The following discussion and analysis of financial condition and results of
operations should be read in conjunction with our unaudited interim condensed
consolidated financial statements and notes thereto included in Item 1
"Financial Statements" in this Quarterly Report and audited Consolidated
Financial Statements for the years ended December 31, 2019 and 2018 of Immunic,
Inc. filed with the Securities and Exchange Commission ("SEC"), on our Annual
Report on Form 10-K on March 16, 2020. As used in this report, unless the
context suggests otherwise, "we," "us," "our," "the Company" or "Immunic" refer
to Immunic, Inc. and its subsidiaries.

Forward-Looking Statements
In addition to historical information, this Quarterly Report includes
forward-looking statements within the meaning of federal securities laws.
Forward-looking statements are subject to certain risks and uncertainties, many
of which are beyond our control. Such statements include, but are not limited
to, statements preceded by, followed by or that otherwise include the words,
"believe," "may," "might," "can," "could," "will," "would," "should,"
"estimate," "continue," "anticipate," "intend," "seek," "plan," "project,"
"expect," "potential," "predicts," or similar expressions and the negatives of
those terms.
Forward-looking statements discuss matters that are not historical facts. Our
forward-looking statements involve assumptions that, if they never materialize
or prove correct, could cause our results to differ materially from those
expressed or implied by such forward-looking statements. In this Quarterly
Report, for example, we make forward-looking statements, among others, regarding
potential strategic options; financial estimates and projections; and the
sufficiency of our capital resources to fund our operations.
The inclusion of any forward-looking statements in this Quarterly Report should
not be regarded as a representation that any of our plans will be achieved. Our
actual results may differ from those anticipated in our forward-looking
statements as a result of various factors, including those noted below under the
caption "Part II, Item 1A-Risk Factors," and the differences may be material.
These risk factors include, but are not limited to statements relating to our
three development programs and the targeted diseases; the potential for IMU-838,
IMU-935 and IMU-856 to safely and effectively target diseases; the nature,
strategy and focus of the Company; the development and commercial potential of
any product candidates of the Company; and our ability to retain certain
personnel important to our ongoing operations and to maintain effective internal
control over financial reporting.
Although our forward-looking statements reflect the good faith judgment of our
management, these statements are based only on facts and factors currently known
by us. As a result, stockholders are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. All
forward-looking statements are qualified in their entirety by this cautionary
statement, and we undertake no obligation to revise or update such statements to
reflect events or
                                       27
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circumstances after the date hereof, except as required by law.

Overview


We are a clinical-stage biopharmaceutical company developing a pipeline of
selective oral immunology therapies aimed at treating chronic inflammatory and
autoimmune diseases, including relapsing-remitting multiple sclerosis,
ulcerative colitis, Crohn's disease and psoriasis. We are developing three small
molecule products: lead development program, IMU-838, is a selective immune
modulator that inhibits the intracellular metabolism of activated immune cells
by blocking the enzyme DHODH and exhibits a host-based antiviral effect; IMU-935
is an inverse agonist of RORgt; and IMU-856 targets the restoration of the
intestinal barrier function. IMU-838 is in Phase 2 clinical development for
relapsing-remitting multiple sclerosis, ulcerative colitis and COVID-19, with an
additional Phase 2 trial considered in Crohn's disease. An
investigator-sponsored proof-of-concept clinical trial for IMU-838 in primary
sclerosing cholangitis is ongoing at the Mayo Clinic. IMU-935 is currently being
tested in a Phase 1 clinical trial in healthy volunteers, which was initiated in
September 2019. IMU-856 is currently in advanced preclinical testing.
The following table summarizes the potential indications, clinical targets and
clinical development status of Immunic's three product candidates:

[[Image Removed: vtl-20200630_g1.jpg]]
Our business, operating results, financial condition and growth prospects are
subject to significant risks and uncertainties, including the failure of our
clinical trials to meet their endpoints, failure to obtain regulatory approval
and needing additional funding to complete the development and commercialization
of our three development programs.
Liquidity and Financial Condition
We have no products approved for commercial sale and have not generated any
revenue from product sales. We have never been profitable and have incurred
operating losses in each year since inception in 2016. We have an accumulated
deficit of approximately $79.9 million as of June 30, 2020 and $59.9 million as
of December 31, 2019. Substantially all of our operating losses resulted from
expenses incurred in connection with our research and development programs and
from general and administrative costs associated with our operations.
We expect to incur significant expenses and increasing operating losses for the
foreseeable future as we initiate and continue the preclinical and clinical
development of our product candidates and add personnel necessary to advance our
clinical
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pipeline of product candidates. We expect that our operating losses will
fluctuate significantly from quarter-to-quarter and year-to-year due to timing
of clinical development programs.
From inception through June 30, 2020, we have raised net cash of approximately
$112.1 million from private and public offerings of preferred and common stock.
As of June 30, 2020, we had cash and cash equivalents of approximately
$48.6 million. With these funds we expect to be able to fund our operations
beyond twelve months from the date of the issuance of the accompanying unaudited
condensed consolidated financial statements.
Recent Events
Equity Financings
Public Equity Offering
On June 10, 2020, we entered into a placement agency agreement with ROTH Capital
Partners, LLC ("RCP") and Ladenburg Thalmann & Co. Inc. relating to our public
offering of 2,175,000 shares of our common stock. Pursuant to this agreement, we
agreed to pay the placement agents a cash fee of 6.5% of the gross proceeds from
the offering raised from investors and to reimburse the placement agents for
certain costs incurred in connection therewith.
In addition, on June 10, 2020, we and certain institutional investors entered
into securities purchase agreements relating to the issuance and sale of an
aggregate of 2,175,000 shares of our common stock. The purchase price per share
in this offering was $11.40 for aggregate gross proceeds of approximately $25.0
million. The securities purchase agreements restrict us from issuing additional
common stock for a period of 60 days from June 12, 2020, subject to certain
exceptions.

The net proceeds to us from this offering, after deducting our offering
expenses, were approximately $23.0 million. We intend to use the proceeds to
fund the ongoing clinical development of our three small molecule products:
IMU-838, IMU-935 and IMU-856, and for other general corporate purposes,
including to investigate IMU-838, our lead asset, as a potential oral treatment
option for COVID-19.

Registered Direct Offering

On April 23, 2020, we entered into an engagement letter with RCP relating to our
registered direct offering of common stock to select institutional investors.
Pursuant to this Agreement, we agreed to pay RCP a cash fee of 6.5% of the gross
proceeds from the offering raised from investors and to reimburse RCP for
certain costs incurred in connection therewith.

In addition, on April 23, 2020, we and certain investors entered into securities purchase agreements relating to the issuance and sale of an aggregate of 1,764,706 shares of our common stock. The purchase price per share in this offering was $8.50 for aggregate gross proceeds of approximately $15.0 million.



The net proceeds to us from this offering, after deducting our offering
expenses, were approximately $13.9 million. We intend to use the proceeds to
fund the ongoing clinical development of our three small molecule products:
IMU-838, IMU-935 and IMU-856, and for other general corporate purposes,
including to investigate IMU-838, our lead asset, as a potential oral treatment
option for COVID-19.

ATM issuances

In addition to the $568,000 net proceeds through the sale of 78,745 shares during the quarter ended March 31, 2020, we raised net proceeds of $2.2 million through the sale of 205,083 shares of common stock under the ATM during the period from April 1, 2020 through June 30, 2020.


                                       29
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Positive top-line data from Phase 2 EMPhASIS trial of IMU-838 in patients with
relapsing-remitting multiple sclerosis (RRMS)
On August 2, 2020, the Company announced positive top-line data from its phase 2
EMPhASIS trial of IMU-838 in patients with relapsing-remitting multiple
sclerosis (RRMS). The study achieved all primary and key secondary endpoints,
indicating activity in RRMS patients. In particular, the study met its primary
endpoint, demonstrating a statistically significant reduction in the cumulative
number of combined unique active (CUA) magnetic resonance imaging (MRI) lesions
up to week 24 in patients receiving 45mg of IMU-838 once daily, by 62%
(p=0.0002), as compared to placebo. The study also met its key secondary
endpoint, showing a statistically significant reduction in the cumulative number
of CUA MRI lesions for the 30mg once daily dose, by 70% (p<0.0001), as compared
to placebo.
First Patients Enrolled in Investigator-Sponsored Phase 2 Clinical Trial of
IMU-838 in Combination with Oseltamivir for the Treatment of Patients with
Moderate-to-Severe COVID-19
On July 27, 2020 the Company announced enrollment of the first patients in an
investigator-sponsored phase 2 clinical trial of IMU-838 for the treatment of
patients with coronavirus disease 2019 (COVID-19). The IONIC trial, which is run
by sponsor and lead site, University Hospitals Coventry and Warwickshire NHS
Trust, is a prospective, randomized, parallel-group, open-label phase 2b study,
designed to evaluate efficacy and safety of IMU-838 in combination with the
neuraminidase inhibitor, Oseltamivir (Tamiflu?), in approximately 120 adult
patients with moderate-to-severe COVID-19.

Immunic Joins the Russell 3000 Index



At the conclusion of the 2020 Russell indexes annual reconstitution effective
June 29, 2020, Immunic joined the Russell 3000® Index. Membership in the US
all-cap Russell 3000® Index, which remains in place for one year, means
automatic inclusion in the large-cap Russell 1000® Index or small-cap Russell
2000® Index as well as the appropriate growth and value style indexes. FTSE
Russell determines membership for its Russell indexes primarily by objective,
market-capitalization rankings and style attributes.
Immunic Initiates Phase 2 Clinical Trial of IMU-838 in COVID-19
We announced on April 21, 2020 that our lead asset, IMU-838, a selective oral
DHODH inhibitor, has successfully demonstrated preclinical activity against
severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). More specifically,
IMU-838 was observed to inhibit replication of clinical isolates of SARS-CoV-2
associated with coronavirus disease 2019 (COVID-19). In cellular assays, IMU-838
demonstrated this antiviral activity at concentrations which are well below the
blood concentrations associated with IMU-838 dosing regimens studied in ongoing
and previous clinical trials. These positive results have encouraged us to
prepare a clinical development program for IMU-838 as a potential treatment
option for patients with COVID-19 and on June 15, 2020 we announced the first
patients dosed in our Phase 2, CALVID-1 clinical trial of IMU-838 in COVID-19.
It is a prospective, multicenter, randomized, placebo-controlled, double-blind
clinical trial in patients with moderate COVID-19, designed to evaluate
efficacy, safety and tolerability of IMU-838. CALVID-1 had received regulatory
allowance from the German health authority, BfArM (Bundesinstitut für
Arzneimittel und Medizinprodukte), from the U.S. Food and Drug Administration
(FDA) and from regulatory authorities in other European countries involved in
the study.
IMU-838 is already being investigated in ongoing Phase 2 clinical trials in
patients with relapsing-remitting multiple sclerosis, ulcerative colitis and
primary sclerosing cholangitis. Although the drug is being studied in these
ongoing trials primarily for its anti-inflammatory effect, one of IMU-838's
postulated benefits is a host-based antiviral effect, which may be important in
these indications to potentially prevent virus reactivations known to occur with
other immunomodulatory therapies. In support, IMU-838's antiviral activity has
previously been demonstrated in vitro against human immunodeficiency virus
(HIV), hepatitis C virus (HCV), human cytomegalovirus (hCMV), Arenavirus and
Influenza A virus. Given what is known about the natural course of the disease,
IMU-838's combination of antiviral activity against the highly pathogenic
SARS-CoV-2 and a selective immunomodulatory effect against highly activated
immune cells may be a promising profile for the treatment of COVID-19.
Importantly, IMU-838 has an attractive pharmacokinetic, safety and tolerability
profile and, to date, has already been tested in approximately 650 individuals.

Changes to Executive Team
Separation Agreement with Sanjay S. Patel
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On April 17, 2020, our former Chief Financial Officer, Sanjay S. Patel, resigned
and entered into a Confidential Severance Agreement and Full and General Release
with the Company (the "Separation Agreement"). Pursuant to the terms of the
Separation Agreement, Mr. Patel's employment terminated on April 17, 2020.
Executive Chairman Agreement with Duane Nash
On April 15, 2020, the compensation committee of our board of directors
independently reviewed and approved entering into an employment agreement with
our current Chairman of the Board of Directors, Duane Nash, MD, JD, MBA (the
"Executive Chairman Agreement") and pursuant to such approval, on April 17,
2020, the Company and Mr. Nash entered into an Executive Chairman Agreement. The
Executive Chairman Agreement establishes an "at will" employment relationship
pursuant to which Mr. Nash serves as Executive Chairman and contemplates a term
that ends on October 15, 2020 and may be extended upon the Company's and Mr.
Nash's mutual consent.
Promotion of Glenn Whaley
On April 17, 2020, Glenn Whaley, the Company's Principal Accounting Officer and
Controller, has been promoted to the position of Vice President Finance,
Principal Financial and Accounting Officer. Mr. Whaley will assume day-to-day
financial management responsibilities, and will report directly to Daniel Vitt,
Ph.D., Chief Executive Officer and President of the Company.
Daiichi Sankyo Option Exercise
On January 5, 2020, Immunic AG, under the terms of the Daiichi Sankyo Agreement,
exercised its option to obtain the exclusive worldwide right to
commercialization of IMU-856. Among other things, the option exercise grants
Immunic AG the rights to Daiichi Sankyo's patent application related to IMU-856.
In connection with the option exercise, we paid a one-time upfront licensing fee
to Daiichi Sankyo. Under the Daiichi Sankyo Agreement, Daiichi Sankyo is also
eligible to receive future development, regulatory and sales milestone payments,
as well as royalties related to IMU-856.
Components of Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect
to generate any revenue from the sale of products in the foreseeable future. If
our development efforts for our product candidates are successful and result in
regulatory approval, we may generate revenue in the future from product sales.
We cannot predict if, when, or to what extent we will generate revenue from the
commercialization and sale of our product candidates. We may never succeed in
obtaining regulatory approval for any of our product candidates.
Research and Development Expenses
Research and development expenses consist of costs associated with our research
activities, including our product discovery efforts and the development of our
product candidates. Our research and development expenses include:

•external research and development expenses and milestone payments incurred
under arrangements with third parties, such as CROs, contract manufacturing
organizations, collaborations with partners, consultants, and our scientific
advisors; and

•internal personnel expenses.
We expense research and development costs as incurred. Non-refundable advance
payments for goods and services that will be used in future research and
development activities are capitalized as prepaid expenses and expensed when the
service has been performed or when the goods have been received.
Since our inception in March 2016, we have spent a total of approximately $60.2
million in research and development expenses through June 30, 2020. These costs
primarily include external development expenses and internal personnel expenses
for the two development programs, IMU-838 and IMU-935. We have spent the
majority of our research and development resources on IMU-838, our lead
development program. We initiated a Phase 2 clinical trial in patients with UC
in the first quarter of 2018, a Phase 2 clinical trial in patients with RRMS in
the first quarter of 2019 and a Phase 2 clinical trial in patients with COVID-19
in the second quarter of 2020. In addition, we are considering the initiation of
a Phase 2 clinical trial in patients
                                       31
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with CD. An investigator-sponsored proof-of-concept clinical trial for IMU-838
in PSC was initiated at the Mayo Clinic in August 2019. IMU-935 is currently
being tested in a Phase 1 clinical trial in healthy volunteers, which was
initiated in September 2019. IMU-856 is currently in advanced preclinical
testing.
In August 2019, our subsidiary Immunic AG received a grant of up to
approximately $730,000 from the German Federal Ministry of Education and
Research, in support of the InnoMuNiCH (Innovations through Munich-Nippon
Cooperation in Healthcare) project. The grant funds will be used to fund a
three-year research project relating to autoimmune diseases by us and our three
project partners.
We expect our research and development expenses to increase for the foreseeable
future as we continue to conduct ongoing regulatory and development activities,
initiate new preclinical and clinical trials and build our pipeline. The process
of commercialization, conducting clinical trials and preclinical studies
necessary to obtain regulatory approval is costly and time consuming. We may
never succeed in achieving marketing approval for any of our product candidates.
Successful development of product candidates is highly uncertain and may not
result in approved products. Completion dates and completion costs can vary
significantly for each product candidate and are difficult to predict. We
anticipate that we will make determinations as to which programs to pursue and
how much funding to direct to each program on an ongoing basis in response to
the development and regulatory success of each product candidate, and ongoing
assessments as to each product candidate's commercial potential.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel expenses,
professional fees for legal, auditing, tax and business consulting services,
insurance premiums and stock-based compensation.
Other Income (Expense), Net
Interest Income
Interest income consists of interest earned on our money market funds, which are
a portion of our cash and cash equivalents balance. Our interest income has not
been significant due to low interest rates earned on invested balances.
Other Income (Expense), Net
Other income consists primarily of reimbursement of research and development
expenses in connection with the Daiichi Sankyo Agreement and a research and
development tax incentive related to clinical trials performed in Australia.
Results of Operations
Comparison of the Three Months Ended June 30, 2020 and 2019
The following table summarizes our operating expenses for the three months ended
June 30, 2020 and 2019:
                                   Three Months Ended June 30,                             Change
                                   2020                      2019            $            %
(dollars in thousands)                                  (unaudited)
Operating expenses:
Research and development     $       9,987               $   6,029       $ 3,958          66  %
General and administrative           2,235                   8,978        (6,743)        (75) %
Total operating expenses            12,222                  15,007        (2,785)        (19) %
Loss from operations               (12,222)                (15,007)        2,785         (19) %
Total other income                     764                     293           471         161  %
Net loss                     $     (11,458)              $ (14,714)      $ 3,256         (22) %



Research and development expenses increased by $4.0 million during the three
months ended June 30, 2020 as compared to the three months ended June 30, 2019.
The increase reflects (i) a $2.2 million increase in external development costs
for our lead development program, IMU-838, related to the Phase 2 clinical
trials in patients with relapsing-remitting multiple sclerosis,
                                       32
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ulcerative colitis and COVID-19, (ii) a $1.0 million increase in drug supply
costs related to IMU-838, (iii) a $1.0 million increase in preclinical, drug
supply and Phase 1 preparation costs related to IMU-856, (iv) a $1.0 million
increase in costs due to drug supply and the start of the Phase 1 trial in
September 2019 for our IMU-935 program and (v) $0.3 million of increased
employee costs. The increase was partially offset by a contingent payment under
the asset purchase agreement with 4SC AG settled in stock valued at $1.5 million
at the Transaction in the second quarter of 2019.

General and administrative expenses decreased by $6.7 million during the three
months ended June 30, 2020 as compared to the three months ended June 30, 2019.
The decrease is primarily due to one-time costs related to the Transaction
including $6.4 million of stock-based compensation for our executives, key
employees and members of the board of directors and $1.2 million in investment
banking and legal fees in the second quarter of 2019. The decrease was offset by
a $0.9 million increase in personnel and other expenses.

Other income increased by $0.5 million during the three months ended June 30,
2020 as compared to the three months ended June 30, 2019. The increase is
primarily attributable to (i) $0.2 million of research and development tax
incentives for clinical trials in Australia as a result of increased spending on
clinical trials in Australia and (ii) $0.3 million recognized deferred income
attributable to reimbursements of research and development expenses in
connection with the Daiichi Sankyo Agreement.

Comparison of the Six Months Ended June 30, 2020 and 2019
The following table summarizes our operating expenses for the six months ended
June 30, 2020 and 2019:
                                    Six Months Ended June 30, 2020                              Change
                                    2020                          2019            $            %
(dollars in thousands)                                     (unaudited)
Operating expenses:
Research and development     $       16,421                   $   9,384       $ 7,037          75  %
General and administrative            4,815                      10,285        (5,470)        (53) %
Total operating expenses     $       21,236                   $  19,669       $ 1,567           8  %
Loss from operations                (21,236)                    (19,669)       (1,567)          8  %
Total other income                    1,291                         642           649         101  %
Net loss                            (19,945)                  $ (19,027)         (918)          5  %



Research and development expenses increased by $7.0 million during the six
months ended June 30, 2020 as compared to the six months ended June 30, 2019.
The increase reflects (i) a $3.2 million increase in external development costs
for our lead development program, IMU-838, related to the Phase 2 clinical
trials in patients with relapsing-remitting multiple sclerosis, ulcerative
colitis and COVID-19, (ii) a $1.2 million increase in drug supply costs related
to IMU-838, (iii) $2.2 million of an increase in license fees, preclinical, drug
supply and phase 1 preparation costs related to IMU-856, (iv) $1.2 million in
costs for drug supply and the start of the Phase 1 trial in September 2019 for
our IMU-935 program and (v) $0.7 million of increased employee and other costs.
The increase was offset by a contingent payment under the asset purchase
agreement with 4SC AG settled in stock valued at $1.5 million at the Transaction
in the second quarter of 2019.
General and administrative expenses decreased by $5.5 million during the six
months ended June 30, 2020 as compared to the six months ended June 30, 2019.
The decrease is primarily due to one-time costs related to the Transaction
including $6.4 million of stock-based compensation for our executives, key
employees and members of the board of directors and $2.1 million in investment
banking and legal fees in the first six month of 2019. The decrease was
partially offset by (i) a $1.6 million increase in personnel expenses, (ii) $0.8
million of increased legal and consultancy costs and (iii) $0.6 million of
increased costs across numerous categories primarily due to becoming a public
company and expanding operations into the U.S..

Total other income increased by $0.6 million during the six months ended June
30, 2020 as compared to the six months ended June 30, 2019. The increase is
primarily attributable to (i) $0.3 million of research and development tax
incentives for clinical trials in Australia as a result of increased spending on
clinical trials in Australia and (ii) $0.3 million recognized deferred income
attributable to reimbursements of research and development expenses in
connection with the Daiichi Sankyo Agreement.

Liquidity and Capital Resources
Financial Condition
We have no products approved for commercial sale and have not generated any
revenue from product sales. We have never been profitable and have incurred
operating losses in each year since inception (2016). We have an accumulated
deficit of
                                       33
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approximately $79.9 million as of June 30, 2020 and $59.9 million as of December
31, 2019. Substantially all of our operating losses resulted from expenses
incurred in connection with our research and development programs and from
general and administrative costs associated with our operations.
We expect to incur significant expenses and increasing operating losses for the
foreseeable future as we initiate and continue the preclinical and clinical
development of our product candidates and add personnel necessary to advance our
clinical pipeline of product candidates. We expect that our operating losses
will fluctuate significantly from quarter-to-quarter and year-to-year due to
timing of clinical development programs.
From inception through June 30, 2020, we have raised net cash of approximately
$112.1 million from private and public offerings of preferred and common stock.
As of June 30, 2020, we have cash and cash equivalents of approximately
$48.6 million. With these funds we expect to be able to fund our operations
beyond twelve months from the date of the issuance of the accompanying unaudited
condensed consolidated financial statements.
We currently have an effective shelf registration statement on Form S-3 on file
with the SEC which expires in June 2021. The shelf registration statement
currently permits the offering, issuance and sale by us of up to an aggregate
offering price of $200.0 million of common stock, preferred stock, warrants,
debt securities or units in one or more offerings and in any combination, of
which $40.0 million may be offered, issued and sold under our Sales Agreement
(the "ATM") with SVB Leerink LLC ("SVB Leerink") as agent. We may use the net
proceeds from any offerings under the ATM to continue to fund the ongoing
clinical development of our product candidates and for other general corporate
purposes, including funding existing and potential new clinical programs and
product candidates.
In the three months ended June 30, 2020, we raised gross proceeds of
$2.3 million pursuant to the ATM through the sale of 205,083 shares of common
stock at a weighted average price of $11.31 per share. The net proceeds from the
ATM were $2.2 million after deducting underwriter commissions of $69,610 and
estimated offering expenses of $4,962. At June 30, 2020, there was $31.7 million
available under the ATM.
In the six months ended June 30, 2020, we raised gross proceeds of $2.9 million
pursuant to the ATM through the sale of 283,828 shares of common stock at a
weighted average price of $10.31 per share. The net proceeds from the ATM were
$2.8 million after deducting underwriter commissions of $87,766 and estimated
offering expenses of $23,996.
Public Equity Offering
On June 10, 2020, we entered into a placement agency agreement with RCP and
Ladenburg Thalmann & Co. Inc. relating to our public offering of 2,175,000
shares of our common stock. Pursuant to this agreement, we agreed to pay the
placement agents a cash fee of 6.5% of the gross proceeds from the offering
raised from investors and to reimburse the placement agents for certain costs
incurred in connection therewith.
In addition, on June 10, 2020, we and certain institutional investors named
therein entered into securities purchase agreements relating to the issuance and
sale of an aggregate of 2,175,000 shares of our common stock. The purchase price
per share in the Offering was $11.40 for aggregate gross proceeds to us of
approximately $25.0 million. The securities purchase agreement restricts us from
issuing additional common stock for a period of 60 days from June 12, 2020,
subject to certain exceptions.

The net proceeds to us from this offering, after deducting our offering
expenses, were approximately $23.0 million. We intend to use the proceeds to
fund the ongoing clinical development of our three small molecule products:
IMU-838, IMU-935 and IMU-856, and for other general corporate purposes,
including to investigate IMU-838, our lead asset, as a potential oral treatment
option for COVID-19.

Registered Direct Offering

On April 23, 2020, we entered into an engagement letter with ROTH Capital
Partners, LLC ("RCP") relating to our registered direct offering of common stock
to select institutional investors. Pursuant to this Agreement, we agreed to pay
RCP a cash fee of 6.5% of the gross proceeds from the offering raised from
investors and to reimburse RCP for certain costs incurred in connection
therewith.

In addition, on April 23, 2020, we and the investors entered into a securities
purchase agreement relating to the issuance and sale of an aggregate of
1,764,706 shares of our common stock. The purchase price per share was $8.50 for
aggregate gross
                                       34
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proceeds to us of approximately $15.0 million. This securities purchase agreement restricted us from issuing additional common stock for a period of 75 days from April 27, 2020, subject to certain exceptions.



The net proceeds to us from this offering, after deducting our offering
expenses, were approximately $13.9 million. We intend to use the proceeds to
fund the ongoing clinical development of our three small molecule products:
IMU-838, IMU-935 and IMU-856, and for other general corporate purposes,
including to investigate IMU-838, our lead asset, as a potential oral treatment
option for COVID-19.
We expect to require substantial additional capital to continue and complete our
clinical development activities and fund our operations. The amount and timing
of our future funding requirements will depend on many factors, including the
pace and results of our development, regulatory and commercialization efforts.
Failure to raise capital as and when needed, on favorable terms or at all, would
have a negative impact on our financial condition and our ability to develop and
commercialize our product candidates. We can give no assurances that we will be
able to secure additional sources of funds to support our operations, or if such
funds are available to us, that such additional financings will be sufficient to
meet our needs or on terms acceptable to us. This is particularly true if our
clinical data is not positive or economic and market conditions deteriorate.
Future Capital Requirements
As noted above, we have not generated any revenue from product sales and we do
not know when, or if, we will generate any revenue from product sales. We do not
expect to generate any revenue from product sales unless and until we obtain
regulatory approval for and commercialize any of our product candidates. At the
same time, we expect our expenses to increase as we continue the ongoing
research, development, manufacture and clinical trials of, and seek regulatory
approval for, our product candidates. We expect to incur additional costs
associated with operating as a public company. In addition, subject to obtaining
regulatory approval of any of our product candidates, we anticipate that we will
need substantial additional funding in connection with our continuing
operations.
Our future capital requirements are difficult to forecast and will depend on
many factors, including but not limited to:

•the terms and timing of any strategic alliance, licensing and other arrangements that we may establish;

•the initiation and progress of our ongoing preclinical studies and clinical trials for our product candidates;

•the number of programs we pursue;

•the outcome, timing and cost of regulatory approvals;

•the cost and timing of hiring new employees to support our continued growth;

•the costs involved in patent filing, prosecution, and enforcement; and



•the costs and timing of having clinical supplies of our product candidates
manufactured.
Until we can generate a sufficient amount of product revenue to finance cash
requirements, we expect to finance our future cash needs primarily through the
issuance of additional equity and potentially through borrowings and strategic
alliances with third parties. To the extent that we raise additional capital
through the issuance of additional equity or convertible debt securities, the
ownership interest of our shareholders will be diluted, and the terms of these
securities may include liquidation or other preferences that adversely affect
the rights of our existing shareholders. Debt financing, if available, may
involve agreements that include covenants limiting or restricting our ability to
take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends. If we raise additional funds through
marketing and distribution arrangements or other collaborations, strategic
alliances or licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies, future revenue streams, research
programs or product candidates or grant licenses on terms that may not be
favorable. If we are unable to raise additional funds through equity or debt
financings when needed, we may be required to delay, limit, reduce or terminate
our product development or commercialization efforts or grant rights to develop
and market product candidates to third parties that we would otherwise prefer to
develop and market ourselves.
As of June 30, 2020, we had approximately $48.6 million in cash and cash
equivalents.
                                       35
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Cash Flows
The following table shows a summary of our cash flows for the six months ended
June 30, 2020 and 2019:
                                    Six Months Ended June 30,
                                    2020                   2019
(in thousands)                             (unaudited)
Cash (used in) provided by:
Operating activities          $    (20,256)            $ (16,304)
Investing activities                   (59)                9,324
Financing activities                39,780                29,965


Operating activities
During the six months ended June 30, 2020, operating activities used $20.3
million of cash. The use of cash primarily resulted from (i) our net loss of
$19.9 million adjusted for non-cash charges of $742,000 related to stock-based
compensation and depreciation and amortization and (ii) a $1.1 million net
increase in our operating assets and liabilities. Changes in our operating
assets and liabilities during the six months ended June 30, 2020 consisted
primarily of (i) an increase of $1.5 million in other current assets and prepaid
expenses primarily due to prepayments related to certain clinical trial and drug
supply contracts which was partially offset by (ii) $0.4 million related to an
increase in our current liabilities.
During the six months ended June 30, 2019, operating activities used $16.3
million of cash. The use of cash primarily resulted from (i) our net loss of
$19.0 million adjusted for non-cash charges of $7.5 million related to
stock-based compensation and (ii) a $4.8 million net increase in our operating
assets and liabilities. Changes in our operating assets and liabilities during
the six months ended June 30, 2019 consisted primarily of (i) an increase of
$1.9 million in other current assets and prepaid expenses primarily due to
prepayments related to certain drug supply contracts, (ii) decreases of $1.4
million in accounts payable and (iii) $1.5 million in accrued expenses primarily
attributable to the Transaction with Vital.
Investing activities
Net cash used in investing activities was $59,000 during the six months ended
June 30, 2020, which was related to the purchase of property and equipment.
Net cash provided by investing activities of $9.3 million during the six months
ended June 30, 2019 consisted primarily of cash acquired through the Transaction
of $8.1 million and cash proceeds from the sale of Vital assets of $1.2 million.
Financing Activities
Net cash provided by financing activities was $39.8 million during the six
months ended June 30, 2020 consisting of net cash proceeds from the sale of
common stock under the ATM and the April 2020 and June 2020 equity offerings.
Net cash provided by financing activities was $30.0 million for the six months
ended June 30, 2019 resulting from the sale of our common stock immediately
before closing of the Transaction. See Notes 1 and 7 to our unaudited condensed
consolidated financial statements included elsewhere in this Quarterly Report
for more information.
Off-Balance Sheet Arrangements
Through June 30, 2020, we have not entered into and did not have any
relationships with unconsolidated entities or financial collaborations, such as
entities often referred to as structured finance or special purpose entities,
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purpose.
Contractual Obligations
Maturities of the operating lease obligations are as follows as of June 30,
2020:
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                           2020                $      183
                           2021                       337
                           2022                       337
                           2023                       188
                           2024                       113
                           2025                        56
                           Total                    1,214
                           Interest                   130
                           PV of obligation    $    1,084


As of June 30, 2020, we have non-cancelable contractual obligations under
certain agreements related to its development programs IMU-838, IMU-935 and
IMU-856 totaling approximately $1.3 million, all of which is expected to be paid
in 2020.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in
conformity with U.S. GAAP. The preparation of our unaudited condensed
consolidated financial statements and related disclosures requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
costs and expenses, and the disclosure of contingent assets and liabilities in
our financial statements. We base our estimates on historical experience, known
trends and events and various other factors that we believe are reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. We evaluate our estimates and assumptions on an
ongoing basis. Our actual results may differ from these estimates under
different assumptions or conditions. We have reviewed these critical accounting
policies and related disclosures with the Audit Committee of our Board.
During the first six months of 2020, there were no significant changes in our
critical accounting policies or in the methodology used for estimates. Our
significant accounting policies are described in more detail in (i) Note 2 to
our unaudited condensed consolidated financial statements included elsewhere in
this Quarterly Report and (ii) our audited consolidated financial statements for
the years ended December 31, 2019 and 2018 filed in our Annual Report on Form
10-K on March 16, 2020.
Recently Issued Accounting Standards
Recently issued accounting standards are described in more detail in (i) Note 2
to our unaudited condensed consolidated financial statements included elsewhere
in this Quarterly Report, and (ii) Note 2 to the audited consolidated financial
statements for the years ended December 31, 2019 and 2018 included in our Annual
Report on Form 10-K filed with the SEC on March 16, 2020.

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