Immunic, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Immunic is a clinical-stage biopharmaceutical company developing oral therapies for inflammatory and autoimmune diseases. It had no approved products and generated no product revenue. The 2019 comparison reflects Immunic AG as the accounting predecessor following the April 2019 reverse acquisition.
Financial results
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| R&D expense | $10.0m | $6.0m | $16.4m | $9.4m |
| General and administrative expense | $2.2m | $9.0m | $4.8m | $10.3m |
| Total operating expenses | $12.2m | $15.0m | $21.2m | $19.7m |
| Net loss | $11.5m | $14.7m | $19.9m | $19.0m |
| Net loss per share | $0.90 | $1.52 | $1.70 | $3.60 |
| Operating cash used | Not separately stated | Not separately stated | $20.3m | $16.3m |
There was no revenue, so operating margins are not meaningful. Q2 net loss narrowed year over year, mainly as 2019 included substantial one-time transaction-related stock compensation and fees. R&D spending rose with clinical and drug-supply costs for IMU-838, IMU-935 and IMU-856. For the first half, higher R&D spending outweighed lower G&A, and net loss increased 5%.
- Liquidity: Cash and cash equivalents were $48.6m at June 30, 2020, versus $29.4m at December 31, 2019. Current assets were $53.0m and current liabilities $7.7m.
- Cash flows: First-half operating cash use was $20.3m; financing provided $39.8m, principally from equity offerings and ATM sales. Investing used $0.1m.
- Debt and obligations: The filing reports no borrowings. Lease liabilities were $1.084m present value ($0.793m long term); approximately $1.3m of non-cancelable development-program commitments was expected to be paid in 2020.
- Equity: The April registered direct offering generated approximately $13.9m net, the June offering approximately $23.0m net, and first-half ATM sales approximately $2.8m net. Shares outstanding rose from 10.7m at year-end to 15.0m at June 30.
Business developments, outlook and risks
- Pipeline: IMU-838 was in Phase 2 studies for relapsing-remitting multiple sclerosis (RRMS), ulcerative colitis and COVID-19; an investigator-sponsored primary sclerosing cholangitis study was ongoing, and a Crohn’s disease Phase 2 study was under consideration. IMU-935 was in Phase 1; IMU-856 was in advanced preclinical testing. Immunic exercised its IMU-856 license option in January, paying an upfront fee; further milestones and royalties may be payable.
- Subsequent developments: On August 2, 2020, the company reported positive top-line EMPhASIS Phase 2 results in RRMS: MRI lesion reductions versus placebo of 62% at 45 mg (p=0.0002) and 70% at 30 mg (p<0.0001). The filing cautions that these were preliminary top-line data and could change after full review. First patients had entered an investigator-sponsored Phase 2b COVID-19 study of IMU-838 plus oseltamivir in July.
- Management outlook: Management expected significant expenses and increasing operating losses as development advanced, and anticipated cash would fund operations beyond 12 months from issuance of the financial statements. The company also stated it would require substantial additional capital; further financing could dilute shareholders or prove unavailable on acceptable terms.
- Key risks: Clinical efficacy and safety are unproven, trials may fail or be delayed, and regulatory approval is uncertain. COVID-19 could disrupt trial enrollment, supply and regulatory timelines; pursuing COVID-19 could also divert resources from other programs. Foreign-exchange exposure, primarily to the euro, was identified; a hypothetical 10% adverse currency move would reduce foreign net current assets by about $0.15m and affect six-month net loss by about $1.5m.
- Other matters: No material litigation was reported. Management concluded disclosure controls were effective and reported no material change in internal control during the quarter. The former CFO resigned in April; the Controller became Principal Financial and Accounting Officer, and the board chairman assumed the Executive Chairman role under an agreement then scheduled to end October 15, 2020.
Investor verification priorities
- Review complete EMPhASIS efficacy and safety data against the preliminary results, including whether the top-line findings are confirmed.
- Track cash burn, development spending and the timing and terms of any additional financing; the stated runway is management’s estimate.
- Verify progress, enrollment, safety and timelines for the IMU-838 studies, including COVID-19, and the development milestones for IMU-935 and IMU-856.
- Assess the effect of equity issuance and remaining ATM capacity on dilution and outstanding shares.
- Monitor trial disruptions, foreign-exchange movements, lease and development commitments, and potential Daiichi Sankyo milestones and royalties.