Instil Bio, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing was signed March 21, 2024. Instil Bio is a clinical-stage biopharmaceutical company with no approved products and no product-sales revenue.
Business context and outlook
Instil’s strategy is to develop or acquire therapies for unmet medical needs, with a historical focus on engineered tumor-infiltrating lymphocyte (TIL) therapies using its CoStAR platform. In December 2023, it agreed to collaborate with a third party on an autologous FRα CoStAR-TIL product for potential investigator-initiated trials in non-small cell lung cancer in China. Feasibility work was reported as complete; the collaborator is expected to lead any trials and manufacture the product using its own process. The collaborator has an option for an exclusive license in China and Taiwan.
In January 2024, Instil announced plans to close its UK manufacturing and clinical operations and ceased ITIL-306 Phase 1 activities. The company reported no active clinical trials. It expects the UK workforce reduction to be substantially completed in the first half of 2024, while retaining selected personnel for early-stage research and collaboration support. Management aims to pursue the collaboration and seek additional assets, but provided no specific clinical, revenue, or earnings guidance.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $39.6 million | $141.1 million |
| General and administrative expense | $47.6 million | $62.2 million |
| Restructuring and impairment charges | $72.0 million | $23.2 million |
| Total operating expenses | $159.2 million | $226.5 million |
| Net loss | $156.1 million | $223.2 million |
| Net loss per share, basic and diluted | $24.00 | $34.46 |
| Cash used in operating activities | $82.0 million | $180.2 million |
At December 31, 2023, cash, cash equivalents, restricted cash, marketable securities and long-term investments totaled $175.0 million (rounded). Total assets were $325.6 million, total liabilities $99.8 million, and stockholders’ equity $225.8 million. Accumulated deficit was $581.0 million. The company reported no product revenue, so product gross margin and operating margin are not meaningful.
Outstanding loan principal was $82.8 million, with a net carrying amount of $81.4 million. The loan is secured by the Tarzana property, bears interest at one-month SOFR plus 5.25%, and is due July 2025, with an extension option to July 2027. Instil reported compliance with its loan covenants, including a required minimum of $85.0 million in consolidated net worth and liquid assets. Management believes available resources can fund operating expenses and capital requirements beyond 2026, but cautions that this estimate depends on assumptions and could prove incorrect.
Material changes and unusual items
- Net loss narrowed by $67.1 million year over year. R&D expense fell $101.5 million and G&A fell $14.7 million, mainly reflecting lower headcount, discontinued or reduced development activity, and facility cost reductions.
- Lower operating expenses were partly offset by restructuring and impairment charges rising $48.8 million to $72.0 million. These included $41.5 million for building and construction-in-progress impairment, $16.3 million for assets held for sale, $7.7 million for lease right-of-use asset impairment, and employee and contract termination costs.
- Operating cash use decreased $98.1 million. The FY2023 net loss included substantial noncash charges, including $60.1 million of fixed-asset impairment and $7.7 million of right-of-use asset impairment.
- Interest income increased to $8.9 million from $3.7 million, while interest expense increased to $5.2 million from $1.9 million, principally due to the construction loan.
- Instil effected a 1-for-20 reverse stock split on December 7, 2023. It had 6,503,913 common shares outstanding at year-end and reported the same number as of March 19, 2024.
Risks and contingencies
- The company has incurred significant losses, has no approved product or product-sales revenue, and will need additional capital if its plans or spending exceed available resources. Future financing could dilute shareholders or require concessions on assets or programs.
- All company-led ITIL-306 clinical activity has ceased, and the China trials, if opened, will be investigator-initiated and collaborator-led. Instil warns that its control over trial conduct, data access, manufacturing, and timing is limited, and regulators may not accept China-generated data.
- Cell-therapy manufacturing is complex. Prior manufacturing issues contributed to trial pauses and program discontinuation; future process, supply, quality, or collaborator problems could delay development.
- Instil is evaluating a sale or lease of its Tarzana manufacturing facility and potential subleases of other space; there is no assurance these transactions will occur or recover carrying value. Further impairment charges are possible.
- The January 2024 restructuring is expected to incur charges of up to $6.1 million, subject to assumptions; actual costs may differ or be higher. The company also may owe up to $3.4 million in future collaboration milestone payments after $2.6 million of payments in the first quarter of 2024.
- Other material risks include competition, regulatory and clinical uncertainty, intellectual-property protection, reimbursement, data privacy and cybersecurity, and U.S.-China political and regulatory tensions.
Important facts for investors to verify
- Whether the China collaboration advances to IIT enrollment, what clinical data are produced, and how the collaborator’s license option and manufacturing arrangement affect Instil’s rights.
- Whether management’s cash runway beyond 2026 remains supportable after restructuring, collaboration spending, debt service, and any new development or business-development commitments.
- Progress and terms of any Tarzana sale or lease and other facility subleases, including possible proceeds, timing, and additional impairment exposure.
- The final cost and completion status of the 2024 UK closure, compared with the estimate of up to $6.1 million.
- Loan covenant compliance, interest-rate exposure, and repayment or extension plans before the July 2025 maturity.
- Potential future financing, share issuance, and other dilution; the filing also notes registration rights covering approximately 2.9 million shares as of year-end 2023.
Audit and controls: Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements. Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2023; the auditor did not provide an internal-control attestation under the company’s applicable exemption.