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 endedDecember 31, 2019 and 2018 ofImmunic, Inc. filed with theSecurities and Exchange Commission ("SEC"), on our Annual Report on Form 10-K onMarch 16, 2020 . As used in this report, unless the context suggests otherwise, "we," "us," "our," "the Company" or "Immunic" refer toImmunic, 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 --------------------------------------------------------------------------------
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 theMayo Clinic . IMU-935 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated inSeptember 2019 . IMU-856 is currently in advanced preclinical testing. The following table summarizes the potential indications, clinical targets and clinical development status ofImmunic'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 ofJune 30, 2020 and$59.9 million as ofDecember 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 28 -------------------------------------------------------------------------------- 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 throughJune 30, 2020 , we have raised net cash of approximately$112.1 million from private and public offerings of preferred and common stock. As ofJune 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 OnJune 10, 2020 , we entered into a placement agency agreement withROTH Capital Partners, LLC ("RCP") andLadenburg 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, onJune 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 fromJune 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 OnApril 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
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
29 -------------------------------------------------------------------------------- Positive top-line data from Phase 2 EMPhASIS trial of IMU-838 in patients with relapsing-remitting multiple sclerosis (RRMS) OnAugust 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 OnJuly 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 effectiveJune 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 onApril 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 onJune 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 theU.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 withSanjay S. Patel 30 -------------------------------------------------------------------------------- OnApril 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 onApril 17, 2020 . Executive Chairman Agreement withDuane Nash OnApril 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, onApril 17, 2020 , the Company andMr. Nash entered into an Executive Chairman Agreement. The Executive Chairman Agreement establishes an "at will" employment relationship pursuant to whichMr. Nash serves as Executive Chairman and contemplates a term that ends onOctober 15, 2020 and may be extended upon the Company's andMr. Nash's mutual consent. Promotion ofGlenn Whaley OnApril 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 toDaniel Vitt , Ph.D., Chief Executive Officer and President of the Company. Daiichi Sankyo Option Exercise OnJanuary 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 grantsImmunic 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 inMarch 2016 , we have spent a total of approximately$60.2 million in research and development expenses throughJune 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 -------------------------------------------------------------------------------- with CD. An investigator-sponsored proof-of-concept clinical trial for IMU-838 in PSC was initiated at theMayo Clinic inAugust 2019 . IMU-935 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated inSeptember 2019 . IMU-856 is currently in advanced preclinical testing. InAugust 2019 , our subsidiaryImmunic AG received a grant of up to approximately$730,000 from theGerman 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 inAustralia . Results of Operations Comparison of the Three Months EndedJune 30, 2020 and 2019 The following table summarizes our operating expenses for the three months endedJune 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 endedJune 30, 2020 as compared to the three months endedJune 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 -------------------------------------------------------------------------------- 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 inSeptember 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 endedJune 30, 2020 as compared to the three months endedJune 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 endedJune 30, 2020 as compared to the three months endedJune 30, 2019 . The increase is primarily attributable to (i)$0.2 million of research and development tax incentives for clinical trials inAustralia as a result of increased spending on clinical trials inAustralia 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 EndedJune 30, 2020 and 2019 The following table summarizes our operating expenses for the six months endedJune 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 endedJune 30, 2020 as compared to the six months endedJune 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 inSeptember 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 endedJune 30, 2020 as compared to the six months endedJune 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 theU.S. . Total other income increased by$0.6 million during the six months endedJune 30, 2020 as compared to the six months endedJune 30, 2019 . The increase is primarily attributable to (i)$0.3 million of research and development tax incentives for clinical trials inAustralia as a result of increased spending on clinical trials inAustralia 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 -------------------------------------------------------------------------------- approximately$79.9 million as ofJune 30, 2020 and$59.9 million as ofDecember 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 throughJune 30, 2020 , we have raised net cash of approximately$112.1 million from private and public offerings of preferred and common stock. As ofJune 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 theSEC which expires inJune 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") withSVB 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 endedJune 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 . AtJune 30, 2020 , there was$31.7 million available under the ATM. In the six months endedJune 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 OnJune 10, 2020 , we entered into a placement agency agreement with RCP andLadenburg 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, onJune 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 fromJune 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 OnApril 23, 2020 , we entered into an engagement letter withROTH 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, onApril 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 --------------------------------------------------------------------------------
proceeds to us of approximately
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 ofJune 30, 2020 , we had approximately$48.6 million in cash and cash equivalents. 35 -------------------------------------------------------------------------------- Cash Flows The following table shows a summary of our cash flows for the six months endedJune 30, 2020 and 2019: Six Months Ended June 30, 2020 2019 (in thousands) (unaudited) Cash (used in) provided by: Operating activities$ (20,256) $ (16,304) Investing activities (59) 9,324 Financing activities 39,780 29,965 Operating activities During the six months endedJune 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 endedJune 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 endedJune 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 endedJune 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 endedJune 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 endedJune 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 endedJune 30, 2020 consisting of net cash proceeds from the sale of common stock under the ATM and theApril 2020 andJune 2020 equity offerings. Net cash provided by financing activities was$30.0 million for the six months endedJune 30, 2019 resulting from the sale of our common stock immediately before closing of the Transaction. See Notes 1 and 7 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for more information. Off-Balance Sheet Arrangements ThroughJune 30, 2020 , we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose. Contractual Obligations Maturities of the operating lease obligations are as follows as ofJune 30, 2020 : 36 --------------------------------------------------------------------------------
2020$ 183 2021 337 2022 337 2023 188 2024 113 2025 56 Total 1,214 Interest 130 PV of obligation$ 1,084 As ofJune 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 withU.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 endedDecember 31, 2019 and 2018 filed in our Annual Report on Form 10-K onMarch 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 endedDecember 31, 2019 and 2018 included in our Annual Report on Form 10-K filed with theSEC onMarch 16, 2020 .
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