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Item 7. Management’s Discussion and Analysis

2023-02-23 compared with 2022-02-24 · 286 added, 156 removed, 170 unchanged (72% of the section changed)

6 unchanged sentences

and its subsidiaries.

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 a clinical-stage biopharmaceutical company with a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune diseases.

We are headquartered in New York City with our main operations in Gräfelfing near Munich, Germany.

We currently have approximately 66 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 are currently pursuing clinical development of three orally administered, small molecule programs, each of which has unique features intended to directly address the unmet needs of patients with serious chronic inflammatory and autoimmune diseases.

These include the vidofludimus calcium (IMU-838) program, which is in Phase 3 clinical development for patients with multiple sclerosis (“MS”);

the izumerogant (proposed International Nonproprietary Name (“INN”) for IMU-935) program, which is an inverse agonist of retinoic acid receptor-related orphan nuclear receptor gamma truncated (“RORγt”) that inhibits the interleukin-17 (“IL-17”) pathway in diseases such as psoriasis;

and the IMU-856 program, which is targeted to restore intestinal barrier function and regenerate bowel epithelium.

We have incurred net losses since inception of $317.3 million through December 31, 2022.

2 unchanged sentences

Recent Events

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;

◦ 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.

We believe that these blinded baseline characteristics of randomized patients and the methodology regarding endoscopic assessments contributes to ensuring an optimized study read-out.

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”.

$60 Million Private Placement Equity Financing

On October 10, 2022, we entered into a Securities Purchase Agreement for a private placement with select accredited investors and certain existing investors.

Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchasers (i) 8,696,552 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”), at a purchase price of $4.35 per Share, and (ii) 5,096,552 pre-funded warrants to purchase Common Stock, at a purchase price of $4.34 per Pre-Funded Warrant.

The Pre-Funded Warrants have an exercise price of $0.01 per share of Common Stock, be immediately exercisable and remain exercisable until exercised in full.

The holders of Pre-Funded Warrants may not exercise a Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise.

The holders of Pre-Funded Warrants may increase or decrease such percentages not in excess of 19.99% by providing at least 61 days’ prior notice to the Company.

The Pre-Funded Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise.

In addition, the Pre-Funded Warrants do not provide any guarantee of value or return.

All of the pre-funded warrants were exercised in January 2023.

The Private Placement closed on October 12, 2022.

The gross proceeds of the Private Placement were approximately $60.0 million, before deducting offering expenses payable by us of approximately $4.0 million.

We intend to use the net proceeds from the Private Placement to fund the ongoing clinical development of our three lead product candidates, vidofludimus calcium (IMU-838), izumerogant (IMU-935) and IMU-856, and for other general corporate purposes.

New Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in Relapsing-Remitting Multiple Sclerosis Supporting the Drug’s Neuroprotective Potential

On November 17, 2022, we reported newly available data from the Phase 2 EMPhASIS trial of vidofludimus calcium in patients with relapsing-remitting multiple sclerosis (“RRMS”).

The trial includes an optional long-term open-label extension (“OLE”) phase running up to 9.5 years.

An interim analysis was performed with data extraction in October 2022, when 209 patients remained on treatment in the OLE phase, some of whom have already received more than 180 continuous weeks (approximately four years) of active treatment with vidofludimus calcium.

Long-term open-label treatment with vidofludimus calcium was associated with a low rate of confirmed disability worsening over time, comparing favorably to historical trial data for currently available MS medications.

During the 24-week double-blind main treatment period, 12-week and 24-week Confirmed Disability Worsening (“12w/24wCDW”) events occurred in 1.6% of subjects in the combined vidofludimus calcium treatment arms as compared to 3.7% in the placebo group.

In the OLE phase, the proportion of patients free from 12wCDW was 97.6% after 48 weeks and 94.5% after 96 weeks of vidofludimus calcium treatment as compared to the start of the OLE phase.

Similar results were observed for 24wCDW and sustained CDW.

The OLE phase also showed low relapse activity.

Presentation of Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in RRMS at ACTRIMS Forum 2023

On February 22, 2023, we announced that Robert J.

Fox, M.D., Staff Neurologist, Mellen Center for Multiple Sclerosis, Vice-Chair for Research, Neurologic Institute, Cleveland Clinic, Cleveland, Ohio, will present data from the blinded and OLE parts of our phase 2 EMPhASIS trial of vidofludimus calcium in RRMS at the eighth annual Americas Committee for Treatment and Research in Multiple Sclerosis (ACTRIMS) Forum 2023, taking place February 23-25 in San Diego, California.

The poster presentation includes our previously announced data from the trial showing that long-term open-label treatment with vidofludimus calcium was associated with a low rate of confirmed disability worsening over time, comparing favorably to historical trial data for currently available MS medications.

Publication of Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in RRMS in Peer Reviewed Journal

On June 15, 2022, we announced that data from our Phase 2 EMPhASIS trial of vidofludimus calcium in patients with RRMS has been published in the peer reviewed journal, Annals of Clinical and Translational Neurology.

The paper, authored by coordinating investigator, Robert J.

Fox, M.D., Staff Neurologist, Mellen Center for Multiple Sclerosis, Vice-Chair for Research, Neurologic Institute, Cleveland Clinic, Cleveland, Ohio, is entitled, “Safety and efficacy of vidofludimus calcium, a selective dihydroorotate dehydrogenase inhibitor, in relapsing-remitting multiple sclerosis (EMPhASIS):

a double-blind, randomized, placebo-controlled Phase 2 trial.”

Results of Phase 1 Trial of Vidofludimus Calcium in Hepatic Impaired Patients

We completed a Phase 1 trial in a total of 24 patients with either no liver function impairment or liver disease of Child-Pugh A Child-Pugh B grade which was designed to explore dose optimization of vidofludimus calcium.

The study showed little influence on the PK of vidofludimus calcium in patients with Child-Pugh A Child-Pugh B liver impairmen t.

Update on the Use of Steroids in the Phase 2 EMPhASIS Trial in RRMS

Based on the observed interaction between vidofludimus calcium and chronic steroid use in the CALDOSE-1 trial in ulcerative colitis patients, we performed a post-hoc analysis of our Phase 2 EMPhASIS data in RRMS patients to explore the potential influence of steroids on these study results.

As anticipated, steroid use was rare and among those RRMS patients who received any steroids, the majority received only short steroid courses following relapse events or acute neurological events.

Only four patients received any steroids for reasons other than relapse (COVID-19 infection, eczema, acute bronchitis, and contact urticaria, one patient each).

Most patients only had one single short course of steroids, and only nine patients had two or more steroid courses.

The average duration of steroid treatment in this RRMS trial was 4.4 days with a maximum duration of 10 days.

This indicates to us that steroids are rarely used in MS patients and mostly for a very short duration.

In conclusion, comparing patients who received at least one dose of corticosteroids with those who did not, we do not see any difference in clinical parameters or any evidence that the rare, short-term use of steroids in RRMS patients has any influence on the effectiveness of vidofludimus calcium in this patient population.

Celiac Disease Research and Development Webcast

On February 9, 2023, we hosted a celiac disease research and development webcast.

Our management, including Daniel Vitt, Ph.D., Chief Executive Officer and President;

Andreas Muehler, M.D., M.B.A., Chief Medical Officer;

and Hella Kohlhof, Ph.D., Chief Scientific Officer, were joined by renowned key opinion leaders to discuss the dynamics of this multifactorial, complex autoimmune disease, immune stimulation and its connection to clinical symptoms, the role of the epithelial barrier in the pathogenesis of the disease, current and potential treatment options, and the continued unmet medical need for effective therapeutics, which is driving an increased focus within the industry.

Phase 1 Clinical Trial of IMU-856, Results of Parts A and B in Healthy Human Subjects

On September 20, 2022, we announced positive unblinded safety, tolerability and pharmacokinetic (“PK”) results from Part A (single ascending doses) and Part B (multiple ascending doses) of our Phase 1 clinical trial of IMU-856 in healthy human subjects.

In the single ascending doses part, healthy human subjects were randomized in a double-blinded manner to either placebo or active treatment with single ascending doses of IMU-856 at 10 mg, 20 mg, 40 mg, 80 mg, 120 mg and 160 mg.

Single ascending doses of IMU-856 were found to be safe and well-tolerated and no maximum tolerated dose was reached.

No serious adverse events occurred.

Moreover, a dose-linear PK profile was observed across the investigated dose range.

In the multiple ascending doses part, healthy human subjects were dosed for 14 consecutive days with 40 mg, 80 mg or 160 mg once-daily of IMU-856 or placebo in a double-blinded manner.

Multiple ascending doses of IMU-856 were found to be safe and well-tolerated and no maximum tolerated dose was reached.

Treatment emergent adverse events were mostly mild in severity.

No Investigational Medicinal Product-related serious adverse events were reported.

No dose-dependent changes in laboratory parameters (including no effects on liver enzymes or in hematological parameters), vital signs, physical examination or electrocardiographic evaluations were found.

PK analysis showed a quick achievement of stable steady-state plasma concentrations within the first week and stable steady-state trough levels over the 14-day treatment period with a low accumulation factor for IMU-856, allowing predictable trough levels during daily dosing.

PK parameters in steady-state revealed a Tmax (time to reach maximum plasma concentration) of 2 to 3 hours post-dose, a plasma half-life of 17.4 to 21.5 hours and dose proportional increases in Cmax (maximum plasma drug concentration) and AUC (area under the concentration-time curve).

IMU-856 Composition-of-Matter Patent Granted

On August 16, 2022, we announced that we have received a Notice of Allowance from the U.S.

Patent and Trademark Office (“USPTO”) for patent application 16/646130, entitled, “Compound Having Cyclic Structure.” The patent covers composition-of-matter of IMU-856 and related pharmaceutical compositions and is expected to provide protection into at least 2038, without accounting for potential PTE.

Start of Patient Cohorts in Phase 1 Clinical Trial of IMU-856 in Celiac Disease

On May 5, 2022, we announced the start of the patient cohorts in our ongoing Phase 1 clinical trial of IMU-856 in patients with celiac disease.

Part C is structured as a 28-day, double-blind, placebo-controlled trial designed to assess the safety, tolerability, PK, pharmacodynamic (“PD”) and biomarker responses of IMU-856 in patients with celiac disease during periods of gluten-free diet and gluten challenge.

Approximately 42 patients were planned to be enrolled in two consecutive cohorts with IMU-856 given once-daily over 28 days.

Secondary objectives include PK and disease markers, including those evaluating gastrointestinal architecture and inflammation.

Sites in Australia and New Zealand are participating in Part C.

Initial results are expected to be available in mid-2023.

Top-Line Data from Phase 2 CALDOSE-1 Trial of Vidofludimus Calcium in Patients with Moderate-to-Severe Ulcerative Colitis

On June 2, 2022, we reported top-line data from our Phase 2 CALDOSE-1 trial of vidofludimus calcium in patients with moderate-to-severe ulcerative colitis (“UC”).

The trial did not achieve the primary endpoint of clinical remission for the pooled 30 and 45 mg/day active dose groups of vidofludimus calcium versus placebo at week 10.

In addition, no meaningful differences were observed between the three active dose groups for the overall intent-to-treat patient population (10 mg/day:

14.9%, 30 mg/day:

10.6%, 45 mg/day:

13.6%, placebo:

12.5%) or for the trial’s other secondary endpoints, including symptomatic remission, or endoscopic healing.

Consistent with prior data sets in other patient populations, administration of vidofludimus calcium in this clinical trial was observed to be safe and well-tolerated.

No new safety signals were observed.

As compared to placebo, there were no increased rates of infections and infestations, no elevated rates of liver events or liver enzyme elevations, and no elevated rates for changes in hematology-related laboratory variables.

The most common adverse events in this clinical trial were anemia (15/263 patients, 5.7%), headache (9/263 patients, 3.4%) and COVID-19 (7/263 patients, 2.7%).

Most adverse events were generally mild in severity.

As is common for the design of clinical trials in UC, the use of oral systemic corticosteroids (≤20 mg/day prednisolone equivalent) was allowed in CALDOSE-1 in patients who had been treated with corticosteroids for at least four weeks before

randomization.

Doses of corticosteroids were required to be kept constant throughout the induction phase (weaning was not allowed in this phase of the clinical trial), and the distribution of patients using corticosteroids was equal throughout all treatment groups.

Surprisingly, CALDOSE-1 data suggest a previously unknown treatment interference between the efficacy of vidofludimus calcium and the concurrent use of corticosteroids in the UC patient population.

More specifically, the non-steroid patient population showed an 11.4% advantage in clinical remission for vidofludimus calcium over placebo (pooled vidofludimus calcium treatment groups at week 10:

14.7%, placebo:

Such a difference in clinical remission between active treatment and placebo would traditionally be considered as confirming therapeutic activity.

In contrast, patients concomitantly taking vidofludimus calcium and corticosteroids during induction treatment had a lower rate of clinical remission at week 10 (11.5%) than placebo patients (20.6%) and also lower than the group of vidofludimus calcium monotherapy without concurrent use of steroids (14.7%).

This treatment interference between vidofludimus calcium and corticosteroids was not expected based on our analysis of currently available preclinical or clinical data.

Based on these results, we announced that our development programs in the IBD indications will not be continued without a partner.

Investigator-Sponsored Phase 2 IONIC Trial in Moderate-to-Severe COVID-19 Closed Down

On June 23, 2022, sponsor and lead site, University Hospitals Coventry and Warwickshire NHS Trust, London, United Kingdom, informed us that the investigator-sponsored Phase 2 IONIC trial for the treatment of patients with moderate-to-severe COVID-19 is being closed down.

Recruitment for the trial ended on May 20, 2022 and the last patient follow-up occurred in September 2022.

On September 29, 2022, we were informed that the sponsor submitted the end of trial declaration.

The trial was a prospective, randomized, parallel-group, open-label Phase 2b trial, designed to evaluate efficacy and safety of vidofludimus calcium in combination with the neuraminidase inhibitor, Oseltamivir (Tamiflu Ⓡ ), in approximately 120 adult patients with moderate-to-severe COVID-19.

Pre-Planned Phase 1b Interim Analysis of Izumerogant in Moderate-to-Severe Psoriasis and Goodwill Impairment

On October 20, 2022, we announced the outcome of a pre-planned interim group-level data analysis of our Phase 1b clinical trial of izumerogant in patients with moderate-to-severe psoriasis.

The overall trial is ongoing.

The pre-planned interim analysis revealed that the group averages for Psoriasis Area and Severity Index ("PASI”) reductions in the two active arms did not separate from placebo at four weeks.

Although the active arms performed in line with expectations, based on similarly designed trials, the trial experienced a greater decrease than expected in PASI in the placebo arm.

Administration of izumerogant and placebo in this trial were demonstrated to be safe and well-tolerated, and no new safety signals were observed.

We plan to provide further updates and guidance on potential next steps for this development program towards the end of the first quarter of 2023.

Following the announcement of our interim group level data on October 20, 2022, our stock price experienced a significant decline from the prices preceding the announcement and the recent prices raised in our October 10, 2022 Private Placement.

We considered these to be triggering events indicating that it is more likely than not that goodwill is impaired.

Upon further evaluation we incurred a non-cash full impairment of our goodwill of approximately $33.0 million in the quarter ended December 31, 2022.

Phase 1 Clinical Trial of Izumerogant in mCRPC

The pre-planned dose escalation in the Phase 1 clinical trial of izumerogant in mCRPC with dosing of up to 900 mg daily has been completed.

Initial safety data available, to date, show a promising safety profile, with only benign adverse events and no dose limiting toxicities.

Izumerogant Composition-of-Matter Patents Granted

On February 2, 2022, we received a Notice of Allowance from the 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.

Other Product updates

For status updates on our product candidates in development, please see "Business - Key Status Updates."

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.

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 .

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.

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.

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.

All three patents cover composition-of-matter of izumerogant 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 in Europe, respectively.

Results of Exploratory Phase 1 Drug-Drug Interaction Study of Izumerogant

An exploratory Phase 1 study was completed in 15 evaluable healthy human subjects to assess the drug-drug interaction potential of izumerogant.

No relevant signals for drug-drug interaction potential were observed and treatment was safe and well-tolerated.

Phase 1 Clinical Trial of Izumerogant, Results of Parts A and B in Healthy Human Subjects

On July 12, 2021, we provided an update on our izumerogant program, including new preclinical and clinical data.

The main result from preclinical investigations was that izumerogant inhibits cytokine production (thought to be a pre-condition for its use in immunological and autoimmune diseases) while maintaining the known and required physiological functions of maturing T lymphocytes.

In ex vivo mouse cell differentiation and maturation assays, izumerogant was observed to selectively inhibit RORγt-dependent gene expression during Th17 differentiation without affecting either RORγt-dependent gene regulation relevant to thymocyte development, or the viability of these cells.

In third-party research, impairment of thymocyte development has been shown to be associated with serious safety issues, including, among others, T cell malfunction and potential lymphoma formation.

We believe that izumerogant's observed selectivity may enable it to inhibit both the generation of Th17 cells and the production of IL-17 cytokines that are responsible for the development of autoimmune diseases, without impairing thymocyte development, which is associated with the potential risk of lymphoma seen with other, third-party RORγt programs.

On December 14, 2021, we provided an update on the preclinical and clinical development of izumerogant , announcing that:

• Unblinded data from the single ascending dose part of the ongoing Phase 1 clinical trial of a new powder-in-capsule formulation of izumerogant, in which healthy human subjects were treated with 100 mg, 200 mg, 300 mg and 400 mg of this new formulation or placebo, found these single ascending daily doses of izumerogant to be safe and well-tolerated, and no maximum tolerated dose was reached.

No serious adverse events occurred.

A dose-proportional PK profile was observed across the investigated dose range.

• Unblinded data from the multiple ascending dose part of the ongoing Phase 1 clinical trial, in which healthy human subjects were dosed for 14 days with 150 mg either once or twice daily doses of izumerogant or placebo, found these multiple ascending doses of izumerogant to be safe and well-tolerated, and no maximum tolerated dose was reached.

Treatment emergent adverse events were generally mild in severity, with moderate treatment emergent adverse events reported in one of eleven izumerogant treated subjects, compared with one of four subjects on placebo.

No serious adverse events were reported.

No dose-dependent changes in laboratory values (including no effects on liver enzymes or in hematological parameters), vital signs or in electrocardiographic evaluations were found.

PK analysis showed that stable steady-state plasma concentrations were achieved within the first week of dosing with an accumulation factor for izumerogant allowing predictable trough levels during daily dosing.

• Based on the favorable safety and tolerability data observed in healthy human subjects, our Phase 1 clinical trial of izumerogant was expanded in October 2021 to include a third portion, part C, in which moderate-to-severe psoriasis patients are randomized to 28-day treatment of izumerogant or placebo.

Assessments include safety, tolerability, PK and PD markers, as well as skin evaluations.

• In previous preclinical in vitro data, it was shown that izumerogant selectively inhibits Th17 differentiation and IL-17 production, whereas RORγt was unaffected by izumerogant during thymocyte maturation and, therefore, does not harm normal thymocyte maturation.

Data from acute and chronic treatment of mice corroborated in vivo that izumerogant is the first molecule observed to impact neither thymus size, thymocyte numbers, nor the maturation status of thymocytes, in contrast to two other known inhibitors of RORγt.

Changes in Board of Directors

On July 6, 2022, we announced the appointment of Monika Maria Törnsén as a member of our Board of Directors, effective as of July 5, 2022.

As a Class III director, Ms.

Törnsén’s term lasts until the Company’s 2023 annual meeting of stockholders.

Concurrently, we also announced that current Class III director, Jan Van den Bossche, resigned from the Board.

The Board accepted Mr.

Van den Bossche’s resignation effective July 5, 2022.

Van den Bossche’s decision to resign did not result from any disagreement with the Company on any matter relating to Company operations, policies or practices.

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.

On April 15, 2020, the compensation committee of the Board of Directors of the Company independently reviewed and approved entering into an employment agreement with the Executive Chairman of the Board, Duane Nash, MD, JD, MBA (the “Executive Chairman Agreement”) and pursuant to such approval, on April 17, 2020, the Company 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.

The Executive Chairman Agreement establishes an “at will” employment relationship with a base salary of $25,417 per month pursuant to which Dr.

Nash serves as Executive Chairman and contemplated a term that ends on October 15, 2020.

On October 15, 2020, the Company and Dr.

Nash entered into an addendum (the “First Addendum”) to extend the term of the Executive Chairman Agreement to April 15, 2021.

In connection with the First Addendum, the Company made a one-time award to Dr.

Nash of an option to purchase 120,000 shares of Company common stock, which vests monthly over six months commencing on November 15, 2020.

On April 15, 2021, the Company and Dr.

Nash entered into Addendum No.

Two (the “Second Addendum”) to extend the term of the Executive Chairman Agreement to April 15, 2022.

In connection with the Second Addendum, the Company made a one-time award to Dr.

Nash of an option to purchase 90,000 shares of Company common stock, which vests monthly over 12 months commencing on May 15, 2021, and to increase Dr.

Nash’s monthly base salary to $27,960 from $25,417.

On March 15, 2022, the Company and Dr.

Nash entered into Addendum No.

Three (the “Third Addendum”), which extended the term of employment from April 15, 2022 to December 31, 2022 with a base salary of $29,358 per month.

In connection with the Third Addendum, the Company made a one-time award to Dr.

Nash of an option to purchase 75,000 shares of the Company’s common stock, which vests monthly over 12 months commencing on April 10, 2022.

On December 28, 2022, the Company and Dr.

Nash entered into Addendum No.

Four, which extended the term of employment from December 31, 2022 to December 31, 2023 with a base salary of $30,250 per month (which includes the cash retainer payable for serving on the Company’s Board or for acting as the Chairman of the Board).

All other terms of the Executive Chairman Agreement remain the same.

Critical Accounting Policies and Estimates

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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.

Foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future are recorded in Other Income (loss).

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.

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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.

Examples of such events or circumstances include, but are not limited to, an unfavorable clinical trial result, a significant adverse change in legal or business climate, industry or market conditions, an adverse regulatory action, sustained decrease in stock price or unanticipated competition.

On October 20, 2022, we announced the outcome of a significant interim analysis of our Phase 1b clinical trial of izumerogant in patients with moderate-to-severe psoriasis which was not deemed positive progress.

On October 21, 2022, we experienced a significant decrease in our market capitalization.

We considered this to be a triggering event as the fair market value of the company was less than its book value indicating that it is more likely than not that goodwill is impaired.

Upon further evaluation, we recorded an approximately $33.0 million goodwill impairment charge in the fourth quarter of 2022 which represents a full write down of our previous goodwill balance.

We did not have any goodwill impairment during the year ended December 31, 2021.

Research and Development Expenses

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, izumerogant and IMU-856.

Immunic has spent the majority of its research and development resources on vidofludimus calcium, the Company's lead development program for clinical trials in RRMS, UC, PMS and COVID-19.

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 Company enters into agreements with contract research organizations (“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.

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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.

("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 gastrointestinal diseases such as celiac disease, inflammatory bowel disease, irritable bowel syndrome with diarrhea 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.

Such reimbursement was recorded as other income.

There are no additional research and development reimbursements expected under this agreement.

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.

Among other things, the option exercise grants Immunic AG the rights to Daiichi Sankyo’s patent application related to IMU-856, for which the Company received a notice of allowance from the US Patent & Trademark Office in August 2022.

In connection with the option exercise, the Company paid a one-time upfront licensing fee to Daiichi Sankyo.

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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.

The Company measures 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 (i) estimated at the date of grant based on the award’s fair value for equity classified awards and (ii) 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.

The Company estimates the fair value of stock options using the Black-Scholes-Merton option-pricing model ("BSM"), 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 the Company’s common stock, the expected volatility of the price of the Company’s 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.

If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future.

We are subject to corporate income tax laws and regulations in the U.S., Germany and Australia.

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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.

As of December 31, 2022 and 2021, respectively, the Company 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.

We are subject to U.S.

federal, New York, California, Texas, German and Australian income taxes.

The Company is subject to U.S.

federal or state income tax examination by tax authorities for tax returns filed for the years 2003 and forward due to the carryforward of NOLs.

Tax years 2017 through 2021 are subject to audit by German and Australian tax authorities.

The Company is not currently under examination by any tax jurisdictions.

Components of Results of Operations

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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.

We may never succeed in obtaining regulatory approval for any of our product candidates or achieving market acceptance and commercial success for any product that does receive regulatory approval.

Research and Development Expenses

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Since our inception in March 2016, we have spent a total of approximately $214.8 million in research and development expenses through December 31, 2022.

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, IMU-935 and IMU-856.

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, izumerogant 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.

The grant funds have been 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 $611,000 of income in total of which $254,000 and $178,000 were recorded in 2022 and 2021, respectively, and were classified in Other Income in the accompanying consolidated statement of operations.

Our research and development expenses are expected to increase in the foreseeable future as we continue to conduct ongoing research and development activities, initiate new preclinical and clinical trials and build our pipeline of product candidates.

Our research and development expenses may also increase in the foreseeable future due to the current inflationary environment as well as supply chain shortages, which result in increased costs.

The process of 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.

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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.

Our interest income has been increasing throughout 2022 as interest rates in the U.S.

have been increasing.

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.

Other income (expense) consists primarily of a research and development tax incentive related to clinical trials performed in Australia and foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the

foreseeable future.

The intercompany loan between Immunic Inc.

and Immunic AG was settled on September 28, 2022 through an equity infusion from Immunic Inc.

to Immunic AG.

Results of Operations

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General and administrative 15,263 13,300 1,963 15 %

Goodwill impairment (see Note 2) 32,970 — 32,970 NM

4SC royalty settlement (see note 4) — 17,250 (17,250) NM

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Loss from operations (119,488) (91,665) (27,823) 30 %

Total other income (expense) (1,280) 4,954 (6,234) (126) %

Total other expense, net (919) (1,280) 361 (28) %

Net loss (120,407) (92,945) (27,462) 30 %

Research and development expenses increased by $10.1 million during the twelve months ended December 31, 2022, as compared to the twelve months ended December 31, 2021.

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.

The increase reflects (i) a $9.2 million increase in external development costs related to the Phase 3 program of vidofludimus calcium in relapsing multiple sclerosis, (ii) a $3.9 million increase in external development costs related to the clinical trials of izumerogant, (iii) a $3.9 million increase in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in progressive multiple sclerosis, (iv) a $2.5 million increase in personnel expense in research and development, $1.5 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, and (v) a $1.4 million increase in external development costs related to the Phase 1 clinical trial of IMU-856.

The increases were partially offset by (i) a decrease of $5.8 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in ulcerative colitis, (ii) a $3.0 million decrease in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in COVID-19, (iii) a decrease of $1.3 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in relapsing-remitting multiple sclerosis, and (iv) a decrease of $0.7 million in external development costs across numerous categories.

General and administrative expenses increased by $2.0 million during the twelve months ended December 31, 2022, as compared to the twelve months ended December 31, 2021.

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.

The increase was primarily due to (i) a $1.6 million increase in personnel expense in general and administrative, $0.5 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, (ii) a $0.3 million increase in travel expenses, and (iii) a $0.1 million net increase across numerous categories.

On October 20, 2022, we announced the outcome of a significant interim analysis of our Phase 1b clinical trial of izumerogant in patients with moderate-to-severe psoriasis, which was not deemed positive progress.

On October 21, 2022, we experienced a significant decrease in the Company's market capitalization.

The Company considered this to be a triggering event indicating that it is more likely than not that goodwill is impaired.

Upon further evaluation, we recorded an approximately $33.0 million non-cash goodwill impairment charge in the fourth quarter of 2022 which represents a full write down of our previous goodwill balance.

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).

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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.

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.

Other expense decreased by $0.4 million during the twelve months ended December 31, 2022, as compared to the twelve months ended December 31, 2021.

The decrease was primarily attributable to (i) a $1.0 million increase in interest income as a

result of higher interest rates, 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.

This was offset by a $1.1 million decrease in grants.

Liquidity and Capital Resources

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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.

We expect to incur significant expenses and increasing operating losses for the foreseeable future as we initiate and continue the development of our product candidates and add personnel necessary to operate as a company with an advanced 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, 2022, we have raised net cash of approximately $355.5 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.

As of December 31, 2022, we had cash and cash equivalents of approximately $106.7 million and investments - other of $9.6 million.

With these funds we expect to be able to fund our operations beyond twelve months from the date of the issuance of the accompanying condensed consolidated financial statements.

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.

As of February 17, 2023, there is $75.0 million remaining on this shelf registration statement.

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 ("December 2020 ATM").

We have used and intend to continue 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 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.

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 17, 2023, $8.4 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

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

In May 2022, we filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $80.0 million of common stock that may be issued and sold under another at-the-market sales agreement ("May 2022 ATM") with SVB Securities LLC as agent.

We intend to use the net proceeds from the offering 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 May 2022 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Securities LLC on the terms and subject to the conditions set forth in the May 2022 ATM or (ii) termination of the May 2022 ATM as otherwise permitted thereby.

The May 2022 ATM may be terminated at any time by either party upon ten days’ prior notice, or by SVB Securities LLC at any time in certain circumstances, including the occurrence of a material adverse effect on the Company.

As of February 17, 2023, $80.0 million in capacity remains under the May 2022 ATM.

For the year ended December 31, 2022, we raised gross proceeds of $40.9 million pursuant to the December 2020 ATM through the sale of 4,204,113 shares of common stock at a weighted average price of $9.72 per share.

The net proceeds from the December 2020 ATM were $39.6 million after deducting underwriter commissions of $1.2 million.

Equity Offerings

$60 Million Private Placement Equity Financing

On October 10, 2022, we entered into a Securities Purchase Agreement for a private placement with select accredited investors and certain existing investors.

Pursuant to the Securities Purchase Agreement, the Company agreed to sell to the Purchasers (i) 8,696,552 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”), at a purchase price of $4.35 per Share, and (ii) 5,096,552 pre-funded warrants to purchase Common Stock, at a purchase price of $4.34 per Pre-Funded Warrant.

The Pre-Funded Warrants have an exercise price of $0.01 per share of Common Stock, are immediately exercisable and remain exercisable until exercised in full.

The holders of Pre-Funded Warrants may increase or decrease such percentages not in excess of 19.99% by providing at least 61 days’ prior notice to the Company.

All of the Pre-Funded Warrants were exercised in January 2023.

The Private Placement closed on October 12, 2022.

The gross proceeds of the Private Placement were approximately $60.0 million, before deducting offering expenses payable by the Company.

The Company intends to use the net proceeds from the Private Placement to fund the ongoing clinical development of its three lead product candidates, vidofludimus calcium (IMU-838), izumerogant (IMU-935) and IMU-856, and for other general corporate purposes.

July 2021 Public Equity Offering

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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.

The following table shows a summary of our cash flows for the years ended December 31 (in thousands):

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.

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.

Future Capital Requirements

As noted above, we have not generated any revenue from product sales and we do not know when, or if, we will generate any revenue from product sales.

We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize any of our product candidates.

At the same time, we expect our expenses to increase as we continue the ongoing research, development, manufacture and clinical trials of, and seek regulatory approval for, our product candidates.

We also incur additional costs associated with operating as a public company.

In addition, subject to obtaining regulatory approval of any of our product candidates, we anticipate that we will need substantial additional funding in connection with our continuing operations.

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;

• the cost, timing and outcome of any future litigation;

• 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 scope, progress, duration, results and costs of research and development and ongoing clinical trials;

• the cost and timing of future regulatory submissions;

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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.

Recent developments, however, will make it more difficult and costly for us to obtain funding for our cash needs.

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.

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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.

Sales of equity securities will also be more difficult for at least the foreseeable future because of general volatility in the equity markets for companies like us, as well as the significant decline in the trading price of our stock following our announcement on October 21, 2022 of the Phase 1b interim analysis of izumerogant in moderate-to-severe psoriasis.

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.

Also, the cost of debt financing has increased due to the rise in interest rates beginning in March 2022.

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.

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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.

Any of these factors could harm our operating results and could result in substantial declines in the trading price of our common stock.

As of December 31, 2022, we had cash and cash equivalents of approximately $106.7 million.

The following table shows a summary of our cash flows for the years ended December 31 (in thousands):

Cash (used in) provided by:

Operating activities $ (65,144) $ (83,233)

Investing activities (9,741) (67)

Financing activities 95,760 42,841

Net cash used in operating activities

During the year ended December 31, 2022, operating activities used $65.1 million of cash.

The use of cash related to our net loss of $120.4 million adjusted for non-cash charges of $45.7 million related to $33.0 million of goodwill impairment, $7.9 million of stock-based compensation and a $4.8 million foreign currency loss as well as a $9.5 million net change in our operating assets and liabilities.

Changes in our operating assets and liabilities consisted primarily of an decrease of $7.5 million in prepaid expenses and other current assets combined with a $2.0 million increase in other current liabilities, accrued expenses and accounts payable.

The decrease in prepaid expenses and other current assets is primarily due to lower prepaid clinical costs.

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, 2021, operating activities used $83.2 million of cash.

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.

Net cash used in investing activities

During the year ended December 31, 2022, net investing activities used $9.7 million of cash, primarily due to purchase of 9.6 million of time deposits that had an original maturity of greater than three months and the purchase of equipment.

During the year ended December 31, 2021, 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, 2022, financing activities provided $95.8 million of cash of consisting of net cash proceeds from the sale of common stock under the $60 Million Private Placement Equity Financing and the December 2020 ATM.

Off-Balance Sheet Arrangements

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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

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.

Effective April 12, 2019, the parties agreed to settle 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.

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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.

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 .

See Note 2 - Collaboration Arrangements of the 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, 2022 (in thousands):

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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.

As of December 31, 2022, the Company has non-cancelable contractual obligations under certain agreements related to its development programs for vidofludimus calcium, izumerogant and IMU-856 totaling approximately $4.5 million, all of which is expected to be paid in 2023.

Recently Adopted Accounting Standards

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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-K

Item 7. Management’s Discussion and Analysis