Indaptus Therapeutics / Intec Pharma Q1 2021 10-Q Summary
Reporting context: The filing covers Intec Pharma Ltd. and its subsidiaries for the three months ended March 31, 2021. It is attached to Intec Parent, Inc.’s filing to satisfy Parent’s reporting obligations; Parent itself had no business, operations, or assets. Intec was a clinical-stage drug-delivery company and had not generated operating revenue.
Financial performance and liquidity
- Revenue: No operating revenue was reported. Collaboration funding, when earned, is recorded as a reduction of research and development expense.
- Expenses and loss: R&D expense was $2.157 million versus $2.024 million a year earlier; general and administrative expense was $2.021 million versus $1.715 million. Operating loss was $4.178 million versus $3.739 million, and net loss was $4.229 million versus $3.870 million. Financial expense, net, was $31,000; income tax expense was $20,000.
- Per-share loss: $0.96 basic and diluted, compared with $1.65 in Q1 2020. The weighted-average share count rose to 4.419 million from 2.346 million. Accelerated depreciation related to the proposed merger increased Q1 2021 loss per share by $0.05, according to the filing.
- Cash flow: Operating cash use was $4.311 million, compared with $5.147 million in Q1 2020. Investing cash use was $1,000, versus $769,000 provided in the prior-year quarter. Financing provided $956,000 from warrant exercises, compared with $6.113 million in Q1 2020, largely from equity offerings.
- Cash and liquidity: At March 31, cash and cash equivalents were $10.135 million, plus $1.0 million of restricted cash, for $11.135 million total cash and restricted cash. At December 31, 2020, cash and cash equivalents were $14.671 million. Current assets were $12.159 million and current liabilities $5.203 million.
- Liabilities: Total liabilities were $6.086 million, including $5.203 million current liabilities and $883,000 long-term liabilities. The filing does not identify material interest-bearing debt.
- Margins: Not meaningful because the company reported no operating revenue.
Changes, outlook, and material developments
- Net loss increased about 8% year over year. Management attributed higher R&D expense primarily to accelerated depreciation following the proposed merger, and higher G&A expense primarily to merger-related professional fees.
- Intec agreed to merge with Decoy Biosystems following a planned domestication of Intec Israel into a Delaware parent. The merger required, among other conditions, completion of the domestication, disposition of the Accordion Pill business, required approvals, and financing that would leave the combined company with net cash of $30 million to $50 million. The filing described an expected ownership split of approximately 75% for Decoy securityholders and 25% for Intec securityholders before adjustments for cash, liabilities, and financing.
- Intec shareholders approved the proposals on June 21, 2021, according to the filing’s explanatory note. As of that note, the transactions had not closed; the company expected closing in Q3 2021, subject to remaining conditions.
- Management believed available cash would fund ongoing activities through the merger and into Q1 2022, but cautioned that merger costs or other changes could shorten the runway. The financial statements state that substantial doubt exists about Intec’s ability to continue as a going concern within one year after issuance.
- Intec expected to need substantial additional financing. If financing were unavailable, it could delay, reduce, or eliminate development programs or reduce operations. Failure to complete the merger or another strategic transaction could lead to dissolution and liquidation.
- In April 2021, Intec sold 319,393 shares to Aspire Capital for approximately $1.2 million. A May amendment allowed up to an additional 963,912 shares under an exchange cap, subject to stated conditions, potentially creating dilution.
- Intec reported preliminary results from an AP-THC trial showing a more controlled release profile than Marinol; the disclosure described initial results, not definitive clinical outcomes. Merck terminated its collaboration in May 2021 based on its pipeline and resource-allocation decisions.
- Four securities lawsuits filed in May 2021 alleged inadequate merger-related disclosures; two plaintiffs later voluntarily dismissed their claims as moot. Intec said the remaining matters were too early to assess and intended to defend them. Potential loss could not be estimated.
- COVID-19 disrupted partnering efforts and could affect operations, commercial prospects, and access to capital. A separate former-director/officer lawsuit was settled for approximately $250,000 in total and dismissed in February 2021; payment occurred in March.
Important facts for investors to verify
- Whether the merger, domestication, required Accordion Pill disposition, and closing financing were completed, and the final exchange ratio, ownership split, and dilution.
- Cash available after restricted funds, merger expenses, subsequent financing, and ongoing operating burn; the company’s stated runway was an estimate and the filing disclosed substantial going-concern doubt.
- Whether the Aspire Capital arrangement provided further proceeds and the resulting share issuance and dilution.
- Progress and outcomes for AP-THC and other programs, including the effect of Merck’s termination and any definitive agreement for AP-CD/LD.
- Developments in the remaining merger-related litigation and any eventual exposure.