Instil Bio, Inc. — Q2 2022 Form 10-Q
Business context and reporting period
Clinical-stage biopharmaceutical company developing autologous tumor-infiltrating lymphocyte (TIL) therapies for cancer. This unaudited filing covers the three and six months ended June 30, 2022; the comparable periods are the three and six months ended June 30, 2021. Instil had no approved products and had generated no product revenue.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $41.5 million | $21.2 million | $80.7 million | $35.6 million |
| General and administrative expense | $17.2 million | $14.2 million | $32.3 million | $23.2 million |
| Net loss | $59.0 million | $35.3 million | $113.1 million | $58.4 million |
| Net loss per share, basic and diluted | $0.46 | $0.27 | $0.88 | $0.71 |
| Cash used in operating activities | Not presented quarterly | $102.3 million | $50.0 million |
At June 30, 2022, cash and cash equivalents were $42.5 million, restricted cash was $0.5 million, and marketable securities were $312.1 million, totaling $355.1 million in cash and investments including restricted cash. Current assets were $367.7 million and current liabilities were $43.2 million. Stockholders’ equity was $458.3 million; accumulated deficit was $314.8 million. As a development-stage company without revenue, product margins are not applicable.
Six-month investing cash flow was a net inflow of $56.4 million, principally reflecting marketable-security maturities net of purchases, offset by $46.4 million in property and equipment purchases. Financing cash flow was $51.0 million, mainly from construction-loan proceeds. Cash, cash equivalents and restricted cash increased by $5.0 million during the period.
Material changes versus prior comparable period
- Q2 research and development expense increased $20.3 million, primarily from added personnel and clinical manufacturing, research and clinical development, and facility costs. Six-month R&D expense rose $45.1 million.
- Q2 general and administrative expense increased $3.0 million; six-month expense increased $9.2 million, mainly due to higher headcount and personnel-related costs.
- Six-month net loss increased $54.7 million year over year, while operating cash use more than doubled, from $50.0 million to $102.3 million.
- Marketable securities declined from $416.5 million at December 31, 2021 to $312.1 million at June 30, 2022, while property, plant and equipment, net rose from $122.0 million to $167.1 million.
Outlook, commentary, risks and unusual items
- Management estimated existing cash and investments, together with expected proceeds from an anticipated sale-leaseback of the Tarzana manufacturing site, would fund operating expenses and capital requirements into 2025. The estimate depends on assumptions that may prove incorrect; sale-leaseback proceeds had not yet been received.
- In June 2022, subsidiaries entered into construction loans with an initial principal amount of $52.1 million and up to $32.9 million of additional future funding. The loan is secured by the Tarzana property, guaranteed by Instil, bears interest at one-month SOFR plus 5.25%, and is due in July 2025 with an extension option to July 2027. The balance-sheet carrying amount was $49.1 million, net of debt issuance costs. The company reported covenant compliance at quarter-end; covenants include minimum consolidated net worth and liquid assets of $85 million each. An interest-rate swap was also entered into.
- Tarzana construction commitments were $33.3 million at June 30, 2022. The company also reported approximately $50.3 million of future clinical-trial services obligations, dependent on milestones, and up to $13.8 million of contingent acquisition consideration.
- ITIL-168’s Phase 2 DELTA-1 trial was ongoing; management expected topline safety and efficacy data in early 2024. The company reported initiating the ITIL-306 trial in July 2022 and DELTA-2, evaluating ITIL-168 with pembrolizumab in additional cancer indications, in August 2022.
- Major risks include clinical efficacy and safety uncertainty, regulatory approval, manufacturing scale-up and comparability, patient enrollment, competition, and the possibility of needing additional capital. Management said COVID-19 had not materially affected operations to date but could affect trial enrollment and timelines. The company reported no material legal proceedings.
- The company adopted lease accounting effective January 1, 2022, recognizing $15.4 million of right-of-use assets and $8.9 million of lease liabilities at adoption; prior periods were not recast. The Tarzana building was placed in service at quarter-end, with depreciation expected to begin in Q3 2022.
Important facts for investors to verify
- Whether the anticipated Tarzana sale-leaseback was completed, on what terms, and how much cash it generated.
- Actual cash burn and updated runway assumptions relative to the stated funding estimate into 2025.
- Construction-loan draws, interest-rate-swap effect, covenant headroom, and remaining Tarzana construction costs.
- Clinical-trial enrollment, safety and efficacy updates, and whether the projected early-2024 DELTA-1 data timing changed.
- Manufacturing readiness and comparability of ITIL-168 produced at the Tarzana facility, plus any resulting trial or regulatory delays.