Immunic, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Immunic is a clinical-stage biopharmaceutical company developing oral therapies for inflammatory and autoimmune diseases. It reported no product revenue and no products approved for commercial sale.
Business and pipeline
Lead candidate IMU-838 was in Phase 2 trials for relapsing-remitting multiple sclerosis and ulcerative colitis; a Phase 2 Crohn’s disease trial was under consideration. An investigator-sponsored proof-of-concept trial in primary sclerosing cholangitis was ongoing. IMU-935 was in Phase 1, and Immunic had exercised its option for worldwide commercialization rights to IMU-856 in January 2020.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $6.434 million | $3.355 million |
| General and administrative expense | $2.580 million | $1.307 million |
| Total operating expenses / operating loss | $9.014 million | $4.662 million |
| Other income | $0.527 million | $0.349 million |
| Net loss | $8.487 million | $4.313 million |
| Net loss per share, basic and diluted | $0.79 | $5.09 |
| Net cash used in operating activities | $11.029 million | $5.317 million |
Gross margin is not applicable because the company had no product sales. Cash and cash equivalents were $18.578 million at March 31, down from $29.369 million at December 31, 2019. Total assets were $57.292 million; total liabilities were $6.804 million, including $0.471 million of long-term operating lease liabilities. The filing reports no borrowings. Stockholders’ equity was $50.488 million, and accumulated deficit was $68.398 million. The balance sheet included $32.970 million of goodwill.
Operating cash use exceeded net loss, principally reflecting a $2.172 million increase in prepaid and other current assets, mainly clinical-trial and drug-supply prepayments. Q1 financing provided $0.568 million net through the at-the-market (ATM) program; investing used $0.004 million.
Material changes versus prior period
- Operating expenses rose 93% year over year and net loss increased 97%. R&D expense rose $3.079 million, primarily from IMU-838 trials, IMU-856 licensing, preclinical and drug-supply costs, and IMU-935’s Phase 1 trial.
- G&A expense increased $1.273 million, mainly reflecting personnel, insurance and facility costs associated with becoming a public company and expanding U.S. operations.
- The weighted-average share count was 10.75 million versus 846,953 in Q1 2019. The filing’s comparable period reflects Immunic AG as accounting predecessor before the April 2019 reverse acquisition; per-share comparisons should be interpreted in that context.
- Subsequent to quarter-end, the company sold 1,764,706 shares in a registered direct offering for $15.0 million gross and approximately $13.9 million net. It also raised $2.3 million net through ATM sales from April 1 to April 27. Management expected these proceeds, together with March-end cash, to fund operations beyond 12 months from issuance of the financial statements.
Outlook, risks and contingencies
- Management expected significant expenses and increasing operating losses as development continues, and stated that substantial additional capital will be needed. Future funding may involve dilution, debt restrictions, or licensing and collaboration arrangements that require relinquishing rights.
- On April 21, Immunic announced preclinical activity of IMU-838 against SARS-CoV-2 and plans to prepare a COVID-19 clinical development program. This was an early-stage effort, not evidence of clinical efficacy. The filing cautions that allocating resources to COVID-19 could delay other programs, while the candidate may not prove effective.
- COVID-19 could disrupt trial enrollment, clinical sites, supply, manufacturing and regulatory review, and could constrain access to capital. Clinical-trial failure, inability to obtain regulatory approval, and the need for additional funding are core business risks.
- Development-program contractual commitments totaled approximately $1.7 million, expected to be paid in 2020. Operating lease obligations had a $0.670 million present value. The company reported no litigation it believed would materially affect it.
- Foreign-exchange exposure is primarily to the euro and Australian dollar. Management estimated a hypothetical 10% adverse exchange-rate change would reduce German subsidiaries’ net current assets by about $1.1 million and affect quarterly net loss by about $0.6 million.
- Subsequent events included the CFO’s resignation and severance agreement, and appointment of an Executive Chairman and a new Principal Financial and Accounting Officer.
Important facts for investors to verify
- Whether cash burn and development spending remain consistent with management’s stated runway, including the impact of post-quarter financing and subsequent trial costs.
- Progress, enrollment, timing and results of IMU-838 and IMU-935 trials, and whether a COVID-19 clinical program proceeds without materially delaying other programs.
- Terms and potential costs of IMU-856’s future milestones and royalties under the Daiichi Sankyo agreement.
- Availability and use of remaining ATM capacity, and the potential dilution from future equity financing and outstanding equity awards.
- Clinical, regulatory, pandemic-related, foreign-currency and funding risks; management cautions that interim results may not indicate full-year results.