Imunon(IMNN) - 2020 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements show increased cash and equity from financing activities, offset by continued net operating losses Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $22,653,760 | $6,875,273 | | Total current assets | $26,796,060 | $16,235,198 | | Total assets | $46,722,960 | $38,278,367 | | Total current liabilities | $9,205,745 | $7,894,457 | | Total liabilities | $22,514,798 | $23,719,332 | | Total stockholders' equity | $24,208,162 | $14,559,035 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Licensing revenue | $125,000 | $250,000 | | Research and development | $2,990,861 | $6,042,910 | | General and administrative | $1,901,136 | $3,740,042 | | Loss from operations | $(4,766,997) | $(9,532,952) | | Net loss | $(5,342,935) | $(10,399,813) | | Net loss per common share | $(0.18) | $(0.37) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, Six Months Ended June 30) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash (used in) operating activities | $(7,923,276) | $(10,161,871) | | Net cash provided by (used in) investing activities | $5,147,269 | $(1,642,414) | | Net cash provided by financing activities | $18,554,494 | $4,464,060 | | Increase (decrease) in cash and cash equivalents | $15,778,487 | $(7,340,225) | - The company is a development-stage oncology drug company focused on advancing a portfolio of innovative cancer treatments, including directed chemotherapies (ThermoDox®) and DNA-mediated immunotherapies (GEN-1)[43] - As of June 30, 2020, the company has incurred approximately $301 million of cumulative net losses and had approximately $25.5 million in cash, investment securities, and interest receivable, with management believing it has sufficient capital to fund operations through the end of 2021[47][54] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical trial updates, including a futility recommendation for the ThermoDox® study, alongside financial results showing lower operating losses and sufficient capital through 2021 Strategic and Clinical Overview The company's strategic focus is on advancing its lead oncology candidates, ThermoDox® and GEN-1, through clinical development towards commercialization - The company's lead product candidates are ThermoDox®, a proprietary heat-activated liposomal encapsulation of doxorubicin, and GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian cancer[130] - In July 2020, the independent Data Monitoring Committee (DMC) recommended considering stopping the global Phase III OPTIMA Study of ThermoDox® for primary liver cancer after a futility analysis[143][175] - The GEN-1 OVATION 2 study (Phase I/II) is evaluating GEN-1 plus standard chemotherapy in newly diagnosed Stage III/IV ovarian cancer, with initial Phase I data showing a 78% complete tumor resection (R0) rate in the GEN-1 arm versus 50% in the chemotherapy-only arm[154][160] - In March 2020, the European Medicines Agency (EMA) recommended orphan medicinal product designation for GEN-1 for the treatment of ovarian cancer[158] Business Plan and Financial Condition Despite a history of losses and COVID-19 risks, the company reports sufficient capital to fund operations through 2021 via recent financing activities - The company has incurred substantial operating losses since inception, with an accumulated deficit of approximately $301 million as of June 30, 2020[169] - With $25.5 million in cash, investments, and receivables, plus potential proceeds from selling New Jersey NOLs and an equity facility, management believes it has sufficient capital to fund operations through the end of 2021[178][195] - The company raised approximately $27.8 million in gross proceeds from various equity transactions in 2019 and the first half of 2020, including an underwritten offering in June 2020 that yielded net proceeds of approximately $9.1 million[95][185] - The COVID-19 pandemic is identified as a risk that could materially impact future financial condition, results of operations, and cash flows, potentially disrupting clinical trials and capital raising efforts[171][172][173] Financial Review Operating losses decreased for the three and six-month periods ended June 30, 2020, driven by lower R&D and G&A expenses Comparison of Operating Results (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Research and development | $2,991 | $3,558 | (15.9)% | | General and administrative | $1,901 | $2,137 | (11.0)% | | Loss from operations | $(4,767) | $(5,570) | 14.4% | | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change (%) | | Research and development | $6,043 | $6,325 | (4.5)% | | General and administrative | $3,740 | $4,355 | (14.1)% | | Loss from operations | $(9,533) | $(10,430) | 8.6% | - R&D expenses decreased by $0.6 million in Q2 2020 compared to Q2 2019, primarily due to a decrease in costs for the OPTIMA Study from $1.2 million to $0.6 million[198] - G&A expenses decreased in Q2 2020 compared to Q2 2019, mainly due to lower professional fees[199] - The company recognized a non-cash charge of $0.3 million for the six months ended June 30, 2020, from the change in fair value of the earn-out milestone liability, compared to a non-cash benefit of $3.0 million in the same period of 2019[210][211] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate changes affecting its investment portfolio, with no significant changes from the 2019 Form 10-K - The company's primary investment objective is to preserve capital while maximizing income without significantly increasing risk[220] - Cash flow and earnings are subject to fluctuations from changes in interest rates in the investment portfolio, which consists of various issuers, types, and maturities and is classified as available-for-sale[220] - The information required for this item is not significantly different from what was disclosed in the 2019 Form 10-K[221] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes during the quarter - Management, including the CEO and CFO, concluded that as of June 30, 2020, the company's disclosure controls and procedures are effective at a reasonable assurance level[222] - No changes in internal control over financial reporting were identified during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[223] PART II: OTHER INFORMATION Legal Proceedings The company entered into a settlement agreement to resolve a 2019 shareholder lawsuit concerning the 2018 Stock Incentive Plan - A shareholder derivative and class action lawsuit was filed on September 20, 2019, alleging breaches of fiduciary duties concerning the approval of the 2018 Stock Incentive Plan[226] - On April 24, 2020, the parties entered into a Settlement Agreement to resolve the lawsuit, with terms including the repricing of certain stock options and a payment of $187,500 for plaintiff's legal fees[227] - A court hearing for final approval of the settlement was scheduled for September 8, 2020[227] Risk Factors The company faces significant financial, clinical, regulatory, and operational risks, including the need for future capital and potential COVID-19 disruptions - Financial Risk: The company has a history of significant losses, with an accumulated deficit of $301 million as of June 30, 2020, and will need to raise additional capital to fund future operations[229][234] - Clinical Trial Risk: Drug development is inherently uncertain, and the DMC recommended considering stopping the Phase III OPTIMA study for ThermoDox® due to futility, which highlights the high risk of failure at any stage[231][232] - Pandemic Risk: The COVID-19 outbreak could adversely impact the business by disrupting preclinical studies, clinical trial enrollment, supply chains, and the ability to raise capital[245][326] - Regulatory Risk: The company's novel gene-based products are subject to extensive and uncertain regulation by the FDA and other agencies, which could delay or prevent approval[250] - Commercialization Risk: The company relies on third parties for clinical trials and manufacturing and currently has no internal sales or marketing capabilities, which are critical for commercial success[277][280][316] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - None[337] Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None[338] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[338] Other Information No other information was required for disclosure during the period - None[339] Exhibits This section lists filed exhibits, including key agreements, plan amendments, and required officer certifications - Key exhibits filed include the Underwriting Agreement with Oppenheimer & Co. Inc. dated June 22, 2020, and the Settlement Agreement related to the O'Connor v. Braun et al. shareholder action[341] - The list also includes amendments to the 2018 Stock Incentive Plan, CEO and CFO certifications under Sarbanes-Oxley, and XBRL data files[341]