Immunic, Inc. — Q3 2019 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2019. Immunic is a clinical-stage biopharmaceutical company developing oral therapies for inflammatory and autoimmune diseases; it has no approved products and has generated no product revenue.
Financial results
| Metric (USD millions, except per-share data) | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | 7.102 | 1.410 | 16.486 | 5.350 |
| General and administrative expense | 2.075 | 0.395 | 12.360 | 1.412 |
| Total operating expenses / operating loss | 9.177 | 1.805 | 28.846 | 6.762 |
| Net loss | 8.215 | 1.797 | 27.242 | 6.730 |
| Net loss per share | $0.82 | $2.12 | $3.96 | $7.95 |
With no product revenue, gross profit and operating margins are not meaningful. Other income was $0.962 million in Q3 and $1.604 million for the nine months, including R&D reimbursements and income associated with the ELAD asset sale. Net loss increased 357% in Q3 and 305% for the nine-month period versus the respective 2018 periods.
Cash, liquidity, and financing
- Cash and cash equivalents were $30.460 million at September 30, 2019, versus $13.072 million at December 31, 2018. Current assets were $34.519 million and current liabilities $7.036 million.
- Cash used in operating activities was $22.280 million for the first nine months, compared with $6.293 million in 2018. Investing activities provided $10.561 million, including $8.151 million of cash acquired in the transaction and proceeds from the ELAD asset sale. Financing activities provided $30.188 million, principally from a pre-closing equity financing.
- Total liabilities were $7.077 million. The filing reports no material borrowings; the balance sheet included a $71,000 operating lease liability. Contractual obligations for development programs totaled approximately $557,000, expected to be paid in 2019.
- Management said available resources were expected to fund planned operations for at least 12 months from the filing date, while also stating that substantial additional capital would be needed to continue development. A $40 million ATM facility had $39.6 million available at quarter-end; Q3 sales generated $358,000 gross and $214,000 net.
Material changes and unusual items
- The April 12, 2019 reverse acquisition made Immunic AG the accounting acquirer and predecessor for reporting. Former Immunic AG shareholders held approximately 88.25% of the combined company. The company changed its name from Vital Therapies to Immunic and completed a 40-for-1 reverse stock split. The transaction makes historical comparisons less directly comparable.
- Q3 R&D expense rose mainly with IMU-838 Phase 2 trials and Crohn’s disease trial preparation, as well as IMU-856 preclinical and drug-supply costs. Nine-month R&D also included a $1.5 million contingent 4SC payment settled in stock.
- Nine-month G&A included substantial transaction-related and public-company costs, including $6.4 million of stock-based compensation and $1.7 million of investment banking and legal fees. Management expected transaction-related G&A costs to decline, but anticipated ongoing public-company expenses.
- The ELAD asset sale was completed in September; collection of the promissory note resulted in approximately $405,000 of income compared with its recorded fair value, partly offset by a write-off related to VTL China.
- At quarter-end the company reported $32.970 million of goodwill from the acquisition and no impairment indicators. In November 2019, after quarter-end, it entered a New York office lease with estimated present-value obligations of $593,000.
Pipeline, outlook, and risks
- IMU-838 was in Phase 2 trials for relapsing-remitting multiple sclerosis and ulcerative colitis; a Crohn’s disease Phase 2 trial was planned, and an investigator-sponsored primary sclerosing cholangitis study was ongoing. IMU-935 began a Phase 1 healthy-volunteer trial in September 2019. IMU-856 remained subject to an option agreement; the option had not been exercised.
- The company expected R&D spending and operating losses to increase as it advanced and expanded clinical programs. It provided no specific revenue, profitability, or trial-readout guidance in the filing.
- Key risks include clinical or regulatory failure, uncertain development timelines and costs, the need for additional financing and potential dilution, and foreign-exchange exposure. A hypothetical 10% adverse currency move was estimated to reduce German subsidiaries’ net current assets by about $2.1 million. The company had no material litigation and reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Clinical trial progress, endpoints, enrollment, and timing for IMU-838 and IMU-935, and whether the planned Crohn’s disease trial proceeds.
- Cash burn and runway against management’s 12-month estimate, and future financing needs or ATM share issuance.
- Potential dilution from outstanding options and restricted stock units, and final purchase-accounting allocations for the reverse acquisition.
- Whether reimbursements and asset-sale-related income recur; neither represents product sales.
- Foreign-currency exposure and the financial impact of the new office lease.