UNITED STATES SECURITIES AND EXCHANGE COMMISSION | ||||||||
| WASHINGTON, D.C. 20549 | ||||||||
FORM | ||||||||
(Mark one)
For the quarterly period ended March 31, 2023
or
For the transition period from to
Commission File Number: 001-39452
| (Exact name of registrant as specified in its charter) | ||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
| (Registrant’s telephone number, including area code) | ||||||||
| N/A | ||||||||
| (Former name, former address and former fiscal year, if changed since last report) | ||||||||
| Securities registered pursuant to Section 12(b) of the Act | ||||||||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 30, 2023, the registrant had 43,615,678 shares of common stock outstanding.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or this Quarterly Report, contains express and implied forward-looking statements that involve risks and uncertainties. Except as otherwise indicated by the context, references in this Quarterly Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “design,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
•the initiation, timing, progress and results of our research and development programs as well as our preclinical studies and clinical trials;
•our ability to advance therapeutic candidates into, and successfully complete, clinical trials;
•our interpretation of initial, interim or preliminary data from our clinical trials, including interpretations regarding disease control and disease response;
•the timing or likelihood of regulatory filings and approvals, including whether INBRX-101, or any other product candidate, receives approval from the Food and Drug Administration, or FDA, or similar regulatory authority, for an accelerated approval process;
•the commercialization of our therapeutic candidates, if approved;
•the pricing, coverage and reimbursement of our therapeutic candidates, if approved;
•our ability to utilize our technology platform to generate and advance additional therapeutic candidates;
•the implementation of our business model and strategic plans for our business and therapeutic candidates;
•our ability to successfully manufacture our therapeutic candidates for clinical trials and commercial use, if approved;
•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
•the scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates;
•our ability to enter into strategic partnerships and the potential benefits of such partnerships;
•our estimates regarding expenses, capital requirements and needs for additional financing;
•our ability to raise funds needed to satisfy our capital requirements, which may depend on financial, economic and market conditions and other factors, over which we may have no or limited control;
•our expectations regarding the continued evolution of the impact of the COVID-19 pandemic on our business;
•our and our third party partners’ and service providers’ ability to continue operations and advance our therapeutic candidates through clinical trials and the ability of our third party manufacturers to provide the required raw materials, antibodies and other biologics for our preclinical research and clinical trials in light of the COVID-19 pandemic, current market conditions and geopolitical events, such as the ongoing conflict in Ukraine;
•our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals; and
•developments relating to our competitors and our industry.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the header “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission, or the SEC, on March 6, 2023, and in our other filings with the SEC, as updated by the risk factors set forth in Part II, Item 1A “Risk Factors” of this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-
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looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to new information, actual results or to changes in our expectations, except as required by law.
You should read this Quarterly Report and the documents that we file with the SEC with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.
This Quarterly Report includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Quarterly Report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.
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TABLE OF CONTENTS
| Page | ||||||||
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Part I — Financial Information
Item 1. Financial Statements.
Inhibrx, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data and par value)
(Unaudited)
Condensed Consolidated Balance Sheets
(In thousands, except share data and par value)
(Unaudited)
| MARCH 31, | DECEMBER 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable | |||||||||||
| Receivables from related parties | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Right-of-use asset | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Deferred revenue | |||||||||||
| Current portion of lease liability | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, including final payment fee | |||||||||||
| Non-current portion of lease liability | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 7) | |||||||||||
| Stockholders’ equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in-capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Inhibrx, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenue: | |||||||||||
| License fee revenue | $ | $ | |||||||||
| Grant revenue | |||||||||||
| Total revenue | |||||||||||
| Operating expenses: | |||||||||||
| Research and development | |||||||||||
| General and administrative | |||||||||||
| Total operating expenses | |||||||||||
| Loss from operations | ( | ( | |||||||||
| Other income (expense): | |||||||||||
| Interest expense, net | ( | ( | |||||||||
| Other income (expense), net | ( | ||||||||||
| Total other expense | ( | ( | |||||||||
| Loss before income tax expense | ( | ( | |||||||||
| Provision for income taxes | |||||||||||
| Net loss | ( | ( | |||||||||
| Net loss per share, basic and diluted | $ | ( | $ | ( | |||||||
| Weighted-average shares of common stock outstanding, basic and diluted | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Inhibrx, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
| Common Stock (Shares) | Common Stock (Amount) | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance as of December 31, 2022 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||
| Issuance of shares upon exercise of stock options | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
Balance as of March 31, 2023 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Common Stock (Shares) | Common Stock (Amount) | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance as of December 31, 2021 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||
| Issuance of shares upon exercise of stock options | — | — | ||||||||||||||||||||||||||||||
| Issuance of warrants | — | — | — | |||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
Balance as of March 31, 2022 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Inhibrx, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Accretion of debt discount and non-cash interest expense | |||||||||||
| Stock-based compensation expense | |||||||||||
| Non-cash lease expense | |||||||||||
| Loss on disposal of fixed assets | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Receivables from related parties | |||||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Accrued expenses and other current liabilities | ( | ||||||||||
| Operating lease liability | ( | ( | |||||||||
| Deferred revenue, current portion | ( | ( | |||||||||
| Deferred revenue, non-current portion | ( | ||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchase of fixed assets | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from the issuance of debt | |||||||||||
| Payment of fees associated with debt | ( | ||||||||||
| Proceeds from the exercise of stock options | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Supplemental schedule of non-cash investing and financing activities | |||||||||||
| Payable for purchase of fixed assets | $ | $ | |||||||||
| Fair value of warrants issued to lender in conjunction with February 2022 Amendment | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Inhibrx, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Notes to Unaudited Condensed Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Inhibrx, Inc., or the Company, or Inhibrx, is a clinical-stage biopharmaceutical company focused on developing a broad pipeline of novel biologic therapeutic candidates. The Company combines target biology with protein engineering, technologies, and research and development to design therapeutic candidates. The Company’s current pipeline is focused on oncology and orphan diseases.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, related to an interim report on the Form 10-Q. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.
The unaudited interim condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods.
Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, the accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K filed with the SEC.
Liquidity
As of March 31, 2023, the Company had an accumulated deficit of $421.3 million and cash and cash equivalents of $234.3 million. From its inception and through March 31, 2023, the Company has devoted substantially all of its efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of its therapeutic candidates, pre-commercialization activities, organizing and staffing the Company, establishing its intellectual property portfolio and raising capital to support and expand these activities.
The Company believes that its existing cash and cash equivalents will be sufficient to fund the Company’s operations for at least 12 months from the date these condensed consolidated financial statements are issued. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses, strategic transactions, and other similar arrangements.
If the Company does raise additional capital through public or private equity or convertible debt offerings, the ownership interests of its existing stockholders will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect its stockholders’ rights. If the Company raises capital through additional debt financings, it may be subject to covenants limiting or restricting its ability to take specific actions, such as incurring additional debt or making certain capital expenditures. To the extent that the Company raises additional capital through strategic licensing, collaboration or other similar agreement, it may have to relinquish valuable rights to its therapeutic candidates, future revenue streams or research programs at an earlier stage of development or on less favorable terms than it would otherwise choose, or to grant licenses on terms that may not be favorable to the Company. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure adequate additional funding, it will need to reevaluate its operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of its development programs, or
8
relinquish rights to its technology on less favorable terms than it would otherwise choose. These actions could materially impact its business, financial condition, results of operations and prospects.
The rules and regulations of the SEC or any other regulatory agencies may restrict the Company’s ability to conduct certain types of financing activities, or may affect the timing of and amounts it can raise by undertaking such activities.
Use of Estimates
The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The Company’s most significant estimates relate to evaluation of whether revenue recognition criteria have been met, accounting for development work and preclinical studies and clinical trials, determining the assumptions used in measuring stock-based compensation, the incremental borrowing rate estimated in relation to the Company’s operating lease, and valuation allowances for the Company’s deferred tax assets. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. The Company’s actual results may differ from these estimates under different assumptions or conditions.
As of March 31, 2023, the Company’s investments in debt securities consist of U.S. Treasury Bills, all of which mature in the second quarter of 2023. As of March 31, 2023, these investments are recorded at their amortized cost of $198.4 million, which is adjusted for the amortization or accretion of premiums or discounts.
Concentrations of Credit Risk
Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, including investments in debt securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits by the Federal Deposit Insurance Corporation, or FDIC, of up to $250,000. The Company’s investment portfolio consists of investments in U.S. Treasury securities, in excess of Securities Investor Protection Corporation, or SIPC, limits of up to $500,000 in securities. The Company’s cash management and investment policy limits investment instruments to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds can be used in operations. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial condition of the depository institutions in which those deposits are held.
Fair Value Measurements
The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. These tiers include:
•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been
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Revenue Recognition
The Company has generated revenue from its license and collaboration agreements with partners, as well as from grants from government agencies and private not-for-profit organizations.
Collaborative Research, Development, and License Agreements
The Company enters into collaborative agreements with partners which may include the transfer of licenses, options to license, and the performance of research and development activities. The terms associated with these agreements may include one or more of the following: (1) license fees; (2) nonrefundable up-front fees; (3) payments for reimbursement of research costs; (4) payments associated with achieving specific development, regulatory, or commercial milestones; and (5) royalties based on specified percentages of net product sales, if any. Payments received from customers are included in deferred revenue, allocated between current and non-current on the condensed consolidated balance sheet, until all revenue recognition criteria are met.
Typically, license fees, non-refundable upfront fees, and funding of research activities are considered fixed, while milestone payments, including option exercise fees, are identified as variable consideration, which is constrained and excluded from the transaction price. The Company will recognize revenue for sales-based royalty if and when a subsequent sale occurs.
The Company applies significant judgment when making estimates and assumptions under these agreements, including evaluating whether contractual obligations represent distinct performance obligations, including the assessment of whether options represent material rights, determining whether there are observable standalone prices and allocating transaction price to performance obligations within a contract, assessing whether any licenses are functional or symbolic, determining when performance obligations have been met, and assessing the recognition of variable consideration. The Company evaluates each performance obligation to determine if it can be satisfied and recognized as revenue at a point in time or over time. Typically, performance obligations consisting of a transfer of a license or the achievement of milestones are recognized at a point in time upon the transfer, while performance obligations consisting of research activities are recognized over time using an input method which is representative of the Company’s efforts to fulfill the performance obligation, based on costs incurred with third-parties or internal labor hours performed.
Accrued Research and Development and Clinical Trial Costs
Research and development costs are expensed as incurred and include the cost of compensation and related expenses, as well as expenses for third parties who conduct research and development on the Company’s behalf, pursuant to development and consulting agreements in place. The Company’s preclinical studies and clinical trials are performed internally, by third party contract research organizations, or CROs, and/or clinical investigators. The Company also engages with contract development and manufacturing organizations, or CDMOs, for clinical supplies and manufacturing scale-up activities related to its therapeutic candidates. Invoicing from these third parties may be monthly based upon services performed or based upon milestones achieved. The Company accrues these expenses based upon its assessment of the status of each clinical trial and the work completed, and upon information obtained from the CROs and CDMOs. The Company’s estimates are dependent upon the timeliness and accuracy of data provided by the CROs and CDMOs regarding the status and cost of the studies. Costs incurred related to the Company’s purchases of in-process research and development for early-stage products or products that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred. Costs incurred related to the licensing of products that have not yet received marketing approval to be
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Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the same period. Diluted net loss per share is computed by dividing net loss by the weighted average number of common and common equivalent shares outstanding during the same period. The Company excludes common stock equivalents from the calculation of diluted net loss per share when the effect is anti-dilutive.
For purposes of the diluted net loss per share calculation, warrants for purchase of common stock and stock options are considered to be potentially dilutive securities. Accordingly, for the three months ended March 31, 2023 and March 31, 2022, there is no difference in the number of shares used to calculate basic and diluted shares outstanding.
| AS OF MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Outstanding stock options | |||||||||||
| Warrants to purchase common stock | |||||||||||
Segment Information
The Company operates under one segment which develops biologic therapeutic candidates. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies. The Company believes that the impact of the recently issued accounting pronouncements that are not yet effective will not have a material impact on its condensed consolidated financial condition or results of operations upon adoption.
Adoption of New Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as held-to-maturity debt securities. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. The Company adopted ASU 2016-13 as of January 1, 2023, which did not result in a material impact on its condensed consolidated financial statements and related disclosures.
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2. OTHER FINANCIAL INFORMATION
Prepaid Expense and Other Current Assets
Prepaid expense and other current assets were comprised of the following (in thousands):
| AS OF | AS OF | ||||||||||
| MARCH 31, 2023 | DECEMBER 31, 2022 | ||||||||||
Clinical trials (1) | $ | $ | |||||||||
Clinical drug substance and product manufacturing (2) | |||||||||||
Outside research and development services (3) | |||||||||||
| Licenses | |||||||||||
| Other | |||||||||||
| Prepaid expense and other current assets | $ | $ | |||||||||
(1) Relates primarily to the Company’s prepayments to third-party CROs for management of clinical trials and prepayments for drug supply to be used in combination with the Company’s therapeutics. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.
(2) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.
Property and Equipment, Net
Property and equipment, net were comprised of the following (in thousands):
| AS OF | AS OF | ||||||||||
| MARCH 31, 2023 | DECEMBER 31, 2022 | ||||||||||
| Machinery and equipment | $ | $ | |||||||||
| Leasehold improvements | |||||||||||
| Computer software | |||||||||||
| Furniture, fixtures, and other | |||||||||||
| Construction in process | |||||||||||
| Total property and equipment | |||||||||||
| Less: accumulated depreciation and amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense totaled $0.3
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Research and development | $ | $ | |||||||||
| General and administrative | |||||||||||
| Total depreciation and amortization expense | $ | $ | |||||||||
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Accrued Expenses
Accrued expenses were comprised of the following (in thousands):
| AS OF | AS OF | ||||||||||
| MARCH 31, 2023 | DECEMBER 31, 2022 | ||||||||||
Clinical trials(1) | $ | $ | |||||||||
Clinical drug substance and product manufacturing(2) | |||||||||||
Other outside research and development (3) | |||||||||||
| Interest expense | |||||||||||
| Compensation-related | |||||||||||
| Professional fees | |||||||||||
| Other | |||||||||||
| Accrued expenses | $ | $ | |||||||||
(1) Relates primarily to the Company’s usage of third-party CROs for management of clinical trials. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.
(2) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.
(3) Relates to the Company’s usage of third-parties for other research and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.
3. DEBT
2020 Loan Agreement
In July 2020, the Company entered into a loan and security agreement, or the 2020 Loan Agreement, with Oxford Finance LLC, or Oxford, pursuant to which it received $10.0 million in gross proceeds, or Term A. The 2020 Loan Agreement was subsequently amended in November 2020, or the November 2020 Amendment, upon which a second tranche in an aggregate principal amount of $20.0 million was funded, or Term B, and in June 2021, or the June 2021 Amendment, upon which a third tranche in an aggregate principal amount of $40.0 million was funded, or Term C.
In February 2022, the Company entered into an additional amendment, or the February 2022 Amendment, to the 2020 Loan Agreement, collectively, the Amended 2020 Loan Agreement, upon which the Company received gross proceeds of $40.0 million, or Term D. The February 2022 Amendment also provided for an increase in the interest rate and for three future tranches of debt to be funded upon the achievement of certain milestones. In June 2022, the Company received additional gross proceeds of $30.0 million, or Term E, following the initiation of part 4 of the Phase 1/2 clinical trial of INBRX-105, as well as an additional $30.0 million in gross proceeds, or Term F, following the receipt of positive topline data from the Phase 1 clinical trial of INBRX-101.
In October 2022, the Company entered into an amendment to the Amended 2020 Loan Agreement, or the October 2022 Amendment. The October 2022 Amendment amended the milestone terms of the last remaining tranche, Term G, under the Amended 2020 Loan Agreement to provide for the funding of $30.0 million upon the announcement of the regulatory path for INBRX-101 rather than upon the initiation of a registration-enabling clinical trial of INBRX-101. In October 2022, the Company met this milestone and drew the final tranche for additional gross proceeds of $30.0 million.
The Company determined the November 2020, June 2021, February 2022, and October 2022 Amendments should be treated as modifications of the original 2020 Loan Agreement since the terms and resulting cash flows were not substantially changed upon each of the amendments. The Company will continue to amortize the existing debt discounts prior to modification through the Amended Maturity Date (as defined below).
As of March 31, 2023, the Company had $200.0 million in gross principal outstanding in term loans under the Amended 2020 Loan Agreement. The outstanding term loans will mature on January 1, 2027, or the Amended
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Maturity Date, and bear interest at a floating per annum rate equal to the greater of (1) 8.30 % or (2) the sum of (i) the 30 day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (ii) 8.19 %. Under the Amended 2020 Loan Agreement, the repayment schedule provides for interest-only payments through February 1, 2025, followed by 23 months of principal and interest payments, unless extended by a financing event as defined in the Amended 2020 Loan Agreement. In the event of a qualifying financing event in which the Company raises at least $100.0 million in upfront licensing or partnership proceeds by February 2025, the interest-only period may be extended an additional 12 months through February 1, 2026, which would then be followed by 11 months of equal payments of principal plus interest, beginning on March 1, 2026. Upon the Amended Maturity Date, a final payment of 9.0 % of the original principal amount will be due to Oxford. This final payment of $18.0 million is being accreted over the life of the Amended 2020 Loan Agreement using the effective interest method. The Company has the option to prepay the outstanding balance of the term loans in full prior to the Amended Maturity Date, subject to a prepayment fee ranging from 1.0 % to 3.0 %, depending upon the timing of the prepayment.
The Company’s outstanding debt balance under the Amended 2020 Loan Agreement consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands).
| AS OF | AS OF | ||||||||||
| MARCH 31, 2023 | DECEMBER 31, 2022 | ||||||||||
| Term A | $ | $ | |||||||||
| Term B | |||||||||||
| Term C | |||||||||||
| Term D | |||||||||||
| Term E | |||||||||||
| Term F | |||||||||||
| Term G | |||||||||||
| Less: debt discount | ( | ( | |||||||||
| Long-term debt, including debt discount and final payment fee | $ | $ | |||||||||
As of March 31, 2023, and unless extended in accordance with the terms described above, the Company’s interest-only period will continue through February 2025, with principal payments beginning in March 2025. Future principal payments and final fee payments will be made as follows (in thousands):
| AS OF | |||||
| MARCH 31, 2023 | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| Total future minimum payments | |||||
| Less: unamortized debt discount | ( | ||||
| Total debt | $ | ||||
The Company’s obligations under the Amended 2020 Loan Agreement are secured by a first priority security interest of substantially all of the Company’s assets with a positive lien on intellectual property. The Amended 2020 Loan Agreement includes customary events of default, including instances of a material adverse change in the Company’s operations, that may require prepayment of the outstanding term loans. Additionally, following the June 2021 Amendment, the Amended 2020 Loan Agreement requires the Company to maintain a minimum cash balance of $20.0 million. As of March 31, 2023, the Company is in compliance with all covenants under the Amended 2020 Loan Agreement and has not received any notification or indication from Oxford of an intent to declare the loan due prior to maturity.
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Concurrently with the February 2022 Amendment, the Company issued 40,000 warrants to Oxford to purchase shares of the Company’s common stock at an exercise price of $45.00 . Upon issuance, the warrants were classified as equity and recorded at their fair value of $0.7 million. See Note 4 for further discussion of these warrants.
Interest Expense
Interest expense is calculated using the effective interest method and is inclusive of non-cash amortization of the debt discount and accretion of the final payment. During the three months ended March 31, 2023, interest expense was $7.6 million, $1.2 million of which related to non-cash amortization of the debt discount and accretion of the final payment. During the three months ended March 31, 2022, interest expense was $2.3 million, $0.5 million of which related to non-cash amortization of the debt discount and accretion of the final payment.
4. STOCKHOLDERS’ EQUITY
Common Stock
In September 2021, the Company entered into the Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or the Sales Agent, under which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent, or the ATM Offering. Pursuant to the Sales Agreement, the Company will pay the Sales Agent a commission for its services in acting as an agent in the sale of common stock in an amount equal to 3 % of the gross sales price per share sold. During each of the three months ended March 31, 2023 and March 31, 2022, the Company did not issue any shares under the Sales Agreement.
Common Stock Warrants
As of March 31, 2023, the following equity-classified warrants were outstanding:
| Expiration Date | Shares of Common Stock Issuable Upon Exercise of Warrants | Exercise Price per Share | ||||||||||||
| July 15, 2030 | $ | |||||||||||||
| February 18, 2032 | $ | |||||||||||||
The Company’s warrants are equity-classified and carried at the instruments’ fair value upon classification into equity, with no subsequent remeasurements.
5. EQUITY COMPENSATION PLAN
Stock Incentive Plan
The Company’s share-based compensation plan, the Amended and Restated 2017 Employee, Director and Consultant Equity Incentive Plan, or the 2017 Plan, provides for the issuance of incentive stock options, restricted and unrestricted stock awards, and other stock-based awards. As of March 31, 2023, an aggregate of 7.8 million shares of common stock were reserved for issuance under the 2017 Plan, of which 1.3 million were available.
Stock Option Activity
The Company recognizes compensation costs related to stock-based awards, including stock options, based on the estimated fair value of the awards on the date of grant. The Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant. The options are subject to four-year vesting with a one-year cliff and have a contractual term of 10 years.
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| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding as of December 31, 2022 | $ | ||||||||||||||||||||||
| Granted | $ | ||||||||||||||||||||||
| Exercised | ( | $ | |||||||||||||||||||||
| Forfeited | ( | $ | |||||||||||||||||||||
Outstanding as of March 31, 2023 | $ | $ | |||||||||||||||||||||
Vested and exercisable as of March 31, 2023 | $ | $ | |||||||||||||||||||||
The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2023 and March 31, 2022 was $0.4 million and $1.0 million, respectively. Aggregate intrinsic value of stock options exercised and outstanding is calculated using the fair value of common stock on the date of exercise and as of March 31, 2023, respectively. The total fair value of stock options vested during the three months ended March 31, 2023 and March 31, 2022 was $7.7 million and $12.1 million, respectively. The Company expects all outstanding stock options to vest.
Stock-Based Compensation Expense
The weighted-average assumptions used by the Company to estimate the fair value of stock option grants using the Black-Scholes option pricing model, as well as the resulting weighted-average fair value for the three months ended March 31, 2023 and March 31, 2022 were as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Risk-free interest rate | % | % | |||||||||
| Expected volatility | % | % | |||||||||
| Expected dividend yield | % | % | |||||||||
| Expected term (in years) | |||||||||||
| Weighted average fair value | $ | $ | |||||||||
Stock-based compensation expense for stock options consisted of the following (in thousands):
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Research and development | $ | $ | |||||||||
| General and administrative | |||||||||||
| Total stock-based compensation expense | $ | $ | |||||||||
As of March 31, 2023, the Company had $58.4 million of total unrecognized stock-based compensation expense related to its stock options, which is expected to be recognized over a weighted-average period of 2.8 years.
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6. LICENSE AND GRANT REVENUES
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| License fee revenue | |||||||||||
| Chiesi Farmaceutici S.p.A. | $ | $ | |||||||||
| Phylaxis BioScience, LLC | |||||||||||
| Total license fee revenue | |||||||||||
| Grant revenue | |||||||||||
| Total revenue | $ | $ | |||||||||
License and Collaboration Agreements
Chiesi
In May 2019, the Company entered into an Option Agreement, as amended by the First Amendment to Option Agreement, dated August 19, 2019, or the Chiesi Option Agreement, with Chiesi Farmaceutici S.p.A., or Chiesi, pursuant to which the Company granted to Chiesi an exclusive option to obtain an exclusive license to develop and commercialize INBRX-101 outside of the United States and Canada. Additionally, the Chiesi Option Agreement provides Chiesi with a right of negotiation for INBRX-101 development and commercialization rights in the United States and Canada in the event that the Company engages in discussions with any third parties for such rights during the term of the Chiesi Option Agreement or, as applicable, the term of a definitive exclusive license agreement between Chiesi and the Company. Under the terms of the Chiesi Option Agreement, the Company received a one-time, non-refundable option initiation payment of $10.0 million in August 2019. If Chiesi chooses to exercise its option under the Chiesi Option Agreement, then Chiesi must pay the Company a one-time, non-refundable fee of $12.5 million upon the effective date of the definitive agreement granting Chiesi the exclusive license. If the option is exercised, under the license agreement, the Company may be entitled to receive specified milestone payments of up to $122.5 million, as well as royalties on future product sales.
The Company has identified one performance obligation as of the effective date of the Chiesi Option Agreement, which is to perform research and development services for Chiesi during the option period, which will continue (unless the Chiesi Option Agreement is terminated earlier by Chiesi or the Company) until 60 days following the last to occur of (i) the Company’s delivery to Chiesi of the trial phase data for the first Phase I Clinical Trial, (ii) the Company’s delivery to Chiesi of the finalized minutes from the definitive U.S. Food and Drug Administration, or FDA, scientific advice meeting conducted following completion of such Phase I Clinical Trial, and (iii) the Company’s delivery to Chiesi of the finalized minutes from the definitive parallel European Medicines Agency health technology assessment scientific advice meeting conducted following completion of such Phase I Clinical Trial. The Company has determined that the option to grant a license in the future is not a material right.
The $10.0 million upfront payment has been allocated to the single performance obligation. Revenue is recognized over time as services are performed during the option period, based on the Company’s effort to satisfy the performance obligation relative to the total expense estimated to be incurred during the option period. During the three months ended March 31, 2023 and March 31, 2022, the Company recognized $17,000 and $0.2 million in revenue related to this agreement, respectively. As of March 31, 2023 and December 31, 2022, the Company had $0.1
Phylaxis
In July 2020, the Company entered into a joint venture with Phylaxis BioScience, LLC, or Phylaxis. In connection with the joint venture, the Company entered into the following agreements: Contribution Agreement, License Agreement, Limited Liability Company Agreement, and Master Services Agreement, or collectively the Phylaxis Agreements, pursuant to which the Company licensed certain intellectual property and know-how to Phylaxis and
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agreed to provide services to develop certain compounds. Upon closing, the Company received a $2.5 million nonrefundable, upfront payment from Phylaxis under the Master Services Agreement, or the MSA. The Company has also received an additional $2.5 million, which was payable within 180 days from closing under the MSA, in two payments of $1.25 10 % equity interest in Phylaxis as consideration for the contribution of the license of the Company’s intellectual property and know-how and is entitled to receive an additional 5 % based on the achievement of certain milestones. Under the License Agreement, the Company is also entitled to specified development and commercialization milestone payments of up to an aggregate of $225.0 million and $175.0 million, respectively. The Company is also entitled to share in a percentage of the profits of Phylaxis under the Limited Liability Company Agreement.
In order to determine the fair value of the equity interest in Phylaxis, the Company engaged a third-party valuation specialist. The valuation report utilized a market approach to establish the total equity value of Phylaxis using inputs not observable in the market, including the discount rate. The fair value of the equity interest was $0.5 million, which has been accounted for under the equity method. The fair value of the equity interest upon the execution of the agreements has been included in the transaction price, along with the $5.0 million of payments due pursuant to the MSA.
The Company identified the transfer of the exclusive licenses for, and performance of, development services to modify the first and second compounds as one performance obligation and allocated the transaction price evenly between the two compounds. Revenue related to the performance obligation will be recognized over time as services are performed, based on the Company’s progress to satisfy the performance obligation. During the third quarter of 2022, the Company fulfilled this performance obligation in full and recognized all remaining deferred revenue under this contract.
During the three months ended March 31, 2023, the Company recognized no revenue related to this performance obligation following its completion in 2022. During the three months ended March 31, 2022, the Company recognized $0.7 million of revenue related to this performance obligation. As of March 31, 2023 and December 31, 2022, there was no
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
In September 2017, the Company entered into a seven-year lease agreement as its sole location in La Jolla, California. The lease expires in June 2025 with an option to extend the lease an additional five years . The lease contained an initial base rent of approximately $0.1 million per month with 2 % annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which to be determined annually.
In May 2019, the Company executed an amendment to its lease agreement to expand its facilities and began occupying this space in January 2020. The amended lease terminates coterminously with the initial lease agreement and contains an initial base rent of approximately $30,000 per month with 2 % annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which is to be determined annually.
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The right-of-use asset and operating lease liability as of March 31, 2023 and December 31, 2022 are as follows (in thousands):
| AS OF | AS OF | ||||||||||
| MARCH 31, 2023 | DECEMBER 31, 2022 | ||||||||||
| Right-of-use asset | $ | $ | |||||||||
| Operating lease liability | |||||||||||
| Current | $ | $ | |||||||||
| Non-current | $ | ||||||||||
| Total operating lease liability | $ | $ | |||||||||
During the three months ended March 31, 2023 and March 31, 2022, the Company recognized operating lease expense of $0.9 million and $0.8 million, respectively. During the three months ended March 31, 2023 and March 31, 2022, the Company paid $0.5
As of March 31, 2023 and December 31, 2022, the Company’s operating lease had a remaining term of 2.3 and 2.5 years, respectively. The Company discounts its lease payments using its incremental borrowing rate as of the commencement of the lease. The Company has determined a weighted-average discount rate of 8.2
Future minimum rental commitments for the Company’s operating leases reconciled to the lease liability are as follows (in thousands):
| AS OF | |||||
| MARCH 31, 2023 | |||||
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| Thereafter | |||||
| Total future minimum lease payments | $ | ||||
| Less: imputed interest | ( | ||||
| Present value of operating lease liability | |||||
| Less: current portion of operating lease liability | ( | ||||
| Non-current portion of operating lease liability | $ | ||||
Purchase Commitments
The Company has several ongoing contracts with CROs for preclinical studies and clinical trials and with CDMOs for clinical supplies and manufacturing scale-up activities. While these contracts are generally cancellable, some may contain specific activities that involve one or more non-cancellable commitments, including minimum purchase commitments, binding annual forecasts, and capital equipment investments. Additionally, depending on the timing and reasoning of the exit, certain termination penalties may apply and can range from cost of work performed to date and up to twelve months of future committed manufacturing costs. As of March 31, 2023 and December 31, 2022, the non-cancellable portion of these contracts total in aggregate, excluding amounts paid or incurred at each respective date, approximately $74.4 million and $74.8 million, respectively. The non-cancellable purchase commitments relate to the purchase of clinical supply for INBRX-101. During the three months ended March 31, 2023 and March 31, 2022, the Company incurred $0.1 million and $0.3 million of expenses related to its non-cancellable purchase agreements, respectively.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together in conjunction with our condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report, and our audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 6, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report contain forward-looking statements that involve risk and uncertainties, including those described in the section titled “Special Note Regarding Forward-Looking Statements.” As a result of many factors, including those factors set forth in the section of this Quarterly Report titled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company with a pipeline of novel biologic therapeutic candidates developed using our proprietary modular protein engineering platforms. In particular, our proprietary single domain antibody, or sdAb, platform allows us to pursue validated targets with clinical promise where other antibody and biologic based approaches have failed. Highly modular, our platform technologies can be combined with precise valencies and multiple specificities, creating therapeutic candidates designed to be capable of enhanced cell signaling, conditional activation or combined synergistic functions.
We have multiple programs in various stages of development from discovery to preclinical to clinical. We currently have four programs in ongoing clinical trials. Three of these programs are for the treatment of various cancers, and one for the treatment of Alpha-1 Antitrypsin Deficiency, or AATD, as shown below:
 | ||||||||||||||||||||
| INBRX-101 | INBRX-109 | INBRX-105 | INBRX-106 | |||||||||||||||||
| AAT-Fc fusion protein | Tetravalent DR5 agonist | PD-L1x4-1BB tetravalent conditional agonist | Hexavalent OX40 agonist | |||||||||||||||||
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| Program | Therapeutic Area | Target(s)/Format | STAGE OF DEVELOPMENT | |||||||||||||||||||||||||||||
| Preclinical | Phase 1 | Phase 2 | Phase 3 | |||||||||||||||||||||||||||||
| INBRX-101* | Orphan/Respiratory | Neutrophil Elastase AAT-Fusion Protein | ||||||||||||||||||||||||||||||
| INBRX-109** | Oncology | DR5 Tetravalent Agonist | ||||||||||||||||||||||||||||||
| INBRX-105*** | Oncology | PD-L1 x 4-1BB Tetravalent Conditional Agonist | ||||||||||||||||||||||||||||||
| INBRX-106*** | Oncology | OX40 Hexavalent Agonist | ||||||||||||||||||||||||||||||
__________________
* Commercialization and development rights outside of the United States and Canada, subject to an option agreement, or the Chiesi Option Agreement, with Chiesi Farmaceutici S.p.A., or Chiesi.
** Third party partnership with Chinese biotechnology company, Transcenta Holding, Ltd., or Transcenta, currently in place for development and commercialization in China, Hong Kong, Macau and/or Taiwan.
*** Third party partnership with Chinese biotechnology company, Elpiscience Biopharmaceuticals, Inc, or Elpiscience, currently in place for development and commercialization in China, Hong Kong, Macau and/or Taiwan.
INBRX-101 is an optimized, recombinant alpha-1 antitrypsin, or AAT, augmentation therapy candidate for AATD. In March 2022, the FDA granted orphan drug designation for INBRX-101 for the treatment of AATD. In May 2022, we announced topline results from the INBRX-101 Phase 1 clinical trial. We believe the data revealed the potential to achieve normal AAT levels with less frequent dosing than the current standard of care and showed the treatment was well tolerated with no drug-related severe or serious adverse events at doses up to and including 120 mg/kg in single and multi-dose administered intravenously. In April 2023, we initiated ElevAATe, a registration-enabling trial for INBRX-101 for the treatment of patients with emphysema due to AATD. The primary endpoint of the trial is the mean change in the average functional AAT, or fAAT, concentration as measured by anti-neutrophil elastase capacity from baseline to average serum trough fAAT concentration at steady state (Ctrough,ss). The initial read-out from the ElevAATe trial is expected to occur in late 2024 and we intend to submit for regulatory approval once completed. In our end of Phase 1 meeting, the FDA requested additional information to support the correlation between serum AAT levels and the clinical benefit in AATD to further support serum AAT levels as a surrogate endpoint reasonably likely to predict clinical benefit. We are in the process of compiling this data through existing registry, health records and published data and plan to submit those analyses to the FDA as part of the BLA submission.
Our most advanced therapeutic candidate, INBRX-109, is a tetravalent death receptor 5, or DR5, agonist currently being evaluated in patients diagnosed with difficult-to-treat cancers, such as chondrosarcoma, mesothelioma, colorectal cancer, Ewing sarcoma and pancreatic adenocarcinoma. In June 2021, based on the initial Phase 1 data results, we initiated a registration-enabling Phase 2 trial for the treatment of unresectable or metastatic conventional chondrosarcoma for which the FDA and the European Medicine Agency, or EMA, granted orphan drug designation in November 2021 and August 2022, respectively. In November 2022, we announced updated efficacy and safety data from the ongoing Phase 1 INBRX-109 expansion cohorts for the treatment of chondrosarcoma, which showed disease control was observed in patients with and without isocitrate dehydrogenase, or IDH, mutations.
In March 2023, we announced the pause in patient enrollment for the INBRX-109 trials as a result of the pre-defined stopping rules built into the Phase 2 protocol. This did not impact active patients who were already on treatment and remained on the trial. With data from over 200 patients dosed with INBRX-109 to date, we were able to more precisely identify elderly individuals with fatty liver disease as the at-risk population for severe liver toxicity. As a result, we amended its protocol to include the Hepatic Steatosis Index as part of the screening criteria.
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In April 2023, the FDA lifted the partial clinical hold. Patient enrollment resumed in May 2023. Phase 1 combination cohorts are expected to begin reading out by the end of 2023 and data from the registration-enabling trial in unresectable or metastatic conventional chondrosarcoma is expected during the second half of 2024.
INBRX-105 is a precisely engineered multi-specific sdAb-based therapeutic candidate that is designed to agonize 4-1BB selectively in the presence of PD-L1, which is typically found in the tumor microenvironment and associated lymphoid tissues. It is currently being investigated as a single agent and in combination with Keytruda, a PD-1 blocking checkpoint inhibitor, in patients with locally advanced or metastatic solid tumors. Parts 1 and 3, dose escalation as a single agent and in combination with Keytruda, have been completed. We continue to enroll patients in Part 2, single agent dose expansion, with enrollment expected to be between 62 to 98 patients. Part 4, combination expansion cohorts, are enrolling approximately 105 to 175 patients in total. We expect to announce initial data from these cohorts during the second half of 2023.
INBRX-106 is a precisely engineered hexavalent sdAb-based therapeutic candidate targeting OX40, designed to be an optimized agonist of this co-stimulatory receptor. It is currently being investigated as a single agent and in combination with Keytruda in patients with locally advanced or metastatic solid tumors. Parts 1 and 3, dose escalation as a single agent and in combination with Keytruda, have been completed. It was observed to be well tolerated, with predominantly mild or moderate immune-related toxicities notes. We observed durable responses across multiple tumor types. We continue to enroll patients in Part 2, single agent dose expansion, with enrollment expected to be between 82 to 94 patients. Part 4, combination expansion cohorts, are enrolling approximately 170 patients in total who are positive for PD-L1 expression as determined by immunohistochemistry and possessing adequate hematologic and organ function, to qualify for enrollment. We expect to announce initial data from these cohorts during the first half of 2024.
License and Collaboration Agreements
Celgene Agreement
On July 1, 2013, we entered into a license agreement with Celgene Corporation, a Bristol Myers Squibb Company, or Celgene, as amended on November 23, 2018, or the Celgene Agreement, pursuant to which we granted Celgene an exclusive, global license for the development, manufacture and commercialization of our proprietary CD47 binding domain, or the Celgene Licensed Intellectual Property. Per the terms of the Celgene Agreement, Celgene is operationally and financially responsible for the development, manufacturing and commercialization activities of Celgene Licensed Intellectual Property and any additional related antibodies covered by the Celgene Agreement.
As payment for the license granted in the Celgene Agreement, we may be eligible to receive development and regulatory milestones of an aggregate of $934.1 million, assuming the achievement of all potential milestones in the Celgene Agreement, as well as percentage tiered royalties based on future worldwide sales, with rates ranging from the high single-digits to the low teens, subject to potential reduction when and if comparable third party products attain certain levels of competitive market share (on a country-by-country basis) and, subject to certain limitations, payments to third parties for third-party intellectual property rights. We are obligated to pay 2% of future amounts received under the Celgene Agreement to advisors who assisted us with the negotiations and other matters in connection with the Celgene Agreement.
2seventy bio Agreements
On December 20, 2018, we entered into an exclusive license agreement with bluebird bio, Inc., or bluebird, to research, develop and commercialize CAR T-cell therapies using our proprietary sdAb platform. In November 2021, bluebird assigned this license agreement, or the 2018 2seventy Agreement, to its affiliate 2seventy bio, Inc., or 2seventy, in connection with an internal restructuring and subsequent spin-out of 2seventy. Under the terms of this license agreement, we provided 2seventy the exclusive worldwide rights to develop, manufacture and commercialize certain cell therapy products containing sdAbs directed to various cancer targets. To date, we have received $9.0 million in payments pursuant to the license agreement. We are entitled to receive developmental milestone payments of up to an aggregate of $51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single digits.
On June 9, 2020, we entered into an additional license agreement with bluebird, or the 2020 2seventy Agreement, which was also assigned to 2seventy in November 2021 in connection with bluebird’s internal restructuring and
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subsequent spin-out of 2seventy. In June 2020, we received a non-refundable upfront option fee of $0.2 million in connection with each of the two initial programs, or $0.4 million in aggregate, and we are entitled to an upfront option fee for each additional program. In June 2022, 2seventy selected a third program and paid an additional $0.2 million as a non-refundable upfront option fee in exchange for a development license. We also granted options in which 2seventy may acquire an exclusive license with respect to all binders and cell therapy products developed under the 2020 2seventy Agreement, which entitles us to additional fees upon exercise of an option for each program. Additionally, 2seventy may extend the option term for up to six months in the event that there are additional bona fide development activities that 2seventy desires to undertake. We are also entitled to receive certain developmental milestone payments of up to an aggregate of $51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single-digits.
In May 2021, pursuant to the option extension terms in the 2020 2seventy Agreement, bluebird requested to extend the option term for one of the initial programs by an additional six months in exchange for an option extension fee of $0.1 million. In August 2021, pursuant to the option exercise terms in the agreement, bluebird exercised its option to exclusively license one of the initial programs in exchange for an option exercise fee of $2.1 million, the payment of which was received in October 2021.
Chiesi
In May 2019, we entered into the Chiesi Option Agreement with Chiesi. Under this agreement, we granted to Chiesi an exclusive option to obtain an exclusive license to develop and commercialize INBRX-101 outside of the United States and Canada. Additionally, the Chiesi Option Agreement provides Chiesi with a right of negotiation for INBRX-101 development and commercialization rights in the United States and Canada in the event we engage in discussions with any third parties for such rights during the term of the Chiesi Option Agreement or, as applicable, the term of a definitive exclusive license agreement between Chiesi and the Company. Under the terms of the Chiesi Option Agreement, we received a one-time, non-refundable option initiation payment of $10.0 million in August 2019. Pursuant to the Chiesi Option Agreement, we are performing research and development services for Chiesi during the option period, which will continue (unless the Chiesi Option Agreement is terminated earlier by the Chiesi or the Company) until 60 days following the last-to-occur of (i) the Company’s delivery to Chiesi of the trial phase data for the first Phase I Clinical Trial for INBRX-101 (including the complete clinical study report), (ii) the Company’s delivery to Chiesi of the finalized minutes from the definitive FDA scientific advice meeting conducted following completion of such Phase I Clinical Trial with the use of the full clinical study report if required by the FDA, and (iii) the Company’s delivery to Chiesi of the finalized minutes from the definitive parallel European Medicines Agency, or EMA, health technology assessment scientific advice meeting conducted following completion of such Phase I Clinical Trial with full use of the clinical study report if required by the EMA.
If Chiesi chooses to exercise its option under the Chiesi Option Agreement, we will receive a one-time, non-refundable fee of $12.5 million upon the effective date of the definitive agreement granting Chiesi the exclusive license. If the option is exercised, under the license agreement, we may be entitled to receive specified milestone payments of up to $122.5 million, as well as royalties on future product sales.
Other Collaboration Agreements
In addition to these contracts, we have entered into strategic collaborations with other third parties, including Phylaxis BioScience, LLC, or Phylaxis, Transcenta, and Elpiscience. For more information regarding these agreements, refer to Note 6 to the condensed consolidated financial statements.
Components of Results of Operations
Revenue
To date, all of our revenue has been derived from licenses with collaboration partners and grant awards. We have not generated any revenue from the commercial sale of approved therapeutic products, and until, if ever, they are approved for commercial sale, we expect our revenue will be derived primarily from payments under our current license agreements and any potential future collaborations or strategic transactions.
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Operating Expenses
Research and Development
To date, our research and development expenses have related primarily to research activities, including our discovery efforts, and preclinical and clinical development and the manufacturing of our therapeutic candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We do not track our internal research and development expenses on a program-by-program basis as they primarily relate to personnel, early research and consumable costs, which are deployed across multiple projects under development.
Research and development expenses consist primarily of:
•External expenses, consisting of:
◦expenses incurred in connection with the preclinical development of our programs;
◦clinical trials of our therapeutic candidates, including under agreements with third parties, such as consultants and contract research organizations, or CROs;
◦expenses associated with the manufacturing of our therapeutic candidates under agreements with contract development and manufacturing organizations, or CDMOs;
◦expenses associated with regulatory requirements, including fees and other expenses related to our Scientific Advisory Board; and
◦other external expenses, such as laboratory services related to our discovery and development programs and other shared services, and
•Internal expenses, consisting of:
◦salaries, benefits and other related costs, including non-cash stock-based compensation, for personnel engaged in research and development functions;
◦facilities, depreciation and other expenses, which include direct and allocated expenses for depreciation and amortization, rent and maintenance of facilities; and
◦other internal expenses, such as laboratory supplies and other shared research and development costs.
We expect that research and development expense will continue to increase over the next several years as we continue development of our therapeutic candidates currently in clinical stage development, support our preclinical programs, and continue to discover new therapeutic candidates, as well as increase our headcount. In particular, clinical development of our therapeutic candidates, as opposed to preclinical development, generally has higher development costs, primarily due to the increased size and duration of later-stage clinical trials. Moreover, the costs associated with our CDMOs to manufacture our therapeutic candidates and future commercial products is also much more costly as compared to early stage preclinical development. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our therapeutic candidates due to the inherently unpredictable nature of preclinical and clinical development. Preclinical and clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which therapeutic candidates to pursue and how much funding to direct to each therapeutic candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each therapeutic candidate’s commercial potential. We will need substantial additional capital in the future to support these efforts. In addition, we cannot forecast which therapeutic candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our clinical development costs may vary significantly based on factors such as:
•the per patient trial costs;
•the number of trials required for approval;
•the number of sites included in the trials;
•the countries in which the trials are conducted;
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•the length of time required to enroll eligible patients;
•the number of patients that participate in the trials;
•the number of doses that patients receive;
•the drop-out or discontinuation rates of patients;
•the potential additional safety monitoring requested by regulatory agencies;
•the duration of patient participation in the trials and follow-up;
•the cost, timing, and successful manufacturing of our therapeutic candidates;
•the phase and development of our therapeutic candidates;
•the efficacy and safety profile of our therapeutic candidates; and
•the uncertainties related to potential economic downturn, geopolitical events, and widespread health events on capital and financial markets.
General and Administrative
G&A expenses consist primarily of:
•salaries, benefits and other related costs, including non-cash stock-based compensation, for personnel engaged in G&A functions;
•expenses incurred in connection with accounting and audit services, legal services, including costs associated with obtaining and maintaining our patent portfolio, investor relations, and consulting expenses under agreements with third parties, such as consultants and contractors;
•expenses incurred in connection with commercialization and business development activity; and
•facilities, depreciation and other expenses, which include direct and allocated expenses for depreciation and amortization, rent and maintenance of facilities, insurance and supplies.
We expect our G&A expenses will continue to increase in the future to support our continued research and development activities. These increases will likely include legal and professional fees, including patent-related costs for filing, prosecution, and maintenance of our product candidates. We also expect increased costs related to pre-commercialization and business development activities, including the hiring of additional personnel as we continue to build our commercial team, regulatory and compliance costs, and other professional service fees, including accounting, legal, investor, and public relation fees, and additional personnel to support these functions as well.
Other Income (Expense)
Interest expense. Interest expense consists primarily of our interest on our loans with Oxford Finance LLC, offset in part by interest income. Interest income consists of our interest earned on cash and cash equivalents, including our investments in highly liquid debt securities with original maturities of less than three months from our date of acquisition.
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Results of Operations
Comparison of the Three Months Ended March 31, 2023 and March 31, 2022
The following table summarizes our condensed consolidated results of operations for each of the periods indicated (in thousands, except percentages):
| THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
| 2023 | 2022 | ($) | (%) | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| License fee revenue | $ | 17 | $ | 915 | $ | (898) | (98) | % | |||||||||||||||
| Grant revenue | — | 14 | (14) | (100) | % | ||||||||||||||||||
| Total revenue | 17 | 929 | (912) | (98) | % | ||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||
| Research and development | 37,386 | 24,895 | 12,491 | 50 | % | ||||||||||||||||||
| General and administrative | 6,397 | 5,051 | 1,346 | 27 | % | ||||||||||||||||||
| Total operating expense | 43,783 | 29,946 | 13,837 | 46 | % | ||||||||||||||||||
| Loss from operations | (43,766) | (29,017) | (14,749) | 51 | % | ||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest expense, net | (5,080) | (2,274) | (2,806) | 123 | % | ||||||||||||||||||
| Other income (expense), net | (70) | 37 | (107) | (289) | % | ||||||||||||||||||
| Total other expense | (5,150) | (2,237) | (2,913) | 130 | % | ||||||||||||||||||
| Provision for income taxes | — | — | — | 100 | % | ||||||||||||||||||
| Net loss | $ | (48,916) | $ | (31,254) | $ | (17,662) | 57 | % | |||||||||||||||
License Fee Revenue
During the three months ended March 31, 2023, we recognized $17,000 of license fee revenue related to the Chiesi Option Agreement, while we recognized $0.2 million under the Chiesi Option Agreement during the three months ended March 31, 2022. This decrease in revenue earned during the three months ended March 31, 2023 is due to the timing of the performance of CDMO and CRO services in relation to INBRX-101 and the completion of the Phase 1 clinical trial during 2022. Additionally, during the three months ended March 31, 2022 we recognized license fee revenue of approximately $0.7 million related to our agreements with Phylaxis. Work on the first phase of this agreement was completed and all deferred revenue was recognized during 2022. Accordingly, no revenue was recognized under our agreements with Phylaxis during the three months ended March 31, 2023.
Grant Revenue
Grant revenue during the three months ended March 31, 2022 consisted of revenue earned under a grant with the Department of Defense of $14,000. During the three months ended March 31, 2023, there was no grant revenue following the completion of our grant with the Department of Defense in the first quarter of 2022.
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Research and Development Expense
The following table sets forth the primary external and internal research and development expenses (in thousands, except percentages):
| THREE MONTHS ENDED MARCH 31, | CHANGE | ||||||||||||||||||||||
| 2023 | 2022 | ($) | (%) | ||||||||||||||||||||
| External expenses: | |||||||||||||||||||||||
| Contract manufacturing | $ | 10,328 | $ | 6,893 | $ | 3,435 | 50 | % | |||||||||||||||
| Clinical trials | 10,019 | 5,007 | 5,012 | 100 | % | ||||||||||||||||||
| Other external research and development | 2,286 | 2,078 | 208 | 10 | % | ||||||||||||||||||
| Internal expenses: | |||||||||||||||||||||||
| Personnel | 11,302 | 8,429 | 2,873 | 34 | % | ||||||||||||||||||
| Equipment, depreciation, and facility | 1,798 | 1,382 | 416 | 30 | % | ||||||||||||||||||
| Other internal research and development | 1,653 | 1,106 | 547 | 49 | % | ||||||||||||||||||
| Total research and development expenses | $ | 37,386 | $ | 24,895 | $ | 12,491 | 50 | % | |||||||||||||||
Research and development expenses increased by $12.5 million to $37.4 million during the three months ended March 31, 2023 from $24.9 million during the three months ended March 31, 2022. The overall increase was primarily due to the following factors:
•contract manufacturing expense increased by $3.4 million due to greater development and manufacturing costs at our CDMO partners supporting our clinical and preclinical therapeutic candidates, including early and late stage drug substance clinical manufacturing, analytical development, QC testing, and stability studies, as well as drug product development, scale-up, robustness studies, and selected BLA-enabling activities;
•clinical trial expense increased by $5.0 million as a result of an increase in expense as a result of the initiation of the registration-enabling Phase 2 trial for INBRX-101 for the treatment of emphysema due to alpha-1 antitrypsin deficiency, as well as the progression of our INBRX-109 registration-enabling Phase 2 trial for the treatment of unresectable or metastatic conventional chondrosarcoma. Additionally, costs increased as a result of the continuation of the combination cohorts in our Phase 1 trial for INBRX-109. Costs associated with our Phase 1/2 clinical trials for INBRX-105 and INBRX-106 remained consistent in each period;
•personnel-related expense increased by $2.9 million, primarily related to an increase in headcount as a result of a significant expansion of our clinical operations team, as well as the issuance of additional stock options and the expansion of the bonus eligibility pool during the current year; and
•facilities expense increased by $0.4 million, which was primarily attributable to an increase in depreciable equipment.
G&A Expense
G&A expenses increased by $1.3 million to $6.4 million during the three months ended March 31, 2023 from $5.1 million during the three months ended March 31, 2022. The overall increase during the three months ended March 31, 2023 was primarily due to the following factors:
•personnel-related expenses increased by $1.1 million, primarily attributable to an increase in headcount as we continue to build out our commercial strategy team, as well as expense related to additional stock option grants to employees and the expansion of the bonus eligibility pool in the current year; and
•pre-commercialization expenses increased by $0.2 million, primarily related to market research expenses related to INBRX-101 and INBRX-109, and other expenses incurred related to scientific publications and conferences.
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Other income (expense)
Interest expense, net. Interest expense, net, increased by $2.8 million to $5.1 million during the three months ended March 31, 2023 from $2.3 million during the three months ended March 31, 2022. During the three months ended March 31, 2023, we recorded $7.6 million of interest expense related to interest incurred and the amortization of debt discounts related to the Amended 2020 Loan Agreement, under which we had an outstanding principal balance of $200.0 million as of March 31, 2023. Interest expense was offset in part by $2.5 million of interest income and the accretion of discounts on investments in debt securities during the period. During the three months ended March 31, 2022, we incurred $2.3 million of interest expense related to interest incurred and the amortization of debt discounts related to the Amended 2020 Loan Agreement, under which we had an outstanding principal balance of $110.0 million as of March 31, 2022.
Liquidity, Capital Resources and Financial Condition
Sources of Liquidity
To date, sources of capital raised to fund our operations have been comprised of the sale of equity securities, borrowings under the loan and security agreements, payments received from commercial partners for licensing rights to our therapeutic candidates under development and grants, and proceeds from the sale and issuance of convertible promissory notes.
Proceeds from the sale of equity securities as a public company consist of $125.9 million in net proceeds from our initial public offering and $167.6 million in net proceeds under our Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or the Sales Agent. Under the Sales Agreement, which we entered into in September 2021, we may, from time to time, sell shares of common stock through the Sales Agent with an aggregate offering price of up to $200.0 million, of which we have sold $171.4 million in gross proceeds to date as of March 31, 2023 and December 31, 2022. Sales of our common stock made pursuant to the Sales Agreement have been made under our $400.0 million Shelf Registration on Form S-3ASR, which became automatically effective upon filing on September 3, 2021.
Borrowings under loan and security agreements consist of the Amended 2020 Loan Agreement with Oxford, under which we received $200.0 million in gross proceeds in seven tranches between July 2020 and October 2022.
Other sources of capital raised to fund our operations have been comprised of payments received from commercial partners for licensing rights to our therapeutic candidates under development and grant revenue.
Future Funding Requirements
Since our inception, we have devoted substantially all of our efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of our therapeutic candidates, establishing our intellectual property portfolio, developing our commercialization strategy, hiring to support these departments and activities, and raising capital to support and expand these activities. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
Our net loss for the three months ended March 31, 2023 and March 31, 2022 was $48.9 million and $31.3 million, respectively. As of March 31, 2023, we had an accumulated deficit of $421.3 million and cash and cash equivalents of $234.3 million. Based upon our current operating plans, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months from the date these condensed consolidated financial statements are issued. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.
The process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain. We expect to continue to incur net losses for the foreseeable future until, if ever, we have an approved product and can successfully commercialize it. We expect our
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research and development expenses to increase as we continue our development of, and seek marketing approvals for, our therapeutic candidates (especially as we move more candidates into later stages of clinical development), and begin to commercialize any approved products, if ever. At this time, we are preparing to proceed with the commercialization of certain of our product candidates, if ever approved. As a result, we will incur significant pre-commercialization expenses in preparation for launch, the outcome of which is uncertain. Additionally, if approved, we will incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. We also expect additional general and administrative expenses as we hire additional personnel and incur increased accounting, audit, legal, regulatory and compliance, investor and public relations expense.
Until such time, if ever, we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including strategic licensing and collaborations, strategic transactions, or other similar arrangements and transactions, and from time to time, we engage in discussions with potential acquirers regarding the disposition of one or more of our product candidates. However, there can be no assurance as to the availability or terms upon which such finances or capital might be available in the future. If we are unable to secure adequate additional funding, we will need to reevaluate our operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our intellectual property on less favorable terms than we would otherwise choose. These actions could materially impact our business, results of operations, financial condition, and prospects.
Our future liquidity and capital funding requirements will depend on numerous factors, including:
•the outcome, costs and timing of preclinical studies and clinical trials for our current or future therapeutic candidates;
•whether and when we are able to obtain marketing approval to market any of our therapeutic candidates and the outcome of meetings with applicable regulatory agencies, including the FDA;
•our ability to successfully commercialize any therapeutic candidates that receive marketing approval;
•the emergence and effect of competing or complementary therapeutics or therapeutic candidates;
•our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
•our ability to retain our current employees and the need and ability to hire additional management and scientific and medical personnel;
•the terms and timing of any strategic licensing, collaboration or other similar agreement that we have established or may establish;
•our ability to repay, refinance or restructure our indebtedness when payment is due, including in the event such indebtedness is accelerated;
•the valuation of our capital stock; and
•the continuing or future effects of a potential economic downturn, geopolitical events, and widespread health events on capital and financial markets.
We do not own or operate manufacturing and testing facilities for the production of any of our therapeutic candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on a limited number of third-party contract manufacturers for all of our required raw materials, antibodies, and other biologics for our preclinical research, clinical trials, and if and when applicable, commercial product, and employ internal resources to manage our manufacturing relationships with these third parties.
Commitments
Our material cash requirements from known contractual and other obligations primarily relate to our lease obligations, debt, and services provided by our third party CROs, and CDMOs.
We have two leases for our laboratory and office space, which expire in 2025, with an option to extend the leases for an additional five years. As of March 31, 2023, we have future minimum rental obligations under these leases of
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$5.0 million, of which $2.2 million and $2.8 million are current and non-current, respectively. For more information regarding these lease agreements, refer to Note 7 to the condensed consolidated financial statements.
Under the Amended 2020 Loan Agreement, we are required to make interest only payments through February 2025, with all principal payments and final fee payments beginning in March 2025, unless the Amended 2020 Loan Agreement is extended an additional twelve months upon a qualified financing event, and continuing through the maturity date of January 2027. As of March 31, 2023, we have a minimum obligation of $270.1 million of long-term debt, including minimum interest and final fee payments, of which $18.5 million and $251.6 million are current and non-current, respectively. For more information regarding the Amended 2020 Loan Agreement, refer to Note 3 to the condensed consolidated financial statements.
We enter into contracts in the normal course of business with CROs related to our ongoing preclinical studies and clinical trials and with CDMOs for clinical supplies and manufacturing scale-up activities. These contracts are generally cancellable, with notice, at our option. We have recorded accrued expenses of approximately $14.4 million in our condensed consolidated balance sheets for expenditures incurred by CROs and CDMOs as of March 31, 2023.
While these contracts are generally cancellable, some may contain specific activities that involve one or more non-cancellable commitments, including minimum purchase commitments, binding annual forecasts, and capital equipment investments. Additionally, depending on the timing and reasoning of the exit, certain termination penalties may apply and can range from the cost of work performed to date up to twelve months of future committed manufacturing costs. As of March 31, 2023, the non-cancellable portion of these contracts total in aggregate, excluding amounts recorded in accounts payable and accrued expenses as of this date is approximately $74.4 million. The non-cancellable purchase commitments relate to the purchase of clinical supply for INBRX-101.
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Cash Flow Summary
The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Net cash used in operating activities | $ | (39,944) | $ | (26,941) | ||||||||||
| Net cash used in investing activities | (23) | (117) | ||||||||||||
| Net cash provided by financing activities | 356 | 39,224 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (39,611) | $ | 12,166 | ||||||||||
Operating Activities
Net cash used in operating activities was $39.9 million during the three months ended March 31, 2023 and consisted primarily of a net loss of $48.9 million, adjusted for non-cash items including accretion on our debt discount and the non-cash portion of interest expense related to our debt of $1.2 million, stock-based compensation expense of $5.6 million, depreciation and amortization of $0.3 million, and non-cash lease expense of $0.4 million. Changes in operating assets and liabilities also contributed to the cash used in operating activities, primarily related to increases in accrued expenses and other current liabilities of $2.4 million and accounts payable of $2.3 million, offset in part by increases in prepaid expenses and other current assets of $2.8 million due to the timing of clinical activity and contract manufacturing work performed by our CDMO partners during the period. Additionally, the operating lease liability decreased by $0.4 million as a result of lease payments made throughout the period.
Net cash used in operating activities was $26.9 million during the three months ended March 31, 2022 and consisted primarily of a net loss of $31.3 million, adjusted for non-cash items including accretion on our debt discount and the non-cash portion of interest expense related to our debt of $0.5 million, stock-based compensation expense of $5.1 million, depreciation and amortization of $0.3 million, and non-cash lease expense of $0.4 million. Changes in operating assets and liabilities also contributed to the cash used in operating activities, primarily related to decreases in accounts payable of $1.3 million and accrued expenses and other current liabilities of $0.4 million due to the timing of clinical activity and contract manufacturing work performed by our CDMO partners. Additionally, deferred revenue decreased by $0.9 million and the operating lease liability decreased by $0.4 million. These changes were offset in part by decreases in related parties receivables of $0.4 million following the collection of balances and in prepaid expenses and other current assets of $0.5 million.
Investing Activities
Net cash used in investing activities was $23,000 and $0.1 million during the three months ended March 31, 2023 and March 31, 2022, respectively, and was related to capital purchases of laboratory and office equipment.
Financing Activities
Net cash provided by financing activities was $0.4 million during the three months ended March 31, 2023, which consisted of proceeds upon the exercise of stock options.
Net cash provided by financing activities was $39.2 million during the three months ended March 31, 2022 and consisted primarily of approximately $38.9 million of proceeds from Oxford under the Amended 2020 Loan Agreement upon draw of the Term D Loan in February 2022. Additionally, we received approximately $0.4 million of proceeds upon the exercise of stock options.
Critical Accounting Estimates and Policies
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe
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to be reasonable under the circumstances. Changes in estimates are reflected in reported results for the period in which they become known. Actual results could differ significantly from the estimates made by our management.
There have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2022.
Recent Accounting Pronouncements
See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of recent accounting pronouncements and their effect, if any, on us.
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Item 3. Quantitative and Qualitative Disclosures about Market Risks.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not required to provide the information required under this item.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were designed and operating effectively at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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Part II — Other Information
Item 1. Legal Proceedings.
We are not currently a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.
Item 1A. Risk Factors.
Except for the risk factor set forth below, there have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.
We maintain our cash and cash equivalents at financial institutions. The failure of financial institutions could adversely affect our ability to pay our operational expenses or make other payments.
Recent and potential future disruptions in access to bank deposits or lending commitments due to bank failure, have contributed to increased volatility and could materially and adversely affect our liquidity, our business and financial condition. The recent closures of Silicon Valley Bank and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation, or FDIC, created bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at Silicon Valley Bank and Signature Bank would have access to their funds, even those in excess of the standard FDIC insurance limits, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages. The failure of any bank in which we deposit our funds could reduce the amount of cash we have available for our operations or delay our ability to access such funds. Any such failure may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. In the event we have a commercial relationship with a bank that has failed or is otherwise distressed, we may experience delays or other issues in meeting our financial obligations. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash and cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
(a) Exhibits.
Exhibit No. | Description of Exhibit | Filed Herewith | Form | Incorporated By Reference File No. | Date Filed | |||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||
| 32.1* | X | |||||||||||||||||||||||||||||||
| 32.2* | X | |||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document | X | ||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101 | X | ||||||||||||||||||||||||||||||
* This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| INHIBRX, INC. | ||||||||
Date: May 8, 2023 | /s/ Mark P. Lappe | |||||||
| Mark P. Lappe | ||||||||
| Chief Executive Officer and Chairman | ||||||||
| (Principal Executive Officer) | ||||||||
Date: May 8, 2023 | /s/ Kelly D. Deck | |||||||
| Kelly D. Deck, C.P.A. | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial and Accounting Officer) | ||||||||
39