IMMUNIC, INC. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” included elsewhere in this Annual Report. As used in this report, unless the context suggests otherwise, “we,” “us,” our” or “the Company” refer to Immunic, Inc. and its subsidiaries. Overview We are a clinical-stage biopharmaceutical company with a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune diseases, including relapsing multiple sclerosis (“RMS”), ulcerative colitis (“UC”), Crohn’s disease (“CD”) and psoriasis. We are headquartered in New York City with our main operations in Gräfelfing near Munich, Germany. We currently have approximately 55 employees. We are currently pursuing three development programs. These include the vidofludimus calcium (IMU-838) program, which is focused on the development of oral formulations of a small molecule inhibitor of the enzyme dihydroorotate dehydrogenase (“DHODH”); the IMU-935 program, which is focused on an inverse agonist of retinoic acid receptor-related orphan nuclear receptor gamma truncated (“RORγt”), an immune cell-specific isoform of RORγ; and the IMU-856 program, which involves the development of a drug targeting the restoration of intestinal barrier function and regeneration of bowel epithelium. These product candidates are being developed to address diseases such as RMS, UC, CD, and psoriasis. In addition to these large markets, these products are also being developed to address certain rare diseases with high unmet medical needs, such as primary sclerosing cholangitis (“PSC”), as well as metastatic castration-resistant prostate cancer (“mCRPC”). We have incurred net losses since inception of $196.9 million through December 31, 2021. We anticipate that we will continue to incur losses for at least the next several years. Due to the uncertainties involved with therapeutic product development and the clinical trial process, we cannot predict the timing or level of future expenses with certainty, when product approval might occur, if ever, or when profitability may be achieved or sustained. Recent Events 1. CALDOSE-1 Baseline Characteristics On February 18, 2022, we announced the main blinded baseline characteristics of our CALDOSE-1 trial of vidofludimus calcium in moderate-to-severe UC, including: • 263 moderate-to-severe UC patients were enrolled in 78 study sites with the Ukraine and Poland representing the countries with highest number of patients and U.S. sites contributing 12.5% of the overall enrollment. • Of the 263 patients, 148 (56.3%) were male and 115 (43.7%) were female patients. The mean age at baseline was 41.7 (18-77) years. • All patients had to have failed at least one prior therapy option. Of the 263 patients, 83% were biologically naïve and 17% were biologically experienced (received at least 1 prior treatment with any biological agent approved in the UC indication). • Enrolled patients had to show evidence of active moderate-to-severe UC disease. This is reflected in their baseline characteristics for patient-reported outcomes: ◦ The baseline Mayo stool frequency scores were: (i) score of 3 for 59% of patients, (ii) score of 2 for 36% of patients and (iii) score of 1 for 5% of patients. ◦ The Mayo rectal bleeding scores were: (i) score of 3 in 10% of patients, (ii) score of 2 for 54% of patients and (iii) score of 1 for 31% of patients. ◦ The average value for fecal calprotectin at baseline was approximately 1,320 μg/g for currently available, yet incomplete data. • The trial employed a central independent reader to evaluate the endoscopic eligibility criteria and the following modified Mayo endoscopic scores were assessed at baseline: ◦ 55% of patients with a score of 3; and ◦ 45% of patients with a score of 2. • At week 10 (the time point of the primary efficacy analysis), an adjudication procedure was used for endoscopy assessments. In the case of disagreement between two independent readers, a third independent reader was used for adjudication. 68 We believe that these blinded baseline characteristics of randomized patients and the methodology regarding endoscopic assessments contributes to ensuring an optimized study read-out. 2. IMU-935 Composition-of-Matter patents Granted On February 2, 2022, we received a Notice of Allowance from the U.S. Patent and Trademark Office (USPTO) for patent application 16/644581, entitled, “IL-17 and IFN-gamma inhibition for the treatment of autoimmune diseases and chronic inflammation”. We also received notice of allowance of patent application EP18762111.5 in Europe, and notice of grant of patent application 2018330633 in Australia. All three patents cover composition-of-matter of IMU-935 and related formulations, and are expected to provide protection into at least 2038, without accounting for potential Patent Term Extension (PTE) in the United States or Supplementary Protection Certificates (SPC) in Europe, respectively. 3. Other Product updates For status updates on our product candidates in development, please see "Business - Key Status Updates." 4. Equity Financings July 2021 Public Equity Offering On July 15, 2021, we entered into an underwriting agreement with Piper Sandler & Co., as representative of the several underwriters listed on Schedule A thereto, in connection with our public offering of 4,500,000 shares of our common stock, $0.0001 par value per share, at a public offering price of $10.00 per share. Under the terms of the underwriting agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 675,000 shares of Common Stock at the public offering price, less underwriting discounts and commissions. On July 19, 2021, we closed the offering. The net proceeds to us from the offering were approximately $42.0 million, after deducting underwriting discounts and commissions and estimated offering expenses. The underwriters did not exercise the option to purchase additional shares. ATM Issuances On December 29, 2020, we entered into a sales agreement with SVB Leerink LLC under which we may issue and sell up to $50 million of our common stock from time to time, through SVB Leerink as our sales agent, in what is deemed to be an “at the market offering” under applicable securities rules (the “December 2020 ATM”). In the year ended December 31, 2021, we raised gross proceeds of $0.8 million pursuant to the December 2020 ATM through the sale of 73,221 shares of common stock at a weighted average price of $10.27 per share. The net proceeds in 2021 from the December 2020 ATM were $0.7 million after deducting underwriter commissions of $22,555. To date in 2022, we have raised gross proceeds of $16.7 million pursuant to the December 2020 ATM through the sale of 1,568,487 shares of common stock at a weighted average price of $10.62 per shared. The net proceeds were $16.2 million after deducting underwriter commissions of $0.5 million. As of February 18, 2022, $32.6 million in capacity remains under the December 2020 ATM. 5. License Agreement with the University Medical Center Goettingen On September 22, 2021, we announced the execution of an in-license agreement with the University Medical Center Goettingen, Germany, covering the combination of DHODH inhibitors and nucleoside analogues to treat viral infections (COVID-19 and Influenza). Terms of the agreement were not disclosed. Preclinical research completed by the parties and their collaborators has shown that certain DHODH inhibitors, including vidofludimus calcium, strongly synergize with selected nucleoside analogues to inhibit SARS-CoV-2 replication in vitro . For instance, in an in vitro test system, vidofludimus calcium alone showed an up to 99.9% reduction in viral RNA at concentrations of 5 μM, which is well within the exposure levels seen in prior clinical trials. Likewise, NHC, the active metabolite of molnupiravir, alone, was associated with an up to 99% reduction in viral RNA at concentrations of 100 nM. Compared to single agent activity, the combination of vidofludimus calcium and NHC achieved an extra-ordinary reduction in viral RNA, down to the limit of detection, reducing SARS-CoV-2 RNA by up to seven log units (corresponding to 0.00001% viral RNA remaining). This powerful reduction of virus replication in vitro was demonstrated across multiple SARS-CoV-2 variants, including alpha, beta and delta, highlighting the independence of this approach to mutant virus forms. In addition to molnupiravir, we are exploring alternate nucleoside analogues, some of which have shown very promising antiviral activity in vitro . 69 Recalling vidofludimus calcium’s clinical activity against COVID-19 in our Phase 2 CALVID-1 trial published in February 2021, and in light of recent exacerbations in COVID-19 worldwide, we are very excited to have in-licensed this technology to incorporate into our pandemic preparedness effort. However, with the extra-ordinary wealth of activity already ongoing at the company in other programs, we intend to evaluate and pursue the best possible strategic option for this program, including potential partnership, collaboration or external funding. 6. Settlement Agreement with 4SC AG On March 31, 2021, Immunic AG, our wholly-owned subsidiary, and 4SC AG entered into a settlement agreement, pursuant to which Immunic AG settled its remaining obligation of the 4.4% royalty on net sales for $17.25 million. The payment was made 50% in cash and 50% in shares of our common stock. Pursuant to the Agreement, we filed a resale shelf registration statement on Form S-3 covering the resale of the shares. With the execution of the agreement, no further payment obligations remain between Immunic AG and 4SC AG. 7. Other Changes to Executive Team Appointment of Inderpal Singh as General Counsel On June 1, 2021, we announced the appointment of Inderpal Singh as our General Counsel. In his role, Mr. Singh is responsible for legal and compliance matters and has become part of our executive management team. Appointment of Patrick Walsh as Chief Business Officer On October 14, 2021, we announced the appointment of Patrick Walsh as Chief Business Officer. In this newly created role, Mr. Walsh is responsible for business development, including strategic partnering opportunities, and has become part of our executive management team. Executive Chairman Agreement with Duane Nash On April 15, 2020, the compensation committee of our Board of Directors independently reviewed and approved entering into an employment agreement with the current Chairman of the Board, Duane Nash, MD, JD, MBA and pursuant to such approval, on April 17, 2020, we and Dr. Nash entered into the Executive Chairman Agreement. The Executive Chairman Agreement establishes an “at will” employment relationship pursuant to which Dr. Nash serves as Executive Chairman and contemplated a term that ends on October 15, 2020, which was subsequently extended to April 15, 2021. On April 15, 2021, we and Dr. Nash entered into an addendum to extend the term of the Executive Chairman Agreement to April 15, 2022. In connection with the Agreement, we made a one-time award to Dr. Nash of an option to purchase 90,000 shares of Company common stock, which vest monthly commencing on May 15, 2021, and increased Dr. Nash’s monthly base salary to $27,960 from $25,417. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("US"), or 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 financial statements and the reported amounts of expenses during the reporting period. On an on-going basis, management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are typically recognized in the period when new information regarding estimates becomes available to management. Actual results could differ from those estimates. Our significant accounting policies are described in more detail in Note 2, "Summary of Significant Accounting Policies," in the notes to the consolidated financial statements. See below for what we believe are our Critical Accounting Policies. 70 Foreign Currency Translation and Presentation Our reporting currency is US dollars. During the twelve months ended December 31, 2021 and 2020, Immunic AG’s operations were located in Germany with the euro being its functional currency. Immunic Australia Pty Ltd.’s functional currency is the Australian dollar. All amounts in the financial statements where the functional currency is not the US dollar are translated into US dollar equivalents at exchange rates as follows: • assets and liabilities at reporting period-end rates; • income statement accounts at average exchange rates for the reporting period; and • components of equity at historical rates. Gains and losses from translation of the financial statements into US dollars are recorded in stockholders’ equity net of the anticipated income tax effects as a component of accumulated other comprehensive income (loss). Realized and unrealized gains and losses resulting from foreign currency transactions denominated in currencies other than the functional currency are reflected as general and administrative expenses in the Consolidated Statements of Operations. Foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future are recorded in Other Income. The Consolidated Statements of Cash Flows were prepared by using the average exchange rate in effect during the reporting period which reasonably approximates the timing of the cash flows. Goodwill Business combinations are accounted for under the acquisition method. The total purchase price of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, probabilities of success, discount rates, and asset lives, among other items. Assets acquired and liabilities assumed are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform a quantitative test that compares the fair value to its carrying value to determine the amount of any impairment. Impairment testing for goodwill is done at the reporting unit level. The Company has determined that it operates in a single operating segment and has a single reporting unit. The Company has determined there was no goodwill impairment as of December 31, 2021. Research and Development Expenses Research and development expenses consist of expenses incurred in research and development activities, which include clinical trials, contract research services, certain milestone payments, salaries and related employee benefits, allocated facility costs and other outsourced services. Research and development expenses are charged to operations as incurred. The Company enters into agreements with CROs to provide clinical trial services for individual studies and projects by executing individual work orders governed by a Master Service Arrangement (“MSA”). The MSAs and associated work orders provide for regular recurrent payments and payments upon the completion of certain milestones. The Company regularly assesses the timing of payments against actual costs incurred to ensure a proper accrual of related expenses in the appropriate accounting period. 71 Collaboration Arrangements Certain collaboration and license agreements may include payments to or from the Company of one or more of the following: non-refundable or partially refundable upfront or license fees; development, regulatory and commercial milestone payments; payment for manufacturing supply services; partial or complete reimbursement of research and development costs; and royalties on net sales of licensed products. The Company assesses whether such contracts are within the scope of Financial Accounting Standards Board (FASB) Accounting Standards Update (“ASU”) 2014-09 “ Revenue from Contracts with Customers ” and ASU No. 2018-18, “ Collaborative Arrangements”, ("ASU 2018-18"). ASU 2018-18, clarifies that certain elements of collaborative arrangements could qualify as transactions with customers in the scope of ASC 606. In October 2018, the Company entered into an option and license agreement (the "Daiichi Sankyo Agreement") with Daiichi Sankyo Co., Ltd. ("Daiichi Sankyo") which granted the Company the right to license a group of compounds, designated by the Company as IMU-856, as a potential new oral treatment option for diseases such as inflammatory bowel disease, irritable bowel syndrome with diarrhea, celiac disease and other barrier function associated diseases. During the option period, the Company performed agreed upon research and development activities for which it was reimbursed by Daiichi Sankyo up to a maximum agreed-upon limit. Such reimbursement is recorded as other income. On January 5, 2020, the Company exercised its option to obtain the exclusive worldwide right to commercialization of IMU-856. Among other things, the option exercise grants Immunic AG the rights to Daiichi Sankyo’s patent application related to IMU-856. In connection with the option exercise, the Company paid a one-time upfront licensing fee to Daiichi Sankyo. Under the Daiichi Sankyo Agreement, Daiichi Sankyo is also eligible to receive future development, regulatory and sales milestone payments, as well as royalties related to IMU-856. Stock-Based Compensation We measure the cost of employee and non-employee services received in exchange for equity awards based on the grant-date fair value of the award recognized generally as an expense (i) on a straight-line basis over the requisite service period for those awards whose vesting is based upon a service condition, and (ii) on an accelerated method for awards whose vesting is based upon a performance condition, but only to the extent it is probable that the performance condition will be met. Stock-based compensation is estimated (i) at the date of grant based on the award’s fair value for equity classified awards and (ii) at the final measurement date for liability classified awards. Forfeitures are recorded in the period in which they occur. We estimate the fair value of stock options using the Black-Scholes-Merton option-pricing model, which requires the use of estimates and subjective assumptions, including the risk-free interest rate, the fair value of the underlying common stock, the expected dividend yield of our common stock, the expected volatility of the price of our common stock, and the expected term of the option. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. Income Taxes We are subject to corporate income tax laws and regulations in the U.S., Germany and Australia. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment in their application. We utilize the asset and liability method of accounting for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the audited consolidated financial statements. Deferred income tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not some portion or the entire deferred tax asset will not be realized. As of December 31, 2021, and December 31, 2020, we maintained a full valuation allowance against the balance of deferred tax assets. It is our policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. We recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. 72 Components of Results of Operations Revenue To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates. Research and Development Expenses Research and development expenses consist of costs associated with our research activities, including our product discovery efforts and the development of our product candidates. Our research and development expenses include: • external research and development expenses and milestone payments incurred under arrangements with third parties, such as CROs, contract manufacturing organizations, collaborations with partners, consultants, and our scientific advisors; and • internal personnel expenses. We expense research and development costs as incurred. Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized as prepaid expenses and expensed when the service has been performed or when the goods have been received. Since our inception in March 2016, we have spent a total of approximately $143.5 million in research and development expenses through December 31, 2021. These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, IMU-935 and IMU-856. We have spent the majority of our research and development resources on vidofludimus calcium, our lead development program for clinical trials in MS, UC, COVID-19 and PSC. In August 2019, Immunic AG received a grant of up to approximately $730,000 from the German Federal Ministry of Education and Research, in support of the InnoMuNiCH (Innovations through Munich-Nippon Cooperation in Healthcare) project. The grant funds will be used to fund a three-year research project relating to autoimmune diseases by us and our three project partners. Since the inception of the grant, we have recorded $356,000, $178,000 and $159,000 of which were recorded in 2021 and 2020, respectively, and which were classified in Other Income in the accompanying consolidated statement of operations. Our research and development expenses may increase in the foreseeable future as we continue to conduct ongoing regulatory and development activities, initiate new preclinical and clinical trials and build our pipeline. The process of commercialization, conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving regulatory approval for any of our product candidates. Successful development of product candidates is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict. We anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the development and regulatory success of each product candidate, and ongoing assessments as to each product candidate’s commercial potential. General and Administrative Expenses General and administrative expenses consist primarily of personnel expenses, professional fees for legal, accounting, tax and business consulting services, insurance premiums and stock-based compensation. Other Income (Expense), Net 73 Interest Income Interest income consists of interest earned on our money market funds and bank accounts which are a portion of our cash and cash equivalents balance. Our interest income has not been significant due to low interest rates earned on invested balances. Other Income (Expense), Net Other income (expense) consists primarily of a research and development tax incentive related to clinical trials performed in Australia, foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future and the recognition of deferred revenue related to research and development expenses in connection with our option and licensing agreement with Daiichi Sankyo Co., Ltd. Results of Operations Comparison of Fiscal Years Ended December 31, 2021 and 2020 The following table summarizes our operating expenses for the years ended December 31, 2021 and 2020 (dollars in thousands): Years Ended December 31, Change 2021 2020 $ % Operating expenses: Research and development 61,115 38,637 22,478 58 % General and administrative 13,300 10,334 2,966 29 % 4SC royalty settlement (see note 4) 17,250 — 17,250 NM Total operating expenses 91,665 48,971 42,694 87 % Loss from operations (91,665) (48,971) (42,694) 87 % Total other income (expense) (1,280) 4,954 (6,234) (126) % Net loss (92,945) (44,017) (48,928) 111 % Research and development expenses increased by $22.5 million during the twelve months ended December 31, 2021, as compared to the twelve months ended December 31, 2020. The increase reflects (i) a $10.2 million increase in external development costs related to the Phase 3 program of vidofludimus calcium in relapsing multiple sclerosis, (ii) a $7.4 million increase in external development costs related to the Phase 2 trial of vidofludimus calcium in progressive multiple sclerosis, (iii) a $4.7 million increase in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in ulcerative colitis, (iv) a $2.4 million increase in personnel expense in research and development, $1.0 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, (v) a $1.6 million increase in external development costs related to the Phase 1 clinical trial of IMU-935, (vi) a $1.8 million increase in external costs for IMU-856, (vii) a $2.1 million increase in preclinical and drug supply costs related to vidofludimus calcium and (viii) $1.1 million related to increased costs across numerous categories. The increases were partially offset by (i) a $6.9 million decrease in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in COVID-19 and (ii) a decrease of $1.9 million in drug supply costs for IMU-856. General and administrative expenses increased by $3.0 million during the twelve months ended December 31, 2021, as compared to the twelve months ended December 31, 2020. The increase was primarily due to (i) a $2.2 million increase related to non-cash stock compensation expense and (ii) a $0.8 million increase across numerous categories. On March 31, 2021, Immunic AG and 4SC AG entered into a Settlement Agreement, pursuant to which Immunic AG settled its remaining obligation of the 4.4% royalty on net sales for $17.25 million (Tranche III of the Agreement). The payment was made 50% in cash and 50% in shares of Immunic’s common stock. No further payment obligations remain between Immunic and 4SC AG. Other income decreased by $6.2 million during the twelve months ended December 31, 2021, as compared to the twelve months ended December 31, 2020. The decrease was primarily attributable to (i) a $6.9 million change in other income (loss) as a result of a $4.3 million foreign exchange loss in 2021 on a $52.0 million intercompany loan between Immunic, Inc. and 74 Immunic AG combined with a $2.5 million foreign exchange gain in 2020 on this intercompany loan and (ii) a $1.0 million decrease in recognized deferred income attributable to reimbursements of research and development expenses in connection with the Daiichi Sankyo Agreement realized in 2020. The decrease was partially offset by (i) a $1.2 million research allowance received from the German Federal Ministry of Finance and (ii) a $0.5 million increase in research and development tax incentives for clinical trials in Australia as a result of increased spending on clinical trials in Australia. Liquidity and Capital Resources Overview We have no products approved for commercial sale and have not generated any revenue from product sales. We have never been profitable and have incurred operating losses in each year since our inception in 2016. Our net losses were approximately $92.9 million and $44.0 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of approximately $196.9 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we initiate and continue the preclinical and clinical development of our product candidates and add personnel necessary to operate as a company with an advanced clinical pipeline of product candidates. To the extent additional funds are necessary to meet long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of indebtedness, additional equity financings or a combination of these potential sources of funds, although we can provide no assurance that these sources of funding will be available on reasonable terms. From inception through December 31, 2021, we have raised net cash of approximately $259.5 million from private and public offerings of preferred and common stock. As of December 31, 2021, we had cash and cash equivalents of approximately $86.9 million. We are dependent on financing activities to fund ongoing operations, and due to the inherent uncertainties in successfully completing financing transactions, and with our forecasted cash reach through the first quarter of 2023, these are indicators of an inability to continue as a going concern. However, we have the ability to manage the amount and timing of expenditures to reduce costs, have limited required fixed spend, and can manage working capital as needed and that coupled with the $16.2 million of cash raised so far in 2022 under our At The Market ("ATM") facility alleviates any uncertainty that we will have adequate liquidity to meet our obligations for at least the next 12 months from the financial statement release date. In November 2020, we filed a shelf registration statement on Form S-3 (the "2020 Shelf Registration Statement"). The 2020 Shelf Registration Statement permits the offering, issuance and sale of up to $250.0 million of common stock, preferred stock, warrants, debt securities, and/or units in one or more offerings and in any combination of the foregoing. In December 2020, we filed a prospectus supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $50.0 million of common stock that may be issued and sold under an at-the-market sales agreement with SVB Leerink as agent (the "December 2020 ATM"). We intend to use the net proceeds from the December 2020 ATM to continue to fund the ongoing clinical development of our product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The December 2020 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth in the sales agreement for the December 2020 ATM or (ii) termination of the December 2020 ATM as otherwise permitted thereby. The December 2020 ATM may be terminated at any time by either party upon ten days’ prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on us. In the year ended December 31, 2021, we raised gross proceeds of $0.8 million pursuant to the December 2020 ATM through the sale of 73,221 shares of common stock at a weighted average price of $10.27 per share. The net proceeds from the December 2020 ATM were $0.7 million after deducting underwriter commissions of $22,555. To date in 2022, we have raised gross proceeds of $16.7 million pursuant to the December 2020 ATM through the sale of 1,568,487 shares of common stock at a weighted average price of $10.62 per share. The net proceeds were $16.2 million after deducting underwriter commissions of $0.5 million. As of February 18, 2022, $32.6 million in capacity remains under the December 2020 ATM. Debt Financing On October 19, 2020, we and Immunic AG entered into a Finance Contract (the “Loan Agreement”) with the European Investment Bank (“EIB”), pursuant to which EIB agreed to provide Immunic AG with a term loan in an aggregate amount of up 75 to €24.5 million to support the development of our lead product candidate, IMU-838, in moderate coronavirus disease 2019 (“COVID-19”), to be made available to be drawn in three tranches, with the second and third tranches subject to the completion of certain pre-defined milestones. Effective October 20, 2021 we terminated this agreement with the EIB and no funds were drawn under this arrangement. Public Equity Offerings July 2021 Public Equity Offering On July 15, 2021, we entered into an underwriting agreement with Piper Sandler & Co., as representative of the several underwriters listed on Schedule A thereto, in connection with our public offering of 4,500,000 shares of our common stock, $0.0001 par value per share, at a public offering price of $10.00 per share. Under the terms of the underwriting agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 675,000 shares of common stock at the public offering price, less underwriting discounts and commissions. This option was not exercised. On July 19, 2021, we closed the offering. The net proceeds to us from the offering were approximately $42.0 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Cash Flows The following table shows a summary of our cash flows for the years ended December 31 (in thousands): 2021 2020 Cash (used in) provided by: Operating activities $ (83,233) $ (46,124) Investing activities (67) (146) Financing activities 42,841 144,431 Net cash used in operating activities During the year ended December 31, 2021, operating activities used $83.2 million of cash. The use of cash related to our net loss of $92.9 million adjusted for non-cash charges of $8.6 million related to common stock issued for the 4SC AG transaction, $5.9 million related to stock-based compensation and a $4.3 million unrealized foreign currency loss as well as a $9.3 million net change in our operating assets and liabilities. Changes in our operating assets and liabilities consisted primarily of an increase of $12.8 million in prepaid expenses and other current assets partially offset by $3.5 million increase in other current liabilities, accrued expenses and accounts payable. The increase in prepaid expenses and other current assets is primarily due to higher prepaid clinical costs and an increased receivable for the Australian research and development credit. The increase in liabilities is primarily due to an increase in clinical costs as a result of the start of our Phase 3 clinical studies for RMS and Phase 2 clinical studies for PMS. During the year ended December 31, 2020, operating activities used $46.1 million of cash. The use of cash related to our net loss of $44.0 million adjusted for non-cash charges of $2.7 million related to stock-based compensation and was partially offset by a $2.5 million unrealized foreign currency gain as well as a $2.4 million net change in our operating assets and liabilities. Net cash used in investing activities During the year ended December 31, 2021, net investing activities used $67,000 of cash, primarily due to purchase of equipment. During the year ended December 31, 2020, net investing activities used $0.1 million of cash, primarily due to purchase of equipment. Net cash provided by financing activities During the year ended December 31, 2021, financing activities provided $42.8 million of cash of consisting of net cash proceeds from the sale of common stock under the July 2021 equity offering and the December 2020 ATM. 76 During the year ended December 31, 2020, financing activities provided $144.4 million of cash of consisting of net cash proceeds from the sale of common stock under the July 2019 ATM and the April 2020, June 2020, and August 2020 equity offerings. Our forecast of the period of time through which our financial resources will support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. Our future expenses and capital requirements are difficult to forecast and will depend on many factors, including, but not limited to: • the timing and structure of any strategic options and transactions, if any; • the cost, timing and outcome of any future litigation costs; • personnel-related expenses, including salaries, benefits, stock-based compensation expense and other compensation expenses related to retention and termination of personnel; • the scope, progress, results and costs of research and development and ongoing clinical trials; • the cost and timing of future regulatory submissions; • the cost and timing of developing and validating the manufacturing processes for any potential product candidates; • the cost and timing of any commercialization activities, including reimbursement, marketing, sales and distribution costs; • our ability to establish new collaborations, licensing or other arrangements and the financial terms of such agreements; • the number and characteristics of any future product candidates we pursue; • the costs involved with being a public company; • the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such litigation; and • the timing, receipt and amount from the sales of, or royalties on any future products. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of stock offerings, debt financings, strategic alliances, collaborations and licensing arrangements. We do not expect to achieve revenue from product sales prior to the use of the net proceeds from our public and private offerings to date. We do not have any committed external source of funds. Additional funds may not be available on acceptable terms, if at all. To the extent that we raise additional capital through the sale of equity securities, the ownership interest of our stockholders will be diluted and it may be on terms that are not favorable to us or our stockholders. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt or other terms that are not favorable to us or our stockholders. If we raise additional funds through collaborations and licensing arrangements with third parties, we would expect to relinquish substantial rights to our technologies or our future products, or grant licenses on terms that may not be favorable to us. If we were to complete a merger, we may relinquish all control over the organization and could experience detrimental tax effects. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets. Any of these factors could harm our operating results. Off-Balance Sheet Arrangements Through December 31, 2021, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose. Other Commitments and Obligations In May 2016, the Company entered into a purchase agreement with 4SC whereby the Company acquired certain assets, including the rights to patents and patent applications, trademarks and know-how. This transaction was accounted for as an asset acquisition under Accounting Standards Update 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business. The Agreement included payments (Tranches III and IV) that were contingent upon the occurrence of certain events and required the Company to pay royalties equal to 4.4% of the aggregated net sales for a certain period as defined in the Agreement (Tranche III) upon commercialization of the acquired assets. Effective April 12, 2019, the parties agreed to settle 77 Tranche IV by issuing 120,070 shares of the Company’s common stock to 4SC at the time, while keeping the obligation to pay Tranche III in effect. Approximately $1.5 million of expense was recorded as a result of the issuance of these shares on April 12, 2019. On March 31, 2021, Immunic AG, a wholly-owned subsidiary of the Company, and 4SC AG entered into a Settlement Agreement, pursuant to which Immunic AG settled its remaining obligation of the 4.4% royalty on net sales for $17.25 million (Tranche III of the purchase agreement). The payment was made 50% in cash and 50% in shares of Immunic’s common stock. Pursuant to the Agreement, the Company filed a resale shelf registration statement on Form S-3 covering the resale of the Shares. With the execution of the Agreement, no further payment obligations remain between Immunic AG and 4SC AG. See Note 4 of Notes to the Financial Statements regarding the Company’s obligations under the option agreement with Daiichi Sankyo, which includes the potential payment of future development, regulatory and sales milestone payments, as well as royalties related to IMU-856 . Maturities of the operating lease obligation are as follows as of December 31, 2021 (in thousands): 2022 $ 457 2023 $ 307 2024 $ 233 2025 $ 116 2026 $ — Thereafter $ — Total lease payments $ 1,113 Less: interest portion $ 95 Present value of lease obligation $ 1,018 Contractual Obligations As of December 31, 2021, the Company has non-cancelable contractual obligations under certain agreements related to its development programs for vidofludimus calcium, IMU-935 and IMU-856 totaling approximately $2.8 million, all of which is expected to be paid in 2022. Recently Adopted Accounting Standards There are no recently issued accounting standards that would have a significant impact on the company's consolidated financial statements.