Business context and reporting period
Inmune Bio, Inc. is a clinical-stage biotechnology company developing therapies targeting innate immune dysfunction through its DN-TNF and natural killer cell platforms. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2021; financial amounts below are in U.S. dollars.
Key financial metrics
| Metric | Q2 2021 | Six months 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | $0 | $4,000 | $0 |
| Research and development expense | $4.464 million | $6.955 million | $0.903 million Q2; $1.696 million six months |
| General and administrative expense | $2.090 million | $4.151 million | $1.204 million Q2; $2.504 million six months |
| Net loss | $6.655 million | $11.211 million | $2.108 million Q2; $4.178 million six months |
| Basic and diluted loss per share | $0.44 | $0.77 | $0.20 Q2; $0.39 six months |
| Net cash used in operating activities | Not separately presented | $10.801 million | $2.853 million |
Revenue was immaterial and the company remained loss-making, so the filing provides no meaningful operating margin. At June 30, cash and cash equivalents were $39.520 million, working capital was $41.060 million, accumulated deficit was $44.586 million, and stockholders’ equity was $43.233 million. Total liabilities were $17.467 million, including a $15.0 million term loan reported at $14.348 million net of discount.
Material changes versus prior comparable periods
- Q2 operating expenses increased $4.447 million year over year; six-month operating expenses increased $6.906 million. Management attributed the increases mainly to higher drug manufacturing costs, COVID-19 trial costs, compensation and professional fees.
- Six-month net loss widened by $7.033 million year over year. Operating cash use rose from $2.853 million to $10.801 million.
- Cash increased from $21.967 million at December 31, 2020 to $39.520 million at June 30, 2021, supported chiefly by $28.446 million net proceeds from common-stock sales and $14.951 million net proceeds from debt. Investing cash outflow included the $15.0 million Xencor payment.
- Shares issued and outstanding increased from 13,481,283 at year-end 2020 to 15,125,171 at June 30, 2021; 17,703,692 shares were reported outstanding as of August 4, 2021.
Outlook, commentary, risks and unusual items
- Management expected continuing losses and rising R&D expenses as programs advance, and said June 30 cash was expected to fund operations for at least 12 months following the filing date. This assessment preceded the July financing proceeds described below.
- In July 2021, the company raised estimated net proceeds of $36.9 million in a registered direct offering and $15.0 million through its new ATM program. These post-period transactions strengthened liquidity but increased share count.
- In June, the company borrowed $15.0 million from Silicon Valley Bank and an affiliate at a 7.75% initial interest rate. Principal payments are scheduled to begin in July 2022, with maturity in January 2025; the loan includes a 6.5% final payment fee, prepayment premiums, collateral and covenants. Lenders received warrants for 45,386 shares.
- The company paid Xencor $15.0 million and issued 192,533 shares, valued at $3.3 million, to cancel Xencor’s warrant to acquire 10% of fully diluted shares. The cash payment was charged to equity. The loan proceeds were used to fund the cash consideration.
- Clinical and regulatory progress remains uncertain. INKmune’s first Phase I patient was dosed in July. A Phase II treatment-resistant depression study was anticipated to begin in the second half of 2021, but trial design and FDA discussions were not complete. Other planned studies include programs for cancer, Alzheimer’s disease, NASH and COVID-19 complications.
- COVID-19 could delay site initiation, enrollment and trial operations. The company also cited the uncertain costs and timelines of drug development, dependence on future financing, and foreign-exchange exposure; it did not hedge foreign currencies. Clinical candidates may not be approved or commercialized.
- Other notable matters: the company expected UK and Australian R&D tax-credit reimbursements in the second half of 2021; no material adverse litigation was reported. The Xencor license includes future royalties and sublicensing payments. A shareholder rights plan could become exercisable if a non-exempt person reaches 20% ownership without Board approval and was scheduled to expire December 30, 2021.
Important facts for investors to verify
- Whether July’s $51.9 million of estimated net equity proceeds were received as expected, and the resulting share count and dilution.
- Actual operating cash burn, trial spending and remaining liquidity relative to management’s 12-month estimate.
- Loan covenants, repayment and final-fee obligations, and any conditions for the optional additional $5.0 million borrowing.
- Clinical-trial timing, enrollment, safety and efficacy updates, particularly for INKmune and the planned treatment-resistant depression study.
- Receipt and timing of the UK and Australian R&D tax credits, and any material effect of COVID-19 or foreign-exchange movements.