Inmune Bio, Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019; financial statements are unaudited. Inmune Bio is a clinical-stage immunotherapy company developing INKmune, INB03 and XPro1595, with no revenue to date.
Financial performance and position
| Metric | Q2 2019 | Six months 2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $293,812 | $395,404 |
| General and administrative expense | $1,676,611 | $3,486,106 |
| Net loss | $392,083 | $2,293,128 |
| Basic and diluted loss per share | $0.04 | $0.23 |
| Operating cash used | Not provided quarterly | $3,005,525 |
- At June 30, cash and cash equivalents were $9.36 million, current assets $10.81 million, total assets $27.53 million, and total liabilities $692,689. Liabilities included $184,581 of operating lease obligations; the filing reports no other interest-bearing debt.
- Accumulated deficit was $15.89 million. Financing activities provided $12.21 million in the first half; cash increased to $9.36 million from $186,204 at year-end 2018.
- Acquired in-process R&D intangible assets were $16.51 million. No product-sales margins are available because the company had no revenue.
Changes versus prior comparable period
- Q2 net loss declined to $392,083 from $6.17 million in Q2 2018; first-half net loss declined to $2.29 million from $9.02 million.
- The improvement chiefly reflected substantially lower stock-based compensation and a $1.542 million reversal of previously recorded expense after a consultant waived 200,000 shares. First-half G&A was $3.49 million versus $8.63 million a year earlier. R&D expense was broadly similar year over year.
- Operating cash use increased to $3.01 million from $1.15 million in the first half of 2018, despite the lower reported net loss.
- Cash rose primarily following equity financings: the February IPO generated $7.25 million net proceeds, and April–May share sales generated $4.73 million. The company also entered a 24-month agreement allowing it, at its option, to sell up to a further $19.7 million of stock to Lincoln Park, subject to contractual conditions and limits.
Outlook, risks and unusual items
- Management estimated existing cash, R&D credits and Alzheimer’s Association grant funding would support planned operations through 2019 and into Q2 2020. It expected an additional $0.4 million in grant funding by Q1 2020; receipt is not assured.
- The filing states substantial doubt exists about the company’s ability to continue as a going concern. Management expects to seek further funding, but cannot assure it can raise capital on acceptable terms or at all. Product revenue is not expected for several years, if ever; limited near-term MSC sales may be possible.
- Management expects R&D spending and operating losses to increase as programs advance. Development, clinical-trial, regulatory, manufacturing and financing risks remain significant. The company’s INKmune license includes development milestones, including an IND or equivalent filing by October 29, 2019 and Phase I initiation by October 29, 2020.
- Q2 and first-half results include a $1.542 million noncash expense reversal related to the share waiver. The company recorded $0.3 million of Q2 and $0.6 million of first-half contra-R&D expenses related to Alzheimer’s Association grant funding.
- Related-party arrangements include research services and a new office sublease from a company majority-owned by a board member. The Novamune development agreement is with an entity owned by a significant shareholder.
- Management concluded disclosure controls and procedures were not effective at June 30, 2019, citing the company’s small size and limited segregation of duties. No material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether cash runway and expected grant/R&D-credit receipts remain consistent with management’s estimate, and whether additional financing will be needed sooner.
- Clinical development progress, funding needs and compliance with INKmune license milestones.
- Potential dilution from the Lincoln Park facility, outstanding options and warrants, and other equity compensation.
- The sustainability of expense levels: reported loss comparisons are materially affected by stock-based compensation and the one-time share-waiver reversal.
- Remediation of ineffective disclosure controls and the terms and oversight of related-party transactions.