Inhibikase Therapeutics, Inc. — Q1 2021 Form 10-Q Summary
Business Context and Reporting Period
Inhibikase is a clinical-stage pharmaceutical company developing therapies for Parkinson’s disease and related gastrointestinal disorders. The company is advancing IkT-148009, an Abelson Tyrosine Kinase inhibitor, through a Phase 1 study in healthy volunteers and expects, subject to FDA discussions, to begin dosing Parkinson’s disease patients in the Phase 1 multiple-ascending-dose study. The company also expects to submit an IND for IkT-001Pro, a potential chronic myelogenous leukemia treatment, in the third quarter of 2021.
This unaudited Form 10-Q covers the three months ended March 31, 2021, compared with the three months ended March 31, 2020. The filing was signed May 17, 2021.
Financial Performance and Position
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Grant revenue | $1.407 million | $0.271 million | +$1.136 million, or 419.7% |
| Research and development expense | $2.432 million | $0.283 million | +$2.149 million, or 759.0% |
| Selling, general and administrative expense | $1.601 million | $0.528 million | +$1.073 million, or 203.3% |
| Loss from operations | $(2.625) million | $(0.540) million | Loss increased by $2.085 million |
| Net loss | $(2.637) million | $(0.547) million | Loss increased by $2.090 million |
| Net loss per share | $(0.26) | $(0.07) | |
| Cash used in operating activities | $(3.934) million | $(0.255) million | Use increased by $3.679 million |
Grant revenue represented the company’s only reported revenue source. The company has not generated revenue from commercial product sales. Research and development expense included increased grant-related research spending and approximately $0.8 million of non-grant research primarily associated with Phase 1 Parkinson’s disease trials.
Gross margin is not applicable because the company reported no product sales or cost of revenue. Operating margin was approximately negative 186% in Q1 2021, compared with approximately negative 199% in Q1 2020; net margin was approximately negative 187% versus negative 202%, respectively.
Cash was $9.610 million at March 31, 2021, down from $13.954 million at December 31, 2020. Working capital was $8.283 million. Total liabilities were $3.837 million, including $1.244 million of notes payable, of which $0.995 million was current and $0.249 million was long term. The company had an accumulated deficit of $17.669 million.
Financing activities used $0.410 million in Q1 2021, primarily for note repayments. The company had active grants totaling $1.547 million, with $0.772 million remaining available in U.S. Treasury-held accounts as of April 30, 2021.
Material Changes Versus the Prior Comparable Period
- Grant revenue increased substantially because of greater grant research activity in 2021; 2020 activity was more focused on advancing Phase 1 clinical trials.
- Research and development spending increased 759%, reflecting higher grant-related expenditures and Phase 1 Parkinson’s disease trial costs.
- General and administrative expense increased 203%, driven by higher stock-based compensation, approximately $0.4 million of additional director and officer insurance costs related to the December 2020 IPO, and higher legal, board, investor relations and consulting costs associated with being a public company.
- Stock-based compensation expense rose to $0.591 million from $0.140 million, and the company recognized $0.238 million of warrant expense in Q1 2021.
- Cash operating burn increased materially, and cash declined by $4.344 million during the quarter.
- The company issued 9,000 shares valued at $60,391 in exchange for consulting services and granted 68,628 stock options to scientific advisory board members.
- The $27,550 Paycheck Protection Program loan, recorded at December 31, 2020, was forgiven during the quarter.
Guidance, Outlook, Risks and Unusual Items
Management expects research and development expenses and operating losses to increase as clinical development advances. The company expects to fund future operations through additional equity or debt financing, grants, licensing or collaboration arrangements, but states that additional capital may not be available on acceptable terms.
The filing states that substantial doubt exists regarding the company’s ability to continue as a going concern for one year after issuance of the financial statements. Without anticipated grants and future capital raises, the company expects to scale back to preclinical activities and delay its Phase 1 Parkinson’s disease trial. Management’s mitigation plans include raising additional equity, delaying or suspending research projects and capital expenditures, and reducing future operating expenses.
Management reported that Phase 1 results showed IkT-148009 had a half-life exceeding 24 hours and that a 25 mg once-daily dose achieved exposures consistent with efficacious exposures in animal models. Management stated that these findings accelerated the clinical development program by more than six months, although further development remains subject to FDA discussions and clinical results.
The company remains on track, according to management, to submit an IND for IkT-001Pro in the third quarter of 2021. Potential completion of its clinical development in 2022 and the Parkinson’s disease development timeline are forward-looking targets, not assured outcomes.
Key risks include clinical-trial delays or failures, regulatory uncertainty, inability to obtain financing, dependence on government grants, competition, intellectual-property protection, reliance on third-party manufacturers and service providers, and the potential effects of COVID-19 on enrollment, trial integrity, manufacturing and distribution. The filing states that COVID-19 had not materially affected operations during the periods presented, but future effects remain difficult to predict. No pending litigation was reported.
Important Facts for Investors to Verify
- Cash runway and the timing, terms and dilution implications of any required capital raise.
- The going-concern disclosure and whether additional grants or financing are obtained.
- FDA feedback and actual enrollment and dosing of Parkinson’s disease patients in the Phase 1 program.
- Clinical safety, pharmacokinetic and efficacy data for IkT-148009.
- Whether the planned third-quarter 2021 IND submission for IkT-001Pro occurs and whether the program receives regulatory clearance.
- Use of grant funds, availability of the reported $0.772 million held in U.S. Treasury accounts, and continued dependence on government funding.
- Outstanding debt maturities, including the $0.995 million current note payable due in 2021 and the $0.249 million CEO note due in 2022.
- Future stock-based compensation, warrant dilution and additional common-stock issuances.