Item 1. Financial Statements
Item 1. Financial Statements.
IMARA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(Unaudited)
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents
$
49,491
$
48,309
Short-term investments
6,813
41,969
Prepaid expenses and other current assets
2,800
2,418
Total current assets
59,104
92,696
Property and equipment, net
—
250
Right of use assets - operating leases
—
525
Other assets
—
175
Total assets
$
59,104
$
93,646
LIABILITIES & STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
767
$
2,360
Accrued expenses and other current liabilities
1,051
4,604
Operating lease liability, current
—
246
Total current liabilities
1,818
7,210
Operating lease liability, non-current
—
406
Total liabilities
1,818
7,616
Commitments and contingencies (Note 7)
Preferred stock, $ 0.001 par value per share; 10,000,000 shares authorized; no shares
issued or outstanding as of September 30, 2022; no shares authorized, issued or
outstanding as of December 31, 2021
—
—
Common stock, $ 0.001 par value per share; 200,000,000 shares
authorized as of September 30, 2022 and December 31, 2021, respectively;
26,287,264 shares issued and outstanding as of September 30, 2022 and
December 31, 2021, respectively
27
27
Additional paid-in capital
235,457
233,516
Accumulated other comprehensive income
( 4
)
( 16
)
Accumulated deficit
( 178,194
)
( 147,497
)
Total stockholders’ equity
57,286
86,030
Total liabilities and stockholders’ equity
$
59,104
$
93,646
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
IMARA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Operating expenses:
Research and development
$
182
$
10,397
$
18,760
$
27,586
General and administrative
4,649
3,262
12,253
9,522
Total operating expenses
4,831
13,659
31,013
37,108
Loss from operations
( 4,831
)
( 13,659
)
( 31,013
)
( 37,108
)
Total other income, net:
Interest income
242
30
430
161
Other expense
( 20
)
( 18
)
( 114
)
( 118
)
Total other income, net
222
12
316
43
Net loss
$
( 4,609
)
$
( 13,647
)
$
( 30,697
)
$
( 37,065
)
Net loss attributable to common stockholders—basic and diluted
$
( 4,609
)
$
( 13,647
)
$
( 30,697
)
$
( 37,065
)
Weighted-average common shares outstanding—basic and diluted
26,287,264
24,898,346
26,287,264
20,099,976
Net loss per share attributable to common stockholders—basic and
diluted
$
( 0.18
)
$
( 0.55
)
$
( 1.17
)
$
( 1.84
)
Comprehensive loss:
Net loss
$
( 4,609
)
$
( 13,647
)
$
( 30,697
)
$
( 37,065
)
Other comprehensive income:
Unrealized gain (loss) on investments
31
( 2
)
12
( 6
)
Comprehensive loss
$
( 4,578
)
$
( 13,649
)
$
( 30,685
)
$
( 37,071
)
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
IMARA INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
(Unaudited)
COMMON
STOCK
$0.001 PAR
VALUE
ADDITIONAL
PAID-IN
ACCUMULATED
OTHER
COMPREHENSIVE
ACCUMULATED
TOTAL
STOCKHOLDERS’
SHARES
AMOUNT
CAPITAL
INCOME (LOSS)
DEFICIT
EQUITY
Balance at December 31, 2020
17,548,263
$
18
$
180,526
$
4
$
( 96,113
)
$
84,435
Stock-based compensation expense
—
—
947
—
—
947
Exercise of stock options
68,279
—
472
—
—
472
Unrealized loss on investments
—
—
—
( 3
)
—
( 3
)
Net loss
—
—
—
—
( 10,257
)
( 10,257
)
Balance at March 31, 2021
17,616,542
$
18
$
181,945
$
1
$
( 106,370
)
$
75,594
Stock-based compensation expense
—
—
917
—
—
917
Issuance of common stock under ATM offering, net of
issuance costs of $ 357
231,291
1
1,344
—
—
1,345
Exercise of stock options and issuance of stock under the
Employee Stock Purchase Plan
63,104
—
273
—
—
273
Unrealized loss on investments
—
—
—
( 1
)
—
( 1
)
Net loss
—
—
—
—
( 13,161
)
( 13,161
)
Balance at June 30, 2021
17,910,937
$
19
$
184,479
—
( 119,531
)
64,967
Stock-based compensation expense
—
—
1,003
—
—
1,003
Issuance of common stock under ATM and July 2021 offering,
net of issuance costs of $ 210
8,333,333
8
46,899
—
—
46,907
Exercise of stock options and issuance of stock under the
Employee Stock Purchase Plan
31,452
—
145
—
—
145
Unrealized loss on investments
—
—
—
( 2
)
—
( 2
)
Net loss
—
—
—
—
( 13,647
)
( 13,647
)
Balance at September 30, 2021
26,275,722
$
27
$
232,526
$
( 2
)
$
( 133,178
)
$
99,373
3
COMMON
STOCK
$0.001 PAR
VALUE
ADDITIONAL
PAID-IN
ACCUMULATED
OTHER
COMPREHENSIVE
ACCUMULATED
TOTAL STOCKHOLDERS’
SHARES
AMOUNT
CAPITAL
INCOME (LOSS)
DEFICIT
EQUITY
Balance at December 31, 2021
26,287,264
$
27
$
233,516
$
( 16
)
$
( 147,497
)
$
86,030
Stock-based compensation expense
—
—
1,056
—
—
1,056
Unrealized loss on investments
—
—
—
( 35
)
—
( 35
)
Net loss
—
—
—
—
( 14,639
)
( 14,639
)
Balance at March 31, 2022
26,287,264
$
27
$
234,572
$
( 51
)
$
( 162,136
)
$
72,412
Stock-based compensation expense
—
—
385
—
—
385
Unrealized gain on investments
—
—
—
16
—
16
Net loss
—
—
—
—
( 11,449
)
( 11,449
)
Balance at June 30, 2022
26,287,264
$
27
$
234,957
$
( 35
)
$
( 173,585
)
$
61,364
Stock-based compensation expense
—
—
500
—
—
500
Unrealized gain on investments
—
—
—
31
—
31
Net loss
—
—
—
—
( 4,609
)
( 4,609
)
Balance at September 30, 2022
26,287,264
$
27
$
235,457
$
( 4
)
$
( 178,194
)
$
57,286
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
IMARA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
2022
2021
Cash flows from operating activities:
Net loss
$
( 30,697
)
$
( 37,065
)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
1,941
2,867
Depreciation expense
612
74
Amortization and accretion on investments
110
103
Non-cash lease expense
( 12
)
—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
( 382
)
( 975
)
Accounts payable
( 1,593
)
505
Accrued expenses and other current liabilities
( 3,553
)
229
Operating lease assets and liabilities, net
( 114
)
( 24
)
Net cash used in operating activities
( 33,688
)
( 34,286
)
Cash flows from investing activities:
Proceeds from maturities and sales of short-term investments
35,058
42,637
Purchases of short-term investments
—
( 29,766
)
Purchases of property and equipment
( 363
)
( 12
)
Net cash provided by investing activities
34,695
12,859
Cash flows from financing activities:
Proceeds from July 2021 offering, net of underwriting discounts and commissions
—
47,000
Proceeds from ATM offering, net of underwriting discounts and commissions
—
1,818
Payment of issuance costs
—
( 567
)
Proceeds from exercise of options
—
860
Net cash provided by financing activities
—
49,111
Net increase in cash, cash equivalents and restricted cash
$
1,007
$
27,684
Cash, cash equivalents and restricted cash, beginning of period
$
48,484
$
47,786
Cash, cash equivalents and restricted cash, end of period
$
49,491
$
75,470
Supplemental disclosure of non-cash investing and financing activities:
Right of use asset obtained in exchange for lease liabilities
$
1,886
$
—
Unrealized loss on investments
$
12
$
( 6
)
The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the periods shown above:
Nine Months Ended
September 30,
2022
2021
Cash and cash equivalents
$
49,491
$
75,295
Restricted cash (included in other assets)
—
175
Total cash, cash equivalents and restricted cash
$
49,491
$
75,470
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
IMARA INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
IMARA Inc. (“IMARA” or the “Company”) is a biopharmaceutical company that has been dedicated to developing and commercializing novel therapeutics to treat patients suffering from serious diseases. The Company was incorporated in January 2016 under the laws of the State of Delaware, and its principal offices are in Boston, Massachusetts.
On April 5, 2022, the Company announced the results from interim analyses of its Ardent Phase 2b clinical trial of tovinontrine (IMR-687) in patients with sickle cell disease (“SCD”) and Forte Phase 2b clinical trial of tovinontrine in patients with ß-thalassemia. Based on the data generated by these interim analyses, the Company decided to discontinue the Ardent and Forte trials as well as the further development of tovinontrine in SCD and ß-thalassemia. The Company also decided to discontinue development of tovinontrine in heart failure with preserved ejection fraction, as well as its development plans with respect to IMR-261. In connection with these events, the Company’s Board of Directors approved a reduction in workforce designed to substantially reduce the Company’s operating expenses while it undertakes a comprehensive assessment of its strategic options to maximize stockholder value. The Workforce Reduction was completed as of September 30, 2022 and the Company incurred approximately $ 2.1 million of expenses comprised of notice and employee severance and retention payments.
On September 6, 2022, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Cardurion Pharmaceuticals, Inc. (“Cardurion”), discussed further in Note 14, providing for the sale of tovinontrine and all other assets of the Company related to its PDE9 program (the “Asset Sale”). On October 13, 2022, the Company, Iguana Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), and Enliven Therapeutics, Inc., a Delaware corporation (“Enliven”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), discussed further in Note 15, pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Enliven, with Enliven continuing as a wholly owned subsidiary of IMARA and the surviving corporation of the merger (the “Merger”). If the Merger is completed, the business of Enliven will continue as the business of the combined organization. The closing of the transactions contemplated by the Asset Purchase Agreement between IMARA and Cardurion is a condition to the closing of the transactions contemplated by the Merger Agreement. Consummation of the Asset Sale and Merger Agreement is subject to customary closing conditions, including, without limitation, approval of the sale by the Company’s stockholders.
Liquidity
The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of convertible preferred stock and proceeds from the IPO and subsequent common stock offerings. As of September 30, 2022, the Company had cash, cash equivalents, and investments of $ 56.3 million and an accumulated deficit of approximately $ 178.2 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future.
On April 1, 2021, the Company filed a Registration Statement on Form S-3 (the “Shelf”) with the SEC in relation to the registration and potential future issuance of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof in the aggregate amount of up to $ 200.0 million. The Shelf was declared effective on April 8, 2021. The Company also simultaneously entered into a sales agreement with Cantor Fitzgerald & Co, LLC, as sales agent, providing for the offering, issuance and sale by the Company of up to an aggregate $ 75.0 million of its common stock from time to time in “at-the-market” offerings under the Shelf. As of September 30, 2022, the Company had issued and sold 231,291 shares of common stock under the sales agreement, resulting in net proceeds of $ 1.4 million after deducting commissions and offering expenses.
On July 16, 2021, the Company completed a public offering of shares of its common stock. In connection with the offering, the Company issued and sold 8,333,333 shares of common stock at a public offering price of $ 6.00 per share, resulting in net proceeds of $ 46.8 million after deducting underwriting discounts and commissions and offering expenses.
As described above, the Company made the decision to discontinue development of tovinontrine in sickle cell disease, β-thalassemia and heart failure with preserved ejection fraction, as well to discontinue its development plans with respect to IMR-261. As a result and without giving effect to the Asset Sale, the Company believes its cash, cash equivalents and investments as of September 30, 2022 will be sufficient to fund its operating expense requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.
In the event that the Company does not complete the Asset Sale or the Merger, the Company (i) may elect to pursue a dissolution and liquidation of the Company, (ii) pursue another strategic transaction or (iii) may resume research and development
6
activities. If the Company decides to pursue any future product development efforts, it will need additional funding to support its planned operating activities. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all.
2. Summary of Significant Accounting Policies
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 (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2021 and notes thereto, included in the Company’s Annual Report on Form 10-K (the “Annual Report”), filed with the SEC on March 15, 2022. The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of September 30, 2022, the results of its operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021. Such adjustments are of a normal and recurring nature. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results for the year ending December 31, 2022, or for any future period.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, IMARA Security Corporation and IMARA E.U. Limited, the latter of which was dissolved in July 2021. All intercompany transactions and balances have been eliminated in consolidation.
Summary of Significant Accounting Policies
The significant accounting policies and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report. There have been no material changes in the Company’s significant accounting policies during the three and nine months ended September 30, 2022.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, accrued research and development expenses, and stock-based compensation expense. Actual results could differ materially from those estimates.
Segments
Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. All of the Company’s long-lived assets are held in the United States.
Comprehensive Loss
Comprehensive loss includes net loss and certain changes in stockholders’ equity that are excluded from net loss. The Company’s comprehensive loss includes unrealized gains and losses (net) on available-for-sale debt securities for the three and nine months ended September 30, 2022 and 2021.
7
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued “ASU 2020-03”, Codification Improvements to Financial Instruments (“ASU 2020-03”) which addressed, among other topics, Amendments related to ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13”). The amendments align the contractual term under Topic 326 and Topic 842 (Leases) to be consistent, and also clarifies when an entity should record an allowance for credit losses in accordance with Topic 326. The standard is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently evaluating the impact of this new guidance on the Company’s consolidated financial statements and related disclosures, but does not expect the adoption of ASU 2020-03 or ASU 2016-13 to be material.
3. Fair Value of Financial Assets and Liabilities
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):
September 30, 2022
Quoted Prices in
Active Markets
for Identical
Assets
Significant Other
Observable
Inputs
Significant Other
Observable
Inputs
Description
Total
(Level 1)
(Level 2)
(Level 3)
Assets:
Money market funds, included in cash and cash equivalents
$
46,252
$
46,252
$
—
$
—
Marketable securities:
Commercial paper
4,397
—
4,397
—
Corporate debt securities
2,416
—
2,416
—
Total financial assets
$
53,065
$
46,252
$
6,813
$
—
December 31, 2021
Quoted Prices in
Active Markets
for Identical
Assets
Significant Other
Observable
Inputs
Significant Other
Observable
Inputs
Description
Total
(Level 1)
(Level 2)
(Level 3)
Assets:
Money market funds, included in cash and cash equivalents
$
24,798
$
24,798
$
—
$
—
Marketable securities:
Commercial paper
26,131
—
26,131
—
Corporate debt securities
15,838
—
15,838
—
Total financial assets
$
66,767
$
24,798
$
41,969
$
—
As of September 30, 2022 and December 31, 2021, the Company’s Level 1 financial assets consisted of cash equivalents held in money market funds, which are valued using quoted market prices in active markets without any valuation adjustment. The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade securities. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.
During the three and nine months ended September 30, 2022 and the year ended December 31, 2021, there were no transfers between fair value measurement levels.
The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.
8
4. Investments
As of September 30, 2022 and December 31, 2021, the Company had short-term investments consisting of corporate debt securities and commercial paper, which are considered to be available-for-sale investments. These are included in short-term investments on the condensed consolidated balance sheets. The following table summarizes the Company’s investments (in thousands):
September 30, 2022
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Loss
Fair Value
Current:
Commercial paper
$
4,397
$
—
$
—
$
4,397
Corporate debt securities
2,420
—
( 4
)
2,416
Total
$
6,817
$
—
$
( 4
)
$
6,813
December 31, 2021
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Loss
Fair Value
Current:
Commercial paper
$
26,131
$
—
$
—
$
26,131
Corporate debt securities
15,854
—
( 16
)
15,838
Total
$
41,985
$
—
$
( 16
)
$
41,969
As of September 30, 2022, the Company held one available-for-sale securities with an aggregate value of approximately $ 2.4 million in an unrealized loss position for less than twelve months. As of December 31, 2021, the Company held seven available-for-sale securities in unrealized loss positions with an aggregate value of approximately $ 15.8 million in an unrealized loss position for less than twelve months. The Company has the intent and ability to hold such securities until recovery. The Company determined that there was no material change in the credit risk of these investments . As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of September 30, 2022 and December 31, 2021.
5. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
September 30,
2022
December 31,
2021
Accrued research and development expenses
$
136
$
2,288
Accrued compensation and benefits
164
2,024
Accrued professional services
733
249
Accrued other
18
43
Total accrued expenses
$
1,051
$
4,604
Accrued Research and Development Expenses
The Company’s accrued research and development expenses related to tovinontrine and IMR-261 significantly declined in the second and third quarters of 2022 following the Company’s April 2022 decision to discontinue development of each program.
Restructuring Costs
On April 12, 2022, the Company’s Board of Directors approved a reduction of the Company’s workforce (the “Workforce Reduction”) by approximately 83 % across all areas of the Company, to a total of six remaining full-time employees. The Workforce Reduction followed the Company’s decision to discontinue development of tovinontrine, as well to discontinue its development plans with respect to IMR-261. The Workforce Reduction was substantially completed during the three and nine months ended September 30, 2022.
The Company incurred total expenses relating to the Workforce Reduction of approximately $ 2.1 million, which was comprised of notice and employee severance and retention payments. The Company recorded these charges in accordance with ASC 420, Exit or Disposal Cost Obligations, and have included them as operating expenses in the condensed statements of operations and comprehensive loss. The Workforce Reduction was completed as of September 30, 2022.
9
6. License Agreements
Agreement with Lundbeck
In April 2016, the Company entered into a license agreement with Lundbeck A/S (“Lundbeck” and the “Lundbeck Agreement”) pursuant to which Lundbeck granted the Company the following licenses within the field of prevention, treatment or diagnosis of hemoglobinopathy disorders and/or other diseases or disorders, including those directly or indirectly related to hemoglobinopathies: (1) an exclusive, royalty-bearing license to certain patent rights and certain know-how owned or otherwise controlled by Lundbeck (“Licensed Technology”) to research, develop, make, use, sell, and commercialize products (“Licensed Products”) from PDE9 inhibitors, which included tovinontrine (“Licensed Compounds”); (2) a non-exclusive license to the Licensed Technology to make, research, develop, and use such Licensed Technology to enable research and development, with certain restrictions; and (3) a sublicensing right that allows the Company to grant sublicenses to third parties to use the Licensed Technology subject to the certain terms detailed in the Lundbeck Agreement. Under the Lundbeck Agreement, the Company is subject to certain achievement dates for development milestones as defined in the agreement. The regulatory milestones due under the Lundbeck Agreement depend on the products being developed. Development milestones due under the Lundbeck Agreement with respect to the Licensed Compounds total up to $ 23.5 million, and, for any products that contain PDE9 inhibitors other than Licensed Compounds, total up to $ 11.8 million. The Company also agreed to pay tiered royalties based on net sales of all products licensed under the agreement in the low single-digit percentages.
To date, pursuant to the Lundbeck Agreement, the Company has made cash payments to Lundbeck of $ 1.8 million consisting of an upfront payment and ongoing milestone payments, which were recorded as research and development expenses. No payments were made during the year ended December 31, 2021, or for the three and nine months ended September 30, 2022. As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck, which represented 8.0 % of the Company’s then outstanding equity pursuant to a restricted stock agreement. The shares were fully vested on the date of issuance. The Company also allowed Lundbeck to participate in the fourth tranche of its Series A preferred stock financing in November 2018 at $ 1.00 per share.
The Lundbeck Agreement can be terminated by the Company at any time with 180 days’ written notice. The Company or Lundbeck may terminate the agreement by written notice within a specified period of time in the event of a material breach.
In connection with the Asset Sale, the Lundbeck Agreement will be assigned to Cardurion.
7. Commitments and Contingencies
Lease Agreements
In May 2019, the Company entered into an operating lease agreement (the “May 2019 Lease Agreement”) for office space totaling 4,210 square feet, located in Boston, Massachusetts with a 62 -month term. The lease included a rent escalation clause which resulted in cash rental payments of approximately $ 0.3 million annually. Rent expense was being recognized on a straight-line basis over the lease term. In addition to the base rent, the Company was also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of the May 2019 Lease Agreement. The Company provided a security deposit of approximately $ 0.1 million in May 2019, which was included as a component of other assets on the Company’s consolidated balance sheet as of December 31, 2021. The Company occupied the space in August 2019 and commenced recognition of rent expense.
In June 2021, the Company entered into an amendment to the May 2019 Lease Agreement (the “June 2021 Amended Lease Agreement”). Under the terms of the June 2021 Amended Lease Agreement, the Company expanded its current premises in Boston, Massachusetts by an additional 5,026 square feet, bringing the total office space to 9,236 square feet. The term of the June 2021 Amended Lease Agreement commenced in February 2022 and, prior to the early termination of the lease discussed below, was set to expire on March 31, 2027 . Upon commencement of the term of the June 2021 Amended Lease Agreement, the annual base rent obligation increased to approximately $ 0.6 million, with a total cash obligation for base rent over the initial five-year term of the lease of approximately $ 3.1 million. In addition to the base rent, the Company was also responsible for its share of operating expenses, electricity and real estate taxes. Upon execution of the June 2021 Amended Lease Agreement, the Company provided an additional security deposit in the amount of $ 0.1 million, with security deposits under the May 2019 Lease Agreement and June 2021 Amended Lease Agreement totaling $ 0.2 million.
In July 2022, the Company entered into a second amendment and termination of office lease agreement (the “Termination Agreement”) to terminate the lease under the May 2019 Lease Agreement, as amended by the June 2021 Amended Lease Agreement. The termination of the lease became effective on August 7, 2022 as a result of the landlord entering into a new lease agreement with a third-party tenant for the premises covered by the lease. As part of the Termination Agreement the Company paid a lease termination fee of $ 0.3 million, which was comprised of forfeiture of its $ 0.2 million security deposit and an additional fee of $ 0.1 million. In connection with this termination the Company remeasured its right of use assets and operating lease liabilities and recorded a gain of
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less than $ 0.1 million. T he Company revised the estimated useful lives of the existing leasehold improvements and furniture placed in service at its premises, which are included as component of property and equipment, net on its unaudited condensed consolidated balance sheets and are fully depreciated as of September 30, 2022 .
The Company recorded rent expense of approximately $ 0.1 million and $ 0.5 million during the three months and nine months ended September 30, 2022, respectively.
There are no future lease payments due under the June 2021 Amended Lease Agreement following termination.
Legal Proceedings
The Company may from time to time be party to litigation arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the three and nine months ended September 30, 2022 and year ended December 31, 2021, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.
Indemnification Obligations
The Company agrees to standard indemnification obligations as part of entering into agreements in the ordinary course of business. Pursuant to the indemnification provisions, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners, in connection with matters specified in the applicable provision, which may include any U.S. patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products or product liability claims by any third-party with respect to the Company’s products. The term of these indemnification obligations is generally perpetual any time after execution of the agreement. The potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification obligations.
8. Stockholders’ Equity
On August 13, 2019, the Company’s board of directors, and on February 26, 2020, the Company’s stockholders, approved the Company’s restated certificate of incorporation, which became effective upon closing of the IPO on March 16, 2020, to authorize 10,000,000 shares of undesignated preferred stock, $ 0.001 per share par value, and to increase the number of authorized shares of common stock from 100,000,000 to 200,000,000 shares, $ 0.001 per share par value.
Common stockholders are entitled to receive dividends, as may be declared by the Board, if any, subject to the preferential dividend rights of any preferred stock then outstanding. Through September 30, 2022, no cash dividends have been declared or paid.
As of September 30, 2022, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding.
As of September 30, 2022 and December 31, 2021, the Company has reserved for future issuance the following shares of common stock:
September 30,
2022
December 31,
2021
Shares reserved for future issuance under the 2020 Equity Incentive Plan
2,593,338
1,216,532
Shares reserved for future issuance under the 2020 Employee Stock Purchase Plan
438,539
175,667
3,031,877
1,392,199
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9. Stock-Based Compensation
2016 Stock Incentive Plan
The Company’s 2016 Stock Incentive Plan, (the “2016 Plan”) provided for the grant of restricted stock, restricted stock units, stock appreciation rights, incentive stock options, non-statutory stock options and other stock-based awards to employees, officers, members of the Board, consultants and advisors of the Company.
As of the effective date of the 2020 Equity Incentive Plan (the “2020 Plan”) on March 11, 2020, and as of September 30, 2022, no shares remained available for future issuance under the 2016 Plan. Any options or awards outstanding under the 2016 Plan remain outstanding and effective
2020 Equity Incentive Plan
On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020 the Company’s stockholders approved, the 2020 Plan, which became effective on March 11, 2020. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares reserved for issuance under the 2020 Plan is the sum of: (1) 1,220,283 shares of the Company’s common stock; plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) 228,852 shares, which represents the Company’s common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan as of March 11, 2020 and (y) the number of shares of the Company’s common stock subject to outstanding awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right. The number of shares reserved will be annually increased on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 4 % of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (ii) an amount determined by the Company’s board of directors. On January 1, 2021, 701,930 additional shares were reserved for issuance under the 2020 Plan pursuant to this provision. On January 1, 2022, a further 1,051,490 shares were reserved for future under the 2020 Plan pursuant to this provision. No more than 8,541,982 shares of common stock may be issued as incentive stock options under the 2020 Plan. The shares of common stock underlying any awards that expire, terminate, or are otherwise surrendered, cancelled, forfeited or repurchased by the Company under the 2016 Plan or the 2020 Plan will be added back to the shares of common stock available for issuance under the 2020 Plan
As of September 30, 2022, there were 2,593,338 shares available for future issuance under the 2020 Plan.
The following table summarizes the Company’s stock option activity:
Number of
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding as of December 31, 2021
2,373,024
$
9.63
8.19
$
—
Granted
501,839
1.35
Exercised
—
—
Forfeited
( 1,040,598
)
10.16
Outstanding as of September 30, 2022
1,834,265
$
7.06
7.39
$
264
Options vested and exercisable as of September 30, 2022
1,155,807
$
6.93
6.84
$
—
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period.
The weighted-average grant date fair value of the Company’s stock options granted during the nine months ended September 30, 2022 was $ 1.02 . There were no options granted during the three months ended September 30, 2022. The weighted-average grant date fair value of the Company’s stock options granted during each of the three and nine months ended September 30, 2021 was $ 3.66 and $ 7.44 , respectively.
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Restricted Stock Units
In January 2022, the Company granted 425,289 restricted stock units to employees under the 2020 Plan, which will vest over a four year term. A summary of the restricted stock unit ("RSU") activity and related information is as follows:
Number of
Shares
Weighted-
Average
Grant Date Fair Value
Unvested as of December 31, 2021
—
$
—
Granted
425,289
1.38
Vested
—
—
Forfeited
( 211,846 )
1.38
Unvested as of September 30, 2022
213,443
$
1.38
Stock-Based Compensation
Stock-based compensation expense included in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Research and development
$
( 26
)
$
322
$
198
$
1,034
General and administrative
526
681
1,743
1,833
Total stock-based compensation expense
$
500
$
1,003
$
1,941
$
2,867
As of September 30, 2022 and December 31, 2021, total unrecognized compensation cost related to the unvested stock-based awards was $ 3.0 million and $ 9.4 million, respectively, which is expected to be recognized over a weighted-average period of 1.94 and 2.65 years, respectively.
10. Income Taxes
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs.
The CARES Act provided for an Employee Retention Credit (“ERC”), which is a refundable payroll tax credit that encouraged businesses to keep employees on the payroll during the COVID-19 pandemic. Eligible employers are entitled to a refundable tax credit equal to 50 % of qualified wages paid to employees between March 13, 2020, and December 31, 2020, up to a maximum of $ 5,000 credit per employee. In late December 2020 Congress expanded and amended the CARES Act by enacting Public Law 116-260. Per the amendment to the CARES Act, eligible employers are entitled to a refundable tax credit equal to 70 % of the qualified wages paid to employees between January 1, 2021, and September 30, 2021, up to a maximum of $ 10,000 of wages per employee per quarter, with a maximum of $ 7,000 per employee per calendar quarter. Congress further extended the credit with the American Rescue Plan signed into law on March 11, 2021; the American Rescue Plan extended the credit for the period July 1, 2021 to December 31, 2021 with the same limitations as the prior amendment (i.e., tax credit equal to 70 % of qualified wages up to a maximum of $ 10,000 of wages per employee per quarter). However, on November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act which redacted the credit for calendar quarter 4 of 2021. Qualified Wages must be paid on or after March 13, 2020 and before October 1, 2021, and may include wages paid to employees, as well as so much of the employer’s qualified health plan expenses as are properly allocable to such wages, not to exceed $ 10,000 per employee for calendar year 2020 or $ 10,000 per employee per calendar quarter in quarter 1, 2, or 3 of 2021 (“2021 Eligible Quarter”). The Retention Credit may be claimed for up to
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$5,000 per employee for calendar year 2020 (i.e., 50% of the $10,000 maximum in Qualified Wages for calendar year 2020) or $ 7,000 per employee per 2021 Eligible Quarter (i.e., 70% of the $10,000 maximum in Qualified Wages per 2021 Eligible Quarter). Therefore, the maximum Retention Credit per employee in 2020 is $ 5,000 and in 2021 is $ 21,000 . Based on the Company’s evaluation of this provision and pandemic-related impact on its operations in 2020 and 2021, it was determined that the Company qualified to claim ERC in the second, third and fourth calendar quarters of 2020, as well as in both the first, second, and third calendar quarters of 2021. The Company recognized an ERC of approximately $ 1.0 million as an offset to payroll tax expenses for the year ended December 31, 2021. The Company did no t recognize an ERC for the three and nine months ended September 30, 2022.
11. Net Loss Per Share
Basic and diluted net loss per share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. The Company has computed diluted net loss per common share after giving consideration to all potentially dilutive common shares, including convertible preferred stock (if any such convertible preferred stock were outstanding), and options to purchase common stock during the period determined using the if-converted method, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share have been the same.
The Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Options to purchase common stock
2,593,338
2,313,084
2,593,338
2,313,084
Unvested restricted stock units
213,443
—
213,443
—
Shares reserved for future issuance under the ESPP
438,539
187,209
438,539
187,209
12. Related Party Transactions
Lundbeck
Lundbeckfond Invest A/S is one of the Company’s stockholders and participated in all tranches of the Series A preferred stock financing and both tranches of the Series B preferred stock financing. Prior to the conversion of the Company’s preferred stock, Lundbeckfond Invest A/S owned 5,470,492 shares of Series A Preferred Stock as of December 31, 2019, and 478,749 shares of Series Seed Preferred Stock as of December 31, 2019. Lundbeckfond Invest A/S owned 1,326,111 shares of Series B Preferred Stock as of December 31, 2019. All shares of preferred stock converted into shares of common stock upon closing of the IPO. Lundbeckfond Invest A/S also purchased 187,500 shares of common stock in the IPO. This reflects a 5.1 % ownership interest on a fully diluted basis as of September 30, 2022 and December 31, 2021. Mette Kirstine Agger, who was a member of our board of directors until June 29, 2021, is a Managing Partner at Lundbeckfonden Ventures, which is an affiliate of Lundbeckfond Invest A/S.
Lundbeck, an affiliate of Lundbeckfond Invest A/S, is also one of the Company’s stockholders and participated in the fourth tranche of the Company’s Series A preferred stock financing. Prior to the conversion of the Company’s preferred stock, Lundbeck owned 499,069 shares of Series A Preferred Stock as of December 31, 2019, as well as 443,271 shares of common stock issued in conjunction with the Lundbeck Agreement (See Note 6). All shares of preferred stock converted into shares of common stock upon closing of the IPO. This reflects a 1.9 % ownership interest on a fully diluted basis as of September 30, 2022 and December 31, 2021. Lundbeck did not participate in the Series B Preferred Stock financing.
To date, pursuant to the Lundbeck Agreement, the Company has made cash payments to Lundbeck of $ 1.8 million consisting of an upfront payment and ongoing milestone payments which are recorded as research and development expense.
In connection with the Asset Sale, the Lundbeck Agreement will be assigned to Cardurion.
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13. Benefit Plans
The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code effective as of January 2019. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the plan may be made at the discretion of the Board. The Company made less than $ 0.1 million and $ 0.1 million of contributions for the three and nine months ended September 30, 2022, respectively, and has made $ 0.3 million of contributions to the plan to date.
14. Asset Purchase Agreement
On September 6, 2022, the Company entered into an Asset Purchase Agreement with Cardurion, providing for the sale of tovinontrine and all other assets of the Company related to its PDE9 program. Pursuant to the terms of the Asset Purchase Agreement, in addition to $ 250,000 previously paid by Cardurion to the Company upon execution of a non-binding term sheet, the aggregate purchase price consists of an upfront cash payment of $ 34,750,000 upon closing of the transaction and a $ 10,000,000 potential future payment that may become payable if Cardurion achieves a proof of concept milestone or other specified clinical milestones and a $ 50,000,000 potential future payment that may become payable if Cardurion achieves specified regulatory and/or commercial milestone events, in each case as described in the Asset Purchase Agreement and subject to the terms of the Asset Purchase Agreement. Consummation of the Asset Sale is subject to customary closing conditions, including, without limitation, approval of the sale by the Company’s stockholders.
15. Subsequent Events
Merger Agreement
On October 13, 2022, the Company, Merger Sub and Enliven entered into the Merger Agreement, pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Enliven, with Enliven continuing as the Company's wholly owned subsidiary and the surviving corporation of the Merger. If the Merger is completed, the business of Enliven will continue as the business of the combined organization. Consummation of the transactions contemplated by the Merger Agreement is subject to certain closing conditions, including, among other things, (1) approval by our stockholders of the Required Voting Proposal, (2) approval by the Enliven stockholders of the adoption of the Merger Agreement, (3) Nasdaq’s approval of the listing of the shares of our common stock to be issued in connection with the Merger, (4) the effectiveness of the Registration Statement, (5) our net cash as determined in accordance with the Merger Agreement being between $ 75 million and $ 95 million, (6) the waiting period under the HSR Act having expired or been terminated and (7) our closing of the previously announced Asset Sale. Each party’s obligation to consummate the Merger is also subject to other specified customary conditions, including the representations and warranties of the other party being true and correct as of the date of the Merger Agreement and as of the closing date of the Merger, generally subject to an overall material adverse effect qualification, and the performance in all material respects by the other party of its obligations under the Merger Agreement required to be performed on or prior to the date of the closing of the Merger. Enliven’s obligation to consummate the Merger is also subject to the completion of the Financing Transaction such that Enliven receives gross proceeds of at least $ 131.6 million and our obligation to consummate the Merger is subject to the completion of the Financing Transaction such that Enliven receives gross proceeds of at least $ 75.0 million.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (a) each then-outstanding share of Enliven common stock (including shares of Enliven common stock issued upon conversion of Enliven preferred stock, which conversion will occur immediately prior to the Effective Time and shares of Enliven common stock issued in the Financing Transaction (as defined below)) will be converted into the right to receive a number of shares of IMARA common stock ( subject to the payment of cash in lieu of fractional shares and after giving effect to the IMARA Reverse Stock Split (as defined below)) calculated in accordance with the Merger Agreement (the ratio of such conversion, the “Exchange Ratio”); and (b) each then-outstanding Enliven stock option to purchase Enliven common stock will be assumed by IMARA, subject to adjustment as set forth in the Merger Agreement.
The provisions for calculating the Exchange Ratio are set forth in the Merger Agreement, and assume a valuation for Enliven equal to $ 324.6 million, plus the proceeds of the Financing Transaction (as defined below), and a valuation for IMARA equal to its net cash as of the business day immediately prior to the closing date of the Merger, plus $ 10 million, in each case as further described in the Merger Agreement. The Exchange Ratio is also based on the relative capitalizations of the companies. For purposes of calculating the Exchange Ratio, shares of IMARA common stock underlying IMARA stock options outstanding immediately prior to the Effective Time with an exercise price per share of less than or equal to $ 10.00 (as adjusted for the IMARA Reverse Stock Split) will be deemed to be outstanding, and all shares of Enliven common stock underlying outstanding Enliven stock options, warrants and other derivative securities will be deemed to be outstanding.
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In connection with the Merger, IMARA will seek the approval of its stockholders to, among other things, (a) issue the shares of IMARA common stock issuable in connection with the Merger under the rules of The Nasdaq Stock Market LLC ("Nasdaq") pursuant to the terms of the Merger Agreement (the "Required IMARA Voting Proposal"), (b) amend its certificate of incorporation to effect a reverse split of IMARA common stock, at a ratio to be determined prior to the Effective Time in accordance with the Merger Agreement (the "Reverse Stock Split"), which is intended to ensure that Nasdaq listing requirements are satisfied and (c) amend certain terms of IMARA’s equity incentive plans as described in the Merger Agreement.
Each of IMARA and Enliven has made customary representations, warranties and has agreed to customary covenants in the Merger Agreement. Consummation of the Merger is subject to specified closing conditions.
The Merger Agreement contains certain termination rights of each of IMARA and Enliven, including, subject to compliance with the applicable terms of the Merger Agreement, the right of each party to terminate the Merger Agreement to enter into a definitive agreement for a superior proposal. Upon termination of the Merger Agreement under specified circumstances, IMARA may be required to pay Enliven a termination fee of $ 3.0 million and Enliven may be required to pay IMARA a termination fee of $ 9.75 million. In certain specified circumstances, Enliven may be required to pay IMARA a termination fee of $ 3.0 million.
Concurrently with the execution and delivery of the Merger Agreement, Enliven entered into a common stock purchase agreement (the "Purchase Agreement") with certain new and existing Enliven investors, pursuant to which Enliven agreed to issue and sell to such investors, and such investors agreed to purchase from Enliven, shares of Enliven common stock for an aggregate purchase price of approximately $ 164.5 million (the "Financing Transaction"). The closing of the Financing Transaction is conditioned on the satisfaction or waiver of the closing conditions to the Merger as set forth in the Merger Agreement and other customary closing conditions, and is expected to occur immediately prior to the closing of the Merger, in accordance with the terms of the Purchase Agreement. The shares of Enliven common stock to be issued in connection with the Financing Transaction will be converted into the right to receive a number of shares of IMARA common stock in the Merger in accordance with the Exchange Ratio (the "Converted Financing Stock") (subject to the payment of cash in lieu of fractional shares and after giving effect to the Reverse Stock Split).
At or prior to the Effective Time, IMARA will enter into a Contingent Value Rights Agreement (the "CVR Agreement") with a rights agent ("Rights Agent") pursuant to which IMARA’s preMerger common stockholders will receive one contingent value right ( each, a "CVR") for each outstanding share of IMARA common stock held by such stockholder on such date. Each CVR will represent the contractual right to receive payments upon the occurrence of certain events related to the Asset Sale or a potential sale or license involving IMR-261, in each case as set forth in, and subject to and in accordance with the terms and conditions of, the CVR Agreement.
The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. In the event that no such proceeds are received, holders of the CVRs will not receive any payment pursuant to the CVR Agreement. There can be no assurance that holders of CVRs will receive any amounts with respect thereto. The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with the SEC. The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in IMARA or any of its affiliates. No interest will accrue on any amounts payable in respect of the CVRs.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.