Immunocore(IMCR) - 2024 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations ITEM 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Immunocore Holdings plc, including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Shareholders' Equity, and Statements of Cash Flows, along with their accompanying notes. These statements provide a snapshot of the company's financial position, performance, and cash movements for the periods ended June 30, 2024, and December 31, 2023 (for balance sheet) or June 30, 2024 and 2023 (for income statement, equity, and cash flow) Condensed Consolidated Balance Sheets This table provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------ | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $504,985 | $442,626 | | Marketable securities | $354,612 | — | | Total current assets | $956,859 | $528,820 | | Total assets | $1,023,365 | $597,001 | | Liabilities | | | | Total current liabilities | $185,096 | $139,021 | | Interest-bearing loans and borrowings | $438,121 | $48,011 | | Total liabilities | $664,228 | $228,158 | | Shareholders' Equity | | | | Total shareholders' equity | $359,137 | $368,843 | - Total assets increased significantly from $597.0 million at December 31, 2023, to $1,023.4 million at June 30, 2024, primarily driven by an increase in marketable securities and cash and cash equivalents[9] - Total liabilities saw a substantial increase from $228.2 million to $664.2 million, mainly due to a significant rise in interest-bearing loans and borrowings, reflecting the issuance of convertible senior notes[9] Condensed Consolidated Statements of Operations and Comprehensive Loss This table details the company's revenues, expenses, and net loss over specific reporting periods, including per share data Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product revenue, net | $75,347 | $56,932 | $145,689 | $108,513 | | Collaboration revenue | $53 | $2,825 | $213 | $5,903 | | Total revenue | $75,400 | $59,757 | $145,902 | $114,416 | | Cost of product revenue | $(1,707) | $(346) | $(1,953) | $(562) | | Research and development expense | $(51,072) | $(38,158) | $(108,531) | $(74,730) | | Selling, general and administrative expense | $(38,638) | $(35,010) | $(77,925) | $(67,577) | | Loss from operations | $(16,017) | $(13,757) | $(42,507) | $(28,453) | | Net loss | $(11,616) | $(17,014) | $(36,052) | $(36,463) | | Basic and diluted net loss per share | $(0.23) | $(0.35) | $(0.72) | $(0.75) | - Total revenue increased by 26.2% for the three months ended June 30, 2024, and 27.5% for the six months ended June 30, 2024, primarily driven by product revenue growth[11] - Net loss decreased for both the three-month and six-month periods, from $(17.0) million to $(11.6) million (3M YoY) and from $(36.5) million to $(36.1) million (6M YoY), despite increased operating expenses, due to higher revenue and other income[11] Condensed Consolidated Statements of Shareholders' Equity This table outlines changes in the company's equity components, including ordinary shares, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Shareholders' Equity (in thousands, except share data) | Metric | As of March 31, 2024 | As of June 30, 2024 | As of March 31, 2023 | As of June 30, 2023 | | :-------------------------------------- | :------------------- | :------------------ | :------------------- | :------------------ | | Ordinary Shares (Number) | 50,006,085 | 50,017,606 | 48,379,409 | 48,941,349 | | Ordinary Shares (Amount) | $135 | $135 | $130 | $132 | | Additional Paid-in Capital | $1,163,872 | $1,174,147 | $1,097,248 | $1,117,625 | | Accumulated deficit | $(769,110) | $(780,726) | $(708,836) | $(725,850) | | Total Shareholders' Equity | $359,534 | $359,137 | $341,304 | $351,440 | - Total shareholders' equity remained relatively stable at $359.1 million as of June 30, 2024, compared to $359.5 million as of March 31, 2024, reflecting the impact of net loss offset by share-based compensation and exercise of share options[14] - Accumulated deficit increased to $(780.7) million as of June 30, 2024, from $(744.7) million at December 31, 2023, primarily due to the net loss incurred during the period[17] Condensed Consolidated Statements of Cash Flows This table summarizes the cash inflows and outflows from operating, investing, and financing activities over specific reporting periods Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $18,885 | $10,584 | | Net cash used in investing activities | $(350,761) | $(4,396) | | Net cash provided by financing activities | $395,194 | $17,716 | | Increase in net cash and cash equivalents | $63,318 | $23,904 | | Cash and cash equivalents at end of period | $504,985 | $431,995 | - Net cash provided by operating activities increased to $18.9 million for the six months ended June 30, 2024, from $10.6 million in the prior year, driven by higher revenues and accrued expenses, partially offset by increased R&D expenses[20][125] - Net cash used in investing activities significantly increased to $(350.8) million, primarily due to substantial purchases of marketable securities in 2024[20][126] - Net cash provided by financing activities surged to $395.2 million, mainly from the net proceeds of $389.1 million from the issuance of convertible senior notes in February 2024[20][126] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements, including accounting policies and significant transactions - Immunocore Holdings plc is a commercial-stage biotechnology company focused on immunomodulating medicines, with its lead product KIMMTRAK approved in 38 countries for metastatic uveal melanoma[22][23] - The company adopted the U.S. dollar as its functional currency effective January 1, 2024, due to increased exposure to U.S. dollar cash flows from financing and investing activities[31] Product Revenue, Net by Region (in thousands) | Region | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $55,606 | $41,056 | $105,632 | $77,281 | | Europe | $15,404 | $15,232 | $34,356 | $30,356 | | International | $4,337 | $644 | $5,701 | $876 | | Total | $75,347 | $56,932 | $145,689 | $108,513 | - The company issued $402.5 million in 2.5% Convertible Senior Notes due 2030 in February 2024, with net proceeds of $389.1 million after issuance costs. These notes are senior, unsecured obligations[47][48] Share-based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $2,172 | $1,841 | $4,152 | $3,537 | | Selling, general and administrative | $7,828 | $6,980 | $14,812 | $13,542 | - As of June 30, 2024, total unrecognized compensation expense related to share options was $50.2 million, expected to be recognized over a weighted-average period of 1.1 years[58] - The company's estimated effective tax rate for the six months ended June 30, 2024, was 5.4%, benefiting from the U.K. R&D Expenditure Credit (RDEC) regime[63] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key business developments, financial performance drivers, and future outlook. It covers revenue trends, operating expenses, liquidity, capital resources, and critical accounting estimates, offering insights into the factors influencing the company's financial health and strategic direction Overview This section provides a high-level summary of the company's business, strategic focus, and overall financial performance and position - Immunocore is a commercial-stage biotechnology company focused on immunomodulating medicines for cancer, infectious diseases, and autoimmune diseases, leveraging its proprietary ImmTAX platform[71] - KIMMTRAK, the company's lead product, is approved in 38 countries for unresectable metastatic uveal melanoma and has been launched in 19 countries[71] - The company has treated over 2,000 cancer patients with KIMMTRAK and other ImmTAX candidates, representing the largest clinical data set for a T cell engager bispecific in solid tumors and any TCR therapeutic[72] - Immunocore has incurred significant operating losses, with net losses of $11.6 million and $36.1 million for the three and six months ended June 30, 2024, respectively, and an accumulated deficit of $780.7 million[74] Recent Developments This section highlights significant recent events and milestones, including clinical trial updates and regulatory progress - At ASCO 2024, data from the Phase 1/2 trial of brenetafusp in late-line cutaneous melanoma showed a 58% disease control rate and 4.2 months median PFS in PRAME positive patients[78] - The first patient was randomized in June 2024 into the registrational Phase 3 PRISM-MEL-301 clinical trial for brenetafusp + nivolumab in first-line advanced cutaneous melanoma, with potential data readout in 2027[79] - The Phase 2/3 TEBE-AM clinical trial was converted into a registrational Phase 3 trial for KIMMTRAK in adjuvant uveal melanoma, accelerating the time to final endpoint by up to 12 months, with enrollment expected by H1 2026 and data readout later that year[80] - Enrollment for the Phase 1 clinical trial of IMC-M113V in people living with HIV (PLWH) has reached 3 cohorts, with plans to enroll more patients to characterize anti-viral activity and explore higher doses, shifting data release to Q1 2025[80] Components of Results of Operations This section explains the key components contributing to the company's financial performance, including revenue recognition and expense categories - Product revenue, net, is recognized upon transfer of control to customers (distributors and healthcare providers), net of estimated deductions for rebates, chargebacks, and returns[83] - Collaboration revenue from the Genentech agreement decreased significantly as the performance obligation was completed by December 31, 2023, though the company remains eligible for future milestone payments and royalties[84] - Research and development (R&D) expenses are expensed as incurred and are expected to increase as product candidates advance through clinical studies and regulatory approvals[86][88] - Selling, general and administrative (SG&A) expenses are also expected to increase due to commercialization efforts for KIMMTRAK, growth in the pipeline, and costs associated with operating as a public company[91] - The company benefits from the U.K. Research and Development Expenditure Credit (RDEC) regime, which provides cash rebates of up to 15% on qualifying R&D expenditure[89][63] Comparison of the Three Months Ended June 30, 2024 and 2023 This section analyzes the financial performance for the three-month periods ended June 30, 2024, and 2023, highlighting key revenue and expense variances Revenue Comparison (Three Months Ended June 30, in thousands) | Revenue Type | 2024 | 2023 | Increase / (decrease) | % Increase / (decrease) | | :-------------------- | :------ | :------ | :-------------------- | :---------------------- | | Product revenue, net | $75,347 | $56,932 | $18,415 | 32.3% | | Collaboration revenue | $53 | $2,825 | $(2,772) | (98.1)% | | Total revenue | $75,400 | $59,757 | $15,643 | 26.2% | - Product revenue, net, increased by 32.3% to $75.3 million, driven by increased volume in the United States (35.4% increase) and global country expansion, particularly in International markets (573.4% increase)[100] R&D Expenses Comparison (Three Months Ended June 30, in thousands) | R&D Expense Category | 2024 | 2023 | Increase / (decrease) | % Increase / (decrease) | | :------------------------------------ | :------ | :------ | :-------------------- | :---------------------- | | PRAME programs | $21,932 | $11,024 | $10,908 | 98.9% | | Total external R&D expenses | $32,377 | $21,389 | $10,988 | 51.4% | | Salaries and other employee-related costs | $12,221 | $8,897 | $3,324 | 37.4% | | U.K. R&D tax credits | $(1,831)| $(685) | $(1,146) | 167.3% | | Total R&D expenses | $51,072 | $38,158 | $12,914 | 33.8% | - Total R&D expenses increased by 33.8% to $51.1 million, primarily due to a 98.9% increase in PRAME program expenses driven by the initiation of the Phase 3 PRISM-MEL-301 trial and manufacturing scale-up[102][103] SG&A Expenses Comparison (Three Months Ended June 30, in thousands) | SG&A Expense Category | 2024 | 2023 | Increase / (decrease) | % Increase / (decrease) | | :------------------------------------ | :------ | :------ | :-------------------- | :---------------------- | | Salaries and other employee-related costs | $10,481 | $8,284 | $2,197 | 26.5% | | Selling and commercial costs | $13,051 | $14,280 | $(1,229) | (8.6)% | | Total SG&A expenses | $38,638 | $35,010 | $3,628 | 10.4% | - SG&A expenses increased by 10.4% to $38.6 million, mainly due to a $2.2 million increase in employee-related costs from the internalization of the U.S. sales force and growth in business support functions[104] Comparison of the Six Months Ended June 30, 2024 and 2023 This section analyzes the financial performance for the six-month periods ended June 30, 2024, and 2023, detailing key revenue and expense trends Revenue Comparison (Six Months Ended June 30, in thousands) | Revenue Type | 2024 | 2023 | Increase / (decrease) | % Increase / (decrease) | | :-------------------- | :------- | :------- | :-------------------- | :---------------------- | | Product revenue, net | $145,689 | $108,513 | $37,176 | 34.3% | | Collaboration revenue | $213 | $5,903 | $(5,690) | (96.4)% | | Total revenue | $145,902 | $114,416 | $31,486 | 27.5% | - Product revenue, net, increased by 34.3% to $145.7 million, driven by increased volume in the United States (36.7% increase) and global country expansion, particularly in International markets (550.8% increase)[109] R&D Expenses Comparison (Six Months Ended June 30, in thousands) | R&D Expense Category | 2024 | 2023 | Increase / (decrease) | % Increase / (decrease) | | :------------------------------------ | :------- | :------ | :-------------------- | :---------------------- | | PRAME programs | $48,632 | $19,819 | $28,813 | 145.4% |\ | Total external R&D expenses | $73,716 | $40,579 | $33,137 | 81.7% | | Salaries and other employee-related costs | $21,975 | $18,077 | $3,898 | 21.6% | | U.K. R&D tax credits | $(3,654) | $(1,416)| $(2,238) | 158.1% | | Total R&D expenses | $108,531 | $74,730 | $33,801 | 45.2% | - Total R&D expenses increased by 45.2% to $108.5 million, primarily due to a 145.4% increase in PRAME program expenses from the initiation of the Phase 3 PRISM-MEL-301 trial and manufacturing scale-up[111][112] SG&A Expenses Comparison (Six Months Ended June 30, in thousands) | SG&A Expense Category | 2024 | 2023 | Increase / (decrease) | % Increase / (decrease) | | :------------------------------------ | :------ | :------ | :-------------------- | :---------------------- | | Salaries and other employee-related costs | $25,321 | $17,528 | $7,793 | 44.5% | | Selling and commercial costs | $23,700 | $24,524 | $(824) | (3.4)% | | Total SG&A expenses | $77,925 | $67,577 | $10,348 | 15.3% | - SG&A expenses increased by 15.3% to $77.9 million, mainly due to a $7.8 million increase in employee-related costs from the internalization of the U.S. sales force and growth in business support functions[114] Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash, its capital structure, and its capacity to meet short-term and long-term obligations - As of June 30, 2024, the company had cash, cash equivalents, and marketable securities totaling $859.6 million, a significant increase from $442.6 million at December 31, 2023[118] - Working capital increased to $771.8 million as of June 30, 2024, from $389.8 million at December 31, 2023[125] - The company raised $389.1 million in net proceeds from a private offering of $402.5 million aggregate principal amount of 2.5% Convertible Senior Notes due 2030 in February 2024[123] - Existing cash, cash equivalents, marketable securities, and anticipated future revenue from KIMMTRAK are expected to fund operating expenses and capital expenditure requirements for at least twelve months from the filing date[130] Contractual Obligations This section details the company's significant contractual commitments, including lease obligations, manufacturing commitments, and financing obligations - The company has material contractual lease obligations extending to 2043, primarily for facilities in the United Kingdom, with potential payments up to $58.7 million[135] - Non-cancellable manufacturing commitments for product candidates total $15.5 million, expected to be paid during the remainder of 2024, and are anticipated to increase with the advancement of the brenetafusp program[137] - Financing obligations include interest payments on $402.5 million in Convertible Senior Notes due 2030 and interest/principal repayments on a $50 million Pharmakon Loan Agreement until at least 2028[139][140] Our Key Collaboration Agreements This section describes the company's significant collaboration agreements, outlining their terms, objectives, and financial implications - The Genentech Collaboration for MAGE-A4 HLA-A02 targeted programs was wound down in February 2023, with Genentech acquiring exclusive worldwide license and Immunocore eligible for future milestone payments and royalties[144] - A clinical trial collaboration and supply agreement with Bristol Myers Squibb (BMS) was entered in February 2024 to investigate brenetafusp (IMC-F106C) in combination with nivolumab for first-line advanced cutaneous melanoma, with Immunocore sponsoring and funding the Phase 3 trial[145] - The Gadeta Collaboration (now with Ateda Therapeutics) involves '201 γδ-TCR target discovery, with Immunocore holding an option for an exclusive license to develop ImmTAC therapies[146] Critical Accounting Estimates This section identifies and explains the accounting estimates that require significant judgment and can materially impact the financial statements - The company's critical accounting estimates include revenue recognition, operating lease incremental borrowing rates, share-based compensation expense, clinical accruals, and deferred tax asset valuation allowances[26] - Estimates for rebates, chargebacks, and returns for product revenue are highly judgmental due to limited historical data and uncertainties in contractual/statutory requirements, payor/patient mix, and pricing negotiations, especially in France[149][150][151] - A 20% increase or decrease in estimates of expected rebate and chargeback percentages for critical estimates would result in a $19.3 million reduction or increase in Product revenue, net for the six months ended June 30, 2024[153] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This section outlines the company's exposure to various market risks, including interest rate risk, currency risk, and credit risk, and describes the strategies employed to manage these exposures. The company's financial risk committee oversees these risks, aiming to ensure appropriate governance and management in line with policies and objectives - The company is exposed to interest rate risk primarily from investments in deposits and changes in overnight deposit rates, but all interest-bearing loans and borrowings have fixed rates[156] - Currency risk arises from fluctuations in foreign exchange rates, particularly affecting U.S. dollar monetary assets and liabilities held by the U.K. subsidiary. A 5% change in exchange rates would impact net financial assets and liabilities by approximately $5.9 million as of June 30, 2024[159][160] - Credit risk is primarily associated with accounts receivable and cash/marketable securities held with high-quality financial institutions. The company's exposure to credit losses is considered low due to the credit quality of its customers and financial institutions[161] ITEM 4. Controls and Procedures This section details the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting. Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2024, and no material changes to internal control over financial reporting occurred during the quarter - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2024, concluding they were effective[164] - There were no material changes in internal control over financial reporting during the fiscal quarter ended June 30, 2024[165] PART II – OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and other disclosures ITEM 1. Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[167] ITEM 1A. Risk Factors This section refers to the significant risks outlined in the company's Annual Report on Form 10-K. No material changes to these risk factors were identified during the period covered by this Quarterly Report - There were no material changes during the period covered in this Quarterly Report to the risk factors previously disclosed in Item 1A. Risk Factors in the Annual Report[167] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities There were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report for the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities were reported[168] ITEM 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported[168] ITEM 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the registrant[168] ITEM 5. Other Information This section discloses an insider trading arrangement under Rule 10b5-1 for John Goll, SVP, Finance & Chief Accounting Officer, involving the sale of 10,804 ordinary shares (in the form of ADSs) with an expiration date of December 31, 2025 Insider Trading Arrangement (Rule 10b5-1) | Name and Position | Action | Adoption/Termination Date | Rule 10b5-1 | Total Ordinary Shares to be Sold | Expiration Date | | :------------------------------------ | :------- | :------------------------ | :---------- | :------------------------------- | :-------------------- | | John Goll SVP, Finance & Chief Accounting Officer | Adoption | June 14, 2024 | X | 10,804 | December 31, 2025 | ITEM 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Articles of Association, certifications by the Principal Executive Officer and Principal Financial Officer, and various Inline XBRL documents - Key exhibits include the Articles of Association, certifications by the Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[169][170][171] SIGNATURES The report is signed by Bahija Jallal, Ph.D., Chief Executive Officer, and Brian Di Donato, Chief Financial Officer, on August 8, 2024 - The report was signed by Bahija Jallal, Ph.D., Chief Executive Officer, and Brian Di Donato, Chief Financial Officer, on August 8, 2024[173]