Instil Bio, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are to Q1 2022 unless otherwise noted. Instil Bio is a clinical-stage biopharmaceutical company developing autologous tumor-infiltrating lymphocyte (TIL) therapies. It has no approved products and has generated no product-sales revenue.
Financial performance and position
| Metric | Q1 2023 / March 31, 2023 | Comparable period / prior date |
|---|---|---|
| Revenue | No product-sales revenue | No product-sales revenue |
| Research and development expense | $20.7 million | $39.2 million in Q1 2022 |
| General and administrative expense | $13.2 million | $15.1 million in Q1 2022 |
| Restructuring and impairment charges | $24.6 million | None in Q1 2022 |
| Total operating expenses | $58.4 million | $54.3 million in Q1 2022 |
| Net loss | $57.1 million; $0.44 per share | $54.1 million; $0.42 per share in Q1 2022 |
| Operating cash flow | $(34.7) million | $(55.1) million in Q1 2022 |
| Cash, cash equivalents and marketable securities | $223.9 million, including $0.7 million restricted cash | $260.9 million in cash and marketable securities at December 31, 2022; no restricted cash reported |
| Current assets / current liabilities | $240.1 million / $26.7 million | $269.4 million / $32.8 million at December 31, 2022 |
| Loan payable | $77.1 million carrying amount; $79.2 million principal | $72.4 million carrying amount at December 31, 2022 |
| Stockholders’ equity | $311.2 million | $363.6 million at December 31, 2022 |
No meaningful revenue margin is available because the company has no product-sales revenue. Operating cash use declined year over year, partly because of lower spending and noncash impairment adjustments. Q1 investing cash flow was positive $14.5 million, primarily reflecting net marketable-security maturities, offset by $8.5 million of property and equipment purchases. Financing cash flow was positive $4.5 million, primarily from loan proceeds.
Material changes and unusual items
- R&D expense fell $18.5 million year over year, primarily due to reduced headcount, discontinued ITIL-168 manufacturing activities, and lower facility and overhead costs. G&A expense declined $1.9 million.
- Restructuring and impairment charges of $24.6 million included $10.5 million for assets classified as held for sale, $7.8 million for right-of-use assets, $2.6 million for leasehold improvements, $1.8 million for employee termination benefits, and $1.9 million for contract terminations. These charges were largely noncash impairments.
- Net loss increased $3.0 million year over year despite lower R&D and G&A expense, principally reflecting restructuring charges and the absence of the prior-year $0.5 million income-tax benefit. Interest income rose to $2.1 million, while interest expense was $0.6 million.
- Assets held for sale were $7.6 million at quarter-end. The company is evaluating a sale or lease of its Tarzana, California manufacturing site and subleases of other facilities.
Outlook, management commentary and risks
- The board’s restructuring and prioritization plan discontinued ITIL-168 and refocused resources on the CoStAR platform and next-generation TIL technologies, particularly ITIL-306. The company reduced its U.S. workforce by approximately 60% and UK workforce by approximately 40% as of March 31; the U.S. reduction was substantially completed in April, leaving approximately 15 U.S. employees to lead global business operations.
- Instil expects to transition ITIL-306 clinical manufacturing and trial operations to the United Kingdom. Management expects restructuring to reduce operating expenses and extend cash runway beyond 2026. This is an estimate based on assumptions; the filing cautions that actual spending, savings, trial progress, and facility transactions may differ. Up to $4.0 million of additional restructuring charges were estimated, excluding potential facility-sale costs and certain impairments.
- ITIL-306 is in a Phase 1 dose-escalation trial; the first patient was dosed in October 2022. The company reported that it had resumed the trial after a voluntary pause related to manufacturing review. It planned to initiate a UK Phase 1 trial in 2023. Manufacturing reliability, the planned UK transition, regulatory feedback, and clinical-trial execution remain material uncertainties.
- The Tarzana construction loan bears interest at one-month SOFR plus 5.25%; the weighted-average rate was approximately 7.8% in Q1. Principal is due July 2025, with an option to extend to July 2027. The loan requires at least $85 million of consolidated net worth and liquid assets under its definitions; the company reported compliance at March 31, 2023.
- Instil has no product revenue and expects continuing losses. Management believes existing cash, cash equivalents, restricted cash, and marketable securities will fund operating and capital needs beyond 2026, but warns that additional capital may be needed and may not be available on acceptable terms. Further equity financing could dilute shareholders.
- Other risks include cell-therapy manufacturing failures or contamination, clinical delays or unfavorable results, dependence on regulatory approvals, competition, and the uncertain ability to sell or lease facilities. The filing also reports Nasdaq notified the company in January 2023 that it did not meet the minimum bid-price requirement for continued listing; continued compliance is not assured.
Most important facts for investors to verify
- Whether ITIL-306 trial progress, manufacturing success, and the planned UK transition are on track, and whether any regulatory or trial developments alter timelines.
- Whether the restructuring achieves expected savings, whether further charges arise, and whether the Tarzana site or other facilities are sold, leased, or subleased on acceptable terms.
- Whether liquidity remains consistent with management’s beyond-2026 runway estimate, including the impact of clinical spending, construction costs, debt service, and any financing needs.
- Whether the company maintains compliance with loan covenants and Nasdaq listing requirements.
- Whether the company can demonstrate clinical benefit and manufacturing consistency for its CoStAR-TIL programs; there are no approved products or product-sales revenues to date.