Inmune Bio, Inc. — Form 10-K summary
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone fourth-quarter report. The company is a clinical-stage biotechnology business developing therapies targeting the innate immune system; it had no approved products or product revenue.
Financial performance and position
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $12.44 million | $981,480 |
| Net loss | $12.44 million | $831,486 |
| Net loss per share, basic and diluted | $1.43 | $0.13 |
| Net cash used in operating activities | $2.06 million | $761,834 |
- 2018 research and development expense was $1.11 million, up from $435,362; general and administrative expense was $11.33 million, up from $546,118. Management attributed much of the G&A increase to stock-based compensation and professional fees.
- Stock-based compensation totaled $10.00 million in 2018, including $4.63 million recorded for 600,000 consultant shares and $5.38 million related to stock options. The filing reports no revenue, so operating margins are not meaningful.
- At year-end, cash was $186,204, working capital was $25,576, total assets were $17.36 million and total liabilities were $823,766. Assets included $16.51 million of acquired in-process R&D intangible assets.
- Cash declined by $1.18 million during 2018. Financing provided $900,000 from a stock sale; there was no investing cash flow in 2018. No borrowings are reported as outstanding at year-end; a related-party convertible note had been converted to stock in 2017.
- The company reported an accumulated deficit of $13.60 million. The auditor issued an unqualified opinion but included a going-concern explanatory paragraph, citing recurring losses and no operating revenue.
Changes, funding and outlook
- The net loss increased substantially from 2017. Besides higher R&D activity, 2018 expenses included unusually high noncash stock compensation. 2017 other income included a $150,000 trademark-settlement gain, which did not recur.
- After year-end, the February 2019 IPO raised $8.17 million gross and $7.25 million net. The company also reported receiving $600,000 of a milestone-based Alzheimer’s Association grant in March 2019, with a further $400,000 expected by the first quarter of 2020 if applicable conditions are met.
- Management estimated that cash, IPO proceeds and expected grant and R&D-credit funding would support operations into the first quarter of 2020. It expects to need additional capital; the timing, amount and availability are uncertain, and management cautioned that failure to raise funds could jeopardize operations.
- Development priorities were INKmune for cancer, INB03 for cancer and XPro1595 for Alzheimer’s disease. The filing reports UK authorization for the INKmune ovarian-cancer trial in December 2018 and Australian authorization for the INB03 cancer trial, with enrollment reported as having begun in August 2018. XPro1595 received Australian trial approval in February 2019. These are early-stage programs; efficacy and eventual approval are unproven.
- Management discussed pursuing partnerships and potential expedited or orphan-drug pathways, but reported no active partnering discussions and no assurance that designations or approvals would be obtained. It did not provide financial guidance.
Risks, contingencies and governance
- Key risks include continued financing needs, clinical and regulatory failure or delay, competition, manufacturing and enrollment challenges, intellectual-property protection, reimbursement uncertainty and foreign-currency exposure.
- Management concluded disclosure controls and procedures were not effective at December 31, 2018, citing the company’s small size and limited segregation of duties. The filing did not include management’s internal-control effectiveness assessment or an auditor attestation.
- Related-party matters warrant attention: executives own Immune Ventures, licensor of the INKmune technology; a significant shareholder is associated with Novamune/Luminus and Advent Bioservices. The company also recorded substantial share-based compensation for a consultant supporting its public listing.
- The filing reports no pending legal proceedings. It describes a prior lawsuit resolved through a stock settlement and a trademark dispute settled in 2017.
Important facts for investors to verify
- Available cash, actual operating runway and the status and conditions of remaining grant and R&D-credit funding.
- Enrollment, safety findings, timelines and funding needs for the INKmune, INB03 and XPro1595 trials.
- The accounting, issuance status and potential dilution associated with consultant shares, stock options and warrants.
- License milestones, royalties, termination provisions and related-party conflicts, especially for INKmune and XPro1595/INB03.
- Remediation of the disclosed ineffective controls and any subsequent changes in liquidity or financing needs.