Immunome(IMNM) - 2021 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) For the three months ended March 31, 2021, Immunome, Inc. reported a net loss of $3.9 million, an increase from a $2.7 million loss in the same period of 2020. Total assets decreased to $42.6 million from $44.5 million at year-end 2020, primarily due to a decrease in cash. The company's operations used $3.5 million in cash, driven by the net loss and investments in prepaid expenses Condensed Balance Sheets As of March 31, 2021, the company's total assets were $42.6 million, a slight decrease from $44.5 million at December 31, 2020. The decrease was primarily driven by a reduction in cash from $39.8 million to $36.3 million. Total liabilities increased to $4.7 million from $3.2 million, mainly due to a rise in accounts payable Condensed Balance Sheet Summary (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash | $36,276 | $39,766 | | Total current assets | $41,107 | $42,894 | | Total assets | $42,593 | $44,525 | | Liabilities & Stockholders' Equity | | | | Accounts payable | $2,958 | $1,187 | | Total current liabilities | $4,571 | $3,038 | | Total liabilities | $4,710 | $3,180 | | Total stockholders' equity | $37,883 | $41,345 | | Total liabilities and stockholders' equity | $42,593 | $44,525 | Condensed Statements of Operations For the three months ended March 31, 2021, the company reported a net loss of $3.9 million, or ($0.37) per share, compared to a net loss of $2.7 million, or ($2.44) per share, for the same period in 2020. The increased loss was driven by a significant rise in general and administrative expenses, which grew to $1.9 million from $0.5 million year-over-year Condensed Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Research and development | $1,979 | $2,115 | | General and administrative | $1,918 | $540 | | Total operating expenses | $3,897 | $2,655 | | Loss from operations | ($3,897) | ($2,655) | | Net loss | ($3,898) | ($2,677) | | Net loss per share, basic and diluted | ($0.37) | ($2.44) | Condensed Statements of Cash Flows For the first quarter of 2021, net cash used in operating activities was $3.5 million, an increase from $2.1 million in the prior year period, primarily due to a higher net loss and changes in working capital. Financing activities provided a net cash inflow of $76,000, a significant decrease from $844,000 in Q1 2020 which included proceeds from preferred stock sales. The company's cash and restricted cash balance decreased by $3.5 million during the quarter Condensed Statements of Cash Flows Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,535) | ($2,064) | | Net cash used in investing activities | ($31) | ($55) | | Net cash provided by financing activities | $76 | $844 | | Net decrease in cash and restricted cash | ($3,490) | ($1,275) | | Cash and restricted cash at end of period | $36,376 | $1,368 | Notes to Condensed Financial Statements The notes detail the company's business as a biopharmaceutical firm focused on oncology and infectious diseases, its history of net losses, and its reliance on capital raises, including a recent IPO and private placement. Key accounting policies are outlined, including the treatment of a $13.3 million DoD expense reimbursement contract which resulted in a $4.0 million contra-R&D expense in Q1 2021. The notes also cover debt obligations, including a $0.5 million PPP loan awaiting a forgiveness decision, share-based compensation expenses of $325,000 for the quarter, and a subsequent event in April 2021 where the company raised $27.0 million through a private placement - The company is a biopharmaceutical company focused on discovering and developing antibody therapeutics for oncology and infectious diseases, including COVID-19[24] - The company has a history of net losses, with a net loss of $3.9 million for Q1 2021 and an accumulated deficit of $58.3 million as of March 31, 2021[26] - In July 2020, the company entered into a $13.3 million expense reimbursement contract with the U.S. Department of Defense (DoD) to develop a treatment for COVID-19. This resulted in a $4.0 million contra-research and development expense for Q1 2021[51] - In April 2021, the company raised gross proceeds of $27.0 million by selling 1,000,000 shares of common stock in a private placement[86] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for Q1 2021, highlighting a net loss of $3.9 million compared to $2.7 million in Q1 2020. The increase was driven by a $1.4 million rise in G&A expenses due to costs associated with being a public company. R&D expenses were $2.0 million, reflecting a $4.0 million contra-R&D expense from a DoD contract that offset program costs. The company ended the quarter with $36.3 million in cash and subsequently raised an additional $27.0 million in April 2021, which is expected to fund operations through fiscal year 2022. Management also notes the ongoing risks of the COVID-19 pandemic and details critical accounting policies, particularly regarding share-based compensation Overview The company is a development-stage biopharmaceutical firm that has historically funded its operations through sales of equity and convertible notes. Key financing events include an IPO in October 2020, which raised net proceeds of $41.7 million, and a private placement in April 2021 that raised $27.0 million. The company has incurred significant operating losses since inception, with a net loss of $3.9 million in Q1 2021, and expects losses to continue as it advances its preclinical programs - The company closed its IPO on October 6, 2020, receiving net proceeds of $41.7 million[93] - As of March 31, 2021, the company had a cash balance of $36.3 million and subsequently raised an additional $27.0 million in a private placement in April 2021[95] - The company expects to continue incurring significant expenses and operating losses as it advances its portfolio of preclinical programs[95][96] Results of Operations For the three months ended March 31, 2021, the net loss increased to $3.9 million from $2.7 million in the prior-year period. General and administrative expenses rose by $1.4 million to $1.9 million, primarily due to increased personnel costs and professional fees associated with operating as a public company. Research and development expenses were $2.0 million, reflecting a $4.0 million contra-R&D expense from the DoD Agreement which offset increased program spending Comparison of Operations (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $1,979 | $2,115 | ($136) | | General and administrative | $1,918 | $540 | $1,378 | | Total operating expenses | $3,897 | $2,655 | $1,242 | | Net loss | ($3,898) | ($2,677) | ($1,221) | - R&D expenses for Q1 2021 included a $4.0 million contra-R&D expense related to the DoD Agreement, which offset underlying costs[117] - The $1.4 million increase in G&A expenses was primarily driven by a $0.3 million increase in personnel-related costs and a $1.1 million increase in professional, consulting, and legal fees to support public company operations[119] Liquidity and Capital Resources As of March 31, 2021, the company had $36.3 million in cash. In April 2021, it raised an additional $27.0 million in gross proceeds from a common stock sale. Management expects this combined capital to fund operations and capital expenditures through fiscal year 2022. Net cash used in operating activities was $3.5 million for Q1 2021. The company anticipates needing substantial additional financing in the future to advance its programs and will seek funds through equity/debt financings or collaborations - The company had $36.3 million in cash as of March 31, 2021, and raised an additional $27.0 million in gross proceeds in April 2021[121] - Existing cash plus proceeds from the April 2021 financing are expected to fund operations through fiscal year 2022[129] Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Cash used in operating activities | ($3,535) | ($2,064) | | Cash used in investing activities | ($31) | ($55) | | Cash provided by financing activities | $76 | $844 | Critical Accounting Policies and Use of Estimates The company's most critical accounting policy involves share-based compensation. The fair value of stock options is determined using the Black-Scholes model, which requires significant management judgment for inputs like expected volatility and the fair value of common stock. Prior to its IPO, the company used methods like the net asset approach and the probability-weighted expected return method (PWERM) to estimate its common stock fair value - Share-based compensation is a critical accounting policy, with fair value estimated using the Black-Scholes option pricing model[139] - Prior to the IPO, the company used the Option Pricing Method (OPM) and, beginning in May 2020, the probability-weighted expected return method (PWERM) to determine the fair value of its common stock[141][142][143] Quantitative and Qualitative Disclosures about Market Risk The company states that this information is not required to be provided by smaller reporting companies - As a smaller reporting company, Immunome, Inc. is not required to provide quantitative and qualitative disclosures about market risk[151] Controls and Procedures Management concluded that as of March 31, 2021, the company's disclosure controls and procedures were not effective due to identified material weaknesses in internal control over financial reporting. These weaknesses relate to a lack of journal entry review, ineffective review of financial statement account balances, and insufficient accounting personnel. The company is actively undertaking remediation efforts, including implementing a formal monthly close process, creating a disclosure committee, and hiring a full-time CFO and other qualified personnel - Management concluded that disclosure controls and procedures were not effective as of March 31, 2021, due to material weaknesses[152] - Identified material weaknesses include: lack of review of journal entries, lack of timely and effective review of financial statement account balances, and lack of sufficient accounting and reporting personnel[154] - Remediation activities include implementing a formal monthly close process, creating a disclosure committee, and hiring additional qualified financial personnel, including a full-time CFO[155] PART II – OTHER INFORMATION Legal Proceedings The company reports that it is not currently a party to any material legal proceedings - The company is not currently involved in any material legal proceedings[161] Risk Factors As a smaller reporting company, Immunome, Inc. is not required to provide this information in its Form 10-Q - Disclosure of risk factors is not required for smaller reporting companies in this filing[162] Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2021, the company issued 14,270 shares of common stock from the exercise of stock options for approximately $5,624 and 11,666 shares from the exercise of warrants for approximately $104,994. These issuances were exempt from registration under Rule 701 or Section 4(a)(2) of the Securities Act - In Q1 2021, the company issued 14,270 shares of common stock upon exercise of stock options for aggregate consideration of $5,624[163] - In Q1 2021, the company issued 11,666 shares of common stock upon exercise of warrants for aggregate consideration of $104,994[163] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[165] Mine Safety Disclosures This item is not applicable to the company - Not applicable[166] Other Information The company reported no other information for this item - None[167] Exhibits This section lists the exhibits filed with the Form 10-Q, including the company's certificate of incorporation, bylaws, recent securities purchase agreements, and officer certifications required by the Sarbanes-Oxley Act - The exhibit index lists key corporate documents and agreements, including the Amended and Restated Certificate of Incorporation, a Securities Purchase Agreement dated April 26, 2021, and certifications by the CEO and CFO[170]