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Item 2. Management’s Discussion and Analysis

2024-11-13 compared with 2024-08-12 · 56 added, 54 removed, 235 unchanged (32% of the section changed)

18 unchanged sentences

On October 2, 2023, we completed our merger with Morphimmune Inc., or Morphimmune, a preclinical biotechnology company focused on developing targeted oncology therapies, and Morphimmune became a wholly owned subsidiary of Immunome.

Our current programs and strategic collaboration

Our current programs

AL-102 (Gamma Secretase Inhibitor)

25 unchanged sentences

IM-1021 (ROR1 ADC)

We are developing IM-1021, a preclinical stage ADC targeting ROR1 that we exclusively licensed from Zentalis Pharmaceuticals, Inc., or Zentalis, in January 2024.

We are developing IM-1021, a preclinical stage ADC targeting ROR1 that we exclusively licensed from Zentalis Pharmaceuticals, Inc., or Zentalis, in January 2024, and acquired from Zentalis in October 2024 in connection with the Zentalis Asset Purchase.

In preclinical studies, IM-1021 showed sustained tumor regression in a mouse model of triple-negative breast cancer.

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In addition to the already described current programs, we expect to continue to invest in discovery efforts intended to expand our pipeline.

Additional ADC programs are a major focus of these efforts, but other modalities, including RLTs, merit consideration.

In the context of ADCs, we believe that quality antibodies against novel or underexplored targets, whether generated by our proprietary platform or acquired through business development, are the starting point for differentiated therapies.

Additional ADC programs are the primary focus of these efforts.

We believe that quality antibodies against novel or underexplored targets, whether generated by our proprietary platform or acquired through business development, are the starting point for differentiated therapies.

By pairing these antibodies with linkers and payloads that are suitable for the biology of each target, we believe we can ultimately develop therapies that bring substantial benefit to patients.

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As an example, we may design and evaluate proprietary ADC components with the potential for use across multiple programs.

We believe that establishing a broad toolbox of ADC-related technologies supports the development of first-in-class or best-in-class oncology therapies.

We believe that establishing a broad toolbox of ADC-related technologies supports the development of potential first-in-class or best-in-class oncology therapies.

Components of our results of operations

5 unchanged sentences

We have not received any royalties under the Collaboration Agreement with AbbVie to date.

In-process research and development expenses

In-process research and development expense

Intangible assets acquired in an asset acquisition for use in research and development activities which have no alternative future use are expensed as in-process research and development, or IPR&D, expense on the acquisition date.

IPR&D expenses for the six months ended June 30, 2024 primarily relate to the acquisition of our license pursuant to the Zentalis Agreement and the acquisition of certain assets from Ayala and Atreca.

IPR&D expense for the nine months ended September 30, 2024 primarily relate to the acquisition of our license pursuant to the Zentalis License Agreement and the acquisition of certain assets from Ayala and Atreca.

Research and development expenses

18 unchanged sentences

Results of operations

Comparison of the three months ended June 30, 2024 and 2023

Comparison of the three months ended September 30, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Collaboration revenue

7 unchanged sentences

(1) Amounts include non-cash share-based compensation expense as follows (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Research and development

2 unchanged sentences

Collaboration revenue

Collaboration revenue decreased by $1.9 million, from $4.3 million for the three months ended June 30, 2023 to $2.4 million for the three months ended June 30, 2024.

The decrease was primarily due to a decrease in certain research and development activities allocated to AbbVie during the three months ended June 30, 2024 compared to the same period in 2023.

In-process research and development expenses

IPR&D expense for the three months ended June 30, 2024 primarily related to the write-off of IPR&D assets that were acquired from Atreca and determined to have no alternative future use .

There was no IPR&D expense for the three months ended June 30, 2023.

Collaboration revenue decreased by $0.7 million, from $3.6 million for the three months ended September 30, 2023 to $2.9 million for the three months ended September 30, 2024.

The decrease was primarily due to a decrease in certain research and development activities allocated to AbbVie during the three months ended September 30, 2024 compared to the same period in 2023.

In-process research and development expense

IPR&D expense for the three months ended September 30, 2024 related to $4.0 million for the write-off of acquired IPR&D assets that were determined to have no alternative future use and $2.7 million for the issuance of unregistered shares of our common stock in connection with the BMS License Agreement Amendment.

There was no IPR&D expense for the three months ended September 30, 2023.

Research and development expenses

Research and development expenses increased by $23.4 million, from $5.7 million for the three months ended June 30, 2023 to $29.1 million for the three months ended June 30, 2024.

Research and development expenses increased by $33.4 million, from $3.8 million for the three months ended September 30, 2023 to $37.2 million for the three months ended September 30, 2024.

We record direct research and development expenses , consisting principally of external costs, such as costs related to manufacturing, costs related to specific product development, and clinical trial costs including fees paid to investigators, consultants, central laboratories and CROs, to specific product development and clinical programs.

1 unchanged sentence

The table below shows our research and development expenses incurred with respect to each active program.

Three Months Ended June 30,

Three Months Ended September 30,

Preclinical programs (2)

1 unchanged sentence

Indirect research and development (4)

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due to clinical trial activities related to AL102.

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due primarily to increased outsourced research and manufacturing activities pertaining to IM-1021 and IM-3050.

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due primarily to increased ADC discovery activities.

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due primarily to an increase in personnel and personnel-related costs associated with supporting a larger development pipeline and performing increased discovery work.

The increase for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily due to manufacturing activities and clinical trial activities related to AL102.

The increase for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was due primarily to increased outsourced research and manufacturing activities pertaining to IM-1021 and IM-3050.

The increase for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was due primarily to increased ADC discovery activities.

The increase for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was due primarily to an increase in personnel and personnel-related costs associated with supporting a larger development pipeline and performing increased discovery work.

General and administrative expenses

General and administrative expenses increased by $2.7 million, from $4.3 million for the three months ended June 30, 2023 to $7.0 million for the three months ended June 30, 2024.

General and administrative expenses increased by $5.2 million, from $4.4 million for the three months ended September 30, 2023 to $9.5 million for the three months ended September 30, 2024.

The increase was primarily a result of a $4.1 million increase in personnel-related costs from an increase in headcount, including a $2.5 million increase in share-based compensation.

Interest income

Interest income increased by $3.7 million from $0.2 million for the three months ended June 30, 2023 to $3.9 million for the three months ended June 30, 2024.

The increase was primarily a result of increased interest rates and higher cash and cash equivalent and marketable security balances.

Comparison of the six months ended June 30, 2024 and 2023

Interest income increased by $3.1 million from $0.3 million for the three months ended September 30, 2023 to $3.4 million for the three months ended September 30, 2024.

The increase was primarily a result of higher cash and cash equivalent and marketable security balances.

Comparison of the nine months ended September 30, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Collaboration revenue

7 unchanged sentences

(1) Amounts include non-cash share-based compensation expense as follows (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Research and development

2 unchanged sentences

Collaboration revenue

Collaboration revenue decreased by $3.2 million, from $6.6 million for the six months ended June 30, 2023 to $3.4 million for the six months ended June 30, 2024.

The decrease was primarily due to a decrease in certain research and development activities allocated to AbbVie during the six months ended June 30, 2024 compared to the same period in 2023.

In-process research and development expenses

IPR&D expense for the six months ended June 30, 2024 primarily related to the write-off of IPR&D assets that were acquired from Zentalis, Ayala and Atreca and determined to have no alternative future use .

There was no IPR&D expense for the six months ended June 30, 2023.

Collaboration revenue decreased by $3.9 million, from $10.2 million for the nine months ended September 30, 2023 to $6.3 million for the nine months ended September 30, 2024.

The decrease was primarily due to a decrease in certain research and development activities allocated to AbbVie during the nine months ended September 30, 2024 compared to the same period in 2023.

In-process research and development expense

IPR&D expense for the nine months ended September 30, 2024 was primarily related to the write-off of acquired IPR&D assets that were determined to have no alternative future use .

There was no IPR&D expense for the nine months ended September 30, 2023.

Research and development expenses

Research and development expenses increased by $34.8 million, from $9.6 million for the six months ended June 30, 2023 to $44.5 million for the six months ended June 30, 2024.

Research and development expenses increased by $68.2 million, from $13.5 million for the nine months ended September 30, 2023 to $81.7 million for the nine months ended September 30, 2024.

The table below shows our research and development expenses incurred with respect to each active program.

Six Months Ended June 30,

Nine Months Ended September 30,

Preclinical programs (2)

1 unchanged sentence

Indirect research and development (4)

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to clinical trial activities related to AL102, which was acquired from Ayala in March 2024.

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to increased outsourced research and manufacturing activities pertaining to IM-1021 and IM-3050.

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to increased ADC discovery activities.

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to an increase in personnel and personnel-related costs associated with supporting a larger development pipeline and performing increased discovery work.

The increase for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due to manufacturing activities and clinical trial activities related to AL102, which was acquired from Ayala in March 2024.

The increase for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due primarily to increased outsourced research and manufacturing activities pertaining to IM-1021 and IM-3050.

The increase for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due primarily to increased ADC discovery activities.

The increase for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due primarily to an increase in personnel and personnel-related costs associated with supporting a larger development pipeline and performing increased discovery work.

General and administrative expenses

General and administrative expenses increased by $5.7 million, from $7.2 million for the six months ended June 30, 2023 to $13.0 million for the six months ended June 30, 2024.

General and administrative expenses increased by $10.9 million, from $11.6 million for the nine months ended September 30, 2023 to $22.5 million for the nine months ended September 30, 2024.

The increase was primarily a result of a $8.4 million increase in personnel-related costs from an increase in headcount, including a $5.0 million increase in share-based compensation.

1 unchanged sentence

Interest income

Interest income increased by $6.3 million from $0.4 million for the six months ended June 30, 2023 to $6.7 million for the six months ended June 30, 2024.

Interest income increased by $9.4 million from $0.7 million for the nine months ended September 30, 2023 to $10.1 million for the nine months ended September 30, 2024.

The increase was primarily a result of increased interest rates and higher cash and cash equivalent and marketable security balances.

5 unchanged sentences

Since inception, we have incurred significant operating losses and negative cash flows from operations.

Our net losses were $36.1 million and $5.6 million for the three months ended June 30, 2024 and 2023, respectively, and $165.6 million and $9.8 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $278.4 million and an accumulated deficit of $388.4 million.

Our net losses were $47.1 million and $4.3 million for the three months ended September 30, 2024 and 2023, respectively, and $212.7 million and $14.2 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we had cash, cash equivalents and marketable securities of $240.1 million and an accumulated deficit of $435.5 million.

In February 2024, we completed a follow-on public offering and issued 11,500,000 shares of our common stock at $20.00 per share for net proceeds of $215.4 million, after deducting underwriting discounts and commissions and offering expenses payable by us, or the 2024 Financing.

2 unchanged sentences

We have not yet sold any ATM Shares under the 2024 ATM Agreement.

The following table summarizes our sources and uses of cash for the six months ended June 30, 2024 and 2023 (in thousands):

Six Months Ended June 30,

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended September 30,

Cash (used in) provided by operating activities

3 unchanged sentences

Operating activities

Net cash used in operating activities for the six months ended June 30, 2024 was $34.6 million, consisting primarily of our net loss of $165.6 million, partially offset by noncash charges of $123.7 million and a net change in operating assets and liabilities of $7.3 million.

Net cash used in operating activities for the nine months ended September 30, 2024 was $68.7 million, consisting primarily of our net loss of $212.7 million, partially offset by noncash charges of $134.4 million and a net change in operating assets and liabilities of $9.6 million.

The noncash charges primarily consisted of $125.0 million of in-process research and development assets acquired without alternative future use and $10.3 million of share-based compensation.

The change in operating assets and liabilities primarily consisted of an increase in accrued expenses and other current liabilities of $13.5 million, an increase in accounts payable of $0.3 million and a decrease in prepaid expenses and other assets of $2.3 million, partially offset by a decrease in deferred revenue of $6.3 million.

Net cash provided by operating activities for the six months ended June 30, 2023 was $18.5 million, consisting primarily of our net loss of $9.8 million, partially offset by noncash charges of $2.6 million and a net change in operating assets and liabilities of $25.8 million.

Net cash provided by operating activities for the nine months ended September 30, 2023 was $9.9 million, consisting primarily of our net loss of $14.2 million, partially offset by noncash charges of $4.1 million and a net change in operating assets and liabilities of $19.9 million.

The noncash charges primarily consisted of $3.3 million of share-based compensation expense.

The change in operating assets and liabilities primarily consisted of an increase in deferred revenue of $23.4 million, an increase in accounts payable of $1.3 million and a decrease in prepaid expenses and other assets of $1.2 million.

The change in operating assets and liabilities primarily consisted of an increase in deferred revenue of $19.8 million and a decrease in prepaid expenses and other assets of $1.6 million, partially offset by a decrease in accrued expenses and other current liabilities of $1.5 million.

Investing activities

Net cash used in investing activities for the six months ended June 30, 2024 was $118.9 million, consisting primarily of $112.7 million of purchases of marketable securities, $41.7 million of purchases of IPR&D assets and $4.5 million of purchases of property and equipment, partially offset by $40.0 million from maturities of marketable securities.

Net cash used in investing activities for the six months ended June 30, 2023 was $0.4 million, consisting of purchases of property and equipment.

Net cash used in investing activities for the nine months ended September 30, 2024 was $94.8 million, consisting primarily of $112.7 million of purchases of marketable securities, $46.1 million of purchases of IPR&D assets and $6.0 million of purchases of property and equipment, partially offset by $70.0 million from maturities of marketable securities.

Net cash used in investing activities for the nine months ended September 30, 2023 was $0.5 million, consisting of purchases of property and equipment.

Financing activities

Net cash provided by financing activities for the six months ended June 30, 2024 was $220.1 million, consisting of gross proceeds of $230.0 million from the 2024 Financing and $4.8 million from the exercise of options and common stock warrants, partially offset by offering costs of $14.6 million from our 2024 Financing and 2024 ATM Agreement.

Net cash provided by financing activities for the six months ended June 30, 2023 was $34,000, consisting of net proceeds from the sales of common stock under our prior ATM sales agreement that we terminated in November 2023.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $220.4 million, consisting of gross proceeds of $230.0 million from the 2024 Financing and $5.3 million from the exercise of options and common stock warrants, partially offset by offering costs of $14.8 million from our 2024 Financing and 2024 ATM Agreement.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $60.9 million, consisting primarily of $61.0 million in gross proceeds from prepayments received in relation to the PIPE transaction associated with the closing of the Merger in October 2023.

The Company received these funds prior to the closing of the Merger and recorded this transaction as a deposit liability in the accompanying condensed balance sheets as of September 30, 2023.

Financing activities also provided $34,000 net proceeds from the sales of common stock under our prior ATM sales agreement that we terminated in November 2023, offset by $0.1 million in payments of deferred offering costs associated with the PIPE transaction.

Funding requirements

1 unchanged sentence

We expect that our primary uses of capital will be for clinical development services, non-clinical research, strategic transactions, manufacturing, legal and other regulatory compliance expenses, compensation and related expenses, risk management and general overhead costs.

We expect that our existing cash, cash equivalents and marketable securities as of June 30, 2024 will enable us to fund our current and planned operating expenses and capital expenditures for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

We expect that our existing cash, cash equivalents and marketable securities as of September 30, 2024 will enable us to fund our current and planned operating expenses and capital expenditures for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

We will need additional financing to support our continuing operations and pursue our research and development strategy.

29 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

While our significant accounting policies are described in Note 2 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q, we believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

While our significant accounting policies are described in Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Research and development expenses and accruals

Research and development costs consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation and amortization, preclinical and clinical development expenses, including manufacture and testing of clinical supplies, and amounts incurred under license agreements, consulting agreements and other contracted services.

Research and development costs consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation and amortization, and preclinical and clinical development expenses, including process development, validation, and the manufacture of drug supplies, costs to conduct clinical trials, and amounts incurred under license agreements, consulting agreements and other contracted services.

Research and development costs are expensed as incurred.

30 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis