Immunic(US:IMUX)2020-05-08 12:13PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) For the three months ended March 31, 2020, Immunic, Inc. reported a net loss of $8.5 million, an increase from a $4.3 million loss in the prior-year period, driven by higher research and development and general administrative expenses Condensed Consolidated Balance Sheets As of March 31, 2020, the company's total assets were $57.3 million, a decrease from $66.0 million at December 31, 2019, primarily due to a reduction in cash and cash equivalents from $29.4 million to $18.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $18,578 | $29,369 | | Total current assets | $23,599 | $32,230 | | Total assets | $57,292 | $65,955 | | Total current liabilities | $6,333 | $7,072 | | Total liabilities | $6,804 | $7,592 | | Accumulated deficit | $(68,398) | $(59,911) | | Total stockholders' equity | $50,488 | $58,363 | Condensed Consolidated Statements of Operations For the first quarter of 2020, the company reported a net loss of $8.5 million, or ($0.79) per share, compared to a net loss of $4.3 million, or ($5.09) per share, for the same period in 2019 Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Research and development | $6,434 | $3,355 | | General and administrative | $2,580 | $1,307 | | Total operating expenses | $9,014 | $4,662 | | Loss from operations | $(9,014) | $(4,662) | | Net loss | $(8,487) | $(4,313) | | Net loss per share, basic and diluted | $(0.79) | $(5.09) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities for the first quarter of 2020 was $11.0 million, a significant increase from $5.3 million in the prior-year period, reflecting higher operating losses Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,029) | $(5,317) | | Net cash used in investing activities | $(4) | $(7) | | Net cash provided by financing activities | $568 | $20,531 | | Net change in cash | $(10,791) | $14,947 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business as a clinical-stage biopharmaceutical firm with three main product candidates (IMU-838, IMU-935, IMU-856) and key events including a reverse acquisition, an option exercise, and subsequent equity financings and a COVID-19 development program - The company is a clinical-stage biopharmaceutical company developing three small molecule products: IMU-838 (DHODH inhibitor), IMU-935 (RORγt inverse agonist), and IMU-856 (intestinal barrier function restorer)27 - The company exercised its option with Daiichi Sankyo on January 5, 2020, to obtain exclusive worldwide commercialization rights for IMU-856, paying a one-time upfront licensing fee59160 - In April 2020, the company raised approximately $13.9 million in net proceeds from a registered direct offering and an additional $2.3 million from its ATM facility133134 - In April 2020, the company announced plans for a Phase 2 clinical trial of IMU-838 in COVID-19 patients after it demonstrated preclinical activity against SARS-CoV-2135 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the increase in operating expenses for Q1 2020, attributing it to the advancement of its clinical programs, particularly the Phase 2 trials for IMU-838 and the initiation of a Phase 1 trial for IMU-935 Results of Operations Comparing Q1 2020 to Q1 2019, R&D expenses increased by $3.1 million (92%) due to advancing Phase 2 trials for IMU-838, costs related to IMU-856, and the start of the Phase 1 trial for IMU-935 Operating Expense Comparison (in thousands) | Expense Category | Q1 2020 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $6,434 | $3,355 | $3,079 | 92% | | General and administrative | $2,580 | $1,307 | $1,273 | 97% | | Total operating expenses | $9,014 | $4,662 | $4,352 | 93% | - The increase in R&D expenses was driven by a $1.3 million increase for IMU-838 Phase 2 trials, $1.0 million for IMU-856 license fees and preclinical costs, and $0.3 million for the IMU-935 Phase 1 trial172 - The increase in G&A expenses was primarily due to a $0.7 million increase in personnel expenses and a $0.3 million increase in insurance and facility costs after becoming a public company and expanding in the U.S173 Liquidity and Capital Resources The company ended Q1 2020 with $18.6 million in cash and cash equivalents, and with additional equity offerings in April 2020, management expects to fund operations for more than twelve months - As of March 31, 2020, the company had cash and cash equivalents of approximately $18.6 million177184 - From inception through April 27, 2020, the company has raised net cash of approximately $89.1 million from private and public offerings177 - The company expects its current cash, including proceeds from April 2020 financings, to fund operations beyond twelve months from the report's issuance date177 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate sensitivity and foreign currency exchange risk, with a significant portion of cash held in German bank accounts subject to negative interest rates and exposure to euro fluctuations - The company is exposed to interest rate risk, with $9.2 million of its cash held in German bank accounts earning negative interest of 0.5% as of March 31, 2020197 - The company is exposed to foreign currency risk, primarily from the euro, as its main R&D operations are in Germany; a hypothetical 10% adverse change in exchange rates would have resulted in a $1.1 million decrease in net current assets as of March 31, 2020198200 Item 4. Controls and Procedures Management, including the CEO and Principal Financial Officer, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures are effective202 - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls203 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material litigation and is not aware of any pending or threatened litigation that would materially affect its business - The company is not currently a party to any litigation, nor is it aware of any pending or threatened litigation, that it believes would materially affect its business204 Item 1A. Risk Factors The company has identified new risk factors related to the COVID-19 pandemic, including the inherent uncertainty and resource diversion of pursuing a COVID-19 drug candidate, and potential interruptions or delays to ongoing clinical trials for its other product candidates - A new risk factor highlights that the pursuit of a COVID-19 drug candidate is at an early stage and may not be successful, while committing financial and personnel resources could negatively impact other development programs206208 - The COVID-19 pandemic may cause interruptions or delays in clinical trials, including for IMU-838, due to hospitals shifting resources, patient enrollment difficulties, and potential clinical site closures210 - The pandemic could have a material adverse effect on business operations, including supply chain disruptions, hampering the ability to raise funds, and a general slowdown of the global economy211 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no sales of unregistered securities during the three months ended March 31, 2020 - During the three months ended March 31, 2020, we did not have any sales of unregistered securities212 Item 3. Defaults Upon Senior Securities Not applicable Item 4. Mine Safety Disclosures Not applicable Item 5. Other Information None Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, material agreements, and certifications required by the Sarbanes-Oxley Act