Immunome(IMNM) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents Immunome, Inc.'s unaudited financial statements, management's discussion, market risk disclosures, and controls and procedures. Item 1. Financial Statements (Unaudited) This section presents Immunome, Inc.'s unaudited condensed financial statements for the periods ended June 30, 2023, and December 31, 2022, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows. The company reported a significant increase in cash and cash equivalents, primarily driven by deferred revenue from a collaboration agreement with AbbVie, while continuing to incur net losses. Condensed Balance Sheets This section provides Immunome's financial position, showing significant increases in cash and liabilities due to the AbbVie collaboration. | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $38,416 | $20,323 | $18,093 | 89.0% | | Total current assets | $39,526 | $22,649 | $16,877 | 74.5% | | Total assets | $41,435 | $24,046 | $17,389 | 72.3% | | Total current liabilities | $26,392 | $7,331 | $19,061 | 260.0% | | Total liabilities | $32,097 | $7,393 | $24,704 | 334.1% | | Total stockholders' equity | $9,338 | $16,653 | $(7,315) | -43.9% | | Accumulated deficit | $(125,828) | $(116,001) | $(9,827) | 8.5% | - The significant increase in total liabilities is primarily due to a new deferred revenue of $17.668 million from the AbbVie collaboration, which was zero at December 31, 2022[11] Condensed Statements of Operations This section details Immunome's revenue and expenses, showing a reduced net loss driven by collaboration revenue and lower R&D costs. | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change (3M) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change (6M) | | :-------------------- | :------------------------------- | :------------------------------- | :---------- | :----------------------------- | :----------------------------- | :---------- | | Collaboration revenue | $4,263 | $0 | $4,263 | $6,627 | $0 | $6,627 | | R&D expenses | $5,716 | $5,717 | $(1) | $9,629 | $13,795 | $(4,166) | | G&A expenses | $4,320 | $3,209 | $1,111 | $7,242 | $6,785 | $457 | | Total operating expenses | $10,036 | $8,926 | $1,110 | $16,871 | $20,580 | $(3,709) | | Loss from operations | $(5,773) | $(8,926) | $3,153 | $(10,244) | $(20,580) | $10,336 | | Interest income | $216 | $2 | $214 | $417 | $3 | $414 | | Net loss | $(5,557) | $(8,924) | $3,367 | $(9,827) | $(20,577) | $10,750 | | Net loss per share (basic & diluted) | $(0.46) | $(0.74) | $0.28 | $(0.81) | $(1.70) | $0.89 | - Collaboration revenue of $4.263 million (Q2 2023) and $6.627 million (YTD Q2 2023) was recognized from the AbbVie agreement, which was non-existent in the prior year periods[13] - Net loss significantly decreased by $3.367 million for the three months ended June 30, 2023, and by $10.750 million for the six months ended June 30, 2023, primarily due to collaboration revenue and reduced R&D expenses[13] Condensed Statements of Changes in Stockholders' Equity This section tracks changes in stockholders' equity, primarily impacted by net loss and share-based compensation. - Stockholders' equity decreased from $16.653 million at January 1, 2023, to $9.338 million at June 30, 2023, primarily due to a net loss of $9.827 million, partially offset by share-based compensation expense of $2.198 million and common stock issuances[16] - For the six months ended June 30, 2023, the company issued 5,925 shares of common stock under an ATM agreement for $34,000 net proceeds and 55,250 shares to non-employee directors for $221,000 in lieu of compensation[16] Condensed Statements of Cash Flows This section summarizes cash inflows and outflows, showing significant cash generation from operating activities due to deferred revenue. | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash provided by (used in) operating activities | $18,505 | $(14,436) | $32,941 | | Net cash used in investing activities | $(446) | $(176) | $(270) | | Net cash provided by financing activities | $34 | $32 | $2 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $18,093 | $(14,580) | $32,673 | | Cash and cash equivalents and restricted cash at end of period | $38,516 | $34,749 | $3,767 | - Operating activities generated $18.505 million in cash for the six months ended June 30, 2023, a significant improvement from a $14.436 million cash usage in the prior year, primarily driven by a $23.373 million increase in deferred revenue from the AbbVie collaboration[19] Notes to Condensed Financial Statements This section provides detailed explanations and disclosures supporting the condensed financial statements. 1. Nature of the business Immunome's biopharmaceutical focus, financial performance, pending merger with Morphimmune, and AbbVie collaboration are detailed. - Immunome, Inc. is a biopharmaceutical company focused on oncology, developing antibody therapeutics using a proprietary human memory B cell platform[22] - The company has incurred net losses of $9.8 million (six months ended June 30, 2023) and $20.6 million (six months ended June 30, 2022), with an accumulated deficit of $125.8 million as of June 30, 2023[25] - On June 29, 2023, Immunome entered into a Merger Agreement with Morphimmune Inc., a biotechnology company focused on targeted oncology therapeutics. The merger is expected to close by the end of 2023 and will be treated as an asset acquisition by Immunome[24][33][37] - Immunome received a $30.0 million non-refundable upfront payment from AbbVie in January 2023 under a collaboration agreement and is potentially eligible for up to $2.8 billion in additional payments[26][27] - In connection with the merger, Immunome entered into subscription agreements for a PIPE financing of approximately $125.0 million through the issuance of 21,690,871 shares of common stock at $5.75 per share (or $5.91 for affiliates)[40] - As of June 30, 2023, the company had $38.4 million in cash and cash equivalents and expects this, excluding PIPE proceeds, to fund operations for at least 12 months[30] 2. Summary of significant accounting policies This section outlines Immunome's key accounting principles, including revenue recognition, R&D, and share-based compensation. - The company operates as one segment exclusively in the United States[45] - Restricted cash of $0.1 million at June 30, 2023, serves as collateral for a lease security deposit[51] - Deferred offering costs of $0.4 million (June 30, 2023) are capitalized for the ATM Agreement and PIPE transaction, to be offset against gross proceeds upon consummation[53][54] - Government assistance from the DoD and CARES Act employee retention credit are recorded as contra-research and development or contra-general and administrative expenses[55] - Collaboration revenue is recognized over the estimated performance period of R&D services using the cost-to-cost input method, following the five-step model of ASC 606[60][83] - Share-based compensation is expensed over the vesting period, with stock option fair values estimated using the Black-Scholes model[65][66] - The company adopted ASU No. 2016-13 (Measurement of Credit Losses on Financial Instruments) on January 1, 2023, with no impact on its condensed financial statements[76] 3. Collaboration Agreement with AbbVie This section details the strategic collaboration with AbbVie for oncology target discovery, including upfront and potential milestone payments. - Immunome entered a Collaboration Agreement with AbbVie in January 2023 to discover up to 10 novel target-antibody pairs for oncology[77] - AbbVie paid a nonrefundable upfront payment of $30.0 million and may pay up to $70.0 million in platform access payments, low single-digit million option exercise fees per target, and up to $120.0 million in development/commercial sale milestones per target, plus tiered low single-digit royalties[78] - The total potential value of the agreement is approximately $2.8 billion[27][78] - Immunome recognized $4.3 million and $6.6 million in collaboration revenue for the three and six months ended June 30, 2023, respectively, from the upfront payment, which is being recognized over an estimated 1.5-year R&D period[83][84] 4. Government assistance programs This section describes government funding received from the DoD and CARES Act employee retention credit. - Immunome received the maximum $17.6 million in expense reimbursement from the DoD under the OTA Agreement for COVID-19 antibody development from inception through 2022[26][86] - No contra-research and development expense related to the DoD agreement was recorded for the three and six months ended June 30, 2023[87] - The company was eligible for an $0.8 million refundable employee retention credit under the CARES Act, with $0.2 million remaining as a receivable as of June 30, 2023[88][90] 5. Prepaid expenses and other assets This section provides a breakdown of prepaid expenses and other current assets, showing changes in receivables and advance payments. | (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Prepaid subscriptions and service contracts | $497 | $876 | | Prepaid insurance | $271 | $158 | | CARES Act employee retention credit receivable | $208 | $847 | | Research and development advance payments | $134 | $445 | | Total | $1,110 | $2,326 | 6. Accrued expenses and other liabilities This section details accrued expenses and other current liabilities, highlighting changes in professional fees and R&D accruals. | (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Research and development | $1,980 | $2,261 | | Professional fees | $1,649 | $481 | | Compensation and related benefits | $907 | $1,874 | | Short-term operating lease liability and other liabilities | $489 | $293 | | Deferred research obligations | $0 | $22 | | Total | $5,025 | $4,931 | 7. Commitments and contingencies This section discusses employment agreements, 401(k) plan, legal proceedings, and potential milestone payments under license agreements. - The company is not a party to any material litigation[95] - Immunome may need to pay developmental and regulatory milestone payments of up to approximately $2.6 million and commercial milestone payments of up to $1.5 million under various license agreements[96] - No development, regulatory, or commercial milestone payments were recorded during the three and six months ended June 30, 2023[97] - A Letter Agreement with Whitehead Institute, effective January 4, 2023, clarifies exclusions from payment obligations for certain collaborator payments and outlines new payment terms for net sales and milestones[98] 8. Leases This section provides information on Immunome's office and laboratory lease, including right-of-use assets, liabilities, and lease expenses. - Immunome leases approximately 11,000 square feet of office and laboratory space in Exton, Pennsylvania, with the current lease extending until March 2024 and options for two additional five-year terms[99] | (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $174 | $284 | | Operating lease liability | $180 | $229 | | Total operating lease liability | $180 | $291 | | Lease Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative | $18 | $19 | $38 | $37 | | Research and development | $42 | $41 | $83 | $84 | | Total lease expense | $60 | $60 | $121 | $121 | - As of June 30, 2023, the weighted-average remaining lease term is 0.8 years, and the weighted-average discount rate is 9.0%[103] 9. Common stock This section details common stock outstanding, ATM sales, director issuances, and warrant activity. - As of June 30, 2023, 12,200,433 shares of common stock were issued and outstanding[11] - In January 2023, Immunome sold 5,925 shares of common stock under the ATM Agreement, generating approximately $34,000 in net proceeds[105] - On January 15, 2023, 55,250 shares of common stock were issued to non-employee directors in lieu of accrued compensation for 2022[105] | Warrants | Number of Warrants Outstanding | Exercise Price per Share | Expiration Date | | :------- | :----------------------------- | :----------------------- | :-------------- | | Series B | 500,000 | $10.00 | April 28, 2024 | - On June 2, 2023, 803,112 Series A warrants with an exercise price of $9.00 expired[106] 10. Share-based compensation This section provides an overview of equity incentive plans, share-based compensation expense, and stock option activity. - The 2020 Equity Incentive Plan and ESPP automatically increase shares reserved annually; as of June 30, 2023, 1,236,420 shares were available under the 2020 Plan and 473,733 under the ESPP[107][108] | Share-based Compensation Expense (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $427 | $462 | $857 | $907 | | General and administrative | $606 | $865 | $1,400 | $1,730 | | Total | $1,033 | $1,327 | $2,257 | $2,637 | - Unrecognized compensation cost related to unvested options and restricted stock awards was $8.4 million as of June 30, 2023, to be recognized over an estimated weighted average period of 3.1 years[110] | Stock Option Activity (Six Months Ended June 30, 2023) | Number of shares | Weighted average exercise price per share | | :------------------------------------- | :--------------- | :---------------------------------------- | | Outstanding at January 1, 2023 | 2,519,405 | $9.60 | | Granted | 658,900 | $4.87 | | Forfeited | (98,216) | $11.56 | | Expired | (42,009) | $16.25 | | Outstanding at June 30, 2023 | 3,038,080 | $8.42 | | Exercisable at June 30, 2023 | 1,563,646 | $8.66 | - The weighted-average grant date fair value of stock options granted was $3.67 per share for the six months ended June 30, 2023, up from $2.65 in the prior year[114] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Immunome's financial condition and operational results, highlighting the company's focus on R&D, significant operating losses, and the need for future funding. Key discussions include the pending merger with Morphimmune, the strategic collaboration with AbbVie, and the performance of its oncology and SARS-CoV-2 programs. The company's liquidity is supported by existing cash and potential proceeds from the merger and PIPE financing, but substantial additional capital will be required to advance its pipeline and growth strategy. Overview This section covers Immunome's financial position, ongoing operating losses, future funding needs, and reliance on collaborations. - Immunome has incurred significant operating losses since inception, with net losses of $5.6 million and $8.9 million for the three months ended June 30, 2023 and 2022, respectively, and $9.8 million and $20.6 million for the six months ended June 30, 2023 and 2022, respectively[121] - As of June 30, 2023, the company had $38.4 million in cash and cash equivalents[122] - The company expects to continue incurring significant expenses for R&D, regulatory approvals, IP protection, and personnel, requiring substantial additional financing[123] - Future funding is expected to come from equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements[123] Merger Agreement This section details the pending merger with Morphimmune, ownership structure, accounting treatment, and concurrent PIPE financing. - Immunome entered a Merger Agreement with Morphimmune Inc. on June 29, 2023, with Morphimmune becoming a wholly-owned subsidiary, expected to close by end of 2023[128] - Pre-Merger Immunome equityholders are expected to own approximately 55% and Morphimmune equityholders 45% of the combined company on a fully diluted basis[130] - The merger will be treated as an asset acquisition by Immunome, with the fair value of acquired in-process R&D (IPR&D) assets (Mi-1001 and 177Lu-FAP) expensed as R&D on the acquisition date[132][134] - A concurrent PIPE financing of approximately $125.0 million, involving the issuance of 21,690,871 shares of common stock, is expected to close immediately following the merger[135] Our current programs and strategic collaboration This section provides updates on Immunome's oncology and SARS-CoV-2 programs, discovery engine investments, and the AbbVie collaboration. - Immunome's lead oncology program, IMM-ONC-01, targets IL-38, a negative regulator of inflammation, with an IND application planned for Q1 2024[136][137] - The SARS-CoV-2 program, IMM-BCP-01, completed dosing of the first cohort in a Phase 1b study in January 2023, and the company is now seeking a partner for continued development[138] - The company plans to continue investing in its proprietary discovery engine to expand its pipeline, evaluate novel antibody-target pairs, and develop antibody therapeutics, including ADCs[139] - The Collaboration Agreement with AbbVie, signed in January 2023, involves discovering up to 10 novel target-antibody pairs for oncology, with potential payments up to approximately $2.8 billion[142][144] Components of our results of operations This section explains the sources of revenue and the nature of research and development, general and administrative expenses. - Collaboration revenue is currently the sole source of revenue, derived from the AbbVie agreement, with no product sales expected in the foreseeable future[146] - Research and development expenses are charged as incurred and include personnel, external program costs, clinical trials, manufacturing, and laboratory supplies, with DoD reimbursements and CARES Act employee retention credits recorded as contra-expenses[147][151][152] - General and administrative expenses include personnel, legal, professional fees, insurance, and facility costs, also offset by CARES Act employee retention credits[153][154] Results of operations This section provides an analysis of Immunome's financial performance for the three and six months ended June 30, 2023 and 2022. Three months ended June 30, 2023 and 2022 This section details quarterly financial performance, highlighting collaboration revenue, R&D, G&A expenses, and net loss changes. | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | | Collaboration revenue | $4,263 | $0 | $4,263 | | R&D expenses | $5,716 | $5,717 | $(1) | | General and administrative | $4,320 | $3,209 | $1,111 | | Interest income | $216 | $2 | $214 | | Net loss | $(5,557) | $(8,924) | $3,367 | - R&D expenses were flat, with a $1.2 million decrease in ONC-01 external program expenses and a $1.0 million decrease in BCP-01 external program expenses (net of contra expense), offset by a $1.3 million increase in outsourced research for the AbbVie collaboration and a $0.9 million increase in personnel-related costs[161] - General and administrative expenses increased by $1.1 million, primarily due to a $1.6 million increase in professional fees related to the Morphimmune merger, partially offset by a $0.4 million decrease in general expenses and a $0.1 million decrease in personnel-related costs[163] Six months ended June 30, 2023 and 2022 This section details half-year financial performance, highlighting collaboration revenue, R&D, G&A expenses, and net loss changes. | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :-------------------- | :----------------------------- | :----------------------------- | :----- | | Collaboration revenue | $6,627 | $0 | $6,627 | | R&D expenses | $9,629 | $13,795 | $(4,166) | | General and administrative | $7,242 | $6,785 | $457 | | Interest income | $417 | $3 | $414 | | Net loss | $(9,827) | $(20,577) | $10,750 | - R&D expenses decreased by $4.2 million, with ONC-01 external program expenses down $3.4 million and BCP-01 external program expenses down $3.2 million (net of contra expense), partially offset by a $1.7 million increase in outsourced research for the AbbVie collaboration and a $0.7 million increase in personnel-related costs[167] - General and administrative expenses increased by $0.4 million, primarily due to a $1.2 million increase in professional fees related to the merger, offset by an $0.8 million decrease in general expenses[168] Liquidity and capital resources This section discusses Immunome's funding history, current liquidity, future capital requirements, and financing strategies. - Through June 30, 2023, Immunome raised an aggregate of $155.2 million in gross proceeds from various sources, including common stock sales, preferred stock, warrants, and strategic partnerships[170] - The company received a $30.0 million upfront payment from AbbVie in January 2023 and $17.6 million in expense reimbursement from the DoD through 2022[170] - Immunome has an Open Market Sale Agreement (ATM Agreement) allowing for the sale of up to $75.0 million in common stock, with $34,000 net proceeds from sales through June 30, 2023[171][173] - A $125.0 million PIPE financing is expected to close concurrently with the Morphimmune merger[175] - Cash provided by operating activities was $18.5 million for the six months ended June 30, 2023, a significant increase from $14.4 million used in the prior year, primarily due to deferred revenue from the AbbVie collaboration[177][178] - The company expects its existing cash (excluding PIPE proceeds) to fund operations for at least 12 months but will require additional financing for its growth strategy[184] Critical accounting policies and use of estimates This section explains key accounting policies requiring significant judgment, such as revenue recognition and share-based compensation. - Collaboration revenue recognition under ASC 606 requires significant judgment in identifying distinct performance obligations, allocating transaction price, and assessing variable consideration[196][197] - Share-based compensation fair value is estimated using the Black-Scholes option pricing model, which relies on subjective assumptions such as expected volatility, expected term, and risk-free interest rate[198][199] - Accrued research and development expenses are estimated based on open contracts, purchase orders, and communication with personnel to determine services performed and associated costs[202] - Immunome qualifies as an 'emerging growth company' under the JOBS Act and has elected to use the extended transition period for complying with new or revised financial accounting standards[204][205] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not required to be provided by smaller reporting companies, and therefore, no specific disclosures about market risk are included in this report. - The information under this item is not required to be provided by smaller reporting companies[207] Item 4. Controls and Procedures Management, with the participation of the CEO and CFO, evaluated the effectiveness of Immunome's disclosure controls and procedures as of June 30, 2023, and concluded they were effective. No changes in internal control over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect these controls. - As of June 30, 2023, Immunome's disclosure controls and procedures were evaluated and deemed effective by management, including the CEO and CFO[208] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[209] PART II – OTHER INFORMATION This section includes other information such as legal proceedings, risk factors, unregistered sales of equity securities, defaults, mine safety disclosures, and a list of exhibits. Item 1. Legal Proceedings Immunome is not currently a party to any material legal proceedings. - Immunome is not currently a party to any material legal proceedings[211] Item 1A. Risk Factors This section is not required to be provided by smaller reporting companies. - The information under this item is not required to be provided by smaller reporting companies[212] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period. - None[213] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period. - None[214] Item 4. Mine Safety Disclosures This item is not applicable to Immunome, Inc. - Not applicable[215] Item 5. Other Information There is no other information to report for the period. - None[216] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including the Merger Agreement, organizational documents, stockholder support agreements, lock-up agreements, subscription agreements for the PIPE financing, employment agreements, and certifications. - Key exhibits include the Agreement and Plan of Merger and Reorganization, forms of Stockholder Support Agreements, Lock-Up Agreement, Subscription Agreement for PIPE financing, and the Employment Agreement for the new CEO[218]