Instil Bio, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Instil Bio is a clinical-stage biopharmaceutical company developing autologous tumor-infiltrating lymphocyte (TIL) therapies. It has no approved products and has generated no product revenue.
Financial performance and liquidity
| Metric | Q2 2023 | Six months 2023 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $8.5 million | $29.1 million |
| General and administrative expense | $11.5 million | $24.7 million |
| Restructuring and impairment charges | $1.0 million | $25.6 million |
| Net loss | $18.7 million | $75.7 million |
| Net loss per share, basic and diluted | $0.14 | $0.58 |
| Cash used in operating activities | Not separately stated | $54.2 million |
- At June 30, 2023, cash, cash equivalents, restricted cash and marketable securities totaled $202.9 million: $21.8 million cash and equivalents, $1.2 million restricted cash and $179.9 million marketable securities.
- Cash and equivalents plus restricted cash declined by $20.7 million during the first half. Investing activities provided $24.9 million, primarily from net maturities of marketable securities, while financing activities provided $8.7 million from the construction loan.
- Property, plant and equipment, net, was $181.5 million; total assets were $408.3 million and stockholders’ equity was $296.5 million at June 30.
- The Tarzana construction loan had $83.4 million principal outstanding ($81.5 million net carrying value). It matures in July 2025, with an extension option to July 2027, bears interest at one-month SOFR plus 5.25%, and had a weighted-average quarterly rate of approximately 8.2%. The company reported compliance with its covenants, including the $85 million minimum net-worth and liquid-assets requirement.
Material changes versus prior comparable periods
- Q2 R&D expense fell $33.0 million year over year, mainly due to workforce reductions, discontinuation of ITIL-168 manufacturing activities and lower facility costs. First-half R&D expense fell $51.5 million.
- Q2 G&A expense decreased $5.7 million year over year; first-half expense decreased $7.6 million, primarily due to lower personnel and professional-services costs.
- Net loss improved by $40.3 million in Q2 and $37.4 million for the first half year over year. Lower operating expenses and higher interest income and other income contributed; first-half results also included $25.6 million of restructuring and impairment charges.
- First-half restructuring charges included $11.7 million of impairment on assets held for sale, $7.6 million of right-of-use asset impairment, $2.6 million of leasehold-improvement impairment, $1.8 million of employee-related costs and $1.9 million of contract-termination costs. The held-for-sale assets were carried at $6.4 million at quarter-end.
Outlook, management commentary and risks
- The company expects existing cash, cash equivalents, restricted cash and marketable securities to fund operating expenses and capital needs beyond 2026. This is management’s estimate and depends on assumptions; spending could exceed expectations, and planned property transactions may not occur on favorable terms or at all.
- The restructuring reprioritizes resources toward the CoStAR platform and ITIL-306. ITIL-168 was discontinued. By June 30, the U.S. workforce had been reduced approximately 96% and the U.K. workforce approximately 42%; ITIL-306 clinical manufacturing and trial operations were moved to the U.K.
- Management anticipated initiating the U.K. Phase 1 ITIL-306-202 trial in the second half of 2023, subject to MHRA clearance, and expected initial data in 2024. The filing reports positive initial MHRA feedback on the proposed study design, not trial clearance.
- Management expects near-term R&D and G&A reductions, but R&D spending may rise as the ITIL-306 trial begins and progresses. The company estimated up to $3.1 million of additional restructuring charges, with most expected by year-end 2023; further costs remain possible.
- Key risks include clinical and regulatory uncertainty, trial enrollment and execution, manufacturing reliability and cell-therapy complexity, the U.K. operational transition, and the company’s dependence on future financing despite its stated runway estimate. Prior manufacturing issues included lower ITIL-168 manufacturing success rates and contamination identified in cell media; the company says it implemented corrective actions but cannot assure they will be effective.
- The company was not in compliance with Nasdaq’s minimum bid-price requirement; Nasdaq approved its transfer to the Nasdaq Capital Market on July 26, 2023 and granted an additional 180-calendar-day compliance period. Failure to regain compliance could result in delisting.
- The company reported no material legal proceedings, effective disclosure controls as of June 30, 2023, and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the MHRA cleared the ITIL-306-202 trial and whether the anticipated trial and 2024 data timelines remain achievable.
- Whether the reported cash runway beyond 2026 remains supportable as clinical spending changes, and whether the Tarzana site sale or lease and other facility subleases proceed.
- Actual remaining restructuring costs, further impairments and cash expenditures compared with the estimated additional charges of up to $3.1 million.
- Construction-loan covenant compliance, interest costs and repayment or extension plans, alongside the required liquidity and net-worth threshold.
- Progress in restoring Nasdaq minimum-bid-price compliance within the granted period.