Business context and reporting period
Immunome, Inc. is a preclinical biotechnology company developing cancer and infectious-disease immunotherapies. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2020. The company had not generated product revenue and expected no product sales revenue in the foreseeable future.
Financial highlights
Amounts below are in millions, except per-share data. The company reported no revenue, so revenue-based margins are not meaningful.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Research and development expense | $1.64 | $2.23 | $5.65 | $6.39 |
| General and administrative expense | $1.17 | $0.49 | $2.54 | $1.07 |
| Operating loss | $(2.82) | $(2.72) | $(8.19) | $(7.46) |
| Net loss | $(8.38) | $(2.74) | $(13.76) | $(7.52) |
| Basic and diluted net loss per share | $(7.52) | $(2.50) | $(12.44) | $(6.88) |
- At September 30, cash was $6.74 million; current assets were $7.48 million and current liabilities $5.41 million. Total assets were $11.98 million.
- Nine-month operating cash use was $6.07 million; investing cash use was $0.54 million; financing provided $10.81 million. Cash and restricted cash increased $4.20 million to $6.84 million.
- Total debt was approximately $0.66 million: $0.16 million in equipment loans and a $0.50 million Paycheck Protection Program loan. The PPP loan bears 1% interest and may be eligible for forgiveness, which was not assured.
- Total liabilities were $12.70 million, including a $7.07 million warrant liability. Series A preferred stock was reported as temporary equity with a $51.03 million liquidation value; stockholders’ deficit was $49.09 million.
Material changes and significant events
- Net loss increased year over year, particularly in Q3, principally because of a $5.55 million non-cash charge from remeasuring preferred-stock warrants. The warrants were issued in 2020 and were not outstanding in the comparable 2019 period.
- Q3 R&D expense fell $0.59 million year over year; the filing attributes the decrease partly to a $0.60 million DoD reimbursement and reduced outsourced activity. Nine-month R&D expense fell $0.74 million, also reflecting reduced outsourced work. G&A rose $0.69 million in Q3 and $1.47 million for the nine months, mainly due to personnel, professional fees and consulting.
- In July 2020, the company entered a DoD agreement providing up to $13.3 million to support development of biosynthetic convalescent plasma for COVID-19. Funding was expected through mid-2021; $0.6 million was recorded as contra-R&D expense in the nine months, and $0.3 million was receivable at quarter-end.
- After quarter-end, the company completed its IPO: 3.25 million shares were sold October 6 at $12 per share, and underwriters purchased 487,500 additional shares October 13. Preferred shares converted into 5.67 million common shares and preferred-stock warrants converted to common-stock warrants.
Outlook, risks and controls
- Management expected cash at quarter-end plus IPO proceeds to fund operations into the first quarter of 2022, while anticipating further financing needs thereafter. The company expected operating losses and negative operating cash flows for the foreseeable future, with R&D and public-company costs expected to increase.
- Management cautioned that runway estimates depend on assumptions and capital may be exhausted earlier than expected. Future financing may dilute shareholders or impose restrictive terms; unavailable funding could force delayed, reduced or terminated programs, partnerships, strategic alternatives or cessation of operations.
- The filing describes all programs as preclinical. Development, regulatory, financing and commercialization outcomes are uncertain. COVID-19 had not significantly affected operations or financial statements to date, but its future effects on research timelines, markets and access to capital were uncertain.
- Disclosure controls and procedures were deemed ineffective at September 30, 2020. Three previously identified material weaknesses involved journal-entry review, account-reconciliation review and insufficient accounting personnel. Remediation had begun, but the company stated it could not assure timely remediation.
- The filing’s liquidity disclosures are not fully consistent: the notes state that the IPO alleviated conditions raising substantial doubt, while MD&A later states that conditions raise substantial doubt. IPO proceeds are also reported differently in sections of the filing; see verification items below.
Important facts for investors to verify
- Reconcile the IPO proceeds disclosures: the filing cites $41.7 million net of underwriting discounts but before other offering expenses, $38.9 million in one MD&A passage, and $36.3 million received at the October 6 closing before subsequent proceeds. Confirm total net proceeds after all expenses and the treatment of the overallotment.
- Clarify the differing going-concern statements and confirm the cash runway assumptions supporting the first-quarter 2022 estimate.
- Track DoD reimbursement timing, eligible expenditures and remaining contract funding, as well as the status of PPP loan forgiveness.
- Monitor remediation and testing of the disclosed material weaknesses, and any subsequent changes to disclosure controls.
- Assess the warrant liability’s valuation and its post-IPO conversion, and distinguish non-cash remeasurement expense from operating cash burn.