been experienced. No material litigation was reported.
- Related-party arrangements included research services and office sublease payments to CTI, which is majority-owned by a director, as well as research payments to UCL, where the chief scientific and manufacturing officer is a professor.
Important facts for investors to verify
- Cash runway and subsequent financing needs against the stated expectation of funding into Q3 2020; confirm actual equity-facility usage, dilution, and post-year-end cash movements.
- Progress, enrollment, safety, and efficacy data for the planned or ongoing trials, especially the INB03 Phase II program and XPro1595 Alzheimer’s study.
- Whether manufacturing capacity and drug supply are sufficient for planned trials, and whether additional production is completed on schedule.
- Resolution of the disclosed material weakness in financial controls and any changes to related-party arrangements or licensing obligations.
- Potential dilution from outstanding options and warrants, and the effect of the January 2020 repurchase of 220,000 shares for $1.012 million.