IN8bio(INAB) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Condensed Financial Statements (Unaudited) This section presents the unaudited condensed financial statements for IN8bio, Inc., including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items for the period ended March 31, 2023 Condensed Balance Sheets Condensed Balance Sheets (in thousands) | Metric | March 31, 2023 (unaudited) (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :--------------------------- | :------------------------------- | | Cash | $10,860 | $18,182 | | Total Current Assets | $14,402 | $22,234 | | Total Assets | $24,678 | $33,039 | | Total Current Liabilities | $3,748 | $5,822 | | Total Liabilities | $7,890 | $10,307 | | Total Stockholders' Equity | $16,788 | $22,732 | Condensed Statements of Operations Condensed Statements of Operations | Operating Expense | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $4,385 | $2,381 | | General and administrative | $3,470 | $3,764 | | Total operating expenses | $7,855 | $6,145 | | Other income | $330 | $— | | Net loss | $(7,525) | $(6,145) | | Net loss per share – basic and diluted | $(0.30) | $(0.33) | Condensed Statements of Stockholders' Equity Condensed Statements of Stockholders' Equity | Metric | Balance at December 31, 2022 (in thousands) | Balance at March 31, 2023 (in thousands) | | :-------------------------------- | :--------------------------- | :------------------------ | | Common Stock (Shares) | 24,545,157 | 24,960,869 | | Additional Paid-In Capital (in thousands) | $83,941 | $85,522 | | Accumulated Deficit (in thousands) | $(61,212) | $(68,737) | | Total Stockholders' Equity (in thousands) | $22,732 | $16,788 | | Net loss (3 months ended March 31, 2023) (in thousands) | N/A | $(7,525) | Condensed Statements of Cash Flows Condensed Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(7,439) | $(4,559) | | Net cash used in investing activities | $(429) | $(253) | | Net cash provided by (used in) financing activities | $547 | $(102) | | Net decrease in cash and restricted cash | $(7,321) | $(4,914) | | Cash and restricted cash at end of period | $11,113 | $32,358 | Notes to Condensed Financial Statements 1. Organization and Nature of Operations - IN8bio, Inc. is a clinical-stage biopharmaceutical company focused on gamma-delta T cell product candidates for solid and liquid tumors, with lead candidates INB-200 (glioblastoma), INB-100 (hematologic malignancies), and INB-400 (glioblastoma) in clinical trials[20] - The Company has incurred recurring losses and negative operating cash flows since inception, with net losses of $7.5 million and $6.1 million for the three months ended March 31, 2023 and 2022, respectively, and an accumulated deficit of $68.7 million as of March 31, 2023[22] - Existing cash of $10.9 million as of March 31, 2023, plus $9.9 million net proceeds from ATM sales post-quarter, are not sufficient to fund operations beyond February 2024, raising substantial doubt about the Company's ability to continue as a going concern[25][26] 2. Summary of Significant Accounting Policies - The condensed financial statements are prepared in conformity with U.S. GAAP, with no material changes to significant accounting policies since the December 31, 2022 Annual Report[27][28][29] - Estimates and assumptions are used for accruals of R&D expenses, deferred tax assets/liabilities, stock-based compensation, and useful lives of property and equipment[30] 3. Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets (in thousands) | Prepaid Expense | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------ | :------------------------------ | :------------------------------- | | Prepaid research and development | $2,225 | $2,562 | | Prepaid insurance | $716 | $1,258 | | Other | $601 | $232 | | Total prepaid expenses and other current assets | $3,542 | $4,052 | 4. Property and Equipment, Net Property and Equipment, Net (in thousands) | Asset Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------- | :------------------------------ | :------------------------------- | | Machinery and equipment | $364 | $358 | | Furniture and fixtures | $370 | $335 | | Software | $126 | $126 | | Leasehold improvements | $3,902 | $3,899 | | Less accumulated depreciation and amortization | $(564) | $(321) | | Property and equipment, net | $4,198 | $4,397 | | Depreciation and amortization expense (3 months) | $243 | $16 | 5. Construction in Progress Construction in Progress (in thousands) | Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------- | | Furniture | $— | $29 | | Internal use software not yet in service | $45 | $— | | Total construction in progress | $45 | $29 | 6. Accrued Expenses and Other Current Liabilities Accrued Expenses and Other Current Liabilities (in thousands) | Accrued Expense | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------- | | Accrued clinical trials | $559 | $253 | | Accrued compensation | $422 | $1,460 | | Accrued legal | $104 | $211 | | Accrued other | $407 | $418 | | Total accrued expenses and other current liabilities | $1,492 | $2,342 | 7. Stockholders' Equity - The Company's authorized capital stock consists of 500 million shares ($0.0001 par value), with 490 million designated as common stock and 10 million as preferred stock. No preferred stock was outstanding as of March 31, 2023, and December 31, 2022[39] 8. Stock-Based Compensation - The 2020 Equity Incentive Plan, effective July 29, 2021, initially reserved 4.2 million shares, with an automatic annual increase. As of March 31, 2023, 2.355 million shares were available for grant[41] Stock Option Activity | Stock Option Activity | Outstanding at Dec 31, 2022 | Granted | Forfeited | Outstanding at Mar 31, 2023 | | :-------------------------------- | :-------------------------- | :-------- | :-------- | :-------------------------- | | Number of Stock Options | 4,003,294 | 20,750 | (169,040) | 3,855,004 | | Weighted Average Exercise Price | $4.90 | $2.00 | $2.27 | $5.00 | | Weighted Average Remaining Contractual Term (years) | 8.28 | N/A | N/A | 8.39 | | Aggregate Intrinsic Value (in thousands) | $860 | N/A | N/A | $51 | Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :---------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $389 | $294 | | General and administrative | $470 | $470 | | Total stock-based compensation expense | $859 | $764 | 9. License Agreements - The Company holds an exclusive worldwide license from Emory University, Children's Healthcare of Atlanta, Inc., and UAB Research Foundation (Emory License Agreement) for immunotherapy-related patents and know-how for gamma-delta T cells, requiring development milestones, tiered running royalties, and annual maintenance fees[47][48] - An exclusive worldwide license from UABRF (UABRF License Agreement) covers immunotherapy-related patents for gamma-delta T cells, CAR-T cells, and combination treatments, with consideration including an upfront payment, common stock issuance, development milestones, and various royalties[50][51][52] 10. Net Loss Per Share Net Loss Per Share | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss (in thousands) | $(7,525) | $(6,145) | | Net loss per share—basic and diluted | $(0.30) | $(0.33) | | Weighted-average number of shares used in computing net loss per share—basic and diluted | 24,732,580 | 18,800,546 | - Potentially dilutive securities (stock options) were excluded from diluted net loss per share calculation as their effect was antidilutive due to the Company's net loss[55][56] 11. Commitments and Contingencies - The Company has commitments to intellectual property licensors based on clinical, regulatory, financial, and sales milestones, including single-digit royalties on commercial sales under the Emory and UABRF License Agreements[57] - The Company is not currently party to any material legal proceedings[58] 12. Facility Leases Lease Cost (in thousands) | Lease Cost | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :---------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Amortization of finance right-of-use assets | $188 | $149 | | Interest on finance lease liabilities | $33 | $14 | | Operating lease cost | $288 | $112 | | Short-term lease cost | $116 | $105 | | Total lease cost | $625 | $380 | Undiscounted Cash Flows (in thousands) | Undiscounted Cash Flows | Finance Leases (in thousands) | Operating Leases (in thousands) | | :------------------------------------- | :---------------------------- | :------------------------------ | | Remainder of 2023 | $581 | $891 | | 2024 | $566 | $1,212 | | 2025 | $302 | $1,224 | | 2026 | $— | $1,013 | | 2027 | $— | $767 | | Thereafter | $— | $422 | | Total lease payment | $1,449 | $5,529 | | Total lease liabilities | $1,318 | $4,210 | 13. Subsequent Events - Subsequent to March 31, 2023, the Company sold 4,789,479 shares of common stock under its ATM program, generating approximately $9.9 million in net proceeds[69] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results for the three months ended March 31, 2023, highlighting its clinical-stage biopharmaceutical focus, financial performance, liquidity challenges, and critical accounting estimates Overview - IN8bio is a clinical-stage biopharmaceutical company developing gamma-delta T cell product candidates for solid and liquid tumors, utilizing its DeltEx platform for allogeneic, autologous, iPSC, and genetically modified cell therapy approaches[73] - The company plans to initiate a Phase 2 clinical trial for INB-400 (newly diagnosed GBM) in H2 2023, continue Phase 1 trials for INB-200 (GBM) and INB-100 (hematologic malignancies), and submit an IND for INB-410 (allogeneic GBM) in late 2023 with additional funding[74] - Due to recurring operating losses and no product sales, the company's existing cash and recent ATM proceeds are insufficient to fund operations beyond February 2024, indicating substantial doubt about its ability to continue as a going concern[77][78] Other First Quarter Business and Clinical Highlights - New preclinical data in ovarian cancer from the INB-400 program will be presented at the ASGCT 26th Annual Meeting, demonstrating gamma-delta T cells' potential to target solid tumor cells outside the brain[82] - INB-400 (autologous) and INB-410 (allogeneic) received FDA Orphan Drug Designation for malignant gliomas, including newly diagnosed GBM, granting potential seven-year market exclusivity[82] - Positive INB-100 Phase 1 data showed durable complete responses (CRs) in 100% of evaluable patients with high-risk leukemias, including those who failed prior therapies, with all patients remaining alive at last assessment[83] Components of Our Results of Operations - The Company has not generated any revenue from product sales since inception and does not expect to in the foreseeable future, relying on equity sales and potential collaboration/license agreements for future revenue[85][77] - Research and development expenses, expensed as incurred, primarily cover employee-related costs, consultant fees, preclinical studies, CRO/CMO expenses, intellectual property, and regulatory compliance, and are expected to increase with clinical development[86][88] - General and administrative expenses, including salaries, professional fees, and public company costs, are expected to increase with organizational growth and continued R&D activities[89][90] Results of Operations Operating Expenses and Net Loss (in thousands) | Operating Expense | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | | :------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Research and development | $4,385 | $2,381 | $2,004 | | General and administrative | $3,470 | $3,764 | $(294) | | Total operating expenses | $7,855 | $6,145 | $1,710 | | Other income | $330 | $— | $330 | | Loss from operations | $(7,525) | $(6,145) | $(1,380) | | Net loss | $(7,525) | $(6,145) | $(1,380) | Research and Development Expenses by Category (in thousands) | R&D Expense Category | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | INB-100 | $86 | $34 | $52 | | INB-200 | $60 | $364 | $(304) | | INB-400 | $1,135 | $144 | $991 | | Personnel expenses (incl. stock-based comp) | $2,026 | $1,152 | $874 | | Facility-related and other | $1,044 | $675 | $369 | | Total research and development expenses | $4,385 | $2,381 | $2,004 | - General and administrative expenses decreased by $0.3 million to $3.5 million for Q1 2023, primarily due to lower insurance, accounting, and recruiting costs[96] Liquidity and Capital Resources - As of March 31, 2023, the Company had $10.9 million in cash. Subsequent to this date, an additional $9.9 million in net proceeds was raised through the ATM program[99] - The Company's current cash and subsequent ATM proceeds are projected to fund operations only until February 2024, leading to substantial doubt about its ability to continue as a going concern[99][101] - Future funding requirements are substantial and depend on factors like clinical trial progress, regulatory approvals, manufacturing costs, intellectual property maintenance, and commercialization efforts[104][105] Cash Flows Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(7,439) | $(4,559) | | Net cash used in investing activities | $(429) | $(253) | | Net cash provided by (used in) financing activities | $547 | $(102) | | Net decrease in cash | $(7,321) | $(4,914) | - Net cash used in operating activities increased to $7.4 million in Q1 2023 (from $4.6 million in Q1 2022), primarily due to a higher net loss and changes in operating assets and liabilities, partially offset by non-cash charges[114][115] - Net cash used in investing activities increased to $0.4 million in Q1 2023 (from $0.3 million in Q1 2022), mainly due to increased construction-in-progress for leasehold improvements[116][117] - Net cash provided by financing activities was $0.5 million in Q1 2023, driven by $0.7 million from common stock issuance via ATM, offset by $0.2 million in finance lease principal payments[118] Critical Accounting Estimates - Critical accounting estimates include the accrual of research and development expenses, which are estimated based on task completion and vendor information, and stock-based compensation, valued using the Black-Scholes option-pricing model with subjective assumptions[121][122][123] Recent Accounting Pronouncements - No new accounting guidance adopted during Q1 2023 or pending guidance is expected to have a material impact on the financial statements or disclosures[124] Emerging Growth Company and Smaller Reporting Company Status - The Company qualifies as an Emerging Growth Company (EGC) under the JOBS Act, allowing reduced disclosure requirements and an extended transition period for new accounting standards until December 31, 2026, or earlier if certain revenue/market value thresholds are met[125][126][127] - The Company is also a 'smaller reporting company,' which provides additional exemptions, such as presenting only two fiscal years of audited financial statements and reduced executive compensation disclosures[128][129] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, IN8bio, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[131] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2023, concluding they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - As of March 31, 2023, the Company's disclosure controls and procedures were evaluated by management, including the CEO and CFO, and concluded to be effective at the reasonable assurance level[133] - There were no changes in internal control over financial reporting during the three months ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[134] PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently involved in any material legal proceedings that are expected to have a significant adverse effect on its business, operating results, or financial condition - The Company is not currently a party to any material legal proceedings that are believed to have a material adverse effect on its business, operating results, or financial condition[137] Item 1A. Risk Factors This section outlines significant risks associated with investing in IN8bio's common stock, covering financial viability, product development, manufacturing, intellectual property, business operations, commercialization, regulatory compliance, and stock ownership Summary of Selected Risk Factors Associated with Our Business - There is substantial doubt about the Company's ability to continue as a going concern, requiring significant additional funding, which if not secured, could lead to delays, reductions, or termination of development programs[139] - The Company faces significant competition from companies with greater resources and experience, and its novel cell therapy approaches present substantial development, manufacturing, and commercialization challenges[139] - Dependence on successful clinical development, regulatory approval, and commercialization of gamma-delta T cell product candidates is critical, with risks including uncertain clinical utility, complex manufacturing, and reliance on third parties[139] Risks Related to Our Financial Position and Capital Needs - The Company's existing cash and recent ATM proceeds are insufficient to fund operations beyond February 2024, creating substantial doubt about its going concern ability and necessitating further capital raises[141] - Raising additional capital through equity or convertible debt may dilute existing stockholders and impose restrictive covenants, while collaborations might require relinquishing valuable intellectual property rights[144][145] - The Company has incurred significant operating losses since inception ($68.7 million accumulated deficit as of March 31, 2023) and expects continued losses, with no guarantee of achieving or maintaining profitability[149] Risks Related to the Development of Our Product Candidates - The business is highly dependent on the successful clinical development, regulatory approval, and commercialization of its gamma-delta T cell product candidates (INB-200, INB-100, INB-400), which are in early stages and may never receive approval[157][158][159] - Success in preclinical studies or early-stage clinical trials does not guarantee similar results in later, larger trials, and product candidates may fail to demonstrate desired safety and efficacy, leading to delays or abandonment[165][166] - Difficulties in patient enrollment for clinical trials, especially for rare disorders or elderly populations, could delay or adversely affect clinical development activities[191][192] - Serious adverse events or unexpected side effects identified during development or post-approval could lead to discontinuation of programs, denial of regulatory approval, or market withdrawal, limiting commercial potential[194][195][196] Risks Related to Manufacturing and Our Dependence on Third Parties - The manufacturing process for genetically engineered human cells (INB-200, INB-300, INB-400) is complex, highly regulated, and susceptible to product loss, failure, or variation due to logistical issues, manufacturing errors, contamination, or inherent differences in donor materials[214][215][216][217] - The Company relies on third-party contractors and CMOs for manufacturing, which entails risks such as inability to meet specifications, procure capacity, comply with cGMP, or maintain quality control, potentially delaying regulatory approval or commercialization[220][225] - Dependence on a single third-party supplier for automated manufacturing devices and lentiviral vectors poses a critical risk; any disruption could delay manufacturing and clinical trials[230] Risks Related to Our Intellectual Property - The Company's product candidates are critically dependent on exclusive license agreements with UABRF, CHOA, and Emory University; breaches could lead to termination of licenses and cessation of product development[248][250] - Inability to obtain and maintain broad and robust patent protection for product candidates and technology could allow competitors to commercialize similar products, adversely affecting the Company's market position[254][255][259] - The Company faces risks of third parties alleging infringement, misappropriation, or violation of their intellectual property rights, which could lead to expensive litigation, licensing requirements, or forced cessation of development/commercialization[266][267][268] - Reliance on third parties requires sharing trade secrets, increasing the risk of misappropriation or unauthorized disclosure, which could harm the Company's business and competitive position[283][285] Risks Related to Our Business Operations, Employee Matters and Managing Growth - The Company is highly dependent on its co-founders, President and CEO William Ho, and Chief Scientific Officer Dr. Lawrence Lamb; their loss or inability to attract and retain other qualified personnel could impede development and business strategy[291][292] - Planned organizational expansion in R&D, manufacturing, and commercialization may be difficult to manage due to limited financial resources and management experience, potentially disrupting operations[294] - Compromises to information technology systems or sensitive data, whether internal or via third parties, could lead to significant disruptions, regulatory investigations, litigation, and reputational harm[297][298][301] Risks Related to Commercialization and Regulatory Compliance - Even with regulatory approvals, product candidates will face ongoing oversight, including manufacturing, labeling, and post-market requirements, and may be subject to restrictions or withdrawal if compliance failures or new problems arise[313][314][315] - Commercial success depends on market acceptance by physicians, patients, and third-party payors, which is uncertain and may require significant resources to educate the medical community on the benefits of novel product candidates[320][321] - Relationships with healthcare providers and payors are subject to federal and state healthcare fraud and abuse laws; non-compliance could result in substantial penalties, fines, and exclusion from government programs[329] - Coverage and adequate reimbursement for product candidates are uncertain, and healthcare legislative reforms (e.g., ACA, IRA) could negatively impact pricing, demand, and profitability[331][333][335] Risks Related to the Ownership of Our Common Stock - The market price of the Company's common stock is volatile and can fluctuate substantially due to various factors, including clinical trial results, competitor actions, regulatory developments, and general economic conditions, potentially leading to investor losses[350][351] - Concentrated ownership by executive officers, directors, and principal stockholders (64% of outstanding common stock as of March 31, 2023) may limit new investors' influence on significant corporate decisions and could delay or prevent acquisitions[353] - Provisions in corporate charter documents and Delaware law (Section 203 DGCL) could make an acquisition more difficult and may prevent stockholders from replacing current management, potentially depressing the stock price[354][355] General Risk Factors - Unstable market and economic conditions, including recent bank closures, public health crises, and geopolitical tensions (e.g., Russia-Ukraine war), may have serious adverse consequences on the Company's business, financial condition, and share price[361] - The Company maintains cash deposits exceeding federally insured limits; adverse developments in the financial services industry could threaten liquidity and result in loss of uninsured deposits[362] - Operating as a public company incurs increased costs and requires substantial management time for compliance, and failure to maintain effective internal control over financial reporting could harm the business and stock price[364][365] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities and details the use of proceeds from the Company's initial public offering (IPO), with $31.8 million of the $32.3 million net proceeds utilized as of the report date - No unregistered sales of equity securities occurred during the period[369] - The Company completed its IPO on August 3, 2021, issuing 4 million shares at $10.00 per share, yielding $32.3 million in net proceeds. As of the report date, $31.8 million of these proceeds have been used, with no material change in the planned use[370][372] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - This item is not applicable[374] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - This item is not applicable[375] Item 5. Other Information This item is not applicable to the Company for the reporting period - This item is not applicable[376] Item 6. Exhibits, Financial Statement Schedules This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications from executive officers, and XBRL interactive data files - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Rules 13a-14(a) and 18 U.S.C. Section 1350), and Inline XBRL Instance Document and Taxonomy Extension Documents[377][378]