Indaptus Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Indaptus is a preclinical biotechnology company developing immunotherapies for cancer and viral diseases; it reported no revenue. Comparisons are affected by the August 3, 2021 reverse merger with Decoy Biosystems: Decoy’s historical financial statements became the company’s historical statements, while legacy Intec Pharma’s business was slated to wind down.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development | $0.70 million | $1.35 million | $1.58 million | $2.30 million |
| General and administrative | $2.67 million | $0.20 million | $2.93 million | $0.53 million |
| Total operating expenses | $3.37 million | $1.55 million | $4.51 million | $2.83 million |
| Net loss | $3.37 million | $1.54 million | $4.50 million | $2.81 million |
| Basic and diluted loss per share | $0.81 | $0.79 | $1.67 | $1.45 |
Margins are not meaningful because the company reported no revenue. Net cash used in operating activities was $7.75 million for the nine months, versus $2.37 million in the prior-year period. Financing activities provided $47.97 million, including merger proceeds, private-placement proceeds, and SAFE proceeds. Cash and cash equivalents were $41.86 million at September 30, 2021, versus $1.64 million at December 31, 2020. Total assets were $43.86 million and current liabilities were $5.78 million; no interest-bearing debt is identified in the presented balance sheet. SAFEs of $6.4 million converted into common stock at the merger.
Material changes, outlook, and risks
- Q3 operating expenses rose 118% year over year. G&A increased substantially with higher payroll, stock compensation on August 2021 option grants, and public-company costs. R&D fell as the prior-year period included Decoy20 manufacturing and characterization work.
- The August private placement generated approximately $27.3 million net proceeds. Its pre-funded warrant was fully exercised in September; accompanying warrants remain outstanding. At September 30, the company reported 3.09 million warrants and 1.30 million options outstanding.
- Following the merger, the board elected to wind down the legacy Accordion Pill business. The filing says the wind-down was expected to be substantially complete by year-end 2021. Related arrangements included an expected termination fee of approximately €2.0 million (about $2.3 million) to LTS and an agreed $600,000 lease break-up fee. The company also recorded $600,000 of equipment as held for sale.
- Management believed cash would fund operations for at least one year after issuance of the financial statements; MD&A describes runway of more than one year from the filing. The company nevertheless expects substantial additional financing needs to advance development and says funding may not be available on acceptable terms.
- Key risks include preclinical development and clinical-trial execution, regulatory approvals, manufacturing, intellectual-property protection, reliance on outside providers, and possible COVID-19-related disruptions to operations, trials, supply, and capital access. Management reported no pending material legal proceedings and no material off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the reported cash runway remains adequate given operating cash use and the costs and timing of planned IND-enabling work and clinical trials.
- Actual costs, timing, and completion status of the Accordion Pill wind-down, including the LTS termination fee and lease break-up fee.
- Potential dilution from outstanding warrants and options, and the terms and exercise status of these securities.
- Development milestones for Decoy20 and the financing required to reach clinical trials; the filing provides no revenue guidance or specific clinical-trial timing forecast.
- The effect of the reverse merger and legacy business wind-down when interpreting year-over-year financial comparisons.