Ikena Oncology(IKNA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the six months ended June 30, 2025, detailing the company's financial position, performance, and cash flows, with accompanying notes on its strategic shift Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2025, shows total assets of $126.2 million, a decrease from $141.5 million at year-end 2024, primarily driven by a reduction in marketable securities, partially offset by an increase in cash and cash equivalents and a loan receivable, while total liabilities decreased to $10.3 million from $15.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $58,290 | $39,393 | | Marketable securities | $37,352 | $84,993 | | Total current assets | $99,013 | $127,169 | | Total assets | $126,166 | $141,510 | | Liabilities & Equity | | | | Total current liabilities | $7,324 | $10,778 | | Total liabilities | $10,259 | $15,576 | | Total stockholders' equity | $115,907 | $125,934 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and six months ended June 30, 2025, the company reported significantly lower net losses compared to the same periods in 2024, driven by a sharp reduction in operating expenses and a substantial increase in other income Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $4,025 | $9,832 | $7,740 | $19,477 | | General and administrative | $4,416 | $5,308 | $10,060 | $11,307 | | Total operating expenses | $8,750 | $15,823 | $19,544 | $34,049 | | Other income, net | $5,998 | $2,155 | $8,201 | $4,262 | | Net loss | $(2,767) | $(13,730) | $(11,386) | $(29,876) | | Net loss per share | $(0.06) | $(0.28) | $(0.24) | $(0.62) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased from $125.9 million at the end of 2024 to $115.9 million as of June 30, 2025, primarily due to the net loss incurred during the first six months of 2025 - Total stockholders' equity declined by $10.0 million in the first six months of 2025, from $125.9 million to $115.9 million, mainly driven by the net loss for the period[25] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities significantly reduced to $14.0 million, while net cash provided by investing activities was $32.9 million, primarily from marketable securities sales and maturities, contrasting with a prior-year use of cash Cash Flow Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,984) | $(30,806) | | Net cash provided by (used in) investing activities | $32,881 | $(44,820) | | Net increase (decrease) in cash | $18,897 | $(75,626) | | Cash, cash equivalents and restricted cash, end of period | $59,162 | $45,546 | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide critical context to the financial statements, detailing the company's strategic shift, the pending merger with Inmagene, related financial instruments, and significant changes in R&D expenses - On December 23, 2024, the company entered into a Merger Agreement with Inmagene Biopharmaceuticals. The merger was approved by stockholders on July 15, 2025, and its closing is subject to customary conditions[31][32] - The company provided a total of $22.5 million in term loans to Inmagene, secured by Inmagene's IMG-007 asset. The loan will be forgiven upon consummation of the merger[58][59] - The company recorded restructuring charges of $1.7 million for the six months ended June 30, 2025, related to employee terminations and retention payments in connection with the proposed merger[69][70] - For the six months ended June 30, 2025, R&D expenses for the IK-930 program decreased to $0.7 million from $6.3 million in the prior year period, while expenses for the IK-595 program increased to $5.6 million from $4.0 million[74] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic shift following a review in May 2024, leading to the pending merger with Inmagene and the wind-down of its internal programs, highlighting decreased operating expenses and net loss, with future operations highly dependent on the merger's success Overview The company has transitioned from a clinical-stage oncology company to one focused on a strategic merger with Inmagene Biopharmaceuticals, discontinuing its IK-930 program and winding down IK-595, with its future highly dependent on the merger's completion - Following a strategic review, the company entered into a merger agreement with Inmagene Biopharmaceuticals on December 23, 2024[81] - The company is winding down its IK-595 clinical program and has discontinued the IK-930 program. If the merger completes, the combined company will focus on Inmagene's lead candidate, IMG-007[80][81] - The merger and a concurrent $75.0 million financing are expected to close around the end of July 2025. The company's future operations are highly dependent on the success of these transactions[82][86] Results of Operations The company's results show a significant reduction in net loss for the first six months of 2025 ($11.4 million) compared to the same period in 2024 ($29.9 million), primarily due to a 60% decrease in R&D expenses and a 47% decrease in restructuring charges, alongside increased other income Comparison of Results of Operations (in thousands) | Expense Category | Six Months 2025 | Six Months 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $7,740 | $19,477 | $(11,737) | (60)% | | General and administrative | $10,060 | $11,307 | $(1,247) | (11)% | | Restructuring and other charges | $1,744 | $3,265 | $(1,521) | (47)% | | Total operating expenses | $19,544 | $34,049 | $(14,505) | (43)% | | Net loss | $(11,386) | $(29,876) | $18,490 | (62)% | - The decrease in R&D spending was driven by the wind-down of the IK-930 clinical trial and discontinuation of discovery efforts, which reduced personnel and other related costs[109] - Other income for the first half of 2025 included $4.3 million from a related party for reimbursement of R&D expenses and $0.4 million from the sale of the IK-175 (AHR antagonist) technology[115][71] Liquidity and Capital Resources As of June 30, 2025, the company had $95.6 million in cash, cash equivalents, and marketable securities, which management believes are sufficient for at least the next 12 months if the merger with Inmagene is not consummated, though future funding requirements are highly dependent on the merger's outcome - As of June 30, 2025, the company had cash, cash equivalents, and marketable securities of $95.6 million[116][125] - Net cash used in operating activities decreased to $14.0 million in the first six months of 2025 from $30.8 million in the same period of 2024[117][119] - The company believes its current capital is sufficient to fund operations for at least 12 months from the filing date, assuming the merger is not completed. Future capital needs will change significantly if the merger is consummated[125] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Ikena Oncology is not required to provide the information for this item - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item[138] Item 4. Controls and Procedures Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[140] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[141] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no current material adverse legal proceedings but discloses two lawsuits and five stockholder demands related to the proposed merger with Inmagene, which it believes are without merit and plans to defend vigorously - Two legal actions and five stockholder demands have been filed against the company and its board related to the proposed merger with Inmagene, alleging the registration statement was materially incomplete and misleading[144] - The company believes the complaints and demands are without merit and intends to defend against them vigorously[145] Item 1A. Risk Factors This section outlines significant risks to the company's business, primarily revolving around the successful completion of the proposed merger with Inmagene, its financial position, and the inherent uncertainties of drug development and commercialization Risks Related to Our Strategic Alternatives Review Process This subsection details risks associated with the company's strategic review and the proposed merger with Inmagene, including the potential for merger failure leading to dissolution and liquidation, and high dependence on a few remaining employees - Failure to complete, or delays in completing, the proposed merger with Inmagene could materially and adversely affect the company's results, business, and stock price[148] - If the merger is not consummated, the board of directors may decide to pursue a dissolution and liquidation of the company, and the cash available for distribution to stockholders is not assured[154] - The company is substantially dependent on its remaining nine full-time employees to facilitate the consummation of the merger[156] Risks Related to Our Financial Position and Capital Requirements This subsection highlights the company's precarious financial position, characterized by a history of significant net losses and no revenue from product sales, emphasizing that future operations will require substantial additional capital which may not be available on favorable terms and could lead to significant stockholder dilution - The company has incurred significant net losses since inception, with a net loss of $11.4 million for the six months ended June 30, 2025, and an accumulated deficit of $343.0 million[166] - The company has no products approved for commercial sale and has not generated any revenue from product sales[170] - Additional capital will be required to finance future operations, which may not be available on acceptable terms, or at all. Raising capital may cause dilution to stockholders[175][181] Risks Related to the Development of our Targeted Oncology and Other Programs and Product Candidates This subsection outlines the inherent risks in clinical product development, which would become highly relevant if the merger with Inmagene is completed, including the lengthy, expensive, and uncertain nature of clinical trials, potential for unfavorable results, difficulties in patient enrollment, and reliance on companion diagnostics, noting the company's limited experience in late-stage trials - Clinical product development is a lengthy, expensive process with an uncertain outcome. The company has limited experience completing later-stage clinical trials[185][186] - Future clinical trials may be delayed or fail due to issues with patient enrollment, unforeseen safety events, or inconclusive efficacy data[193][199] - Development may depend on companion diagnostics, which face their own scientific, technical, and regulatory challenges[187] Risks Related to Commercialization This subsection discusses the challenges the company would face if it were to commercialize a product in the future, including substantial competition from larger pharmaceutical companies, uncertainty in market size estimates, and difficulty in achieving broad market acceptance and securing adequate reimbursement from payors - The biopharmaceutical industry is highly competitive, and the company faces competition from major pharmaceutical and biotechnology companies with greater financial resources[228][230] - Market opportunities for future products may be smaller than estimated, and achieving profitability depends on factors like regulatory approval scope, physician acceptance, and pricing[232][233] - Even if approved, future products may not achieve broad market acceptance, and securing adequate coverage and reimbursement from third-party payors is critical and uncertain[234][235] Risks Related to Our Reliance on Third Parties This subsection details the company's dependence on third parties, highlighting risks associated with relying on contract research organizations (CROs) for clinical trials and contract manufacturing organizations (CMOs) for product supply, where failure to perform could substantially harm development timelines and the business - The company relies on third parties like CROs to conduct clinical trials and is responsible for ensuring their compliance with regulations such as Good Clinical Practices (GCPs)[241][242] - The company plans to contract with third-party CMOs for manufacturing, which creates risks related to supply sufficiency, cost, quality, and regulatory compliance (cGMP)[253][254] - The company faces significant competition in seeking collaborators for development and commercialization, and any future collaborations may not be successful[262][266] Risks Related to Our Intellectual Property This subsection covers the extensive risks related to the company's intellectual property, where the ability to obtain, maintain, and enforce patents is uncertain and critical for commercial success, facing challenges from patent disputes, infringement claims, and difficulties in protecting trade secrets - The company's success depends on its ability to obtain and maintain patent protection, but the patent position of biotech companies is highly uncertain and involves complex legal questions[267][269] - The company may become involved in expensive and time-consuming litigation to protect its IP or defend against claims that it infringes on third-party rights[284][289] - Changes in patent law, such as the Leahy-Smith Act and Supreme Court rulings, could diminish the value of patents and impair the ability to protect future products[306][307] Risks Related to Government Regulation This subsection outlines the risks associated with the extensive government regulation of the biopharmaceutical industry, including the difficulty and uncertainty of obtaining regulatory approval, the potential for healthcare reform to impact pricing and reimbursement, and the need to comply with fraud and abuse laws - Obtaining regulatory approval in one jurisdiction does not guarantee approval in others, and the process is long, costly, and uncertain[312][313] - Healthcare reform measures, such as the Inflation Reduction Act (IRA) and the One Big Beautiful Bill Act of 2025 (OBBBA), could limit pricing, reduce reimbursement, and adversely affect the business[326][329] - The company is subject to complex data privacy laws like GDPR in Europe and various state laws in the U.S., which impose significant compliance costs and risks[338][354] Risks Relating to Employee Matters and Managing Growth This subsection focuses on risks related to personnel and operational growth, including high dependence on key employees, intense competition for talent, significant cybersecurity risks to information systems, and challenges in integrating acquisitions and managing future growth with a small team - The company is highly dependent on its key employees and executive team, and the loss of their services could impede its strategy[348] - The company's information systems are vulnerable to cyberattacks, which could lead to the disclosure of confidential information, reputational damage, and financial loss[352] - The use of Artificial Intelligence (AI) presents risks, including security vulnerabilities and an uncertain, evolving regulatory environment like the EU's AI Act[359] Risks Related to Our Common Stock This subsection details risks for investors in the company's common stock, including the dual-class stock structure that can limit stockholder influence, potential limitations on the use of net operating loss (NOL) carryforwards due to ownership changes, and anti-takeover provisions in the company's charter that could deter beneficial acquisitions - The dual-class structure of the common stock, with voting and non-voting shares, may limit stockholders' ability to influence corporate matters[366] - The company's ability to use its significant net operating loss carryforwards ($191.5 million federal, $205.5 million state as of Dec 31, 2024) may be limited by ownership changes under Section 382 of the Code[367] - Anti-takeover provisions in the company's charter and Delaware law could make a potentially beneficial acquisition more difficult[369][370] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports that there were no unregistered sales of equity securities or issuer purchases of its equity securities during the quarter - There were no unregistered sales of equity securities or issuer purchases of equity securities in the reported period[394][395] Item 3. Defaults Upon Senior Securities The company reports that there have been no defaults upon its senior securities - None[396] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[397] Item 5. Other Information The company states that none of its directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading plan or other trading arrangement during the quarter[398] Item 6. Exhibits This section provides a list of all exhibits filed with the Quarterly Report on Form 10-Q, including the Agreement and Plan of Merger with Inmagene, corporate governance documents, and officer certifications - Lists exhibits filed with the report, including the Merger Agreement, corporate governance documents, and officer certifications required by the Sarbanes-Oxley Act[400]