Immunic, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2019. Immunic became a public company through its April 12, 2019 exchange transaction with Vital Therapies. The transaction was accounted for as a reverse acquisition, with Immunic AG treated as the accounting predecessor. Accordingly, comparisons with 2018 reflect Immunic AG’s historical results and are not fully comparable with the post-transaction company.
Business context
Immunic is a clinical-stage biopharmaceutical company developing oral therapies for inflammatory and autoimmune diseases. Lead candidate IMU-838 was in Phase 2 trials for ulcerative colitis and relapsing-remitting multiple sclerosis; a Crohn’s disease Phase 2 trial was planned for the second half of 2019. A proof-of-concept trial in primary sclerosing cholangitis was planned for the second half of 2019. IMU-935 remained in preclinical development, and IMU-856 was being developed under an option agreement.
Financial results and position
| Metric | Three months ended June 30, 2019 | Six months ended June 30, 2019 | Comparable 2018 period |
|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue |
| Research and development expense | $6.0 million | $9.4 million | $2.2 million and $3.9 million, respectively |
| General and administrative expense | $9.0 million | $10.3 million | $0.5 million and $1.0 million, respectively |
| Net loss | $14.7 million | $19.0 million | $2.7 million and $4.9 million, respectively |
| Net loss per share, basic and diluted | $1.52 | $3.60 | $3.15 and $5.82, respectively |
| Net cash used in operating activities | Not provided by quarter | $16.3 million | $4.2 million |
As of June 30, cash and cash equivalents were $36.1 million, compared with $13.1 million at December 31, 2018. Current assets were $39.5 million and current liabilities were $3.1 million. Total liabilities were $3.2 million; the filing reports no material borrowings and lists a $66,000 operating lease obligation. Accumulated deficit was $44.0 million. No profit or operating margin is meaningful because the company had no product revenue.
Six-month investing cash inflow was $9.3 million, including $8.2 million of cash acquired in the transaction and proceeds from asset sales. Financing cash inflow was $30.0 million, primarily from a pre-closing share financing. The company reported a $920,000 note receivable related to the asset sale.
Material changes and unusual items
- Operating expenses and net loss increased substantially year over year. Management attributed higher R&D costs mainly to IMU-838 clinical development and a $1.5 million 4SC contingent payment settled in stock.
- G&A included substantial transaction-related and public-company costs, including $6.4 million of executive, employee and board stock-based compensation in the quarter and investment banking, legal and other costs. The filing reports approximately $10.0 million of transaction costs for the six months.
- The April transaction substantially changed the company’s ownership and capital structure. Former Immunic AG shareholders held approximately 88.25% of the combined company immediately after closing. The filing also notes 127,500 vested RSUs for former Vital officers, with shares to be issued in the second half of 2019.
- In July 2019, the company established a new ATM offering for up to $40.0 million of common stock, with a 3% sales commission. No shares had been sold under the prior shelf at the time described.
Outlook, risks and contingencies
Management expected cash resources to fund planned operations for at least 12 months from the filing date, while also stating that substantial additional capital would be required to continue development and fund operations. The company expected rising expenses and losses as trials progressed and public-company costs continued; it did not provide revenue or earnings guidance.
Key risks include clinical-trial failure, regulatory setbacks, inability to obtain additional financing, and dilution or unfavorable terms from future financing. The company also highlighted foreign-currency exposure: a hypothetical 10% adverse currency move was estimated to reduce German subsidiaries’ net current assets by about $3.0 million. Management reported no material litigation and no material changes to previously disclosed risk factors.
The planned second closing of the ELAD asset sale was not assured. A $1.325 million promissory note, valued at $920,000, was due upon that closing, then expected on August 31, 2019; the filing cautioned that the closing might be delayed or not occur. The company also had approximately $1.4 million of non-cancelable development-program obligations expected to be paid in 2019.
Important facts for investors to verify
- Progress, enrollment and results of IMU-838 trials, particularly the planned Crohn’s disease study, and development plans for IMU-935 and IMU-856.
- Actual cash burn and whether cash resources remain sufficient as clinical spending increases; the runway statement is management’s estimate, not a guarantee.
- Whether the ELAD sale’s second closing occurred and whether the promissory note was collected.
- Shares issued or sold under the new ATM and the resulting dilution, including issuance of the 127,500 RSU shares and subsequent option grants.
- Final purchase-price allocation for the reverse acquisition and the assumptions supporting the $32.97 million goodwill balance.