Nature of the business	6 Months Ended
Jun. 30, 2023
Nature of the business
Nature of the business	IMMUNOME, INC. Notes to Condensed Financial Statements (Unaudited) 1. Nature of the business Organization Immunome, Inc., the Company or Immunome, is a biopharmaceutical company. The Company was incorporated as a Pennsylvania corporation on March 2, 2006 and was converted to a Delaware corporation on December 2, 2015. The Company is utilizing a proprietary human memory B cell platform to discover and develop antibody therapeutics to improve patient care. The Company’s primary focus area is oncology. Since its inception, the Company has devoted substantially all its resources to research and development, raising capital, building its management team and extending its intellectual property portfolio, and executing strategic partnerships. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, risks associated with research, development, and manufacturing activities, uncertain results of preclinical and clinical testing, development of new technological innovations and products by competitors, dependence on key personnel, partners and third-party vendors, protection of proprietary technology, compliance with government regulations, regulatory approval of products and the ability to secure additional capital to fund operations. On June 29, 2023, the Company entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, with Morphimmune Inc., a Delaware corporation, or Morphimmune, a biotechnology company focused on developing targeted oncology therapeutics, and Ibiza Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company, or Merger Sub. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will be merged with and into Morphimmune, with Morphimmune surviving as a wholly owned subsidiary of Immunome, or the Merger. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and is expected to close by the end of 2023. See “The Merger”. Liquidity The Company has incurred net losses since inception, including net losses of $9.8 million and $20.6 million for the six months ended June 30, 2023 and 2022, respectively, and it expects to generate losses from operations for the foreseeable future primarily due to research and development costs for its programs and development candidates. As of June 30, 2023, the Company had an accumulated deficit of $125.8 million. Through June 30, 2023, the Company raised an aggregate of $155.2 million in gross proceeds from sales of common stock, Series A convertible preferred stock and warrants, warrant and stock option exercises, the issuance of convertible promissory notes, the Paycheck Protection Program, or PPP, loan that was forgiven in May 2021, and strategic partnerships with AbbVie Global Enterprises Ltd, or AbbVie. In January 2023, the Company received a $30.0 million non-refundable upfront payment from AbbVie under the collaboration and option agreement, or the Collaboration Agreement. In addition, the Company received $17.6 million in expense reimbursement from the Department of Defense, or DoD under the Other Transaction Authority for Prototype Agreement, or the OTA Agreement, from inception through 2022. On January 4, 2023, the Company entered into the Collaboration Agreement with AbbVie, or the Collaboration Agreement, directed to the discovery of up to 10 novel target-antibody pairs leveraging our discovery engine. The Company is potentially eligible to receive up to approximately $2.8 billion from AbbVie under the Collaboration Agreement from the sources described in Note 3. There are no assurances that the Company will receive additional payments from AbbVie beyond the $30.0 million upfront payment. On October 1, 2021, the Company entered into an Open Market Sale Agreement, or the ATM Agreement, with Jefferies Group LLC, which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell shares of common stock under the registration statement having an aggregate offering price of up to $75.0 million through Jefferies Group LLC acting as sales agent. The Company filed a shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission, or the SEC, on October 14, 2021, pursuant to which the Company may issue from time-to-time securities with an aggregate value of up to $200.0 million. Through June 30, 2023, the Company sold 5,925 shares of common stock under the ATM Agreement resulting in net proceeds of approximately $34,000. The Company can elect to sell additional shares under the ATM Agreement or shelf registration statement. The Company had cash and cash equivalents of $38.4 million at June 30, 2023. The Company expects that its cash, exclusive of any potential proceeds received in connections with the potential closing of the Merger and concurrent Private Investment in Public Equity, or PIPE transaction, will enable it to fund its operating expenses and capital expenditure requirements for at least 12 months from the filing date of this Quarterly Report on Form 10-Q; however; more funding will be necessary to fund additional research and development and operations in order to pursue the Company’s growth strategy. If the Company cannot obtain the necessary funding, it will need to delay, scale back or eliminate some or all of its research and development programs or enter into collaborations with third parties relative to potential programs, products or technologies that it might otherwise seek to progress independently (or enter into these collaborations sooner than it might otherwise have intended to), reduce or cease operations. Further, as a part of our strategy, the Company may consider various other alternatives, including a merger or sale of the Company. If the Company engages in R&D collaborations under these circumstances, it may receive lower consideration than if it had not entered into such arrangements or if it entered into such arrangements at later stages in the research and development process. Additionally, volatility in the capital markets generally and the biotechnology sector specifically, as well as general economic conditions in the United States may be a significant obstacle to raising the required funds on satisfactory terms, if at all. Operations of the Company are subject to certain risks and uncertainties including various internal and external factors that will affect whether and when the Company’s programs and development candidates become approved drugs and how significant their market share will be, many of which are outside of the Company’s control. The length of time and cost of developing and commercializing these programs and development candidates and/or failure of them at any stage of the drug approval process will materially affect the Company’s financial condition and future operations. Merger Agreement On June 29, 2023, the Company entered into the Merger Agreement with Morphimmune Inc., a biotechnology company focused on developing targeted oncology therapeutics, and Merger Sub. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will be merged with and into Morphimmune, with Morphimmune surviving as a wholly owned subsidiary of the Company. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. At the Effective time, each share of Morphimmune capital stock outstanding immediately prior to the Effective Time will be automatically converted solely into the right to receive 0.3042 shares of the Company’s common stock, or the Exchange Ratio, and, if applicable, an amount in cash, rounded to the nearest whole cent, in lieu of any fractional share interest in the Company’s common stock to which such holder otherwise would have been entitled (after aggregating all fractional shares issuable to such holder). Each option to purchase shares of Morphimmune capital stock, or a Morphimmune Option, that is outstanding and unexercised immediately prior to the Effective Time under Morphimmune’s 2020 Equity Incentive Plan, or the Morphimmune Plan, whether or not vested, will be converted into and become an option to purchase the Company’s common stock using the Exchange Ratio, and the Company will assume the Morphimmune Plan and each such Morphimmune Option in accordance with the terms of the Morphimmune Plan and the terms of the stock option agreement by which such Morphimmune Option is evidenced. Immediately following the Merger, the pre-Merger equityholders of the Company are expected to own approximately 55% of the shares of the Company’s common stock and the pre-Merger equityholders of Morphimmune are expected to own approximately 45% of the Company’s common stock, in each case, on a fully diluted basis, excluding out-of-the-money securities of the Company as of June 28, 2023, unallocated shares of the Company’s common stock available for issuance under the Company’s 2020 Equity Incentive Plan and employee stock purchase plan, and the grant of a stock option to Dr. Clay Siegall, Ph.D., in connection with his employment agreement to become Chief Executive Officer of the Company upon consummation of the Merger, and prior to giving effect to the PIPE financing as described below. Anticipated Accounting Treatment The Merger is expected to be treated as an asset acquisition by Immunome of Morphimmune in accordance with U.S. GAAP. Upon completion of the Merger, Immunome will obtain control of Morphimmune’s assets consisting primarily of cash and in-process research and development (IPR&D) associated with Morphimmune’s potential primary product candidate, Mi-1001, and development program, ¹⁷⁷Lu-FAP. In accordance with U.S. GAAP, Immunome must first assess whether an integrated set of assets and activities should be accounted for as an acquisition of a business or an asset acquisition. An initial screen test is completed to determine if substantially all of the fair value of the gross assets acquired of Morphimmune is concentrated in a single asset or group of similar assets. If that screen is met, the set is not considered a business and is accounted for as an asset acquisition. Immunome will account for the acquisition of Morphimmune as an asset acquisition as substantially all of the fair value of the gross assets being acquired of Morphimmune is concentrated within the FA-TLR7a and ¹⁷⁷Lu-FAP development programs which are considered a group of similar assets. These programs are deemed to be similar IPR&D assets being acquired based on the similarity of: (i) their current preclinical stage of development, (ii) solid tumor therapeutic indications, (iii) risks for development, (iv) regulatory pathway, and (v) economics of commercialization. Since the IPR&D being acquired has no alternative future use, Immunome expects to record the amount of consideration allocated to the IPR&D assets as research and development expense in its statement of operations on the date of acquisition. Subscription Agreements In connection with the execution of the Merger Agreement, on June 29, 2023, the Company entered into subscription agreements, each, a Subscription Agreement, with certain investors, or the PIPE Investors, pursuant to which, among other things, the PIPE Investors have agreed to subscribe for and purchase, and the Company has agreed to issue and sell to the PIPE Investors, an aggregate of 21,690,871 shares of the Company’s common stock for an aggregate purchase price of approximately $125.0 million, on the terms and subject to the conditions set forth therein. The shares of the Company’s common stock were sold to the PIPE Investors at a price per share equal to $5.75 and, in the case of affiliate investors, $5.91 per share, the consolidated closing bid price per share immediately preceding the entry into the Subscription Agreement. The closing of the PIPE financing is expected to occur in connection with and immediately following the consummation of the Merger.

Nature of the business

6 Months Ended

Jun. 30, 2023

IMMUNOME, INC.

Notes to Condensed Financial Statements

(Unaudited)

1. Nature of the business

Organization

Immunome, Inc., the Company or Immunome, is a biopharmaceutical company. The Company was incorporated as a Pennsylvania corporation on March 2, 2006 and was converted to a Delaware corporation on December 2, 2015. The Company is utilizing a proprietary human memory B cell platform to discover and develop antibody therapeutics to improve patient care. The Company’s primary focus area is oncology.

Since its inception, the Company has devoted substantially all its resources to research and development, raising capital, building its management team and extending its intellectual property portfolio, and executing strategic partnerships. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, risks associated with research, development, and manufacturing activities, uncertain results of preclinical and clinical testing, development of new technological innovations and products by competitors, dependence on key personnel, partners and third-party vendors, protection of proprietary technology, compliance with government regulations, regulatory approval of products and the ability to secure additional capital to fund operations.

On June 29, 2023, the Company entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, with Morphimmune Inc., a Delaware corporation, or Morphimmune, a biotechnology company focused on developing targeted oncology therapeutics, and Ibiza Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company, or Merger Sub. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will be merged with and into Morphimmune, with Morphimmune surviving as a wholly owned subsidiary of Immunome, or the Merger. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and is expected to close by the end of 2023. See “The Merger”.

Liquidity

The Company has incurred net losses since inception, including net losses of $9.8 million and $20.6 million for the six months ended June 30, 2023 and 2022, respectively, and it expects to generate losses from operations for the foreseeable future primarily due to research and development costs for its programs and development candidates. As of June 30, 2023, the Company had an accumulated deficit of $125.8 million.

Through June 30, 2023, the Company raised an aggregate of $155.2 million in gross proceeds from sales of common stock, Series A convertible preferred stock and warrants, warrant and stock option exercises, the issuance of convertible promissory notes, the Paycheck Protection Program, or PPP, loan that was forgiven in May 2021, and strategic partnerships with AbbVie Global Enterprises Ltd, or AbbVie. In January 2023, the Company received a $30.0 million non-refundable upfront payment from AbbVie under the collaboration and option agreement, or the Collaboration Agreement. In addition, the Company received $17.6 million in expense reimbursement from the Department of Defense, or DoD under the Other Transaction Authority for Prototype Agreement, or the OTA Agreement, from inception through 2022.

On January 4, 2023, the Company entered into the Collaboration Agreement with AbbVie, or the Collaboration Agreement, directed to the discovery of up to 10 novel target-antibody pairs leveraging our discovery engine. The Company is potentially eligible to receive up to approximately $2.8 billion from AbbVie under the Collaboration Agreement from the sources described in Note 3. There are no assurances that the Company will receive additional payments from AbbVie beyond the $30.0 million upfront payment.

On October 1, 2021, the Company entered into an Open Market Sale Agreement, or the ATM Agreement, with Jefferies Group LLC, which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell shares of common stock under the registration statement having an aggregate offering price of up to $75.0 million through Jefferies Group LLC acting as sales agent. The Company filed a shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission, or the SEC, on October 14, 2021, pursuant to which the Company may issue from time-to-time securities with an aggregate value of up to $200.0 million. Through June 30, 2023, the Company sold 5,925 shares of common stock under the ATM Agreement resulting in net proceeds of approximately $34,000. The Company can elect to sell additional shares under the ATM Agreement or shelf registration statement.

The Company had cash and cash equivalents of $38.4 million at June 30, 2023. The Company expects that its cash, exclusive of any potential proceeds received in connections with the potential closing of the Merger and concurrent Private Investment in Public Equity, or PIPE transaction, will enable it to fund its operating expenses and capital expenditure requirements for at least 12 months from the filing date of this Quarterly Report on Form 10-Q; however; more funding will be necessary to fund additional research and development and operations in order to pursue the Company’s growth strategy.

If the Company cannot obtain the necessary funding, it will need to delay, scale back or eliminate some or all of its research and development programs or enter into collaborations with third parties relative to potential programs, products or technologies that it might otherwise seek to progress independently (or enter into these collaborations sooner than it might otherwise have intended to), reduce or cease operations. Further, as a part of our strategy, the Company may consider various other alternatives, including a merger or sale of the Company. If the Company engages in R&D collaborations under these circumstances, it may receive lower consideration than if it had not entered into such arrangements or if it entered into such arrangements at later stages in the research and development process. Additionally, volatility in the capital markets generally and the biotechnology sector specifically, as well as general economic conditions in the United States may be a significant obstacle to raising the required funds on satisfactory terms, if at all.

Operations of the Company are subject to certain risks and uncertainties including various internal and external factors that will affect whether and when the Company’s programs and development candidates become approved drugs and how significant their market share will be, many of which are outside of the Company’s control. The length of time and cost of developing and commercializing these programs and development candidates and/or failure of them at any stage of the drug approval process will materially affect the Company’s financial condition and future operations.

Merger Agreement

On June 29, 2023, the Company entered into the Merger Agreement with Morphimmune Inc., a biotechnology company focused on developing targeted oncology therapeutics, and Merger Sub. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will be merged with and into Morphimmune, with Morphimmune surviving as a wholly owned subsidiary of the Company. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

At the Effective time, each share of Morphimmune capital stock outstanding immediately prior to the Effective Time will be automatically converted solely into the right to receive 0.3042 shares of the Company’s common stock, or the Exchange Ratio, and, if applicable, an amount in cash, rounded to the nearest whole cent, in lieu of any fractional share interest in the Company’s common stock to which such holder otherwise would have been entitled (after aggregating all fractional shares issuable to such holder). Each option to purchase shares of Morphimmune capital stock, or a Morphimmune Option, that is outstanding and unexercised immediately prior to the Effective Time under Morphimmune’s 2020 Equity Incentive Plan, or the Morphimmune Plan, whether or not vested, will be converted into and become an option to purchase the Company’s common stock using the Exchange Ratio, and the Company will assume the Morphimmune Plan and each such Morphimmune Option in accordance with the terms of the Morphimmune Plan and the terms of the stock option agreement by which such Morphimmune Option is evidenced.

Immediately following the Merger, the pre-Merger equityholders of the Company are expected to own approximately 55% of the shares of the Company’s common stock and the pre-Merger equityholders of Morphimmune are expected to own approximately 45% of the Company’s common stock, in each case, on a fully diluted basis, excluding out-of-the-money securities of the Company as of June 28, 2023, unallocated shares of the Company’s common stock available for issuance under the Company’s 2020 Equity Incentive Plan and employee stock purchase plan, and the grant of a stock option to Dr. Clay Siegall, Ph.D., in connection with his employment agreement to become Chief Executive Officer of the Company upon consummation of the Merger, and prior to giving effect to the PIPE financing as described below.

Anticipated Accounting Treatment

The Merger is expected to be treated as an asset acquisition by Immunome of Morphimmune in accordance with U.S. GAAP. Upon completion of the Merger, Immunome will obtain control of Morphimmune’s assets consisting primarily of cash and in-process research and development (IPR&D) associated with Morphimmune’s potential primary product candidate, Mi-1001, and development program, ¹⁷⁷Lu-FAP.

In accordance with U.S. GAAP, Immunome must first assess whether an integrated set of assets and activities should be accounted for as an acquisition of a business or an asset acquisition. An initial screen test is completed to determine if substantially all of the fair value of the gross assets acquired of Morphimmune is concentrated in a single asset or group of similar assets. If that screen is met, the set is not considered a business and is accounted for as an asset acquisition. Immunome will account for the acquisition of Morphimmune as an asset acquisition as substantially all of the fair value of the gross assets being acquired of Morphimmune is concentrated within the FA-TLR7a and ¹⁷⁷Lu-FAP development programs which are considered a group of similar assets. These programs are deemed to be similar IPR&D assets being acquired based on the similarity of: (i) their current preclinical stage of development, (ii) solid tumor therapeutic indications, (iii) risks for development, (iv) regulatory pathway, and (v) economics of commercialization.

Since the IPR&D being acquired has no alternative future use, Immunome expects to record the amount of consideration allocated to the IPR&D assets as research and development expense in its statement of operations on the date of acquisition.

Subscription Agreements

In connection with the execution of the Merger Agreement, on June 29, 2023, the Company entered into subscription agreements, each, a Subscription Agreement, with certain investors, or the PIPE Investors, pursuant to which, among other things, the PIPE Investors have agreed to subscribe for and purchase, and the Company has agreed to issue and sell to the PIPE Investors, an aggregate of 21,690,871 shares of the Company’s common stock for an aggregate purchase price of approximately $125.0 million, on the terms and subject to the conditions set forth therein. The shares of the Company’s common stock were sold to the PIPE Investors at a price per share equal to $5.75 and, in the case of affiliate investors, $5.91 per share, the consolidated closing bid price per share immediately preceding the entry into the Subscription Agreement. The closing of the PIPE financing is expected to occur in connection with and immediately following the consummation of the Merger.