What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-02-22 · 138 added, 176 removed, 193 unchanged (62% of the section changed)

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

We had 77 employees as of February 1, 2024.

We had 91 employees as of March 1, 2025.

We are pursuing clinical development of 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”) and which has shown therapeutic activity in Phase 2 clinical trials in patients suffering from relapsing-remitting MS, progressive MS and moderate-to-severe ulcerative colitis (“UC”);

the IMU-856 program, which is targeted to regenerate bowel epithelium and restore intestinal barrier function, which could potentially be applicable in numerous gastrointestinal diseases, such as celiac disease, inflammatory bowel disease, short bowel syndrome and irritable bowel syndrome with diarrhea;

These include the vidofludimus calcium (IMU-838) program, which is in Phase 3 and Phase 2 clinical development for patients with relapsing and progressive multiple sclerosis (“MS”), respectively, and which has shown therapeutic activity in Phase 2 clinical trials in patients suffering from relapsing-remitting MS ("RRMS"), progressive MS and moderate-to-severe ulcerative colitis (“UC”);

the IMU-856 program, which is targeted to regenerate bowel epithelium and restore intestinal barrier function, which could potentially be applicable in numerous gastrointestinal diseases, such as celiac disease, inflammatory bowel disease (“IBD”), Graft-versus-Host-Disease ("GvHD") and weight management;

and the IMU-381 program, which is a next generation molecule being developed to specifically address the needs of gastrointestinal diseases.

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Recent Events

Private Placement of up to $240 Million

On January 4, 2024, Immunic entered into a Securities Purchase Agreement with select accredited investors, pursuant to which the Company agreed to issue and sell to the Investors in a three-tranche private placement shares of the Company’s common stock, $0.0001 par value per share or in lieu thereof, pre-funded warrants to purchase shares of Common Stock.

Private Placement of up to $240 Million (The "January 2024 Offering")

On January 4, 2024, Immunic entered into a Securities Purchase Agreement with select accredited and institutional investors, pursuant to which the Company agreed to issue and sell to the Investors in a three-tranche private placement shares of the Company’s common stock, $0.0001 par value per share or in lieu thereof, pre-funded warrants to purchase shares of Common Stock.

The Pre-Funded Warrants are exercisable immediately for $0.0001 per share and until exercised in full.

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• The third tranche must occur no later than three years after the second tranche and is conditioned on the same volume-weighted average share price and minimum trading volumes as the second tranche.

The third tranche provides for the issuance of $80 million of shares of common stock (or pre-funded warrants) at the same price per share as the second tranche, but permits investors to fund their purchase obligations on a “cashless” or net settlement basis, which would reduce the cash proceeds to be raised by the Company in the Private Placement.

Any of the conditions in the second or third tranches can be waived by holders of a majority of the outstanding securities (including the lead Investor).

The Private Placement resulted in gross proceeds to the Company of approximately $80 million in the first tranche, and an additional $80 million if and when the second tranche occurs.

The Janaury 2024 Financing resulted in gross proceeds to the Company of approximately $80 million in the first tranche, and an additional $80 million if and when the second tranche occurs.

Assuming that the second tranche is completed and conditions for the third tranche are satisfied or waived, the Company could receive up to an additional $80 million in the third tranche.

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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), IMU-856 and IMU-381, and for other general corporate purposes.

Notice of Allowance for United States Patent Protecting Vidofludimus Calcium's Dosing Regimens in Multiple Sclerosis

On November 21, 2023, we announced that we have received a Notice of Allowance from the United States Patent and Trademark Office (“USPTO”) for patent application 17/992,162, entitled, “Compounds and Dosage Regimen for Use in the Prevention or Treatment of Chronic Inflammatory and/or Autoimmune Diseases.” Specifically, the resulting patent covers dosing regimens associated with vidofludimus calcium and other salt forms as well as free acid forms for the treatment of MS, including all regimens tested in the company’s MS clinical program.

The patent is expected to provide protection into 2038, unless extended further.

The patent was previously granted to us in Japan and certain other countries.

Notice of Allowance for United States Patent Protecting the Treatment of Relapsing Multiple Sclerosis with Vidofludimus and Its Salts

On November 2, 2023, we announced that we have received a Notice of Allowance from the USPTO for patent application 17/391,442, entitled, “Treatment of Multiple Sclerosis Comprising DHODH Inhibitors,” covering a daily dose of about 10 mg to 45 mg of vidofludimus calcium and other salt as well as free acid forms for the treatment of RMS.

Notice of Allowance for Composition-of-Matter Patent of a Specific Polymorph of Vidofludimus Calcium in the United States

On March 20, 2024, we announced Notice of Allowance from the United States Patent and Trademark Office (“USPTO”) for patent application 16/981,122, entitled, “Calcium salt polymorphs as anti-inflammatory, immunomodulatory and anti-proliferative agents,” covering the composition-of-matter of a specific polymorph of vidofludimus calcium and a related method of production of the material.

The claims are expected to provide protection into 2041, unless extended further.

Positive Interim Data from Phase 2 CALLIPER Trial of Vidofludimus Calcium in Progressive Multiple Sclerosis

On October 9, 2023, we announced positive interim data from our Phase 2 CALLIPER trial of vidofludimus calcium in patients with progressive multiple sclerosis ("PMS").

The predefined interim analysis examined the change from baseline to 24 weeks in serum neurofilament light chain (“NfL”) and glial fibrillar acidic protein ("GFAP") levels among approximately the first half of patients enrolled in this trial.

We believe that this data showed biomarker evidence that vidofludimus calcium's activity extends beyond the previously observed anti-inflammatory effects, thereby further reinforcing its neuroprotective potential.

Serum NfL responses were consistently observed for vidofludimus calcium across progressive MS disease and all subpopulations.

In the overall PMS population at 24 weeks (N=203), vidofludimus calcium was associated with a 6.7% reduction from baseline in serum NfL, compared to a 15.8% increase over baseline in placebo (p=0.01, post hoc).

At 48 weeks (N=79), vidofludimus calcium reduced serum NfL by 10.4% from baseline, compared to a 6.4% increase in placebo.

Substantial reductions were also seen across all PMS subtypes, as well as in patients that show or do not show disease and/or magnetic resonance imaging ("MRI") activity.

Although early, interim GFAP data also showed a promising signal:

at 24 weeks (N=203), GFAP increased by 3.7% for vidofludimus calcium, and 4.4% for placebo.

At 48 weeks (N=79), the change was only 2.7% for vidofludimus calcium, with a 6.4% increase for placebo.

Progression of GFAP response is generally thought to evolve more slowly than NfL, and we believe that a longer follow-up may further strengthen this signal.

Completion of Enrollment of Phase 2 CALLIPER Trial of Vidofludimus Calcium in Progressive Multiple Sclerosis

On August 17, 2023, we announced completion of enrollment of our Phase 2 CALLIPER trial of vidofludimus calcium in patients with PMS.

In total, 467 patients with primary PMS, or active or non-active secondary PMS have been randomized to either 45mg of vidofludimus calcium or placebo.

A top-line data readout of the full 467 patients is expected in April 2025.

Vidofludimus Calcium Acts as Potent Nurr1 Activator, Reinforcing Neuroprotective Potential in MS

On May 17, 2023, we announced the publication of preclinical data showing that vidofludimus calcium acts as a potent Nurr1 activator, in addition to its known mode of action as a DHODH inhibitor.

Activation of Nurr1 could be responsible for the drug’s postulated neuroprotective effects and may contribute to the previously reported reduction of confirmed disability worsening events in MS patients.

Specifically, preclinical data shows potent Nurr1 activation by vidofludimus calcium at low concentrations in several test systems.

The data was published in the peer-reviewed, high impact Journal of Medicinal Chemistry, in a paper entitled, “Development of a potent Nurr1 agonist tool for in vivo applications” (Vietor et al., 2023).

Presentation of Clinical and Preclinical Data for IMU-856 at Digestive Disease Week 2023, Including Its Molecular Mode of Action

On May 6, 2023, we announced the presentation of clinical and preclinical data for IMU-856 as a virtual e-poster at Digestive Disease Week 2023.

Included in this presentation were new data on IMU-856’s mode of action as a potent modulator of SIRT6, a protein which serves as a transcriptional regulator of intestinal barrier function and regeneration of bowel epithelium.

Positive Results From Phase 1b Clinical Trial of IMU-856 in Celiac Disease

On May 4, 2023, we announced positive results from our Phase 1b clinical trial of IMU-856 in patients with celiac disease.

The data demonstrated positive effects for IMU-856 over placebo in four key dimensions of celiac disease pathophysiology:

protection of the gut architecture, improvement of patients’ symptoms, biomarker response, and enhancement of nutrient absorption.

IMU-856 was also observed to be safe and well-tolerated in this trial.

We believe that this data set provides initial clinical proof-of-concept for an entirely new therapeutic approach to gastrointestinal disorders by promoting regeneration of bowel architecture.

The data provides first clinical evidence that IMU-856’s ability, observed in preclinical studies, to induce physiological gut cell renewal translates into clinical benefits for patients with celiac disease.

Most importantly, the observed protection of intestinal villi from gluten-induced destruction, independent of targeting immune mechanisms involved specifically in celiac disease, appears to be unique among proposed therapeutic approaches and may be applicable to other gastrointestinal diseases such as inflammatory bowel disease, short bowel syndrome and irritable bowel syndrome with diarrhea.

Appointment of Richard Rudick, M.D.

to Board of Directors

On April 27, 2023, we announced the appointment of Dr.

Richard Rudick as a member of our Board of Directors, effective as of April 26, 2023.

As a Class III director, Dr.

Rudick’s initial term lasted until our 2023 Annual Meeting of Stockholders held on June 28, 2023, at which meeting he was elected to a three year term expiring at the 2026 Annual Meeting of Stockholders.

Richard Rudick, age 72, has over 35 years of experience in the biopharmaceutical industry and academic medicine.

Since January 2023, Dr.

Rudick has been the President and CEO of Astoria Biologic, a private biotechnology company developing novel therapies for MS.

Previously, Dr.

Rudick served as the Vice President of Development Science at Biogen, Inc., a biotechnology company which engages in discovering, developing, and delivering therapies for neurological and neurodegenerative diseases, from May 2014 until September 2020.

Rudick also served as a staff neurologist and director of the Mellen Center for the Cleveland Clinic from January 1987 until May 2014.

Rudick holds an M.D.

from Case Western Reserve University School of Medicine.

The Nominating and Corporate Governance Committee and the Board believe that Dr.

Rudick‘s extensive leadership in clinical research and development of MS treatments provides valuable clinical, strategy and management skills to the Board.

Director Resignation

Vincent Ossipow retired from the Board of Directors on June 28, 2023.

Ossipow’s decision not to stand for re-election was not the result of any disagreement with the Company or its management on any matter relating to the Company’s operations, policies or practices.

Positive Data from Maintenance Phase of Phase 2 CALDOSE-1 Trial of Vidofludimus Calcium in Moderate-to-Severe UC

On April 5, 2023, we reported positive data from the maintenance phase of our Phase 2b CALDOSE-1 trial of vidofludimus calcium in patients with moderate-to-severe UC.

The data showed a dose-linear increase in clinical remission as compared to placebo at week 50.

Moreover, an exploratory statistical analysis confirmed the 30 mg dose of vidofludimus

calcium to be statistically superior (p=0.0358) in achieving clinical remission at week 50, with a 33.7% absolute improvement over placebo.

A similar effect on clinical remission rates at week 50 was also found among those patients who received corticosteroids during the induction phase.

Finally, a dose-linear increase in endoscopic healing was observed, with the 30 mg dose of vidofludimus calcium being associated with a 37.8% absolute improvement over placebo and also achieving statistical significance in an exploratory statistical analysis (p=0.0259).

We believe that the maintenance phase data of CALDOSE-1 confirms vidofludimus calcium's activity in the absence of chronic corticosteroid co-administration.

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

Deprioritization of Izumerogant (IMU-935) Development Program

In order to focus on the rapidly advancing vidofludimus calcium and IMU-856 programs, and considering the totality of available data for izumerogant, including changes in expected time to market and increased complexity of potential further development in this competitive field, we announced on April 5, 2023 to focus our resources and, therefore, deprioritized the clinical portion of our izumerogant development program in psoriasis and castration-resistant prostate cancer.

The patent was previously granted to the Company in Australia, Canada, Indonesia, Japan and Mexico.

Publication of Extended Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in RRMS in the Peer Reviewed Journal, Neurology® Neuroimmunology & Neuroinflammation

On April 30, 2024, we announced that data from our Phase 2 EMPhASIS trial of vidofludimus calcium in patients with RRMS has been published online on April 25, 2024 in Neurology® Neuroimmunology & Neuroinflammation, an official journal of the American Academy of Neurology.

The paper, lead authored by coordinating investigator, Robert J.

Fox, M.D., Staff Neurologist, Mellen Center for Multiple Sclerosis, Vice-Chair for Research, Neurological Institute, Cleveland Clinic, Cleveland, Ohio, is entitled, “Safety and Dose-Response of Vidofludimus Calcium in Relapsing Multiple Sclerosis:

Extended Results of a Placebo-Controlled Phase 2 Trial.”

Appointment of Jason Tardio as Chief Operating Officer and President and Promotion of Werner Gladdines to Chief Development Officer

On July 9, 2024, we announced that seasoned biopharmaceutical executive, Jason Tardio, will be joining the company as Chief Operating Officer and President, effective July 12, 2024.

In the newly created role, Mr.

Tardio leads internal efforts to prepare for the potential launch of vidofludimus calcium.

Jason also works closely with Patrick Walsh, Chief Business Officer, to prepare the Company for a range of potential partnership outcomes for vidofludimus calcium, as well as our other drug candidates.

On July 9, 2024, we also reported that Werner Gladdines, former Vice President, Program Management & Clinical Development Operations, has been promoted to Chief Development Officer.

In his new role, Mr.

Gladdines takes over additional strategic and operational responsibility for our overall clinical operations functions.

Appointment of Simona Skerjanec to Board of Directors

On July 24, 2024, we announced the appointment of Simona Skerjanec, M.Pharm, MBA, a thought-leader in brain health with decades of experience in drug development and commercialization, as a member of our Board of Directors, effective as of July 22, 2024.

As a Class I director, Ms.

Skerjanec’s term lasts until the Company’s 2027 annual meeting of stockholders.

First Patient Enrolled in Investigator-Sponsored Phase 2 Clinical Trial of Vidofludimus Calcium in Patients with Post COVID Syndrome

On September 4, 2024, we announced enrollment of the first patient in an investigator-sponsored Phase 2 clinical trial of vidofludimus calcium, entitled, “Randomized Adaptive Assessment of Post COVID Syndrome Treatments_Reducing Inflammatory Activity in Patients with Post COVID Syndrome (RAPID_REVIVE).” The Phase 2 RAPID_REVIVE trial, for which Immunic is providing study medication, is a randomized, placebo-controlled, double-blind, parallel group trial sponsored by the Goethe University Frankfurt, which received trial funding via a grant from the German Federal Ministry of Education and Research.

Hosted Two Multiple Sclerosis R&D Days in New York City and San Francisco

At two MS R&D Days, on September 10, 2024 in New York City and on April 9, 2024 in San Francisco, management discussed the latest developments in the MS landscape, along with recent mode of action, preclinical and clinical data supporting the combined neuroprotective, anti-inflammatory and antiviral profile of vidofludimus calcium.

Presented Key Vidofludimus Calcium Data at the 40th Congress of ECTRIMS, Highlighting Its Therapeutic Potential in Multiple Sclerosis

On September 18, 2024, we announced the presentation of key data at the 40th Congress of the European Committee for Treatment and Research in Multiple Sclerosis (“ECTRIMS”), highlighting vidofludimus calcium’s therapeutic potential in MS.

The data was presented in an oral poster presentation and three ePosters at this conference in Copenhagen, Denmark.

Positive Outcome of Interim Analysis of Phase 3 ENSURE Program of Vidofludimus Calcium in Relapsing Multiple Sclerosis

On October 22, 2024, we announced a positive outcome of an interim analysis of our Phase 3 ENSURE program, investigating vidofludimus calcium for the treatment of RMS.

An unblinded IDMC confirmed that the predetermined futility criteria have not been met and recommended that both ENSURE trials should continue without changes.

The IDMC considered if a sample size adjustment would be appropriate for either of the two trials based on factors that include statistical analysis and ultimately recommended that the sample sizes for both trials should remain unchanged.

Announced Publication of Data From Phase 1/1b Clinical Trial of IMU-856 in the Peer Reviewed Journal, The Lancet Gastroenterology & Hepatology

On November 13, 2024, we announced that the data from our Phase 1/1b clinical trial of IMU-856, has been published in the peer reviewed journal, The Lancet Gastroenterology & Hepatology .

Lead authored by Dr.

James Daveson, Gastroenterologist, Wesley Research Institute and Coral Sea Clinical Research Institute, Queensland, Australia, the paper is entitled, “Safety, clinical activity, pharmacodynamics, and pharmacokinetics of IMU-856, a SIRT6 modulator, in celiac disease:

a first-in-human, randomized, double-blind, placebo-controlled, phase 1 trial.”

IMU-856 Demonstrated Dose-Dependent Increase of Glucagon-like Peptide-1 (“GLP-1”) in Celiac Disease Patients and Corresponding Effects in Preclinical Testing

On February 20, 2025, we announced that IMU-856 demonstrated a dose-dependent increase of endogenous GLP-1 levels in a post hoc analysis of patients from our Phase 1b clinical trial in celiac disease.

IMU-856 also showed a dose-dependent reduction of body weight gain and food consumption in preclinical in vivo testing.

These effects may indicate the potential for IMU-856 as an oral treatment option for weight management.

The post hoc analysis of our Phase 1b clinical trial of IMU-856 in celiac disease patients measured blood concentrations of GLP-1, between baseline and day 28, in a fasting state.

A highly statistically significant (day 29:

80 mg p=0.014;

160 mg p=0.003) and dose-dependent increase of GLP-1 versus placebo control was detectable, even in the small patient population in this Phase 1b clinical trial (baseline:

N placebo = 11, N 80 mg IMU-856 = 13, N 160 mg IMU-856 = 13).

These clinical findings were corroborated by effects observed in a 6-month preclinical in vivo study, where IMU-856 was found to reduce body weight gain accompanied by food consumption in a dose-dependent fashion up to -40 %, compared to the control group, which was found to be linked to reduced food intake.

Critical Accounting Policies and Estimates

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Our reporting currency is US dollars.

During the twelve months ended December 31, 2023 and 2022, Immunic AG’s operations were located in Germany with the euro being its functional currency.

During the years ended December 31, 2024 and 2023, 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.

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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.

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, 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.

Research and Development Expenses

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, IMU-856 and IMU-381.

These research and development expenses primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, IMU-856 and IMU-381.

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

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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.

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 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 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, for which the Company received a notice of allowance from the U.S.

Patent & Trademark Office in August 2022.

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

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.

Stock-based compensation is (i) estimated at the date of grant based on the award’s fair value for equity classified awards and (ii) based on the final measurement date for liability classified awards.

Forfeitures are recorded in the period in which they occur.

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

Warrants and Tranche Rights

The Company accounts for issued financial instruments either as a liability or equity in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480-10”) or ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (“ASC 815-40”).

If financial instruments do not meet liability classification under ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the financial instruments should be classified as a liability or as equity.

Liability-classified financial instruments are measured at fair value on the issuance date and at the end of each reporting period.

Any change in the fair value of the financial instruments after the issuance date is recorded in the consolidated statements of operations as a gain or loss.

If financial instruments do not require liability classification under ASC 815-40, the instrument is classified in permanent equity.

Equity-classified financial instruments are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.

Components of Results of Operations

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Since our inception in March 2016, we have spent a total of approximately $378.1 million in research and development expenses through December 31, 2024.

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

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, IMU-856 and IMU-381.

We have spent the majority of our research and development resources on vidofludimus calcium, our lead development program, for clinical trials in MS and UC.

In August 2019, Immunic AG received a grant of up to approximately $726,000 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 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 $726,000 of income in total of which $100,000 and $254,000 were recorded in the twelve months ended December 31, 2023 and 2022, respectively, and were classified in Other Income in the accompanying consolidated statement of operations.

The funding of this grant is now completed.

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.

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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 been increasing throughout 2022 and 2023 as global interest rates have been increasing.

Our interest income is expected to decrease as our money market funds balance has decreased and U.S.

interest rates have decreased.

Change in the Fair Value of the Tranche Rights

The change in fair value of the tranche rights is a non-cash charge related to the change in fair value of the tranche 2 and tranche 3 rights associated with the January 2024 Financing from January 8, 2024 until March 4, 2024.

Other Income (Expense), Net

Other income (expense) consists primarily of a research and development tax incentive related to clinical trials performed in Australia, a German Government research and development grant 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.

Other income (expense) consists of (i) deal costs from the January 2024 Financing related to tranche rights that were established at the time of the deal closing (ii) a research and development tax incentive related to clinical trials performed in Australia and (iii) a German Government research and development grant.

Results of Operations

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General and administrative 18,006 16,008 1,998 12 %

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

Total operating expenses 98,052 99,223 (1,171) (1) %

Loss from operations (98,052) (99,223) 1,171 (1) %

Other income (expense):

Interest income 3,390 3,075 315 10 %

Change in fair value of the tranche rights (4,796) — (4,796) NM

Other income (expense), net (1,049) 2,536 (3,585) (141) %

Total other income (expense), net (2,455) 5,611 (8,066) (144) %

Net loss (100,507) (93,612) (6,895) 7 %

Research and development expenses increased by $12.0 million during the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.

The increase reflects (i) a $10.2 million increase in external development costs related to the Phase 3 clinical program of vidofludimus calcium in relapsing multiple sclerosis, (ii) a $5.2 million increase in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in progressive multiple sclerosis, (iii) a $2.2 million increase in drug supply costs for vidofludimus calcium to support our ongoing trials, (iv) a $2.2 million increase in personnel expense in research and development related to an increase in headcount, $0.2 million of which was due to non-cash stock based compensation and (v) a $1.5 million increase in external development costs related to IMU-856.

The increases were partially offset by (i) a decrease of $6.5 million from deprioritizing the izumerogant program in psoriasis and castration-resistant prostate cancer, (ii) a decrease of $2.5 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in ulcerative colitis and (iii) a $0.3 million increase in related costs across numerous categories.

General and administrative expenses increased by $0.7 million during the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.

The increase was primarily due to (i) a $0.4 million increase in legal and consultancy expense, (ii) a $0.3 million increase in travel expense, (iii) a $0.2 million increase in facility expenses primarily due to additional lease space and (iv) a $0.3 million increase across numerous categories.

The increases were partially offset by a decrease of $0.5 million in personnel expense in general and administrative which was primarily due to non-cash stock based compensation decrease.

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 represented a full write down of our previous goodwill balance.

Other income increased by $6.5 million during the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022.

The increase was primarily attributable to (i) a $3.9 million decrease in foreign exchange losses, (ii) a $2.3 million research allowance attributable to tax year 2021 and 2022 from the German Federal Ministry of Finance and (iii) a $2.0 million increase in interest income as a result of higher interest rates.

The increase was partially offset by (i) a $1.6 million decrease in research and development tax incentives for clinical trials in Australia as a result of decreased spending on clinical trials in Australia and (ii) a $0.1 million decrease across numerous categories.

Research and development expenses decreased by $3.2 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

The decrease reflects (i) a decrease of $4.1 million from deprioritizing the izumerogant program in psoriasis and castration-resistant prostate cancer, (ii) a $3.5 million decrease in external development costs related to IMU-856 due to the completion of the phase 1 clinical trial in celiac disease and (iii) a $0.3 million decrease related costs across numerous categories.

The decreases were offset by (i) a $3.5 million increase in external development costs related to the vidofludimus calcium program and (ii) a $1.2 million increase in personnel costs, $0.2 million of which is related to non-cash stock compensation and the remainder of which is due to an increase in headcount.

General and administrative expenses increased by $2.0 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

The increase was due to a $2.0 million increase in personnel expense in general and administrative, $1.2 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount.

Interest income increased by $0.3 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023 due to a higher average cash balance.

The change in fair value of the tranche rights of $4.8 million was a non-cash charge related to the change in value of the tranche rights associated with the January 2024 Financing from January 8, 2024 until March 4, 2024.

These tranches were initially classified as a liability, but were reclassified to equity on March 4, 2024, when stockholders approved the increase in our authorized shares from 130 million to 500 million shares of common stock and therefore the tranche 2 and tranche 3 rights needed to be revalued to fair value upon the reclassification to equity.

Other income (expense) decreased by $3.6 million during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

The decrease was primarily attributable to (i) a $1.7 million expense related to the portion of deal costs from the January 2024 Financing related to the tranche rights that were established at the time of the deal closing and (ii) a $2.6 million decrease due to the timing of receiving the German Federal Ministry of Finance grant.

In 2023, we recognized grant income from 2022 and 2023 and in 2024, we did not receive approval of the German Federal Ministry of Finance grant as of December 31, 2024, so nothing was recognized.

The decrease was offset by (i) a $0.4 million increase in foreign exchange gains and (ii) a $0.3 million increase related to costs across numerous categories.

Liquidity and Capital Resources

Financial Condition, Liquidity and Going Concern

We have no products approved for commercial sale and have not generated any revenue from product sales.

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We expect to continue 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, if at all.

From inception through January 31, 2024, Immunic has raised net cash of approximately $431.4 million from private and public offerings of preferred and common stock.

As of December 31, 2023, the Company had cash and cash equivalents of approximately $46.7 million.

On January 4, 2024, we raised net cash proceeds in a private placement of approximately $75.0 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 consolidated financial statements.

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, product licensing 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, if at all.

From inception through December 31, 2024, we have raised net cash of approximately $430.9 million from private and public offerings of preferred stock, common stock, pre-funded warrants and tranche rights.

As of December 31, 2024, we had cash and cash equivalents of approximately $35.7 million.

With these funds, the Company does not have adequate liquidity to fund its operations for at least twelve months from the issuance of these consolidated financial statements without raising additional capital, and such actions are not solely within the control of the Company.

If the Company is unable to obtain additional capital, it would have a material adverse effect on the operations of the Company, its clinical development program, and the Company may have to cease operations altogether.

These factors raise substantial doubt about the Company’s ability to continue as a going concern.

In December 2020, the Company filed a Prospectus Supplement to the shelf registration statement on Form S-3 filed on November 13, 2020 and declared effective on November 24, 2020 (the "2020 Shelf Registration Statement") 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 LLC (now Leerink Partners LLC) as agent ("December 2020 ATM").

The Company used the net proceeds from the December 2020 ATM 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 terminated in May 2024.

In May 2022, the Company filed a Prospectus Supplement to the 2020 Shelf Registration Statement for the offering, issuance and sale of up to a maximum aggregate offering price of $80.0 million of common stock to be issued and sold under another at-the-market sales agreement ("May 2022 ATM") with Leerink Partners LLC (formerly SVB Leerink LLC) as agent.

The 2020 Shelf Registration Statement expired in November 2023.

In November 2023, we filed a shelf registration statement on Form S-3 (the "2023 Shelf Registration Statement").

The 2023 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.

As of January 31, 2024, the 2023 Shelf Registration statement has not been made effective, however, we can (i) continue to sell, subject to applicable SEC requirements, unsold securities remaining on the expiring 2020 Shelf Registration Statement;

and (ii) offer and sell additional securities to be registered on the new Form S-3.

In November 2020, we filed a shelf registration statement on Form S-3 (the "2020 Shelf Registration Statement").

The 2020 Shelf Registration Statement permitted 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.

As of January 31, 2024, there is $75.0 million of unsold securities remaining on from the 2020 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 LLC (now Leerink Partners LLC) 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 Leerink Partners LLC 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 Leerink Partners LLC at any time in certain circumstances, including the occurrence of a material adverse effect on us.

As of January 31, 2024, $7.5 million in capacity remains under the December 2020 ATM.

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 (now Leerink Partners LLC) as the sales 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 2023 Registration Statement was declared effective on May 31, 2024.

Unsold securities from the expired 2020 Shelf Registration Statement can continue to be sold under the 2023 Shelf Registration Statement resulting in a total S-3 shelf availability of approximately $412.3 million as of December 31, 2024.

In May 2024, we filed a Prospectus Supplement to the 2023 Shelf Registration Statement 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 an at-the-market sales agreement with Leerink Partners LLC as agent ("May 2024 ATM"), which rolls over the $80.0 million of unsold common stock from the May 2022 ATM.

We intend to use the net proceeds from the May 2024 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 May 2024 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through Leerink Partners LLC on the terms and subject to the conditions set forth in the May 2024 ATM or (ii) termination of the May 2024 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 Leerink Partners LLC at any time in certain circumstances, including the occurrence of a material adverse effect on the Company.

As of January 31, 2024, $80.0 million in capacity remains under the May 2022 ATM.

The May 2024 ATM may be terminated at any time by either party upon ten days’ prior notice, or by Leerink Partners LLC at any time in certain circumstances, including the occurrence of a material adverse effect on us.

As of December 31, 2024, $80.0 million in capacity remains under the May 2024 ATM.

We agreed to pay Leerink Partners LLC a commission equal to 3.0% of the gross proceeds from the sales of common shares pursuant to the May 2024 ATM and have agreed to provide Leerink Partners LLC with customary indemnification and contribution rights.

For the year ended December 31, 2024, the Company raised gross proceeds of $0.2 million pursuant to the December 2020 ATM through the sale of 150,000 shares of common stock at a weighted average price of $1.31 per share.

The net proceeds from the December 2020 ATM were $0.2 million after deducting sales agent commissions of $6,000.

For the year ended December 31, 2023, we raised gross proceeds of $0.9 million pursuant to the December 2020 ATM through the sale of 657,012 shares of common stock at a weighted average price of $1.34 per share.

The net proceeds from the December 2020 ATM were $0.9 million after deducting underwriter commissions of $26,000.

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

Private Placement of up to $240 Million

Janaury 2024 Financing of up to $240 Million

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The third tranche must occur no later than three years after the second tranche and is conditioned on the same volume-weighted average share price and minimum trading volumes as the second tranche.

Any of the conditions in the second or third tranches can be waived by holders of a majority of the outstanding securities (including the lead Investor).

The Private Placement resulted in gross proceeds to the Company of approximately $80 million in the first tranche, and an additional $80 million if and when the second tranche occurs.

Assuming that the second tranche is completed and conditions for the third tranche are satisfied or waived, the Company could receive up to an additional $80 million in the third tranche.

The fair value methodology used by the Company assumed the conditions will be waived if the trading price of the stock exceeds the purchase price.

The January 2024 Financing resulted in gross proceeds to the Company of approximately $80 million in the first tranche, and an additional $80 million if and when the second tranche occurs.

If the second tranche is completed and conditions for the third tranche are satisfied or waived, the Company could receive up to an additional $80 million in the third tranche.

However, the amount of cash received in the third tranche would depend on the extent to which the Investors elect to fund the third tranche through a “cashless” or net settlement basis.

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Gross proceeds to the Company will be reduced by fees paid to the placement agents, capital markets advisors and payments of transaction expenses.

The Company intends to use the net proceeds from the January 2024 Financing to fund the ongoing clinical development of its three lead product candidates, vidofludimus calcium (IMU-838), IMU-856 and IMU-381, and for other general corporate purposes.

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.

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

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

We expect our expenses to continue to increase as we continue the ongoing research, development, manufacture and clinical trials of, and seek regulatory approval for, our product

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

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;

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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 all 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.

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.

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.

Also, the cost of debt financing has increased due to the rise in interest rates over the past few years.

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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As of December 31, 2024, we had cash and cash equivalents of approximately $35.7 million.

On January 4, 2024, we raised net cash proceeds in a private placement of approximately $75.0 million.

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

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During the year ended December 31, 2024, operating activities used $84.8 million of cash.

The use of cash related to our net loss of $100.5 million adjusted for non-cash charges of $8.5 million of stock-based compensation, $4.8 million related to a change in the fair value of the tranche rights, $1.7 million for fees expensed as part of the January 2024 financing and (ii) a net increase in operating assets and liabilities of $0.6 million.

Changes in our operating assets and liabilities during the year ended December 31, 2024 consisted primarily of (i) a $1.9 million increase in our other current assets and prepaid expenses and (ii) a net decrease of $1.3 million in our other current liabilities.

During the year ended December 31, 2023, operating activities used $70.8 million of cash.

The use of cash related to our net loss of $93.6 million adjusted for non-cash charges of $7.1 million of stock-based compensation and a $0.5 million foreign currency loss as well as a $15.0 million net change in our operating assets and liabilities.

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The increase in liabilities is primarily due to an increase in clinical costs as a result of our Phase 3 clinical studies for RMS and Phase 2 clinical studies for PMS.

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 a 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.

Net cash used in investing activities

During the year ended December 31, 2024, net investing activities used $0.3 million due to the purchase of property and equipment.

During the year ended December 31, 2023, net investing activities provided $9.5 million of cash, primarily due to the sale of $9.8 million of time deposits partially offset by the purchase of $0.3 million of property and equipment.

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.

Net cash provided by financing activities

Net cash provided by financing activities was $74.5 million during the year ended December 31, 2024 primarily

consisting of net cash proceeds from the January 2024 Financing and $0.2 million of net proceeds from sale of common stock through our At The Market Sales Agreement.

During the year ended December 31, 2023, financing activities provided $1.0 million due primarily to net cash proceeds from the sale of common stock under our December 2020 ATM.

During the year ended December 31, 2022, financing activities provided $95.8 million of cash 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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Contractual Obligations

As of December 31, 2023, the Company has non-cancelable contractual obligations under certain agreements related to its development programs for vidofludimus calcium, izumerogant and IMU-856 totaling approximately $4.2 million, all of which is expected to be paid in 2024.

As of December 31, 2024, the Company has non-cancelable contractual obligations under certain agreements related to its development programs in vidofludimus calcium and IMU-856 totaling approximately $2.4 million, the majority of which is expected to be paid by the end of 2026.

Legal Proceedings

The Company is not currently a party to any litigation, nor is it aware of any pending or threatened litigation, that it believes would materially affect its business, operating results, financial condition or cash flows.

However, its industry is characterized by frequent claims and litigation including securities litigation, claims regarding patent and other intellectual property rights and claims for product liability.

As a result, in the future, the Company may be involved in various legal proceedings from time to time.

Recently Adopted Accounting Standards

There are no recently issued accounting standards that would have a significant impact on the Company's consolidated financial statements.

During the year ended December 31, 2024, the Company adopted ASU 2023-07 which requires public companies with a single reportable segment to meet all existing disclosure requirements of Topic 280 and additional disclosures.

Single reportable segment entities must now provide qualitative disclosures about factors used to identify reportable segments and types of products and services, as well as quantitative disclosures of profit or loss measures and significant expense categories.

Retrospective application is required to all periods in financial statements unless impracticable, in which case companies must disclose this fact and the reasons why.

Future Accounting Standards

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The new guidance is expected to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information by requiring 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) income taxes paid disaggregated by jurisdiction.

The guidance is effective on a prospective basis, although retrospective application and early adoption is permitted.

The standard will be adopted for the annual period starting January 1, 2025.

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