IN8bio(INAB) - 2022 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 the balance sheets, statements of operations, statements of stockholders' equity, and cash flows, along with accompanying notes for the period ended March 31, 2022 Condensed Balance Sheets | Metric | March 31, 2022 (unaudited) (in thousands) | December 31, 2021 (Note 2) (in thousands) | | :-------------------------------- | :--------------------------------------- | :-------------------------------------- | | Cash | $32,107 | $37,021 | | Total Current Assets | $33,274 | $38,980 | | Total Assets | $36,538 | $42,223 | | Total Current Liabilities | $2,068 | $2,256 | | Total Liabilities | $3,703 | $4,040 | | Total Stockholders' Equity | $32,835 | $38,183 | - The company's cash decreased from $37.021 million at December 31, 2021, to $32.107 million at March 31, 2022. Total assets also decreased from $42.223 million to $36.538 million over the same period[10] Condensed Statements of Operations | Operating Expenses (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $2,381 | $1,245 | | General and administrative | $3,764 | $1,118 | | Total operating expenses | $6,145 | $2,363 | | Loss from operations | $(6,145) | $(2,363) | | Net loss | $(6,145) | $(2,363) | | Net loss attributable to common stockholders | $(6,145) | $(3,069) | | Net loss per share – basic and diluted | $(0.33) | $(0.82) | | Weighted-average shares outstanding | 18,800,546 | 3,764,488 | - The net loss for the three months ended March 31, 2022, significantly increased to $6.145 million from $2.363 million in the prior year period. This was driven by substantial increases in both research and development expenses (from $1.245 million to $2.381 million) and general and administrative expenses (from $1.118 million to $3.764 million)[13] Condensed Statements of Convertible Preferred Stock, Common Stock and Stockholders' Equity (Deficit) | Equity Component (in thousands) | Balance at Dec 31, 2021 | Stock Option Exercises | Stock-Based Compensation Expense | Net Loss | Balance at Mar 31, 2022 | | :------------------------------ | :---------------------- | :--------------------- | :------------------------------- | :------- | :---------------------- | | Common Stock (Shares) | 18,781,242 | 31,025 | — | — | 18,812,267 | | Common Stock (Amount) | $2 | $0 | $0 | $0 | $2 | | Additional Paid-In Capital | $70,872 | $33 | $764 | $0 | $71,669 | | Accumulated Deficit | $(32,691) | $0 | $0 | $(6,145) | $(38,836) | | Total Stockholders' Equity | $38,183 | $33 | $764 | $(6,145) | $32,835 | - Total stockholders' equity decreased from $38.183 million at December 31, 2021, to $32.835 million at March 31, 2022, primarily due to a net loss of $6.145 million, partially offset by stock-based compensation expense and stock option exercises[15] Condensed Statements of Cash Flows | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(4,559) | $(2,507) | | Net cash used in investing activities | $(253) | $0 | | Net cash used in financing activities | $(102) | $(435) | | Net decrease in cash and restricted cash | $(4,914) | $(2,942) | | Cash and restricted cash at end of period | $32,358 | $15,052 | - Net cash used in operating activities increased to $4.559 million for the three months ended March 31, 2022, from $2.507 million in the prior year, primarily driven by the increased net loss. Investing activities used $0.253 million in 2022, compared to none in 2021, mainly for construction in progress[18][102][104] Notes to Condensed Financial Statements - IN8bio, Inc. is a clinical-stage biopharmaceutical company focused on gamma-delta T cell therapies for cancer, with lead candidates INB-200 (glioblastoma) and INB-100 (leukemia) in Phase 1 clinical trials. The company completed its IPO in August 2021, raising $32.3 million net proceeds[21][24] - The company has incurred recurring losses and negative operating cash flows since inception, with an accumulated deficit of $38.8 million as of March 31, 2022. Management believes existing cash of $32.1 million is sufficient for at least 12 months[25][26] - Stock-based compensation expense was $764,000 for the three months ended March 31, 2022, up from $361,000 in the prior year, allocated to research and development ($294,000) and general and administrative ($470,000)[45] - The company holds exclusive worldwide licenses under agreements with Emory University, Children's Healthcare of Atlanta, Inc., and UAB Research Foundation for immunotherapy-related patents and know-how concerning gamma-delta T cells[46][50] Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Accrued clinical trials | $206 | $196 | | Accrued compensation | $318 | $926 | | Accrued other | $360 | $113 | | Total | $884 | $1,235 | 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 results of operations for the three months ended March 31, 2022, highlighting business overview, recent developments, financial performance, liquidity, and critical accounting estimates Overview - IN8bio is a clinical-stage biopharmaceutical company developing gamma-delta T cell therapies for cancer, utilizing its DeltEx platform. Lead candidates INB-200 (glioblastoma) and INB-100 (leukemia) are in Phase 1 clinical trials[71][72] - The company completed its IPO on August 3, 2021, raising $32.3 million in net proceeds. Since inception, it has funded operations primarily through equity sales, totaling $75.6 million gross proceeds through March 31, 2022[73][74] - IN8bio has incurred significant operating losses, with net losses of $6.1 million and $2.4 million for the three months ended March 31, 2022 and 2021, respectively, and an accumulated deficit of $38.8 million as of March 31, 2022[75] Other First Quarter Business Highlights - INB-200 Phase 1 clinical trial for newly diagnosed GBM showed no dose-limiting toxicities (DLTs), cytokine release syndrome (CRS), or neurotoxicity in cohort 1 (n=3). Patients exceeded expected progression-free survival (PFS) based on age and MGMT status[77] - INB-100 Phase 1 clinical trial for leukemia patients undergoing HSCT showed all three treated patients remain in morphologic complete response (CR) with durable remissions (9-23 months). The safety profile was manageable with no DLTs, Grade 3+ GvHD, CRS, or neurotoxicity[77] - The company expanded its clinical and regulatory teams with the appointments of Urvashi Patel, Ph.D., as Vice President, Regulatory Affairs, and Stacey Bilinski as Vice President, Clinical Operations, bringing over 45 years of combined experience[77] Impact of COVID-19 - The COVID-19 pandemic continues to impact clinical sites, startup activities for Phase 1/2 trials, third-party manufacturing, and logistics, potentially disrupting supply chains and material availability/cost[79] - The pandemic may affect the timing of regulatory approvals, clinical trial enrollment, availability of materials, and the company's ability to access capital, negatively impacting short-term and long-term liquidity[79] Components of Our Results of Operations - The company has not generated any revenue since inception and does not expect to in the foreseeable future. Future revenue depends on successful product development, regulatory approval, or collaboration/license agreements[80] - Research and development expenses include employee-related costs, consultant fees, preclinical study expenses, CRO/CMO fees, intellectual property costs, and regulatory compliance. These costs are expensed as incurred and are expected to increase as product candidates advance[81][82][83] - General and administrative expenses cover salaries, stock-based compensation, professional fees (legal, accounting), travel, and facility costs. These are expected to increase with organizational growth and public company operating costs[84][85] Results of Operations | Operating Expenses (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Research and development | $2,381 | $1,245 | $1,136 | | General and administrative | $3,764 | $1,118 | $2,646 | | Total operating expenses | $6,145 | $2,363 | $3,782 | | Net loss | $(6,145) | $(2,363) | $(3,782) | - Research and development expenses increased by $1.136 million, primarily due to increased third-party clinical trial activities and contract manufacturing for INB-200, and higher personnel costs from increased headcount[89] - General and administrative expenses increased by $2.646 million, mainly due to higher personnel costs (salaries, benefits, stock-based compensation) from increased headcount, and increased legal and insurance expenses associated with operating as a public company[90] Liquidity and Capital Resources - As of March 31, 2022, the company had $32.1 million in cash and believes this is sufficient to fund operating expenses and capital expenditure requirements for at least the next 12 months[91] - Future capital requirements are substantial and depend on factors like the scope and timing of preclinical and clinical trials, regulatory review, manufacturing costs, commercialization activities, intellectual property maintenance, and strategic collaborations[94][97] Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(4,559) | $(2,507) | | Net cash used in investing activities | $(253) | $0 | | Net cash used in financing activities | $(102) | $(435) | | Net decrease in cash | $(4,914) | $(2,942) | - Cash used in operating activities increased to $4.6 million in Q1 2022 (from $2.5 million in Q1 2021) due to higher net loss and decreases in accrued expenses. Cash used in investing activities was $0.3 million in Q1 2022 for construction in progress[102][103][104] Critical Accounting Estimates - The company's critical accounting estimates include research and development costs and stock-based compensation. R&D costs are expensed as incurred, with estimates made for accrued expenses based on vendor progress[109][110] - Stock-based compensation is expensed based on grant date fair values, estimated using the Black-Scholes option-pricing model. Key assumptions include expected volatility (based on comparable public companies), expected life (simplified method), risk-free interest rate, and zero dividend rate[111] Recent Accounting Pronouncements - The company evaluated ASU 2019-12, Income Taxes (Topic 740), effective for fiscal years beginning after December 15, 2021, and determined it does not have a material impact on its condensed financial statements[32][113] Emerging Growth Company and Smaller Reporting Company Status - IN8bio qualifies as an Emerging Growth Company (EGC) and a Smaller Reporting Company, allowing it to take advantage of reduced disclosure and other requirements, including an extended transition period for complying with new accounting standards[114][116][117] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, IN8bio, Inc. is exempt from providing quantitative and qualitative disclosures about market risk as per Item 10 of Regulation S-K - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[120] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2022, concluding they were effective at a reasonable assurance level - As of March 31, 2022, 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[122] - Due to a transition period for newly public companies, management is not required to evaluate the effectiveness of internal control over financial reporting until after the filing of the Annual Report on Form 10-K for the year ending December 31, 2022[123] PART II—OTHER INFORMATION Item 1. Legal Proceedings IN8bio, Inc. is not currently a party to any material legal proceedings and is unaware of any pending or threatened legal actions that could significantly impact its business, operating results, or financial condition - The company is not currently involved in any material legal proceedings and is unaware of any pending or threatened legal actions that could have a material adverse effect on its business[126] Item 1A. Risk Factors This section outlines the significant risks associated with investing in IN8bio's common stock, covering financial position, product development, manufacturing, intellectual property, business operations, commercialization, regulatory compliance, and stock ownership Summary of Selected Risk Factors Associated with Our Business - The company requires substantial additional funding and may face delays or termination of development programs if capital is unavailable[128] - Significant operating losses have been incurred since inception, with expectations of continued losses and uncertainty in achieving profitability[128] - The business is dependent on the successful clinical development, regulatory approval, and commercialization of its gamma-delta T cell product candidates, which utilize novel and complex approaches[128] - The ongoing COVID-19 pandemic and geopolitical tensions could adversely impact clinical trials, supply chains, and business development activities[128] Risks Related to Our Financial Position and Capital Needs - Developing pharmaceutical products is expensive and time-consuming; the company will need substantial additional funding for ongoing operations and planned research and clinical development activities[129] - The company has incurred significant operating losses ($6.1 million in Q1 2022) and an accumulated deficit of $38.8 million, expecting increased expenses as product candidates advance through clinical trials and commercialization[133][75] - As an early clinical-stage biotechnology company with a limited operating history and no approved products, evaluating future success and viability is difficult, and unforeseen expenses or delays may occur[139] Risks Related to the Development of Our Product Candidates - The business relies on successful clinical development, regulatory approval, and commercialization of gamma-delta T cell product candidates (INB-200, INB-100), which are in early stages and may never be commercialized[141] - Success in preclinical studies or early-stage clinical trials does not guarantee success in later trials, and product candidates may fail to demonstrate desired safety and efficacy[149] - Interim or preliminary clinical trial data may change as more patient data become available and are subject to audit, potentially leading to material differences in final data[153] - Novel approaches to cell therapies, including genetic modification and allogeneic gamma-delta T cells, present significant development, manufacturing, and commercialization challenges, such as variability in donor cells and immune reactions[155][156][157] - The ongoing COVID-19 pandemic has impacted and may continue to impact clinical trials through delays in enrollment, supply chain disruptions, and diversion of healthcare resources, potentially affecting business operations and financial condition[184][185] Risks Related to Manufacturing and Our Dependence on Third Parties - The manufacturing process for genetically engineered human cells (e.g., INB-200) is complex, highly regulated, and susceptible to product loss or failure due to logistical issues, manufacturing errors, contamination, or variability in starting materials[207][208][209] - The company relies on third-party contractors for manufacturing product candidates and lentiviral vectors, posing risks related to compliance with cGMP, quality control, and potential supply disruptions if contractors fail to perform adequately[213][214][223] - Damage or loss to storage freezers for biologic specimens and clinical lentivectors at research facilities could cause significant delays and expenses[222] - Reliance on third-party healthcare professionals to administer gamma-delta T cells introduces risks of incorrect administration, diminished therapeutic effect, or patient injury, potentially harming the company's reputation and business[224][225] Risks Related to Our Intellectual Property - The company's business is critically dependent on exclusive license agreements with UABRF, CHOA, and Emory University for immunotherapy-related patents and know-how. Breach of these agreements could lead to loss of intellectual property rights and termination of product development[240][241][244] - Obtaining and maintaining patent protection for product candidates and technology is uncertain, expensive, and complex. Issued patents may not provide meaningful protection, and competitors could circumvent them[247][248][252] - Third parties may allege infringement of their intellectual property rights, leading to costly litigation, potential licensing fees, or forced cessation of development/commercialization. Such claims could negatively impact business success[259][261][262] - Reliance on third parties requires sharing trade secrets, increasing the risk of misappropriation or unauthorized disclosure, which could harm the company's competitive position[277][280] Risks Related to Our Business Operations, Employee Matters and Managing Growth - The company is highly dependent on its co-founders, William Ho (CEO) and Dr. Lawrence Lamb (CSO), and the loss of their services or inability to recruit and retain other key personnel could harm the business[286][287] - Planned organizational expansion may lead to difficulties in managing growth, including implementing systems, expanding facilities, and recruiting personnel, potentially disrupting operations[289] - Strategic collaborations may not materialize or could require relinquishing important rights, and the company's information technology systems are vulnerable to cyberattacks and security incidents, risking disruption, data loss, and regulatory penalties[290][291][292] - The ability to use net operating losses (NOLs) to offset future taxable income may be limited due to ownership changes or changes in tax law, potentially accelerating or increasing future tax liabilities[300][301] - The business is exposed to product liability risks inherent in testing, manufacturing, and selling biopharmaceutical products, which could lead to expensive litigation, substantial damages, and harm to reputation[303][306] Risks Related to Commercialization and Regulatory Compliance - Even if regulatory approvals are obtained, product candidates will be subject to ongoing regulatory oversight for manufacturing, labeling, promotion, and safety. Non-compliance could lead to severe penalties, including withdrawal of approval[308][309][310] - Market acceptance by physicians, patients, and third-party payors is crucial for commercial success. Failure to achieve adequate acceptance due to cost, efficacy, safety, or other factors could prevent profitability[314][315] - Establishing sales and marketing capabilities or securing agreements with third parties is essential for commercialization. Failure to do so could limit revenue generation[317] - Obtaining regulatory approval outside the United States is complex and time-consuming, and failure to do so would limit market opportunities and expose the company to international operational risks[318][319] - Relationships with healthcare stakeholders are subject to federal and state healthcare fraud and abuse laws. Non-compliance could result in substantial penalties and reputational harm[321] - Coverage and adequate reimbursement for product candidates may not be available from third-party payors, which could hinder profitable sales and market demand[323][325] - Healthcare legislative reforms, such as the ACA and drug pricing initiatives, could negatively impact business by limiting reimbursement amounts and increasing pricing pressures[326][331] - Actual or perceived failures to comply with evolving data privacy and security obligations (e.g., HIPAA, GDPR, CCPA) could lead to regulatory investigations, litigation, fines, and business disruptions[333][341] Risks Related to the Ownership of Our Common Stock - The public market for common stock may not be liquid enough for quick sales at market price, and market volatility (due to inflation, geopolitical tensions) could adversely affect the share price[343][344][345] - Concentration of common stock ownership among executive officers, directors, and principal stockholders (71% as of April 11, 2022) may prevent new investors from influencing significant corporate decisions[348] - Raising additional capital through equity or convertible debt could dilute existing stockholders' ownership and impose restrictive covenants. Relinquishing rights to product candidates may be necessary for collaborations[349][350] - Provisions in corporate charter documents and Delaware law (Section 203 DGCL) could make an acquisition more difficult and prevent attempts to replace current management, potentially depressing the stock price[353][354] General Risk Factors - Lack of research coverage by industry or financial analysts, or unfavorable reports, could lead to a decline in stock price and trading volume[360] - Operating as a public company incurs increased legal, accounting, and compliance costs, requiring substantial management time for new initiatives like Sarbanes-Oxley Act Section 404 compliance[361][362] - Failure to maintain an effective system of internal control over financial reporting could lead to inaccurate financial reports, fraud, loss of investor confidence, and negative impact on stock price[363][364] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities occurred and details the use of net proceeds from the company's Initial Public Offering (IPO) - No unregistered sales of equity securities occurred during the period[366] - The company completed its IPO on August 3, 2021, issuing 4,000,000 shares at $10.00 per share, receiving net proceeds of $32.3 million after deducting underwriters' discounts, commissions, and offering costs[367] - As of March 31, 2022, $0.2 million of the IPO proceeds have been used, with no material change in the planned use of proceeds from what was disclosed in the Registration Statement[369] Item 3. Defaults Upon Senior Securities This item is not applicable to IN8bio, Inc. for the reporting period - This item is not applicable[371] Item 4. Mine Safety Disclosures This item is not applicable to IN8bio, Inc. for the reporting period - This item is not applicable[372] Item 5. Other Information This item is not applicable to IN8bio, Inc. for the reporting period - This item is not applicable[373] Item 6. Exhibits, Financial Statement Schedules This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents and certifications Selected Exhibits Filed | Exhibit Number | Description | | :------------- | :---------- | | 3.1 | Amended and Restated Certificate of Incorporation | | 3.2 | Amended and Restated Bylaws | | 31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) | | 31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) | | 32.1* | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 | | 101.INS | Inline XBRL Instance Document | | 104 | Cover Page Interactive Data File | SIGNATURES - The report is signed by William Ho, Chief Executive Officer (Principal Executive Officer), and Patrick McCall, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer), on May 12, 2022[379]