Immunic, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Immunic is a clinical-stage biopharmaceutical company developing oral therapies for inflammatory and autoimmune diseases. It had no products approved for sale and reported no product revenue.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Research and development expense | $15.7 million | $10.0 million | $27.3 million | $16.4 million |
| General and administrative expense | $3.4 million | $2.2 million | $7.1 million | $4.8 million |
| 4SC royalty settlement expense | — | — | $17.25 million | — |
| Total operating expenses | $19.2 million | $12.2 million | $51.6 million | $21.2 million |
| Net loss | $17.9 million | $11.5 million | $52.5 million | $19.9 million |
| Basic and diluted loss per share | $0.82 | $0.90 | $2.44 | $1.70 |
Operating margins are not meaningful because the company had no product revenue. Q2 operating expenses rose 57% year over year, primarily reflecting increased clinical development spending and higher stock compensation and professional costs. For the first half, the 4SC settlement was a significant unusual item; excluding it, operating expenses were still higher than the prior-year period as development activity expanded. Other income/expense also included foreign-exchange effects and Australian R&D tax incentives.
- Cash and liquidity: Cash and cash equivalents were $87.2 million at June 30, down from $127.5 million at December 31, 2020. Current assets were $101.7 million and current liabilities $14.5 million.
- Cash flow: Operating activities used $42.0 million in the first half, compared with $20.3 million in the prior-year period. Investing activities used $28,000; there were no cash financing proceeds in the 2021 first half.
- Capital raised after quarter-end: The July 19, 2021 public offering generated approximately $42.2 million net. Management expected available funds, including this offering, to support operations beyond twelve months from issuance of the financial statements.
- Debt and obligations: No borrowings had been drawn under the EIB facility of up to €24.5 million. Further tranches are subject to milestones; the agreement also includes repayment terms, potential prepayment penalties and a revenue-based payment obligation subject to caps. Lease liabilities had a present value of $1.2 million. Development-program contractual obligations totaled approximately $0.6 million, expected to be paid in 2021.
Material changes and business developments
- On March 31, Immunic settled its remaining 4SC royalty obligation for $17.25 million, paid half in cash and half in common stock. The company stated that no further payment obligations to 4SC remained.
- R&D expense increased as Immunic prepared the IMU-838 multiple-sclerosis trials and advanced its ulcerative colitis, COVID-19, IMU-935 and IMU-856 programs. The company cited higher trial and preparation costs, partly offset by lower drug-supply costs.
- On July 1, the FDA cleared the IND for the IMU-838 Phase 3 ENSURE program in relapsing-remitting multiple sclerosis (RRMS), and also cleared the separate Phase 2 CALLIPER trial in progressive MS. First-patient dosing was expected in the second half of 2021 for ENSURE and in Q3 2021 for CALLIPER.
- CALDOSE-1, a Phase 2 IMU-838 trial in ulcerative colitis, was recruiting; enrollment completion was expected in the second half of 2021, with induction-phase top-line data expected in the first half of 2022.
- The company reported evidence of clinical activity in its Phase 2 COVID-19 trial but said a Phase 3 monotherapy program and near-term commercialization in that indication were no longer considered viable. It planned further exploration of IMU-838’s antiviral properties.
- IMU-935 and IMU-856 Phase 1 trials were ongoing. Immunic expected to expand IMU-935 testing to psoriasis patients and prepare an mCRPC Phase 1 dose-escalation trial; these were forward-looking plans, not completed milestones.
Outlook, risks and other considerations
Management expected significant expenses and operating losses to continue as clinical programs advance; it provided no numerical revenue or earnings guidance. It stated that further capital may be needed over time and could come from equity, debt or partnerships, with possible dilution or other adverse terms. The principal risks include clinical-trial failure, inability to obtain regulatory approval, funding needs, and development timing and costs. The company also reported foreign-currency exposure, especially to the euro, and did not hedge these exposures. A hypothetical 10% adverse currency move was estimated to reduce German subsidiaries’ net current assets by about $4.1 million and affect six-month net loss by about $4.5 million. No material litigation was reported, and management reported disclosure controls as effective.
Important facts for investors to verify
- Whether ENSURE, CALLIPER and CALDOSE-1 started or progressed on the stated schedules, and the eventual trial results and safety data.
- Cash use and runway after incorporating the July offering, ongoing trial costs and any subsequent financing.
- The accounting and completion details of the 4SC settlement, including the stock issuance and resale registration.
- Whether EIB loan tranches are drawn and the resulting repayment, revenue-payment and guarantee obligations.
- The extent to which foreign-exchange movements, clinical accrual estimates and stock-based compensation affect reported results.