Instil Bio(TIL) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section provides the company's unaudited financial statements and management's analysis of financial condition and operational results Item 1. Financial Statements (Unaudited) This section presents Instil Bio, Inc.'s unaudited condensed consolidated financial statements, including core financial statements and explanatory notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | ASSETS | | | | Cash and cash equivalents | $7,688 | $8,805 | | Restricted cash | $150 | $1,830 | | Marketable securities | $84,135 | $104,510 | | Prepaid expenses and other current assets | $3,317 | $9,325 | | Assets held for sale | $112,096 | — | | Total current assets | $207,386 | $124,470 | | Property, plant and equipment, net | $150 | $129,406 | | Operating lease right-of-use assets | $590 | $934 | | Long-term investments | $11,659 | — | | Other long-term assets | $11,201 | $8,757 | | Total assets | $230,986 | $263,567 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $523 | $659 | | Accrued expenses and other current liabilities | $13,329 | $7,237 | | Total current liabilities | $13,852 | $7,896 | | Contingent consideration | $948 | $948 | | Operating lease liabilities, non-current | $6 | $1,017 | | Loan payable | $84,420 | $84,187 | | Other long-term liabilities | $90 | $83 | | Total liabilities | $99,316 | $94,131 | | Total stockholders' equity | $131,670 | $169,436 | | Total liabilities and stockholders' equity | $230,986 | $263,567 | - Total assets decreased by $32.581 million from December 31, 2024, to June 30, 2025, primarily due to a significant reclassification of Property, plant and equipment to Assets held for sale, and decreases in cash, marketable securities, and prepaid expenses[8] - Total liabilities increased by $5.185 million, driven by a rise in accrued expenses and other current liabilities, while total stockholders' equity decreased by $37.766 million[8] Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance, including revenues, expenses, and net loss over specific periods | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | In-process research and development | $10,000 | $— | $10,000 | $— | | Research and development | $6,743 | $2,921 | $12,114 | $10,177 | | General and administrative | $6,157 | $10,706 | $15,266 | $23,130 | | Restructuring and impairment charges | $540 | $508 | $16,622 | $4,783 | | Total operating expenses | $23,440 | $14,135 | $54,002 | $38,090 | | Loss from operations | $(23,440) | $(14,135) | $(54,002) | $(38,090) | | Interest income | $1,044 | $1,919 | $2,219 | $3,981 | | Interest expense | $(1,582) | $(1,999) | $(2,680) | $(3,980) | | Other rental income | $2,242 | $— | $4,484 | $— | | Other income (expense), net | $342 | $(702) | $385 | $(1,130) | | Net loss | $(21,394) | $(14,917) | $(49,594) | $(39,219) | | Net comprehensive loss | $(21,748) | $(14,981) | $(50,171) | $(39,498) | | Net loss per share, basic and diluted | $(3.24) | $(2.29) | $(7.55) | $(6.03) | - Net loss increased significantly for both the three-month period (from $14.917 million to $21.394 million) and the six-month period (from $39.219 million to $49.594 million) ended June 30, 2025, compared to 2024[11] - The increase in net loss was primarily driven by a substantial rise in in-process research and development expenses (from $0 to $10 million for both periods) and restructuring and impairment charges (from $4.783 million to $16.622 million for the six-month period)[11] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit | Metric (in thousands) | Balance - Dec 31, 2024 | Balance - June 30, 2025 | | :-------------------------------- | :--------------------- | :---------------------- | | Common Stock Shares | 6,525,887 | 6,750,716 | | Additional Paid-in Capital | $824,780 | $837,185 | | Accumulated Other Comprehensive (Loss) | $(228) | $(805) | | Accumulated Deficit | $(655,116) | $(704,710) | | Total Stockholders' Equity | $169,436 | $131,670 | - Total stockholders' equity decreased from $169.436 million at December 31, 2024, to $131.670 million at June 30, 2025, primarily due to net losses incurred during the period[14] - Additional paid-in capital increased by $12.405 million, reflecting proceeds from stock option exercises and an at-the-market offering, partially offset by a significant increase in accumulated deficit[14] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(18,986) | $(25,004) | | Net cash provided by investing activities | $9,211 | $21,160 | | Net cash provided by financing activities | $6,914 | $— | | Net decrease in cash, cash equivalents and restricted cash | $(2,861) | $(3,844) | | Cash, cash equivalents and restricted cash—end of period | $7,838 | $6,781 | - Net cash used in operating activities decreased from $25.004 million in 2024 to $18.986 million in 2025, primarily due to higher non-cash charges like impairment of property, plant and equipment and in-process R&D expenses, partially offset by changes in operating assets and liabilities[21][155][156] - Net cash provided by investing activities decreased significantly from $21.160 million in 2024 to $9.211 million in 2025, mainly due to changes in marketable securities purchases and maturities[21][157][158] - Net cash provided by financing activities increased to $6.914 million in 2025 from nil in 2024, driven by net proceeds from an at-the-market offering and stock option exercises[21][159][160] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Organization and Description of Business This note describes Instil Bio, Inc.'s corporate structure and its primary focus as a clinical-stage biopharmaceutical company - Instil Bio, Inc. is a clinical-stage biopharmaceutical company focused on developing novel therapies, with its lead product candidate, AXN-2510/IMM2510, a bispecific antibody targeting PD-L1 and VEGF in solid tumor cancers[24] - In August 2024, the Company's subsidiary, Axion Bio, Inc., in-licensed AXN-2510/IMM2510 and AXN-27M/IMM27M from ImmuneOnco Biopharmaceuticals, granting exclusive global rights (excluding Greater China) for research, development, manufacturing, and commercialization[24] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the company's financial statements - The financial statements are prepared in accordance with GAAP, are unaudited, and include normal recurring adjustments, with results for the three and six months ended June 30, 2025, not necessarily indicative of future periods[25][26] - The Company operates in a single operating segment focused on research and development[28][29] - Restricted cash as of June 30, 2025, primarily consists of a cash reserve for future tax payments, totaling $0.2 million, a decrease from $1.8 million at December 31, 2024, which was collateral for a loan[31][34] - In March 2025, the Board approved a plan to sell the Tarzana facility, reclassifying the land and building as assets held for sale, leading to a $16.6 million impairment charge for the six months ended June 30, 2025[38][39] - Research and development costs, including third-party clinical trial expenses and contingent milestone payments, are expensed as incurred[42] 3. Segment Reporting This note details the company's operating segments, confirming its focus on a single research and development segment - The Company operates as a single reportable segment focused on the research and development of novel therapies, with the CEO reviewing net loss and program progress[45][46] | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | In-process research and development | $10,000 | $— | $10,000 | $— | | AXN-2510/IMM2510 | $6,597 | $— | $11,312 | $— | | Other program expenses | $146 | $2,689 | $802 | $9,692 | | General and administrative | $6,145 | $9,964 | $14,756 | $21,647 | | Restructuring and impairment charges | $540 | $508 | $16,622 | $4,783 | | Depreciation | $12 | $974 | $510 | $1,968 | | Interest income | $(1,044) | $(1,919) | $(2,219) | $(3,981) | | Interest expense | $1,582 | $1,999 | $2,680 | $3,980 | | Other (income) expense, net | $(2,584) | $702 | $(4,869) | $1,130 | | Segment and consolidated net loss | $21,394 | $14,917 | $49,594 | $39,219 | 4. Balance Sheet Components This note provides a detailed breakdown of specific asset and liability accounts on the condensed consolidated balance sheets | Prepaid and Other Current Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------------------------- | :------------ | :---------------- | | Prepaid general and administrative | $1,641 | $1,316 | | Prepaid research and development | $717 | $4,146 | | Tax-related receivable | $805 | $2,622 | | Prepaid contract research organization expenses | $— | $282 | | Other current assets | $154 | $959 | | Total prepaid and other current assets | $3,317 | $9,325 | | Property, Plant and Equipment, Net (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Land | $— | $31,243 | | Building | $— | $102,433 | | Office and computer equipment | $509 | $509 | | Total property, plant and equipment, gross | $509 | $134,185 | | Less: accumulated depreciation | $(359) | $(4,779) | | Total property, plant and equipment, net | $150 | $129,406 | - As of June 30, 2025, $112.1 million in assets related to the Tarzana facility were reclassified as held for sale, resulting in a $16.6 million impairment charge for the six months ended June 30, 2025[51] | Accrued Expenses and Other Current Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------------------ | :------------ | :---------------- | | Accrued compensation and benefits | $1,356 | $2,691 | | Accrued operational expenses | $410 | $582 | | Accrued restructuring costs | $155 | $2,073 | | Accrued research, development and clinical trial expenses | $952 | $209 | | Accrued in process research and development | $10,000 | $— | | Operating lease liabilities, current | $456 | $1,682 | | Total accrued expenses and other current liabilities | $13,329 | $7,237 | 5. Fair Value Measurement This note explains the valuation methodologies and classifications for the company's financial assets and liabilities - Cash and cash equivalents are classified as Level 1 assets, valued based on quoted market prices in active markets[54] - Marketable securities and long-term investments (U.S. Treasury bills) are classified as Level 2, valued using observable inputs like broker quotations[55] | Financial Assets (in thousands) | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Level 3 (June 30, 2025) | Total (June 30, 2025) | | :------------------------------ | :---------------------- | :---------------------- | :---------------------- | :-------------------- | | Money market funds | $5,593 | $— | $— | $5,593 | | U.S. Treasury bills | $— | $95,794 | $— | $95,794 | | Total Financial Assets | $5,593 | $95,794 | $— | $101,387 | | Financial Liabilities (in thousands) | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Level 3 (June 30, 2025) | Total (June 30, 2025) | | :------------------------------- | :---------------------- | :---------------------- | :---------------------- | :-------------------- | | Contingent consideration | $— | $— | $948 | $948 | - The fair value of the Company's Loan was $87.4 million as of June 30, 2025, and $84.7 million as of December 31, 2024, classified as Level 2[58] 6. Financial Instruments This note details the company's marketable securities and long-term investments, primarily U.S. Treasury bills | Marketable Securities & Long-Term Investments (in thousands) | Maturity | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | | :----------------------------------------------------------- | :------- | :------------- | :--------------- | :---------------- | :--------- | | June 30, 2025 | | | | | | | U.S. Treasury bills | Less than one year | $84,175 | $3 | $(43) | $84,135 | | U.S. Treasury bills | Between one and two years | $11,658 | $5 | $(4) | $11,659 | | Total | | $95,833 | $8 | $(47) | $95,794 | | December 31, 2024 | | | | | | | U.S. Treasury bills | Less than one year | $104,445 | $99 | $(34) | $104,510 | - Marketable securities and long-term investments, primarily U.S. Treasury bills, totaled $95.794 million at June 30, 2025, down from $104.510 million at December 31, 2024[59] - The Company does not intend to sell these securities before recovery of their amortized cost basis, and there were no impairment losses for investments as of June 30, 2025[33][59] 7. License and Collaboration Agreement with ImmuneOnco This note describes the key terms and financial implications of the company's licensing agreement with ImmuneOnco - Axion Bio entered into the IO Collaboration Agreement with ImmuneOnco in August 2024, in-licensing bispecific antibodies including AXN-2510/IMM2510 and AXN-27M/IMM27M[60] - A $10.0 million upfront payment was expensed as IPR&D in 2024, and ImmuneOnco is eligible for up to $20.0 million in near-term payments, $2.1 billion in milestones, and single-digit to low double-digit royalties on global net sales outside Greater China[60][61] - A $10.0 million development payment was accrued and expensed as IPR&D in Q2 2025 due to IND clearance for AXN-2510 in the U.S. for a Phase 1 trial[64] - Expenses recognized from the agreement were $14.1 million for the three months and $18.4 million for the six months ended June 30, 2025, compared to nil in 2024[65] 8. Commitments and Contingencies This note outlines the company's lease obligations, loan agreements, and other significant contractual commitments - The Company leases office and laboratory spaces, with total lease costs of $0.859 million for Q2 2025 (up from $0.613 million in Q2 2024) and $1.446 million for the six months ended June 30, 2025 (up from $1.291 million in 2024)[66][67] - Future minimum lease payments under operating lease liabilities are $0.480 million, with $0.309 million remaining in 2025 and $0.171 million in 2026[68] - The Tarzana facility is leased to AstraZeneca Pharmaceuticals LP for an initial 15-year term, generating $2.242 million in rental income for Q2 2025 and $4.484 million for the six months ended June 30, 2025[69][71] - The Company refinanced its Construction Loans in December 2024 with an $85.6 million Term Loan, bearing a fixed interest rate of 6.35% per annum, with interest-only payments and principal due at maturity[74][76] | Interest Expense Related to Loan (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Contractual interest expense | $1,389 | $1,750 | $2,275 | $3,482 | | Amortization of debt issuance cost | $193 | $249 | $405 | $498 | | Total interest expense related to the Loan | $1,582 | $1,999 | $2,680 | $3,980 | 9. Equity This note details changes in the company's common stock, preferred stock, and other components of stockholders' equity - As of June 30, 2025, the Company had 6,750,716 shares of common stock outstanding, an increase from 6,525,887 shares at December 31, 2024[83] - During Q2 2025, the Company sold 185,837 shares of common stock under its ATM Program for net proceeds of $6.6 million, with approximately $93.1 million remaining available[84] - The Company is authorized to issue up to 10,000,000 shares of preferred stock, but none were issued or outstanding as of June 30, 2025, or December 31, 2024[85] 10. Stock-Based Compensation This note explains the company's stock-based compensation plans and the associated expenses recognized - The 2021 Equity Incentive Plan allows for various awards to employees, directors, and consultants, with 457,088 shares remaining available for issuance as of June 30, 2025[86][87] | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Research and development expense | $137 | $534 | $370 | $1,081 | | General and administrative expense | $1,687 | $3,639 | $4,949 | $7,607 | | Total stock-based compensation expense | $1,824 | $4,173 | $5,319 | $8,688 | - Total unrecognized compensation cost related to unvested stock options was $16.3 million as of June 30, 2025, expected to be recognized over a weighted-average period of 2.6 years[87] 11. Net Loss Per Share This note provides the calculation of basic and diluted net loss per share, including potentially dilutive shares | Potentially Dilutive Shares Excluded from Diluted Net Loss Per Share | June 30, 2025 | June 30, 2024 | | :----------------------------------------------------------------- | :------------ | :------------ | | Stock options to purchase common stock | 1,592,634 | 1,125,216 | 12. Corporate Restructuring Plan This note details the company's restructuring initiatives, including associated charges and liabilities - The Company implemented a 2023 Plan (consolidating ITIL-306 trial to UK) and a 2024 Plan (closing UK manufacturing and clinical operations, eliminating most UK workforce), collectively referred to as the 'Plan'[90][91] - Restructuring and impairment charges were $0.5 million for Q2 2025 and $16.6 million for the six months ended June 30, 2025, primarily due to asset impairments (Tarzana facility) and contract terminations[92][93] | Restructuring and Impairment Charges (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Asset impairment for leasehold improvements | $— | $— | $— | $292 | | One-time employee termination benefits | $— | $247 | $— | $978 | | Contract terminations | $540 | $15 | $53 | $546 | | Right-of-use asset impairment | $— | $— | $— | $187 | | Impairment of long-lived assets held for sale | $— | $246 | $16,569 | $2,780 | | Total restructuring and impairment charges | $540 | $508 | $16,622 | $4,783 | - The restructuring liability decreased from $2.073 million at December 31, 2024, to $0.155 million at June 30, 2025, with $1.4 million paid during the six months ended June 30, 2025[94][95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Instil Bio, Inc.'s financial condition and operational results, highlighting the company's focus on developing AXN-2510/IMM2510, significant operating losses, and strategies for future funding - The Company is a clinical-stage biopharmaceutical company focused on developing AXN-2510/IMM2510, a bispecific antibody for solid tumor cancers, and seeks to in-license or acquire additional therapeutic candidates[98] - Net loss was $21.4 million for the three months and $49.6 million for the six months ended June 30, 2025, with an accumulated deficit of $704.7 million as of June 30, 2025[104] - Cash, cash equivalents, restricted cash, marketable securities, and long-term investments totaled $103.6 million as of June 30, 2025[104] Overview This section provides a high-level summary of Instil Bio's business, its lead product candidate, and recent clinical developments - Instil Bio is a clinical-stage biopharmaceutical company focused on developing AXN-2510/IMM2510, a PD-L1xVEGF bispecific antibody for solid tumor cancers, in-licensed from ImmuneOnco in August 2024[98][99] - ImmuneOnco is conducting Phase 1 and Phase 2 trials of AXN-2510/IMM2510 in China, with preliminary Phase 2 data showing partial responses in 62% of efficacy evaluable NSCLC patients and a favorable safety profile[100][101][102] - The U.S. FDA cleared an IND application for AXN-2510/IMM2510, with a Phase 1 trial in relapsed/refractory solid tumors expected to initiate before the end of 2025[103] Components of Operating Results This section details the various categories of expenses and income that contribute to the company's overall operating results - In-process research and development (IPR&D) expenses include payments for in-licensed IPR&D from ImmuneOnco with no alternative future use, expensed as incurred[106] - Research and development expenses primarily cover clinical trial costs, manufacturing, and personnel, expected to fluctuate with clinical development activities for AXN-2510/IMM2510[107][108] - General and administrative expenses include compensation, professional fees, and public company operating costs, expected to continue as the company operates publicly[110][111] - Restructuring and impairment charges for H1 2025 mainly relate to contract termination fees and a $16.6 million impairment loss on the Tarzana facility listed for sale[112][115] - Other rental income primarily stems from the lease of the Tarzana facility[118] - The Company maintains a full valuation allowance against net deferred tax assets due to cumulative net operating losses and uncertainty of future profitability[121] Results of Operations This section analyzes the company's financial performance over specific periods, comparing current results to prior periods | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | | In-process research and development | $10,000 | $— | $10,000 | | Research and development | $6,743 | $2,921 | $3,822 | | General and administrative | $6,157 | $10,706 | $(4,549) | | Restructuring and impairment charges | $540 | $508 | $32 | | Total operating expenses | $23,440 | $14,135 | $9,305 | | Net loss | $(21,394) | $(14,917) | $(6,477) | - For the three months ended June 30, 2025, net loss increased by $6.477 million YoY, primarily due to a $10.0 million increase in IPR&D related to ImmuneOnco collaboration payments and a $3.8 million increase in R&D expenses from clinical activities, partially offset by a $4.5 million decrease in G&A expenses due to reduced headcount and facility costs[123][124][125][126][127][128] | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | | In-process research and development | $10,000 | $— | $10,000 | | Research and development | $12,114 | $10,177 | $1,937 | | General and administrative | $15,266 | $23,130 | $(7,864) | | Restructuring and impairment charges | $16,622 | $4,783 | $11,839 | | Total operating expenses | $54,002 | $38,090 | $15,912 | | Net loss | $(49,594) | $(39,219) | $(10,375) | - For the six months ended June 30, 2025, net loss increased by $10.375 million YoY, driven by a $10.0 million increase in IPR&D, an $11.8 million increase in restructuring and impairment charges (primarily Tarzana facility impairment), and a $1.9 million increase in R&D expenses, partially offset by a $7.9 million decrease in G&A expenses[129][130][131][132][134][135] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations and its strategies for funding operations - Since inception, the Company has incurred significant operating losses and has no product sales revenue, funding operations through IPO, convertible preferred stock, and ATM Program offerings[136][137] - As of June 30, 2025, cash, cash equivalents, restricted cash, marketable securities, and long-term investments totaled $103.6 million[144] - Existing capital is expected to fund operations beyond 2026, with a potential extension if the Tarzana facility sale is successful[145] - Future funding requirements are substantial due to ongoing R&D, clinical trials, potential acquisitions, and public company operating costs, with additional funds potentially sought through equity, debt, or collaborations[146][153] | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(18,986) | $(25,004) | | Net cash provided by investing activities | $9,211 | $21,160 | | Net cash provided by financing activities | $6,914 | $— | | Net decrease in cash, cash equivalents, and restricted cash | $(2,861) | $(3,844) | Critical Accounting Policies and Estimates This section highlights the accounting policies and estimates that require significant judgment and could materially impact financial results - The financial statements require significant judgments and estimates, based on historical experience and reasonable assumptions, which may differ from actual results[161] - Key policies are detailed in Note 2 to the condensed consolidated financial statements and the Annual Report on Form 10-K[162] Recent Accounting Pronouncements This section provides an overview of new accounting standards and their potential impact on the company's financial reporting - Information on recent accounting pronouncements applicable to the Company is included in Note 2 to the condensed consolidated financial statements[163] Emerging Growth Company Status and Smaller Reporting Company Status This section explains the company's status as an emerging growth company and smaller reporting company, and the implications for its regulatory compliance and disclosures - The Company is an 'emerging growth company' and 'smaller reporting company,' allowing it to rely on reduced disclosure and governance requirements, which may affect investor attractiveness and stock price volatility[164][168][90] - The Company has elected to use the extended transition period for complying with new or revised accounting standards[165] - The 'emerging growth company' status will continue until the earliest of December 31, 2026, achieving $1.235 billion in annual gross revenue, becoming a 'large accelerated filer,' or issuing over $1.0 billion in non-convertible debt[166] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Instil Bio, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is exempt from providing quantitative and qualitative disclosures about market risk[169] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that Instil Bio, Inc.'s disclosure controls and procedures were effective as of June 30, 2025 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting[170] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[171] - Management acknowledges that control systems have inherent limitations and can only provide reasonable, not absolute, assurance against errors and fraud[172] Part II. Other Information This section provides additional information not covered in the financial statements, including legal, risk, and equity matters Item 1. Legal Proceedings Instil Bio, Inc. is not currently subject to any material legal proceedings in the ordinary course of its business activities - The Company is not currently involved in any material legal proceedings[173] Item 1A. Risk Factors This section outlines significant risks that could materially affect Instil Bio, Inc.'s business, financial condition, and results of operations - The Company has incurred significant losses since inception and expects to continue incurring losses, with an accumulated deficit of $704.7 million as of June 30, 2025[177] - All product candidates, including lead candidate AXN-2510/IMM2510, are in early-stage clinical development, and successful development, regulatory approval, and commercialization are uncertain and critical for future viability[176][178][195][196] - Substantial additional funding will be required to meet financial obligations and pursue business objectives, with existing capital projected to fund operations beyond 2026, but this estimate is subject to significant uncertainties[176][184][187] Risks Associated with Our Business This section details the inherent risks in the company's operations, including its development stage, funding needs, and regulatory environment - The Company faces risks including significant losses, limited operating history, the need for substantial additional funding, early-stage clinical development of AXN-2510/IMM2510, and lengthy, unpredictable regulatory approval processes[176] - Reliance on ImmuneOnco and third-party CDMOs for manufacturing, potential challenges in acquiring new product candidates, and intense competition from other biopharmaceutical companies are also key risks[178] Risks Related to our Financial Position and Capital Needs This section addresses risks concerning the company's financial health, including its history of losses and future funding requirements - The Company has incurred significant net losses ($49.6 million for H1 2025) and expects to continue incurring losses for the foreseeable future, with an accumulated deficit of $704.7 million as of June 30, 2025[177] - Substantial additional funding is required for clinical development, regulatory approvals, manufacturing, and commercialization, with existing capital projected to last beyond 2026, but this estimate is uncertain[184][186][187] - Raising additional capital may dilute stockholders, impose restrictive covenants, or require relinquishing rights to technologies or product candidates[189][191][192] - The Company recorded $16.6 million in impairment losses on assets held for sale related to the Tarzana facility in H1 2025, and there is no assurance of a successful sale or recovery of carrying value[193][194] Risks Related to the Development of our Product Candidates This section outlines the challenges and uncertainties inherent in the clinical development process for the company's product candidates - All product candidates, including AXN-2510/IMM2510, are in early-stage development, and the Company lacks prior experience in completing clinical trials or submitting BLAs, making successful development and commercialization uncertain[196][233] - Clinical trials are expensive, time-consuming, and have uncertain outcomes, with potential for delays, suspensions, or terminations due to various factors including regulatory disagreements, patient enrollment issues, or adverse events[201][202][204][205][207] - Data from ImmuneOnco's clinical trials in China may not be accepted by the FDA or other foreign regulatory authorities, potentially requiring additional costly and time-consuming trials[199][245][246] - Interim or preliminary clinical trial results may change, and failure to demonstrate safety and efficacy or the identification of serious adverse effects could delay or prevent regulatory approval[223][225][227][228] - The Company's limited resources necessitate focusing on specific product candidates, potentially missing more profitable opportunities, and market opportunities may be smaller than projected[244][251][253] Risks Related to the Manufacturing of our Product Candidates This section addresses the risks associated with the production of the company's product candidates, including reliance on third parties and regulatory compliance - The Company relies on ImmuneOnco and its third-party CDMOs for manufacturing clinical supplies of AXN-2510/IMM2510 and other product candidates, increasing risks related to control, disruptions, and compliance with cGMP regulations[257][258][259][262] - Failure to secure long-term supply agreements or issues with third-party manufacturers' capacity, quality, or compliance could delay development, regulatory approval, or commercial launch[260][263][264][265] - Diversion of manufacturing capacity or supply by third parties, or challenges in knowledge transfer if manufacturing is shifted from ImmuneOnco, could compromise clinical trials and market entry[266][267][268] - Changes in manufacturing methods or formulation during development may lead to additional costs, delays, or require further testing or clinical trials[270] Risks Related to the Commercialization of our Product Candidates This section covers the challenges and uncertainties involved in bringing the company's product candidates to market and achieving commercial success - Even if approved, product candidates may fail to achieve market acceptance by physicians, patients, and payors due to factors like efficacy, safety, pricing, and competition[271][273] - The Company lacks sales and marketing infrastructure and faces risks in establishing its own capabilities or relying on third parties, potentially leading to lower revenue and profitability[272][274] - Treatable patient populations may be smaller than projected, limiting addressable markets and potentially hindering profitability without approval for additional indications[275][276] - Off-label use or misuse of products could harm reputation, lead to product liability suits, and subject the Company to penalties for non-compliance with regulatory requirements[277][279][280] - The Company faces significant competition from established pharmaceutical and biotechnology companies, as well as non-profit institutions, with greater resources and experience in drug development and commercialization[281][286][287] - Success depends on obtaining and maintaining coverage and adequate reimbursement from third-party payors, which is uncertain and subject to cost-containment efforts and changing policies[293][294][295][296][298] Risks Related to Our Dependence on Third Parties This section addresses the risks arising from the company's reliance on external partners for various critical aspects of its business operations - The Company relies heavily on CROs and other third parties for preclinical testing and clinical trials, and their failure to perform, comply with regulations, or meet deadlines could delay or prevent regulatory approval and commercialization[301][302][303][304][305] - The collaboration with ImmuneOnco for AXN-2510/IMM2510 and AXN-27M/IMM27M carries risks, as collaborators have discretion over resource allocation and may not perform as expected, potentially delaying or terminating development[310][311] - Disagreements with collaborators, or their involvement in business combinations, could delay or terminate development, lead to litigation, or require the Company to assume additional responsibilities and capital[311][312] - Competition for collaborators is significant, and failure to secure additional collaborations on favorable terms could force the Company to curtail development programs or increase expenditures[313][314] Risks Related to our Intellectual Property This section outlines the risks associated with protecting and enforcing the company's intellectual property rights, which are crucial for its competitive position - The Company's business heavily depends on intellectual property licensed from ImmuneOnco; termination of the IO Collaboration Agreement or issues with licensed IP could materially harm the ability to commercialize AXN-2510/IMM2510[315][317] - Failure to obtain and maintain sufficient patent protection, or if patent scope is narrow, could allow competitors to develop similar products, adversely affecting commercialization efforts[320][321][323] - The patent prosecution process is expensive and time-consuming, with no assurance that patent applications will issue or provide meaningful exclusivity, and delays in regulatory approvals could reduce patent protection periods[323][324] - Reliance on trade secret protection and confidentiality agreements carries risks of disclosure, misappropriation, or independent development by competitors, which could harm the Company's competitive position[324][326][329] - Patent terms may be inadequate, and failure to obtain extensions under Hatch-Waxman Amendments could lead to earlier generic competition[330] - Patent reform legislation (e.g., Leahy-Smith Act) and changes in patent laws or interpretations could increase uncertainties and costs for patent prosecution and enforcement[335][336][338] - Involvement in patent infringement lawsuits, whether as plaintiff or defendant, could be expensive, time-consuming, and unsuccessful, potentially leading to invalidation of patents, licensing requirements, or cessation of product commercialization[339][340][349][350] - Failure to identify or correctly interpret third-party patents, or inability to license necessary intellectual property, could adversely affect product development and commercialization[343][344][345] - Limited geographical patent protection and varying intellectual property laws across countries may hinder the ability to protect and enforce IP rights globally[357][359][360] Risks Related to Legal and Regulatory Compliance Matters This section addresses the legal and regulatory challenges the company faces, including healthcare fraud and abuse laws, data privacy, and international relations - Relationships with healthcare providers and payors are subject to federal and state fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), and non-compliance could lead to substantial penalties, fines, and exclusion from healthcare programs[368][369][370][371] - The collaboration with ImmuneOnco exposes the Company to risks from strained U.S.-China relations, including potential sanctions and unpredictable changes in regulations affecting biopharmaceutical companies[373] - Approved products remain subject to ongoing regulatory oversight, including requirements for manufacturing, labeling, promotion, and post-market studies, with non-compliance potentially leading to restrictions, recalls, or withdrawal of approval[374][375][376][377] - Healthcare legislative or regulatory reforms (e.g., ACA, IRA, OBBBA) may negatively impact the business by increasing costs, limiting coverage, or reducing reimbursement for products[381][382][383][384][385][386][387][388][389] - Computer system failures, cyberattacks, or cybersecurity deficiencies (internal or third-party) could lead to security incidents, data breaches, operational disruptions, litigation, fines, and reputational harm[394][395][396][397][398][401][402] - Compliance with stringent and evolving U.S. and foreign data privacy and security laws (e.g., HIPAA, CCPA, UK GDPR, PRC Data Security Law) is complex and costly, with non-compliance risking regulatory actions, litigation, and business disruption[404][405][406][407][409] - Failure to comply with environmental, health, and safety laws could result in fines, penalties, or costs from contamination or injury, potentially exceeding resources and harming the business[410][411][412] Risks Related to Employee Matters and Managing our Growth This section addresses risks related to human capital, including talent retention, organizational growth, and potential employee misconduct - Future success depends on retaining key executives and attracting, retaining, and motivating qualified scientific, clinical, manufacturing, and sales/marketing personnel, which is challenging due to intense competition[413][414] - Failure to adequately manage future growth in clinical development, regulatory affairs, manufacturing, and commercialization could strain resources, disrupt operations, and adversely affect the business[415] - Misconduct by employees, contractors, or collaborators, including non-compliance with regulatory standards and healthcare fraud and abuse laws, could lead to significant penalties, reputational harm, and business disruption[416][417] Risks Related to Ownership of our Common Stock and our Status as a Public Company This section outlines risks pertinent to investors, including stock price volatility, potential dilution, and corporate governance matters - The trading price of the Company's common stock may be volatile due to various factors, including clinical trial results, regulatory decisions, competition, and general market conditions, potentially leading to substantial losses for investors[419][420] - Sales of a substantial number of outstanding shares, including those from equity incentive plans and registration rights, could cause the market price of common stock to decline significantly[425][426][427] - Provisions in corporate charter documents and Delaware law (e.g., preferred stock authority, staggered board, anti-takeover provisions) may prevent or frustrate attempts to change management or acquire a controlling interest, potentially lowering the stock price[428][429] - Concentration of ownership among executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions[430][433] - As an 'emerging growth company' and 'smaller reporting company,' the Company relies on reduced disclosure and governance requirements, which may make its common stock less attractive to some investors and increase price volatility[434][435][436] - The Company has broad discretion in the use of its cash and cash equivalents, and investors will not have the opportunity to influence these decisions[437] - No cash dividends are anticipated in the foreseeable future, making capital appreciation the sole source of gains for investors[439] - Exclusive forum provisions in the certificate of incorporation may limit stockholders' ability to choose a judicial forum for disputes, potentially discouraging lawsuits[440][441] General Risk Factors This section covers broader risks that could impact the company's operations, financial performance, and overall business environment - Operating as a public company incurs increased legal, accounting, and compliance costs, diverting management's time and potentially affecting financial results[442][445] - Failure to maintain proper and effective internal controls could impair the ability to produce accurate financial statements, leading to stock price decline and potential sanctions[447][449][450] - The effective tax rate may fluctuate due to changes in tax legislation, profitability mix, and audits, potentially leading to obligations exceeding accrued amounts[451][452] - A significant portion of net operating loss (NOL) carryforwards may expire unused or be limited by ownership changes under Section 382, increasing future tax obligations[453] - Business activities outside the U.S. are subject to anti-bribery and anti-corruption laws (e.g., FCPA), and non-compliance could result in fines, sanctions, and reputational damage[454] - Disruptions at the FDA and other government agencies (e.g., funding shortages, policy changes, global health concerns) could hinder product development and commercialization[455][457] - Unfavorable global economic and political conditions, including military conflicts and U.S.-China tensions, could adversely affect business, financial condition, and results of operations, particularly for clinical trials in China[458] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Instil Bio, Inc. reports no recent unregistered sales of equity securities and states that the use of proceeds information is not applicable, nor were there any issuer purchases of equity securities during the period - No unregistered sales of equity securities occurred[460] - Use of proceeds is not applicable[461][462] - No issuer purchases of equity securities were made[463] Item 3. Defaults Upon Senior Securities Instil Bio, Inc. reports no defaults upon senior securities - There were no defaults upon senior securities[464] Item 4. Mine Safety Disclosures Instil Bio, Inc. states that mine safety disclosures are not applicable to its operations - Mine safety disclosures are not applicable to the Company[465] Item 5. Other Information Instil Bio, Inc. reports no Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements were adopted or terminated by its directors or executive officers during the quarterly period - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or executive officers during the quarter[466] Item 6. Exhibits This section lists all exhibits filed or furnished with the report, including corporate governance documents, certifications from principal officers, and financial information formatted in Inline XBRL - The exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Investors' Rights Agreement, and certifications from Principal Executive and Financial Officers[468] - Financial information for the quarter ended June 30, 2025, is provided in Inline XBRL format[468] Signatures The report is duly signed on behalf of Instil Bio, Inc. by Sandeep Laumas, Chief Financial Officer and Chief Business Officer, in his capacity as Principal Financial Officer and Principal Accounting Officer, as of August 13, 2025 - The report was signed by Sandeep Laumas, Chief Financial Officer and Chief Business Officer, on August 13, 2025[474]