Immutep(IMMP) - 2021 Q4 - Annual Report

PART I Key Information This section details significant business, intellectual property, securities, and operating environment risks Risk Factors The company faces significant financial, operational, and market risks, including historical losses and reliance on future product success - The company has a history of significant operating losses and negative cash flows, with net losses increasing from A$13.5 million in FY2020 to A$29.9 million in FY2021[33] - Immutep is a development-stage biotech company with no products approved for commercial sale and is heavily dependent on the success of its four LAG-3 related product candidates: eftilagimod alpha (IMP321), IMP761, IMP701, and IMP731[34][37][40] - The company anticipates requiring additional financing to fund increasing clinical trial costs for IMP321 and other candidates, and there is no guarantee that such funding will be available on acceptable terms[42][44] - The COVID-19 pandemic poses a significant risk, potentially causing delays in clinical trial enrollment, supply chain interruptions, and operational disruptions for the company and its partners[99][100][102] - The company's success is dependent on its ability to obtain and maintain patent protection for its product candidates, which involves complex and uncertain legal and scientific challenges[104][106] - The stock price is highly volatile, with ADS prices on NASDAQ ranging from US$1.03 to US$7.95 in FY2021. The stock may be considered a "penny stock," which could adversely affect trading[135][137] - As an Australian-incorporated company, it is subject to Australian takeover laws, which may discourage acquisition offers, and U.S. holders of ADSs may face difficulties in enforcing judgments obtained in the United States[163][164] Information on the Company Immutep is a biotechnology company developing LAG-3 immunotherapeutic products for cancer and autoimmune diseases History and Development of the Company The company transitioned from mining to biotechnology, focusing on LAG-3 immunotherapy, and established key clinical collaborations - Originally a mining company founded in 1987, the company transitioned to biotechnology in 2001. It was renamed from Prima BioMed Ltd to Immutep Limited in November 2017 to reflect its focus on LAG-3 based immunotherapy assets following the 2014 acquisition of Immutep S.A[168][169] - The company has established multiple key clinical collaborations to evaluate its lead product, eftilagimod alpha (efti), in combination with other therapies. These include agreements with Merck & Co. (MSD) for trials combining efti with KEYTRUDA® (TACTI-002 and TACTI-003), Merck KGaA/Pfizer for a trial with avelumab, and CYTLIMIC for trials with a peptide cancer vaccine[170][171][174] Business Overview Immutep leads in LAG-3 immunotherapies with four candidates, including lead product IMP321 (efti) in multiple cancer trials, and has partnerships with GSK and Novartis - Immutep is a leader in developing LAG-3 related immunotherapies with four product candidates: IMP321 (eftilagimod alpha), IMP761, IMP701, and IMP731[178][181] - The lead product, IMP321 (efti), is an APC activator being tested in multiple clinical trials for cancer, including a Phase IIb trial for metastatic breast cancer (AIPAC) and Phase II trials for head and neck cancer and non-small cell lung cancer (TACTI-002, TACTI-003)[179] - The company has partnerships with major pharmaceutical companies for its other LAG-3 candidates: IMP731 is licensed to GSK for autoimmune diseases, and IMP701 (leramilimab) is licensed to Novartis for oncology[180][217][221] - IMP761 is an early-stage agonist antibody of LAG-3 being developed in-house for autoimmune diseases, with cell line development and GMP manufacturing steps underway[209][210] - As of June 30, 2021, Immutep owns or co-owns 12 patent families related to its development candidates. In fiscal year 2021, 9 new key patents were granted for efti, IMP761, and leramilimab[225][233] - The company operates in a highly competitive biopharma industry, facing competition from large pharmaceutical and biotechnology companies developing treatments for the same indications, including other APC activators and immune-modulating therapies[239][242] Organizational Structure This section lists the company's significant wholly-owned subsidiaries across different jurisdictions Significant Subsidiaries of Immutep Limited | Subsidiary | Ownership | Jurisdiction | | :--- | :--- | :--- | | Immutep U.S., Inc. | 100% | Delaware, United States | | Immutep GmbH | 100% | Germany | | Immutep Australia Pty Ltd | 100% | Australia | | Immutep S.A.S. | 100% | France | Property, Plants and Equipment The company primarily leases office and laboratory spaces in Australia, France, and Germany, owning no significant property - The company does not own significant property or plants. It leases office and laboratory space in Sydney (Australia), Paris (France), Berlin (Germany), and Leipzig (Germany), with lease expiry dates ranging from late 2021 to early 2023[284][285] Operating and Financial Review and Prospects The company's financial performance reflects its development stage, with a net loss of A$29.9 million in FY2021, driven by reduced licensing revenue Operating Results The company's net loss significantly increased in FY2021 due to no licensing revenue and a non-cash loss on warrants, despite reduced R&D expenses Comparison of Operating Results (FY2021 vs. FY2020) | Metric | FY 2021 (A$) | FY 2020 (A$) | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Licensing Revenue | 0 | 7.49 million | ▼ 100% | No milestones recognized in FY2021 | | Other Income | 5.0 million | 9.0 million | ▼ A$4.0M | Decrease in R&D tax incentives and other income | | R&D Expenses | 17.24 million | 22.47 million | ▼ A$5.23M | Decrease in clinical trial costs as TACTI-mel and AIPAC trials wound down | | Net Loss After Tax | 29.90 million | 13.47 million | ▲ 122% | Decrease in revenue and a non-cash loss on the fair value of warrants | Comparison of Operating Results (FY2020 vs. FY2019) | Metric | FY 2020 (A$) | FY 2019 (A$) | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Licensing Revenue | 7.49 million | 140,000 | ▲ >5000% | GSK milestone payment of GBP 4 million | | R&D Expenses | 22.47 million | 18.47 million | ▲ A$4.0M | Increased clinical trial activities, especially for TACTI-002 and AIPAC | | Net Loss After Tax | 13.47 million | 18.34 million | ▼ 27% | Significant increase in license revenue | Liquidity and Capital Resources The company maintains strong liquidity with A$60.6 million cash, primarily funded by equity issuances and government R&D tax incentives - As of June 30, 2021, the company had cash and cash equivalents of A$60.6 million, which is considered sufficient to fund operations for more than 12 months[333][342] Summary of Cash Flows (Fiscal Years Ended June 30) | Cash Flow Activity | 2021 (A$) | 2020 (A$) | 2019 (A$) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (17,640,342) | (10,839,339) | (15,286,398) | | Net cash used in investing activities | (15,601) | (19,348) | (41,434) | | Net cash provided by financing activities | 52,679,925 | 20,478,081 | 8,012,715 | - Net cash from financing activities in FY2021 was A$52.7 million, primarily from two private placements (A$41.2 million) and the exercise of warrants (A$11.3 million)[341] - The company has financed its operations primarily through the issuance of equity securities, convertible notes, exercise of warrants, and operating grants[323] Trend Information R&D expenses are projected to increase due to expanding clinical trials for TACTI-002 and the new TACTI-003 trial, alongside IMP761 preclinical development - R&D expenses are expected to increase. While costs for the AIPAC and TACTI-mel trials are declining as they finalize, costs for the TACTI-002 trial are expected to rise due to patient expansion[345] - The new randomized, controlled Phase IIb TACTI-003 trial in 1st line head and neck cancer, in collaboration with MSD, will be a significant driver of future R&D expenditure[345] - Expenses will also increase due to the progression of pre-clinical development for IMP761 and the commencement of newly announced trials with partners[346] Directors, Senior Management and Employees This section details the company's leadership, compensation, and governance, including board structure and employee distribution Directors and Senior Management The company's leadership team includes the Chairman, Deputy Chairman, Non-Executive Director, CEO, CSO & CMO, and COO - The company's leadership as of September 1, 2021, includes Dr. Russell Howard (Chairman), Pete Meyers (Deputy Chairman), Grant Chamberlain (Non-Executive Director), Marc Voigt (Executive Director, CEO, CFO), Dr. Frédéric Triebel (CSO & CMO), and Deanne Miller (COO, General Counsel & Company Secretary)[351][352] Compensation Executive remuneration combines fixed and variable components, with an Executive Incentive Plan aligning employee interests with shareholders - Remuneration for executives includes fixed and variable components. The remuneration policy is based on industry practice rather than financial performance, given the company's R&D focus[362][364] Key Management Personnel Compensation for FY2021 (A$) | Name | Position | Total Compensation | | :--- | :--- | :--- | | Dr. R. Howard | Chairman | 143,452 | | Mr. P. Meyers | Deputy Chairman | 113,508 | | Mr. G. Chamberlain | Non-Executive Director | 164,948 | | Mr. M. Voigt | CEO & CFO | 994,587 | | Dr. F. Triebel | CSO & CMO | 858,630 | | Ms. D. Miller | COO | 568,961 | - The company has an Executive Incentive Plan (EIP), approved in 2018, which allows for the grant of performance rights and/or options to eligible employees to align their interests with shareholders[378] Board Practices The Board comprises four members, mostly independent non-executive directors, and follows Australian corporate governance principles, utilizing NASDAQ exemptions - The Board of Directors consists of four members: three non-executive directors (all independent) and one executive director (the CEO)[403][408] - The Board has an Audit Committee and a Remuneration Committee, both composed of the three independent non-executive directors. It does not have a separate Nomination Committee[415][416][417] - As a foreign private issuer, the company follows Australian home country corporate governance practices in lieu of certain NASDAQ requirements, such as those related to quorum, director independence meetings, and shareholder approval for certain security issuances[418][420] Employees As of June 30, 2021, the company had 28 employees, primarily in R&D, distributed across Australia, France, and Germany - As of June 30, 2021, the company had 28 employees, an increase from 26 in the prior year. The workforce is distributed as follows: - By Function: 20 in R&D, 1 in IP management, and 7 in general management/administration - By Location: 7 in Australia, 3 in France, and 18 in Germany[425] Share Ownership Directors and executive officers collectively owned 3.07% of outstanding shares as of June 30, 2021 - As of June 30, 2021, all directors and executive officers as a group beneficially owned approximately 22.9 million ordinary shares, representing 3.07% of the total shares outstanding[429][430] Major Shareholders and Related Party Transactions This section identifies major shareholders and confirms the absence of significant related party transactions - As of June 30, 2021, Australian Ethical Investment Ltd (AEF) was the only beneficial owner of 5% or more of ordinary shares, holding 5.56%. Its ownership later fell to 4.89% as of July 30, 2021[431][432] - The Bank of New York Mellon (BNYM), as the depositary for the ADR program, held a relevant interest in 32.82% of ordinary shares as of July 30, 2021[433] - On July 30, 2021, FIL Limited became a substantial holder with 6.21% ownership following participation in a placement[434] - The company confirms that there were no related party transactions during fiscal years 2021, 2020, and 2019[438] Financial Information This section confirms audited financial statements, absence of significant legal proceedings, and the company's policy of retaining earnings for growth - The audited consolidated financial statements for the fiscal years ended June 30, 2021, 2020, and 2019 are included in Item 18 of this Annual Report[440] - The company is not currently involved in any legal or arbitration proceedings that could have a significant effect on its financial position[441] - Immutep has never paid cash dividends and does not anticipate paying any in the foreseeable future, intending to retain earnings for business growth[442] The Offer and Listing The company's ordinary shares trade on the ASX under "IMM", while its ADSs trade on NASDAQ Global Market under "IMMP" - The company's ordinary shares are traded on the Australian Securities Exchange (ASX) under the ticker symbol "IMM"[444] - The company's American Depositary Shares (ADSs) are traded on the NASDAQ Global Market under the ticker symbol "IMMP"[444][446] Additional Information This section details the company's corporate structure, material contracts, and regulatory environment, including Australian exchange controls and U.S. tax implications Memorandum and Articles of Association The company's Constitution, amendable by special resolution, defines director powers and shareholder voting rights - The company's constituent document is a Constitution, which can be amended by a special resolution of shareholders (75% vote)[451] - Directors' powers include managing the business, borrowing money, and issuing debentures. However, significant changes to the nature of the business or disposal of the main undertaking require shareholder approval[453][461] - Holders of ordinary shares have one vote per share on a poll. A quorum for a shareholder meeting consists of at least two shareholders present in person or by proxy[464][465] Material Contracts A key material contract is the Clinical Trial Collaboration and Supply Agreement with Merck for the TACTI-003 trial - On March 15, 2021, the company entered into a Clinical Trial Collaboration and Supply Agreement with Merck to evaluate eftilagimod alpha (efti) in combination with KEYTRUDA® in a new Phase IIb clinical trial (TACTI-003) for 1st line Head and Neck Squamous Cell Carcinoma (HNSCC)[475] Exchange Controls Australia has largely abolished exchange controls, but foreign acquisitions exceeding certain thresholds require government approval - Australia has largely abolished exchange controls, and the Australian dollar is freely convertible. However, certain payments to non-residents must be reported[476] - Under the Foreign Acquisitions and Takeovers Act, foreign persons are generally prohibited from acquiring 20% or more of a company with assets over A$266 million without approval from the Australian Treasurer. A 40% aggregate foreign ownership threshold also applies[479][481] Taxation Australian tax rules for ADS holders include withholding tax on dividends, while U.S. holders face potential adverse consequences if the company is classified as a PFIC - For Australian tax purposes, ADS holders are treated as owners of the underlying ordinary shares. Unfranked dividends paid to non-Australian residents are subject to withholding tax (generally 15% for U.S. residents)[489][492] - Non-Australian residents are generally not subject to Australian capital gains tax on the disposal of shares unless they hold 10% or more of the company and the company's value is principally from Australian real property[493] - For U.S. federal income tax purposes, there is a risk the company may be classified as a Passive Foreign Investment Company (PFIC), which could result in adverse tax consequences for U.S. Holders, including additional taxes and interest charges on certain distributions and gains[515][516][517] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is foreign currency fluctuations, particularly USD and EUR, impacting post-tax loss - The company's primary market risk is foreign currency risk, with significant exposure to the U.S. dollar and European Euro due to international operations and cash holdings[533] Foreign Currency Exposure (A$) | Currency | June 30, 2021 (A$) | June 30, 2020 (A$) | | :--- | :--- | :--- | | USD | | | | Cash in bank | 14,016,277 | 7,444,611 | | Trade and other payables | (690,847) | (589,428) | | EUR | | | | Cash in bank | 14,320,386 | 9,243,299 | | Trade and other receivables | 4,312,691 | 1,966,803 | | Trade and other payables | (663,196) | (951,654) | - A sensitivity analysis indicates that a 10% change in the AUD/USD exchange rate would impact the post-tax loss by approximately A$1.34 million, and a 10% change in the AUD/EUR rate would impact it by approximately A$1.80 million[698][699] Description of Securities Other than Equity Securities This section details the company's American Depositary Shares (ADSs), including the 10:1 ratio to ordinary shares and associated depositary fees - Each American Depositary Share (ADS) represents 10 ordinary shares. This ratio was adjusted from 100:1 to 10:1 after a share consolidation in November 2019[538] - ADS holders may be required to pay fees to the depositary, The Bank of New York Mellon, for various services. Key fees include: - Up to US$5.00 per 100 ADSs for issuance or cancellation - Up to US$0.05 per ADS for any cash distribution - An annual fee of up to US$0.05 per ADS for depositary services[539][542] PART II Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2021 - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[547] - Based on an evaluation using the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of June 30, 2021[548] - As an emerging growth company, this annual report does not include an attestation report from the registered public accounting firm on internal control over financial reporting[549] Other Information This section covers governance and compliance topics, including the audit committee financial expert, code of ethics, and principal accountant fees - The Board has determined that Pete Meyers, a member of the audit committee, qualifies as an audit committee financial expert[553] - The company has adopted a code of conduct for its directors and senior financial officers, which is available on its website[554] Principal Accountant Fees (PricewaterhouseCoopers) | Fee Type | Fiscal 2021 (A$) | Fiscal 2020 (A$) | | :--- | :--- | :--- | | Audit fees | 289,202 | 282,580 | | Total | 289,202 | 282,580 | - The company, as a foreign private issuer, follows certain Australian home country corporate governance practices instead of specific NASDAQ Stock Market Rules[561] PART III Financial Statements The consolidated financial statements for FY2019-2021, audited by PricewaterhouseCoopers, show total assets of A$82.0 million and a net loss of A$29.9 million in FY2021 Consolidated Balance Sheet Highlights (as of June 30) | Metric | 2021 (A$) | 2020 (A$) | | :--- | :--- | :--- | | Cash and cash equivalents | 60,593,191 | 26,322,047 | | Total Assets | 82,030,533 | 46,597,252 | | Total Liabilities | 8,758,922 | 13,297,907 | | Total Equity | 73,271,611 | 33,299,345 | Consolidated Income Statement Highlights (for the year ended June 30) | Metric | 2021 (A$) | 2020 (A$) | 2019 (A$) | | :--- | :--- | :--- | :--- | | Total revenue and other income | 3,968,133 | 16,499,968 | 7,489,404 | | R&D and IP Expenses | (17,236,780) | (22,472,648) | (18,466,852) | | Loss after income tax | (29,902,624) | (13,468,232) | (18,343,984) | | Basic loss per share (cents) | (5.03) | (3.26) | (5.29) | - The independent auditor, PricewaterhouseCoopers, issued an unqualified opinion on the consolidated financial statements, stating they present fairly, in all material respects, the financial position and results of operations in conformity with IFRS[569] Exhibits This section provides an index of all exhibits filed, including the company's Constitution, ADS Deposit Agreement, material contracts, and required certifications - The report includes a comprehensive list of exhibits, such as the company's Constitution (Exhibit 1.1), the ADS Deposit Agreement (Exhibit 2.1), the Immutep Executive Incentive Plan (Exhibit 4.1), and material contracts like the Clinical Trial Collaboration and Supply Agreement with Merck (Exhibit 4.12)[856] - Certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act (Rules 13a-14(a) and 13a-14(b)) are filed as Exhibits 12.1 and 13.1[857]