Inmune Bio, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited results; dollar amounts below are in millions unless noted. Inmune Bio is a clinical-stage biotechnology company developing DN-TNF and natural-killer-cell therapies. It reported minimal revenue and no commercial product sales.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0.014 | $0 | $0.018 | $0 |
| Research and development expense | $6.520 | $2.363 | $13.475 | $4.059 |
| General and administrative expense | $2.515 | $2.457 | $6.666 | $4.960 |
| Total operating expenses | $9.035 | $4.820 | $20.141 | $9.019 |
| Net loss | $9.458 | $4.717 | $20.669 | $8.895 |
| Basic and diluted loss per share | $0.55 | $0.36 | $1.33 | $0.77 |
Gross margin and other conventional operating-margin measures are not meaningful given the company’s minimal revenue and development-stage operations. Revenue came from MSC sales to one third party. Q3 R&D expense rose $4.157 million year over year, largely from Alzheimer’s Phase 2 trial costs, additional drug manufacturing, and compensation. For the nine months, R&D expense increased $9.416 million; management attributed the increase principally to manufacturing, the Alzheimer’s trial, COVID-19 trial costs, and compensation. Nine-month G&A expense increased $1.706 million, mainly from professional fees and compensation.
- Cash and working capital: Cash and cash equivalents were $84.471 million at September 30, 2021, versus $21.967 million at December 31, 2020; working capital was $86.121 million. Management said available cash was expected to fund operations for at least 12 months after the filing date.
- Cash flows, nine months: Operating activities used $18.724 million, investing activities used $15.000 million, and financing activities provided $96.357 million. Cash increased by $62.504 million before the reported $0.129 million adverse currency translation impact.
- Debt: A $15.0 million secured term loan was outstanding, reported net of discount at $14.401 million. The rate was 7.75% at quarter-end, with a 6.5% final payment fee. After an equity milestone, principal-and-interest payments were scheduled to begin July 2023, with maturity January 2025. The company may request another $5.0 million, subject to lender discretion.
- Funding and dilution: Nine-month financing included $36.9 million net from a July registered direct offering, $28.4 million from the 2020 ATM, $14.9 million from the 2021 ATM, and the term loan. Shares outstanding increased from 13.481 million at year-end 2020 to 17.843 million at September 30, 2021. The 2021 ATM had a stated capacity of up to $45 million, subject to limitations.
Material changes and notable items
- Nine-month net loss increased by $11.774 million year over year, and operating cash use increased by $12.173 million. The company expects losses and operating cash use to rise as programs advance.
- In June, the company paid Xencor $15.0 million and issued 192,533 shares to cancel a warrant representing an option to acquire 10% of fully diluted shares. The $15.0 million payment was reported as investing cash outflow; the company said it used term-loan proceeds to fund the cash consideration.
- The company initiated an INKmune Phase 1 trial in high-risk MDS during July; one patient had been treated by the filing date. It paid a $25,000 milestone to a related-party licensor, Immune Ventures, whose owners include company officers and a director.
- The COVID-19 respiratory-failure Phase 2 program was closed, with management citing changes in treatment and regulatory conditions and a high-risk, low-reward assessment. The NASH program was deferred; it may be restarted or abandoned.
- The company terminated its UCL Business license for MSC technology in July and reported a $14,000 Q3 revenue sale of MSCs to a third party.
Outlook, risks, and contingencies
- Management planned to begin enrollment in a randomized Phase 2 Alzheimer’s trial in December 2021, with top-line data expected in mid-2023. The planned trial called for 200 patients and six months of treatment. These are forward-looking plans, not reported outcomes.
- Management planned to continue INKmune MDS Phase 1 enrollment, targeting completion in 2022, and intended a separate ovarian-cancer Phase 1 trial in 2022. The treatment-resistant depression Phase 2 design and FDA discussions were ongoing; the filing’s stated anticipated authorization timing was the second half of 2021.
- Clinical development, patient enrollment, site operations, and suppliers may be affected by COVID-19. The company also faces clinical, regulatory, manufacturing, financing, and foreign-currency risks. It does not hedge foreign currency exposure.
- The company has an accumulated deficit of $54.044 million and expects continued losses; its products may not become commercially available for years, if ever. R&D tax-credit receivables totaled $4.958 million; UK and Australian reimbursements were expected, and Australia paid approximately $1.3 million in October 2021.
- The filing reported no pending legal proceeding believed likely to have a material adverse effect. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Key facts for investors to verify
- Whether cash burn and clinical-trial spending remain consistent with the stated 12-month liquidity outlook, and whether additional equity financing is needed.
- Progress, enrollment, safety, and timing for the Alzheimer’s, MDS, breast-cancer, and treatment-resistant depression programs, including any revised trial timelines.
- The loan’s payment schedule, final payment fee, covenants, and any effect of the secured debt on future financing flexibility.
- Actual receipt and timing of R&D tax-credit reimbursements, and the status of the remaining 2021 ATM capacity and potential share dilution.
- Related-party arrangements, including the Immune Ventures license and the milestone and royalty obligations, and any material change in litigation or contingencies.