InflaRx N.V.(IFRX) - 2022 Q2 - Quarterly Report

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss The statements detail operating expenses, other income, and the resulting net loss and comprehensive loss for the periods Statements of Operations and Comprehensive Loss (in €) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development expenses | (11,180,958) | (11,299,270) | (21,652,881) | (16,206,155) | | General and administrative expenses | (4,346,965) | (2,697,839) | (8,734,408) | (5,720,177) | | Total Operating Expenses | (15,527,923) | (13,997,109) | (30,387,289) | (21,926,332) | | Other income | 14,441,541 | 15,216 | 14,443,135 | 20,678 | | Operating Result | (1,086,661) | (13,982,172) | (15,944,999) | (21,906,498) | | Income (Loss) for the Period | 465,376 | (14,780,903) | (13,536,654) | (20,906,280) | | Income (Loss) per share (basic/diluted) | 0.01 | (0.33) | (0.31) | (0.54) | | Total Comprehensive Income (Loss) | 4,874,316 | (16,208,205) | (7,817,839) | (18,828,883) | Unaudited Condensed Consolidated Statements of Financial Position This statement presents the company's assets, equity, and liabilities as of June 30, 2022, and December 31, 2021 Statements of Financial Position (in €) | Metric | June 30, 2022 (unaudited) | December 31, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Total non-current assets | 2,503,468 | 29,461,224 | | Total current assets | 112,129,573 | 95,677,896 | | TOTAL ASSETS | 114,633,041 | 125,139,120 | | Total equity | 102,131,638 | 105,280,996 | | Total non-current liabilities | 1,207,970 | 1,101,373 | | Total current liabilities | 11,293,433 | 18,756,751 | | Total Liabilities | 12,501,404 | 19,858,124 | | TOTAL EQUITY AND LIABILITIES | 114,633,041 | 125,139,120 | Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity This statement outlines the changes in total equity, including loss, exchange differences, and share-based payments, for the six-month periods Statements of Changes in Shareholders' Equity (in €) | Metric | Balance as of Jan 1, 2022 | Loss for the period | Exchange differences | Equity-settled share-based payments | Balance as of June 30, 2022 | | :---------------------------------- | :------------------------ | :------------------ | :------------------- | :---------------------------------- | :-------------------------- | | Total equity | 105,280,996 | (13,536,654) | 5,718,815 | 4,668,481 | 102,131,638 | | Metric | Balance as of Jan 1, 2021 | Loss for the period | Exchange differences | Issuance of common shares and warrants | Transaction costs | Equity-settled share-based payments | Share options exercised | Balance as of June 30, 2021 | | :---------------------------------- | :------------------------ | :------------------ | :------------------- | :------------------------------------- | :---------------- | :---------------------------------- | :---------------------- | :-------------------------- | | Total equity | 77,863,880 | (20,906,280) | 2,077,397 | 65,142,549 | (4,219,222) | 2,687,779 | 963,735 | 123,609,838 | Unaudited Condensed Consolidated Statements of Cash Flows This statement summarizes cash flows from operating, investing, and financing activities, showing the net change in cash and equivalents Statements of Cash Flows (in €) | Metric | 6 Months Ended June 30, 2022 (unaudited) | 6 Months Ended June 30, 2021 (unaudited) | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash used in operating activities | (25,359,081) | (18,254,553) | | Net cash from investing activities | 12,554,101 | (1,942,546) | | Net cash from (used in) financing activities | (182,014) | 61,703,934 | | Net decrease increase in cash and cash equivalents | (12,986,995) | 45,391,927 | | Cash and cash equivalents at end of period | 15,416,152 | 72,360,428 | Notes to the Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and additional disclosures for the interim condensed consolidated financial statements Summary of Significant Accounting Policies and Other Disclosures This section details the basis of financial statement preparation, accounting policies, and the Group's structure Reporting Entity and Group's Structure InflaRx N.V. is a NASDAQ-listed biopharmaceutical company focused on anti-C5a technologies, operating with its German and US subsidiaries - InflaRx N.V. is a Dutch public company listed on The NASDAQ Global Select Market under the symbol IFRX since November 10, 2017[12] - The Group is a clinical-stage biopharmaceutical company focused on proprietary anti-C5a and C5aR technologies for developing inhibitors of complement activation factor C5a and its receptor C5aR[13] - The Group comprises InflaRx N.V. and its wholly-owned subsidiaries InflaRx GmbH (Germany) and InflaRx Pharmaceutical Inc. (United States)[13] Basis of Preparation Interim financial statements adhere to IAS 34, presented in Euro, with consistent accounting policies and no material impact from new standards - The interim condensed consolidated financial statements for the three- and six-month periods ended June 30, 2022 and 2021, were prepared in accordance with IAS 34 Interim Financial Reporting[15] - The financial statements are presented in Euro (€), which is the functional currency of InflaRx GmbH, while InflaRx N.V. and InflaRx Pharmaceutical Inc. use U.S. Dollars as their functional currency[17] - The accounting policies adopted are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2021, except for the adoption of new standards effective as of January 1, 2022, which did not have a material impact[18][19] Significant Events of the Quarter and Changes in Circumstances This section covers the assessment of external impacts, strategic shifts in development programs, and key management personnel changes Russian-Ukraine Conflict The company anticipates no direct near-term operational impact from the Russian-Ukraine conflict - The Company does not expect the ongoing Russian-Ukraine war to have a direct impact on its operations in the near term, as it is not conducting business or receiving services from vendors in Russia or Ukraine[19][22] COVID-19 Pandemic The pandemic continues to influence operations with a hybrid work model, yet patient recruitment remains at regular levels - The COVID-19 pandemic continues to impact operations, with the Company using a hybrid working model and significantly reducing business travel[23][24] - Patient recruitment and new clinical trial sites continued at regular operational levels during the first six months of 2022[24] Development Programs Strategic focus shifted to vilobelimab in PG and severe COVID-19, and INF904, with key regulatory designations obtained - The Company decided to halt clinical development of vilobelimab in HS and AAV to focus resources on Phase III development of vilobelimab in PG, gaining regulatory approval for severe COVID-19, and starting clinical development of INF904[25] - Vilobelimab was granted Orphan Drug Designation for PG by FDA and EMA, and Fast Track designation by FDA for PG[26] - Following encouraging Phase III results for severe COVID-19, InflaRx plans to submit a request for Emergency Use Authorization (EUA) by end of Q3 2022[27] Management Changes The Chief Strategy Officer and Chief Clinical Development Officer departed, transitioning to advisory roles - Mr. Jordan Zwick, Chief Strategy Officer, departed on June 29, 2022, but will continue to serve as an advisor to the Company[28] - Dr. Korinna Pilz, Chief Clinical Development Officer, informed the Company of her intention to leave and will continue to provide services until October 28, 2022, followed by an advisory role[29] Other Income Other income significantly increased due to the recognition of deferred government grant payments and reimbursable costs Other Income (in €) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Other income from government grants | 14,415,368 | - | 14,415,368 | - | | Further other incomes | 26,173 | 15,216 | 27,767 | 20,678 | | Total | 14,441,541 | 15,216 | 14,443,135 | 20,678 | - The €14.4 million increase in other income was due to the recognition of €7.1 million in previously deferred grant payments and €7.3 million in reimbursable costs incurred in Q1 and Q2 2022, following written confirmation of grant conditions from the German government[31][32] Net Financial Result The net financial result was positively impacted by foreign exchange income from U.S. Dollar holdings and increased interest income Net Financial Result (in €) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Financial income (Interest income) | 82,401 | 35,622 | 110,362 | 58,584 | | Financial expenses (Interest expenses) | (2,243) | (305) | (22,102) | (2,885) | | Financial expenses (Interest on lease liabilities) | (5,702) | (2,745) | (10,429) | (3,849) | | Total Financial Result (excluding FX) | 74,456 | 32,572 | 77,831 | 51,850 | | Foreign exchange result | 1,563,580 | (826,303) | 2,291,513 | 905,367 | | Other financial result | (86,000) | (5,000) | 39,000 | 43,000 | - Foreign exchange income and expense are mainly derived from the translation of U.S. Dollar cash, cash equivalents, and securities held by the Company and its subsidiaries[34] Other Assets Total other assets decreased, primarily driven by a reduction in prepayments for research and development projects Other Assets (in €) | Metric | June 30, 2022 (unaudited) | December 31, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Non-current other assets (Prepaid expense) | 341,666 | 336,566 | | Current other assets (Prepayments on R&D projects) | 8,785,786 | 10,649,174 | | Current other assets (Current tax assets) | 1,518,072 | 1,282,177 | | Current other assets (Prepaid expense) | 1,343,166 | 334,284 | | Total Current Other Assets | 11,648,669 | 12,265,635 | - Prepayments on research & development (R&D) projects decreased from €10.6 million as of December 31, 2021, to €8.8 million as of June 30, 2022, consisting of prepayments on clinical and R&D material production contracts[37] Financial Assets and Financial Liabilities Non-current financial assets decreased, while current financial assets, including government grants, increased, and liabilities decreased Financial Assets and Liabilities (in €) | Metric | June 30, 2022 (unaudited) | December 31, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Non-current financial assets | 237,412 | 27,206,990 | | Financial assets from government grants | 8,260,503 | - | | Other current financial assets | 76,804,249 | 57,162,266 | | Liabilities from government grants | 2,145,135 | 8,300,000 | | Trade and other payables | 7,912,503 | 16,874,244 | - Financial assets from government grants amounted to €8.3 million as of June 30, 2022, including €1.6 million in claims submitted and €6.7 million for eligible costs incurred but not yet claimed[38] - The fair value of current and non-current financial assets (primarily quoted debt securities) was €84.3 million (Level 1) as of June 30, 2022, and are considered low credit risk investments[39] Cash and Cash Equivalents Cash and cash equivalents significantly decreased, mainly due to a reduction in short-term deposits Cash and Cash Equivalents (in €) | Metric | June 30, 2022 (unaudited) | December 31, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Short-term deposits (U.S Dollars) | 3,514 | 12,584,892 | | Cash at banks (U.S. Dollars) | 13,336,087 | 7,612,467 | | Cash at banks (Euro) | 2,076,551 | 6,052,636 | | Total cash and cash equivalents | 15,416,152 | 26,249,995 | Equity The company maintains an at-the-market program and previously completed a public offering, with warrants expiring unexercised - The Company has a remaining authorized value of $35.2 million for sale under its at-the-market program[42] - In February 2021, the Company sold 15,000,000 common shares and warrants in a public offering, generating $75.0 million (€62.2 million) in gross proceeds; however, no warrants were exercised before their expiration on March 1, 2022[43] Share-based Payments This section details share option plans, including grants, exercises, forfeitures, and the repricing of options resulting in additional expense Equity Settled Share-based Payment Arrangements The company's share option plans saw grants, forfeitures, and a significant repricing of outstanding options in April 2022 Share Options Outstanding (2012 Plan) | Metric | 2022 | 2021 | | :---------------------------------- | :--- | :--- | | Outstanding as of January 1, | 148,433 | 148,433 | | Outstanding as of June 30, | 148,433 | 148,433 | | thereof vested | 148,433 | 148,433 | Share Options Outstanding (2016 Plan) | Metric | 2022 | 2021 | | :---------------------------------- | :--- | :--- | | Outstanding as of January 1, | 888,632 | 1,094,852 | | Exercised during the six months ended June 30 | - | (202,020) | | Outstanding as of June 30, | 888,632 | 892,832 | | thereof vested | 888,632 | 892,832 | Share Options Outstanding (2017 LTIP) | Metric | 2022 | 2021 | | :---------------------------------- | :-------- | :-------- | | Outstanding as of January 1, | 3,170,046 | 2,146,478 | | Granted during the six months ended June 30 | 1,561,666 | 870,928 | | Exercised during the six months ended June 30 | - | (145,822) | | Forfeited during the six months ended June 30 | (117,259) | (15,000) | | Outstanding as of June 30, | 4,614,453 | 2,856,584 | | thereof vested | 3,306,162 | 1,954,858 | - On April 13, 2022, the Board of Directors adjusted the exercise price of all outstanding and unexercised options under the 2016 Plan and LTIP to $1.86 per share due to a significant stock price decrease, affecting 888,632 options from the 2016 Plan and 4,544,248 options from the LTIP[47][48] - The repricing decision resulted in incremental fair values of the outstanding options, requiring additional compensation expense recognition[48] Share-based Payment Expense Recognized The company recognized €4.67 million in share-based payment expense, including €0.65 million from option repricing - For the six months ended June 30, 2022, the Company recognized €4,668 thousand of share-based payment expense, which included an expense of €651 thousand for the valuation of past grants with the new exercise price as a result of the repricing of options[53] Protective Foundation The company maintains a protective foundation with a call option on preferred shares to deter acquisition bids, incurring ongoing costs - The Company's articles of association authorize the issuance of up to 110,000,000 common shares and up to 110,000,000 preferred shares, each with a nominal value of €0.12[54] - An independent protective foundation has a call option to acquire preferred shares up to 100% of the Company's issued capital (excluding shares held by the foundation) to deter acquisition bids[55] - The Company expensed €30 thousand in ongoing costs to reimburse expenses incurred by the protective foundation for the six months ended June 30, 2022[57]