IGM Biosciences(IGMS) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls Item 1. Financial Statements (Unaudited) The unaudited financial statements detail a net loss of $185.7 million and a shift to net cash used in operations Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $174,794 | $121,231 | | Marketable securities | $212,197 | $305,931 | | Total current assets | $398,395 | $438,421 | | Total assets | $474,350 | $513,499 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $42,965 | $44,685 | | Deferred revenue, non-current | $142,539 | $146,195 | | Total liabilities | $220,488 | $226,236 | | Accumulated deficit | ($760,547) | ($574,826) | | Total stockholders' equity | $253,862 | $287,263 | Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $509 | $331 | $1,479 | $697 | | Research and development | $54,762 | $48,179 | $161,329 | $134,272 | | General and administrative | $12,507 | $12,664 | $38,492 | $38,117 | | Loss from operations | ($66,760) | ($60,512) | ($198,342) | ($171,692) | | Net loss | ($61,989) | ($58,037) | ($185,721) | ($168,526) | | Net loss per share, basic and diluted | ($1.04) | ($1.32) | ($3.73) | ($4.15) | Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($144,223) | $32,005 | | Net cash provided by (used in) investing activities | $83,048 | ($206,833) | | Net cash provided by financing activities | $114,666 | $218,900 | | Net increase in cash, cash equivalents, and restricted cash | $53,491 | $44,072 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide critical details on liquidity, revenue recognition, equity financing, and stock-based compensation - The company has incurred net operating losses since inception, with an accumulated deficit of $760.5 million as of September 30, 2023. However, management believes its existing cash, cash equivalents, and marketable securities of $387.0 million are sufficient to fund operating activities for at least one year[33] - In July 2023, the company completed a public offering and a concurrent private placement, issuing a total of 15,000,000 shares of common stock (voting and non-voting) at $8.00 per share, resulting in total net proceeds of $113.5 million after deducting costs[95][96][164] - Revenue is recognized from the $150.0 million upfront payment received from the Sanofi Agreement in May 2022. For the nine months ended September 30, 2023, the company recognized $1.5 million in collaboration revenue. As of September 30, 2023, $147.5 million remained as deferred revenue[108][112] Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Research and development | $7,391 | $22,078 | | General and administrative | $4,563 | $15,232 | | Total | $11,954 | $37,310 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses operational performance, financial condition, and liquidity, highlighting increased R&D expenses and capital raises Overview This section provides a strategic overview of the company's business, product candidates, and financial performance - IGM Biosciences is a clinical-stage biotechnology company focused on developing IgM antibodies for cancer, autoimmune, inflammatory, and infectious diseases. Its key clinical candidates include Aplitabart (DR5), Imvotamab (CD20/CD3), IGM-7354 (IL-15), and IGM-2644 (CD38/CD3)[126][130] - The company has incurred significant net losses, with a net loss of $185.7 million for the nine months ended September 30, 2023, and an accumulated deficit of $760.5 million as of that date. Operating losses are expected to continue and increase[129] Results of Operations Operating results show an increased net loss of $185.7 million, primarily due to higher research and development expenses Comparison of Results of Operations (in thousands) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Collaboration Revenue | $1,479 | $697 | $782 | | Research and Development | $161,329 | $134,272 | $27,057 | | General and Administrative | $38,492 | $38,117 | $375 | | Loss from Operations | ($198,342) | ($171,692) | ($26,650) | | Net Loss | ($185,721) | ($168,526) | ($17,195) | - R&D expenses for the nine months ended September 30, 2023, increased by $27.1 million compared to the same period in 2022. This was primarily due to: - A $16.7 million increase in personnel-related expenses from higher headcount - A $6.3 million increase in preclinical stage program expenses - A $5.6 million increase in depreciation and facilities expenses[153][155][156][157] - Interest income increased by $9.8 million for the nine months ended September 30, 2023, compared to the prior year period, primarily due to increasing yield rates on cash, cash equivalents, and marketable securities[159] Liquidity and Capital Resources The company maintains strong liquidity, bolstered by a recent capital raise, despite significant cash usage from operations - As of September 30, 2023, the company held $387.0 million in cash, cash equivalents, and marketable securities and believes these resources are sufficient to fund operations for at least one year[161][162] - In July 2023, the company raised net proceeds of $113.5 million from a public offering and concurrent private placement, after deducting discounts, commissions, and offering costs[164] - Net cash used in operating activities was $144.2 million for the nine months ended September 30, 2023, compared to net cash provided by operating activities of $32.0 million in the same period of 2022. The 2022 period included a $149.3 million increase in deferred revenue from the Sanofi agreement[169][170][171] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a "smaller reporting company," the company is exempt from providing quantitative and qualitative disclosures about market risk pursuant to Item 305 of Regulation S-K[183] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of September 30, 2023, with no material changes to internal financial reporting controls - The company's management, including the CEO and CFO, concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[184] - There were no changes in the company's internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[185] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - As of the report date, the company is not a party to any material legal proceedings[188] Item 1A. Risk Factors This chapter details extensive risks related to early-stage development, financial needs, third-party dependencies, and intellectual property Risks Related to Business and Development This section outlines risks in early-stage product development, clinical trials, manufacturing, and the competitive landscape - All product candidates are in preclinical or early-stage clinical development, and the company may never successfully advance them through clinical trials, obtain regulatory approval, or generate product revenue[192] - The use of engineered IgM antibodies is a novel and unproven therapeutic approach. The FDA has limited experience with this technology, which may increase the complexity and length of the regulatory approval process[195][197] - Manufacturing of IgM antibodies is complex and has encountered difficulties. Supply chain constraints and staffing issues at a CMO previously caused an adjustment to the IND filing date for IGM-7354[227][228] - The company faces significant competition from major pharmaceutical and biotechnology companies with greater financial, manufacturing, and commercial resources[222] Risks Related to Financial Position and Need for Additional Capital This section addresses risks associated with the company's history of losses and the ongoing need for substantial additional funding - The company has a history of significant losses, with a net loss of $185.7 million for the nine months ended September 30, 2023, and an accumulated deficit of $760.5 million. It anticipates continued losses for the foreseeable future[289] - Substantial additional funding will be required to finance operations. While current cash is expected to last at least one year, future financing may not be available on acceptable terms, or at all[296][297] Risks Related to Dependence on Third Parties This section highlights risks stemming from reliance on third-party manufacturers, clinical research organizations, and strategic partners - The company relies on third-party manufacturers for its product candidates. Any failure by these parties to deliver acceptable products could delay or impair clinical trials and commercialization[335] - The company depends on third parties such as CROs and academic institutions to conduct and oversee clinical trials. Lack of control over these entities could lead to delays, increased costs, or data quality issues[341][342] - Strategic partnerships, such as the one with Sanofi, are important but pose risks, including partners deprioritizing programs, disagreements over development, or termination of the collaboration[351][355] Risks Related to Intellectual Property This section details risks concerning the company's ability to protect its intellectual property and avoid infringement claims - The company's success depends on its ability to operate without infringing on the patents of third parties, and it may be subject to costly infringement claims[357][358] - The company's ability to obtain, maintain, and enforce patent and trade secret protection for its technology is uncertain and critical to its business. Patents may be challenged, invalidated, or circumvented[362][365] - The company in-licenses critical technology, such as birinapant from Medivir. Failure to comply with license obligations could result in the loss of necessary intellectual property rights[368] Risks Related to Ownership of Our Securities This section discusses risks associated with the volatility of the company's stock price and the concentrated ownership structure - The market price of the company's common stock may be highly volatile due to factors such as clinical trial results, regulatory developments, and market conditions[409] - A concentrated group of stockholders, including Topsøe Holding A/S, beneficially owns a majority of the outstanding capital stock, enabling them to control most matters requiring stockholder approval[413] - The dual-class structure of voting and non-voting common stock may limit the ability of common stockholders to influence corporate matters[416] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[442] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[443] Item 4. Mine Safety Disclosures This item is not applicable to the company - None[443] Item 5. Other Information The company reports no other information for this period - None[444] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications - Lists exhibits filed with the report, including corporate governance documents and officer certifications required by the Sarbanes-Oxley Act[446]