Immatics N.V.(IMTX) - 2021 Q4 - Annual Report

PART I ITEM 3. KEY INFORMATION The company faces significant financial, developmental, regulatory, manufacturing, and intellectual property risks Risks Related to Our Financial Position and Need for Additional Capital The company has a history of significant operating losses, requires additional capital, and faces currency exchange risks Historical Net Losses | Year Ended December 31 | Net Loss (€ millions) | | :--- | :--- | | 2021 | 93.3 | | 2020 | 211.8 | | 2019 | 32.5 | | Accumulated Losses (as of Dec 31, 2021) | 537.8 | - The company anticipates needing additional capital for operations, with cash and financial assets of €145.1 million as of December 31, 2021, deemed sufficient for at least the next twelve months[43][45] - The company has significant net operating loss carryforwards of €219.8 million in Germany and €135.6 million in the U.S., but their usability is subject to limitations[51] - The company operates internationally and is exposed to currency exchange rate fluctuations, particularly between the Euro and the U.S. dollar[50] Risks Related to the Development of Our Product Candidates Novel immunotherapy products face uncertainties in clinical trials, manufacturing complexity, and potential adverse side effects - The company's novel human immunotherapy products face significant uncertainties regarding clinical trial requirements and regulatory acceptance[54] - Clinical trials for ACT and TCR Bispecifics are expensive and difficult to design, with costs likely to be significantly higher than for conventional therapies[73][74] - Product candidates may cause undesirable side effects, with Grade ≥3 treatment-emergent adverse events and a dose-limiting toxicity observed in trials[75][76] - Demonstrating comparability between products from old and new manufacturing processes may require additional clinical testing, increasing costs and timelines[90] Risks Related to Regulatory Approval of Our Product Candidates The regulatory approval process for novel therapies is lengthy and uncertain, with evolving requirements and post-marketing obligations - Obtaining regulatory approval from the FDA and EMA is a lengthy and uncertain process, with additional challenges due to the novelty of T cell directed therapies[93][94][95] - The evolving regulatory landscape for gene and cell therapies could lengthen the review process and increase development costs[100][102][104] - Seeking accelerated approval does not guarantee a faster review and requires post-marketing confirmatory trials[114][115] - Ongoing compliance with comprehensive regulations is required post-approval, and failure can result in significant penalties, including withdrawal of approval[126][127][129] Risk Related to the Manufacturing of Our Product Candidates Complex, patient-specific manufacturing processes are susceptible to failures, and scaling up production presents significant challenges - Manufacturing of ACTengine products is a complex, patient-specific process susceptible to product loss, contamination, and logistical failures[132][133] - Scaling the second-generation manufacturing process carries risks of cost overruns, stability issues, and lot inconsistency[134] - Manufacturing of TCR Bispecifics (TCER) is also complex and prone to product loss from contamination, equipment failure, and scaling difficulties[137] - The company has no experience operating a large-scale manufacturing site and currently relies on a leased facility, which requires significant resources to expand[140][147] Risks Related to the Commercialization of Our Product Candidates The company lacks commercial infrastructure and faces challenges in market acceptance, reimbursement, and healthcare reform - The company has no sales force or commercial infrastructure and will incur significant costs and risks to build these capabilities[156][157] - Commercial success is highly dependent on market acceptance by physicians, patients, and payors[161][162] - The market opportunities for product candidates may be smaller than estimated based on current projections[163] - Obtaining adequate coverage and reimbursement from payors is essential but uncertain due to pricing pressures and cost-containment initiatives[168][172] Risks Related to Our Relationships with Third Parties The company's heavy reliance on third-party CROs, CMOs, and strategic collaborators introduces significant operational risks - The company relies on third-party CROs to conduct clinical trials, reducing direct control over trial conduct and data quality[175][177] - Manufacturing depends on third-party CMOs and suppliers, with potential for supply chain disruption from single-source providers[180][183] - The termination of key collaboration agreements could result in the loss of future funding, milestones, and royalty payments[192][194] - Development of required companion diagnostics is outsourced, and failure by partners could harm the commercialization of therapeutic products[189] Risks Related to Our Intellectual Property Success depends on maintaining patent protection in a highly uncertain biotech landscape with risks of infringement claims - The company's success depends on obtaining and maintaining patent protection, but patents may be challenged, invalidated, or held unenforceable[200][203] - The company may face infringement lawsuits from third parties, which could be expensive and result in damages or injunctions[205][208] - There is a risk of claims challenging the inventorship or ownership of the company's patents, which could lead to loss of valuable IP rights[216][217] - Protecting intellectual property rights globally is challenging, as laws in foreign jurisdictions may not be as protective as in the U.S[224][226] Risks Related to Our Business and Industry The business is subject to pandemic disruptions, dependency on key personnel, intense competition, and complex regulations - The COVID-19 pandemic could adversely affect business operations by delaying clinical trials and disrupting supply chains[235][238] - The company is highly dependent on key management and scientific personnel, and competition for talent is intense[241][244] - The biotechnology industry is intensely competitive, with rivals possessing greater financial and R&D resources[251] - Non-compliance with complex healthcare, data protection (e.g., GDPR, HIPAA), and anti-corruption laws could result in significant penalties[256][260][277] Risks Related to Ownership of Our Securities Security prices are volatile, warrants may expire worthless, and shareholder rights are governed by Dutch law - The market price of the company's securities (IMTX, IMTXW) is subject to high volatility[302] - The company's warrants have an exercise price of $11.50 per share and may expire worthless if the share price does not surpass this level[303] - As a Dutch company, shareholder rights are governed by Dutch law, which may make it difficult for U.S. investors to enforce judgments[312][317] - The company's status as a foreign private issuer and emerging growth company exempts it from certain U.S. reporting standards[327][330][331] Risks Related to Taxation The company faces tax risks including potential PFIC classification, uncertainty of its German tax residency, and dividend withholding tax - The company may be classified as a Passive Foreign Investment Company (PFIC), which could lead to adverse U.S. tax consequences for shareholders[334] - A change in the company's tax residency from Germany could result in different and potentially higher tax liabilities[335][337] - Future dividends may be subject to withholding tax in both Germany and the Netherlands[338][339] ITEM 4. INFORMATION ON THE COMPANY The company develops TCR-based immunotherapies for solid tumors using its ACT and TCER therapeutic modalities A. History and Development of the Company The company went public in July 2020 through a business combination, with its primary operations held in a German subsidiary - Immatics N.V. became a public company on July 1, 2020, following a business combination with ARYA Sciences Acquisition Corp[342] B. Business Overview The company is advancing a pipeline of proprietary and partnered TCR-based therapies driven by its discovery platforms - The company's pipeline includes eight proprietary programs and nine partnered programs utilizing its ACT and TCER platforms[347] IMA203 Phase 1 Interim Clinical Trial Data (as of Oct 5, 2021) | Metric | Result | | :--- | :--- | | Patients Treated | 18 | | Evaluable Patients | 16 | | Disease Control Rate | 94% (15/16) | | Objective Response Rate (RECIST 1.1) | 50% (8/16) | | Objective Response Rate (Doses > DL1) | 62% (8/13) | - The lead TCR Bispecific candidate, IMA401, is being developed with Bristol Myers Squibb under a collaboration including a $150 million upfront payment[357] - The proprietary XPRESIDENT and XCEPTOR technology platforms are central to the company's strategy for discovering novel cancer targets and TCRs[362] C. Organizational Structure The company consists of a Dutch parent with wholly-owned operating subsidiaries in Germany and the United States Principal Subsidiaries | Company | Jurisdiction of Incorporation | Ownership Interest | | :--- | :--- | :--- | | Immatics Biotechnologies GmbH | Germany | 100% | | Immatics US, Inc. | Delaware, United States | 100% | D. Property, Plant and Equipment The company operates from facilities in Germany and the US, with T cell manufacturing conducted at a leased cGMP facility in Houston - The company's main facilities are located in Tübingen and Munich, Germany, and Houston, Texas, USA[618][619] - Clinical T cell products are manufactured at a leased cGMP facility at UTHealth in Houston, Texas[619] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The company's 2021 revenue increased while its net loss narrowed, ending the year with sufficient cash to fund near-term operations A. Operating Results In 2021, revenue grew to €34.8 million, R&D expenses rose, and the net loss decreased significantly to €93.3 million Consolidated Statement of Operations Summary (Years ended Dec 31) | (in € thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Revenue from collaboration agreements | 34,763 | 31,253 | | Research and development expenses | (87,574) | (67,085) | | General and administrative expenses | (33,808) | (34,186) | | Operating result | (86,294) | (69,715) | | Share listing expense | — | (152,787) | | Net loss | (93,335) | (211,841) | - Revenue increased by €3.5 million year-over-year, mainly due to recognizing deferred revenue from the discontinued Amgen collaboration[655] - R&D expenses increased by €20.5 million year-over-year, driven by higher clinical trial activity and increased headcount[657][660] B. Liquidity and Capital Resources The company holds sufficient cash and financial assets, supplemented by a recent upfront payment, to fund operations for at least 12 months - As of December 31, 2021, the company held €133.0 million in cash and cash equivalents and €12.1 million in other financial assets[674][982] Cash Flow Summary (Years ended Dec 31) | (in € thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | (81,784) | (85,610) | | Net cash provided by / (used in) investing activities | 7,493 | (15,949) | | Net cash (used in) / provided by financing activities | (2,613) | 207,883 | - The company believes its existing cash, along with a $150 million upfront payment from BMS received in February 2022, will fund operations for at least the next 12 months[675] E. Critical Accounting Estimates Key accounting estimates involve revenue recognition from collaborations, share-based compensation valuation, and deferred tax asset assessment - Revenue from collaboration agreements is recognized over time on a cost-to-cost basis, requiring significant management judgment[702][705] - The fair value of share-based compensation is determined using valuation models that require assumptions about volatility and exercise patterns[706][707][712] - Recognition of deferred tax assets is based on judgment of future taxable profits, and none have been recognized to date due to a history of losses[708] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES The company is led by an experienced executive team and board, overseeing a highly educated workforce focused on R&D 2021 Compensation Summary (€ thousands) | Group | Periodically-paid remuneration | Bonuses | Share-based compensation expense | Total compensation | | :--- | :--- | :--- | :--- | :--- | | CEO (Harpreet Singh) | 484 | 285 | 7,946 | 8,715 | | All other executives | 1,997 | 1,032 | 9,070 | 12,099 | | Non-Executive Directors | 348 | - | 1,751 | 2,099 | - As of December 31, 2021, the company had 381 full-time employees, with a large portion dedicated to R&D and 144 holding doctorate degrees[770][771] - The Board of Directors has three standing committees: Audit, Compensation, and Nominating and Corporate Governance[763] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A few major shareholders hold significant voting power, and related party transactions include an Investor Rights Agreement 5% or Greater Shareholders (as of Jan 31, 2022) | Shareholder | Percentage of Ordinary Shares | | :--- | :--- | | dievini Hopp BioTech holding GmbH & Co. KG | 27.3% | | Baker Bros. Advisors LP | 7.0% | | Nantahala Capital Management, LLC | 6.3% | | ARYA Sciences Holdings | 5.6% | - An Investor Rights Agreement provides certain shareholders with the right to designate individuals for election to the Board of Directors[782] ITEM 8. FINANCIAL INFORMATION This section contains the IFRS financial statements and notes the company's dividend policy and a legal proceeding - The company is involved in a legal proceeding with Immunocore Limited regarding an opposition to the IMMTAX trademark[787] - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[789] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is primarily exposed to interest rate, credit, and currency risks from its financial assets and international operations - The main financial risks are identified as interest rate risk, credit risk, and currency exchange risk[927] - The company has significant currency risk exposure due to holding U.S. dollar-denominated assets while its functional currency is the Euro[931][932] ITEM 15. CONTROLS AND PROCEDURES Management concluded that disclosure controls were effective and that two previously identified material weaknesses have been remediated - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[941] - The company successfully remediated two material weaknesses in internal control over financial reporting that were identified as of December 31, 2020[948][950] ITEM 16. CORPORATE GOVERNANCE AND OTHER DISCLOSURES The company follows Dutch corporate governance practices and discloses details on its audit committee and accountant fees - The Audit Committee includes two members who qualify as "audit committee financial experts"[951] Principal Accountant Fees (€ thousands) | Fee Type | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fees | 1,298 | 1,042 | | Audit-Related Fees | — | — | | Tax Fees | — | — | | All Other Fees | — | — | | Total Fees | 1,298 | 1,042 | - As a foreign private issuer, the company follows its home country (Netherlands) corporate governance practices, which differ from certain Nasdaq standards[961][965] PART III ITEM 18. FINANCIAL STATEMENTS This section presents the company's audited consolidated financial statements prepared in accordance with IFRS Consolidated Statement of Financial Position Highlights (as of Dec 31) | (in € thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Total Assets | 174,646 | 254,646 | | Cash and cash equivalents | 132,994 | 207,530 | | Total Liabilities | 150,583 | 167,259 | | Deferred revenue | 98,627 | 132,075 | | Total Shareholders' Equity | 24,063 | 87,387 | - The financial statements were prepared in conformity with International Financial Reporting Standards (IFRS) as issued by the IASB[976] ITEM 19. EXHIBITS This section lists all exhibits filed with the annual report, including articles of association and material contracts - Key filed exhibits include the company's Articles of Association, material contracts, and collaboration agreements with partners like Bristol-Myers Squibb[969][972]