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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-10-31 · 281 added, 390 removed, 201 unchanged (77% of the section changed)

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Description of Business

We are a clinical-stage inflammation

and immunology company focused on developing drugs that modify the patient’s innate immune system to treat disease.

We believe targeting

cells of the innate immune system that cause chronic inflammation and are involved in immune dysfunction such as cancer and neurodegenerative

diseases may make a therapeutic impact on many diseases.

The Company’s drugs are in clinical trials and have not been approved by

a regulatory authority.

The Company has two therapeutic platforms – a dominant-negative TNF platform (“DN-TNF”, “XPro™”,

“XPro1595™”, “INB03”, or “pegipanermin”) and a Natural Killer (“NK”, or “INKmune™”)

The DN-TNF platform neutralizes soluble TNF (“sTNF”) without affecting trans-membrane TNF (“tmTNF”)

or TNF receptors.

This unique biologic mechanism differentiates the DN-TNF drugs from currently approved non-selective TNF inhibitors

that inhibit both sTNF and tmTNF.

Protecting the function of tmTNF and TNF receptors while neutralizing the function of sTNF is a potent

anti-inflammatory strategy that does not cause immunosuppression or demyelination which can occur with currently approved non-selective

TNF inhibitors and may occur with many other potent anti-inflammatory drugs.

Currently approved non-selective TNF inhibitors treat autoimmune

disease, but are contraindicated in patients with infection, cancer and neurologic diseases because they increase the risk of infection,

cancer and demyelinating neurologic diseases;

these safety problems are due to off-target effects on inhibiting tmTNF.

The NK platform targets the

dysfunctional natural killer cells in patients with cancer.

NK cells are part of the normal immune response to cancer with important roles

in immunosurveillance to prevent cancer and in preventing relapse by eliminating residual disease.

Residual disease is the cancer left

behind after therapy is finished.

Residual disease can grow to cause relapse.

The NK cells of cancer patients lose the ability to bind

and kill cancer cells.

INKmune converts the patient’s resting NK cells into cancer killing memory like NK cells (mlNK).

improves mlNK killing in the hostile tumor microenvironment in at least three ways:

increasing avidity, improving mitochondrial and cellular

respiration and allowing the cells to function in the immunosuppressive and hypoxic TME.

Avidity is a measure of NK cell binding to cancer

The higher the avidity, the greater the bond between the NK cell to cancer cell and thus the greater NK killing of cancer cells.

INKmune increases NK avidity and further improves mitochondrial function and upregulates nutrient receptors.

These metabolic changes may

help the INKmune™ primed NK cell to function in the hostile tumor microenvironment and persist much longer.

These mechanisms improve

the ability of INKmune™ primed NK cells to overcome the immune evasion of the patient’s cancer cells.

We believe INKmune™

may be best used to eliminate residual disease after the patient has completed other cancer therapies.

Both the DN-TNF platform and

the INKmune platform can be used to treat multiple diseases.

The DN-TNF platform will be used as an immunotherapy for the treatment of

cancer (INB03) and neurodegenerative disease.

INKmune™ is being developed to treat NK-resistant hematologic malignancies and solid

We believe our DN-TNF platform

can be used as a CNS (“central nervous system”) therapy to target glial activation to prevent progression of Alzheimer’s

Our objective is to develop and commercialize our product candidates

to treat diseases where the innate immune system is dysfunctional causing or contributing to the patient’s disease.

Innate immune

dysfunction can occur for a variety of reasons including genetics, lifestyle, and other factors.

However, age plays a significant role

in the development of immune dysfunction.

Innate immune dysfunction can be seen in cancer where Natural Killer (“NK”) cells

are impaired and facilitate a tumor’s evasion of the immune system and subsequent disease progression.

Chronic inflammation is implicated

in neurologic and metabolic diseases where it impairs the innate immune system.

Our primary focus continues to be treatment of cancer

with INKmune and treatment of Alzheimer’s Disease (“AD”) and Treatment Resistant Depression (“TRD”) with

We have added CORDStrom, a pooled, human umbilical cord mesenchymal stem cell product to treat recessive dystrophic epidermolysis

bullosa (“RDEB”), a pediatric orphan disease caused by mutations in the COL7A1 gene that results in a debilitating disease

of skin blistering, dysphagia and failure to thrive with chronic wound problems that often results in fatal squamous cell carcinoma.

XPro1595 (“XPro”), targets Alzheimer’s Disease and

XPro for AD has completed Phase I trials and a Phase II trial has completed enrollment of patients at clinical sites in the United

Kingdom, EU, Australia and Canada.

Patients are currently being treated with XPro for Early AD as part of that clinical trial.

being prepared for Phase II trials.

We expect to start a pivotal global registration trial in patients with AD after the results of the

Phase II trial have been analyzed.

The INKmune program is in an open label Phase II trial in metastatic castrate resistant prostate cancer

CORDStrom for the treatment of children with RDEB has completed a pivotal blinded randomized cross-over trial.

The data will be submitted for a marketing authorization by filing a Biologics License Application (“BLA”) with the FDA in

the US which is anticipated in the first half of 2026.

Afterwards, the company intends to file a Marketing Authorization Application (MAA)

in the United Kingdom and EU.

We believe our DN-TNF

platform can be used as a CNS (“central nervous system”) therapy to target glial activation to prevent progression of Alzheimer’s

disease (“AD”);

to target neuroinflammation in treatment resistant depression (“TRD”).

as a drug to treat many

chronic inflammatory diseases;

and as a cancer therapy to reduce resistance in immunotherapy.

The primary focus of the company’s

development efforts for XPro™ is AD which is currently in a Phase 2 trial to determine if reduction of chronic inflammation without

immunosuppression makes a difference in cognition.

The primary focus of the

company’s development efforts for XPro is AD.

The next indication to be developed with XPro will be TRD.

There is a significant

pre-clinical program on the use on DN-TNF in cancer.

The drug is named differently for the oncology and CNS indications;

or XPro, respectively, but it is the same drug product.

This novel compound has the same mechanism of action but has novel IP protection.

In each case, we believe neutralizing sTNF without blocking tmTNF or TNF receptors is a cornerstone to the treatment of these diseases.

As an immunotherapy for cancer, we are using INB03 to neutralize sTNF produced by HER2+ trastuzumab resistant breast cancers to reverse

resistance to targeted therapy.

sTNF produced by the tumor causes an up-regulation of MUC4 express causing steric hindrance of trastuzumab

binding to the HER receptor on HER2+ breast cancer cells.

Without binding, trastuzumab based therapies are not effective.

sTNF reverses MUC4 expression converting a trastuzumab resistant breast cancer cell into a trastuzumab sensitive breast cancer cell.

mouse models, INB03 changes the immunobiology of the tumor microenvironment (“TME”) by decreasing the number of immunosuppressive

myeloid cells, both myeloid derived suppressor cells and tumor active macrophages (TAM;

phagocytic macrophages) in the TME.

of immunocompetent mice, INB03 increases the number of cytotoxic lymphocytes modifies and the TME by downregulating immune exhaustion

markers – PDL-1, TIGIT, LAG3, CTLA4, CD47 and SIRPꭤ.

The Company has completed an open label dose escalation trial in cancer

patients with metastatic solid tumors that have failed multiple lines of therapy.

The pre-clinical data in MUC4+ expressing tumors and

the clinical trial informs the design of a future Phase II trial by demonstrating that INB03 was safe and well tolerated, defined the

dose of INB03 to carry into Phase II trials, and demonstrated a pharmacodynamic endpoint.

The company does not plan to commence a Phase

II trial in patients with advanced MUC4+ expressing cancer until a partner can be found or extra-mural funding is secured.

Likewise, we believe the DN-TNF

platform can be used to treat selected neurodegenerative diseases by modifying the brain microenvironment (“BME”).

believes the core pathology of cognitive decline is a combination of neurodegeneration and synaptic dysfunction.

Neurodegeneration is

nerve cell death that may include demyelination.

Synaptic dysfunction means the connections between nerve cells stop working efficiently

and may decrease in number.

The combination of neurodegeneration and synaptic dysfunction causes cognitive decline and behavioral changes

associated with Alzheimer’s disease (“AD”).

XPro™ completed a Phase I trial treating patients with Alzheimer’s

disease that was partially funded by a Part-the-Clouds Award from the Alzheimer’s Association.

We believe XPro targets activated

microglia and astrocytes of the brain that produce sTNF causing nerve cell loss, synaptic dysfunction and prevents myelin repair - key

elements in the development of dementia.

In animal models, elimination of sTNF prevents nerve cell dysfunction, reverses synaptic pruning

and promotes myelin repair.

In each case, we believe

neutralizing sTNF is a cornerstone to the treatment of these diseases.

We believe the DN-TNF platform

can be used to treat selected neurodegenerative diseases by reducing neuroinflammation without immunosuppression.

The Company believes

the core pathology of cognitive decline is a combination of neurodegeneration and synaptic dysfunction.

Neurodegeneration is nerve cell

death that may include demyelination.

Synaptic dysfunction means the connections between nerve cells stop working efficiently and may

decrease in number.

The combination of neurodegeneration and synaptic dysfunction causes cognitive decline and behavioral changes associated

with Alzheimer’s disease (“AD”).

XPro completed a Phase I trial treating patients with Alzheimer’s disease that

was partially funded by a Part-the-Clouds Award from the Alzheimer’s Association.

We believe XPro targets activated microglia and

astrocytes of the brain that produce sTNF that promotes nerve cell loss, synaptic dysfunction and prevents myelin repair - key elements

in the development of dementia.

In animal models, elimination of sTNF prevents nerve cell dysfunction, reverses synaptic pruning and promotes

myelin repair.

The Phase I trial in patients with biomarkers of inflammation with AD has been completed.

The open label,

dose escalation trial was designed to demonstrate that XPro can safely decrease neuroinflammation in patients with ADi.

ADi is the term

used to delineate patients with AD with biomarkers of inflammation.

The endpoints of the trial were measures of neuroinflammation and

neurodegeneration in blood and cerebral spinal fluid by measuring changes in inflammatory cytokine levels in the CNS.

XPro, at the 1mg/kg/week

dose, decreased inflammatory cytokines in the CSF in the brain demonstrating that XPro can decrease neuroinflammation in patients with

We also studied downstream benefits of decreasing neuroinflammation by measuring changes in the CSF proteome and using EEG as a functional

measure of brain function.

XPro significantly decreases biomarkers of neurodegeneration as measured by changes in the CSF proteome

including neurofilament light chain, phospho Tau 217 and VILIP-1;

decreases of 84%, 46% and 91% respectively after 3 months of therapy.

Three months of XPro therapy improved measures of synaptic function, as measured in the CSF proteome including a 222% increase in Contactin

2 and a 56% decrease neurogranin, changes that contribute to improved synaptic function.

After 4 weeks of XPro therapy, EEG Alpha power

improved in patients with AD suggesting improved brain activity.

The open label, dose escalation

trial was designed to demonstrate that XPro can safely decrease neuroinflammation in patients with ADi.

ADi is the term used to delineate

patients with AD with biomarkers of inflammation.

The endpoints of the trial were measures of neuroinflammation and neurodegeneration

in blood and cerebral spinal fluid by measuring changes in inflammatory cytokine levels in the CNS and using MRI-DTI to measure brain

microstructural changes.

XPro, at the 1mg/kg/week dose, decreased inflammatory cytokines in the CSF in the brain demonstrating that XPro

can decrease neuroinflammation in patients with AD.

We also studied downstream benefits of decreasing neuroinflammation by measuring changes

in the CSF proteome and quantifying changes in novel white matter MRI biomarkers.

XPro significantly decreases biomarkers of neurodegeneration as

measured by changes in the CSF proteome including neurofilament light chain, phospho Tau 217 and VILIP-1;

decreases of 84%, 46% and 91%

respectively after 3 months of therapy.

Three months of XPro therapy improved measures of synaptic function, as measured in the CSF proteome

including a 222% increase in Contactin 2 and a 56% decrease neurogranin, changes that contribute to improved synaptic function.

The successful completion

of the Phase I trial in AD informed the design of the ongoing blinded randomized, placebo-controlled Phase II trial in patients with early

AD with biomarkers of inflammation.

Early ADi includes patients have mild AD or MCI with at least one biomarker of inflammation.

The early ADi trial is a blinded randomized trial to test if treatment of early AD patients with neuroinflammation with XPro will affect

cognitive decline.

The Phase II trial in early ADi has six important elements.

Two hundred and one patients are being enrolled in a 2:1

ratio (XPro vs placebo).

The patients will receive 1mg/kg/week as a subcutaneous injection for six months.

An enrichment strategy identical

to the successful strategy used in the Phase I trial will be used to ensure patients have neuroinflammation.

Patients will need to have

one or more enrichment criteria:

elevated blood level of at least one of C-reactive protein, hemoglobin A1c, erythrocyte sedimentation

or at least one allele of ApoE4.

The primary endpoint will be Early/mild Alzheimer’s Cognitive Composite (“EMACC”),

a validated cognitive measure that is more sensitive than traditional endpoints used in many studies of patient with early AD.

EMACC is a primary endpoint, CDR-SB, a well recognized cognitive test is being used as a secondary endpoint as well.

The AD program is

enrolling patients in Australia, Canada, the United Kingdom, France, Germany, Spain, Poland, Czech Republic and Slovakia.

Because of resource

constraints, a planned open-label extension has been stopped.

There are at least 4 clinical

milestones associated with the Phase II trial in AD.

Closing enrollment to screening of patients in the Phase II AD trial was announced

at the end of the third quarter of 2024.

Approximately seven months after the last patient is enrolled into AD02, top line cognition data

with EMACC and CDR will be available.

Secondary endpoints which include blood biomarker, neuroimaging and additional neuropsychiatric

endpoints will be available after data-base lock 2-3 months after top line data.

Finally, several months after all the data are analyzed,

of the Phase I trial in AD has informed the design of a blinded randomized, placebo-controlled Phase II trial in patients with early ADi.

Early AD includes patients with AD and MCI who have at least one biomarker of inflammation (ADi).

The ADi trial is a blinded randomized

trial to test if treatment of early AD patients with neuroinflammation with XPro will affect cognitive decline.

Two hundred and eight

patients have been enrolled in a 2:1 ratio (XPro vs placebo).

The patients received 1mg/kg/week as a subcutaneous injection for six months.

An enrichment strategy identical to the successful strategy used in the Phase I trial is used to ensure patients have neuroinflammation.

All patients have one or more enrichment criteria:

elevated blood level of at least one of C-reactive protein, hemoglobin A1c, erythrocyte

sedimentation and at least one allele of ApoE4.

The primary end-point will be Early/mild Alzheimer’s Cognitive Composite (“EMACC”),

a validated cognitive measure that is more sensitive than traditional end-points used in many studies of patients with early AD.

program is open in Australia, Canada, the United Kingdom, France, Germany, Spain, Czech Republic and Slovakia.

Full enrollment in the Phase

II AD trial occurred in late 2024 with 208 patients enrolled.

Data is expected to be reported during June.

After all the data is analyzed,

the Company plans an end-of-phase II meeting with the FDA to finalize plans for the pivotal Phase III trial.

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may be eligible for one or both accelerated approval pathways.

The Company plans to apply for an accelerated pathway and plans to submit

of Fast Track status.

We expect to be eligible for Break Through status after completion of the Phase II trial in 2025.

Effective therapy for TRD

is a large unmet need.

Twenty percent of patients with Major Depressive Disorder have TRD.

Once third of TRD patients have peripheral

biomarkers to inflammation (elevated CRP) – the target population of the TRD program.

We expect to be eligible for Break Through status after completion of the

Phase II trial in 2025.

Effective therapy for

TRD is a large unmet need.

Twenty percent of patients with a Major Depressive Disorder have TRD.

Once third of TRD patients have

peripheral biomarkers to inflammation (elevated CRP).

This is a large patient population.

of TNF and anti-TNF therapeutics was explored in a small open label clinical trial by Prof.

Andrew Miller, MD of Emory University demonstrated

the patients have elevated TNF levels and treatment with infliximab treated their depression (Miller, 2011).

The Company received a $2.9M

USD award from the National Institute of Mental Health (“NIMH”) to treat TRD with XPro.

The blinded, randomized Phase II trial

will use biomarkers of peripheral inflammation to select patients with TRD for enrollment.

The role of TNF and anti-TNF therapeutics

was explored in a small open label clinical trial by Prof.

Andrew Miller, MD of Emory University demonstrated the patients have

elevated TNF levels and treatment with infliximab treated their depression (Miller, 2011).

The Company has a $2.0M USD award from

the National Institute of Mental Health (“NIMH”) to treat TRD with XPro.

To date, these funds have not been impacted by

any changes at the NIH.

The blinded, randomized Phase II trial will use biomarkers of peripheral inflammation to select patients

with TRD for enrollment.

Patients will be treated for 6 weeks.

end-points include both clinical and neuroimaging measures.

The final trial design is ongoing and discussions with the FDA are not complete.

The Company expects to receive authorization to initiate a clinical trial in TRD during the second half of 2024.

The TRD trial is expected

to start enrollment after the AD Phase II trial finishes patient enrollment.

Our data show that INKmune

improves the ability of the patient’s own NK cells to attack their tumor.

INKmune interacts with the patient’s NK cells to

convert them from inert resting NK cells into memory-like NK cells that kill the patient’s cancer cells.

INKmune is a replication

incompetent proprietary cell line that is given to the patient after determining i) the patient has adequate NK cells in their circulation

and ii) those NK cells are functional when exposed to INKmune in vitro.

INKmune is designed to be given to patients after their immune

system has recovered after cytotoxic chemotherapy to target the residual disease that remains after conventional treatment.

vitro data suggesting that INKmune can be used to treat numerous hematologic malignancies and solid tumors including leukemia, multiple

myeloma, lymphoma, lung, ovary, breast, renal and prostate cancer.

The Company had a Phase I trial using INKmune to treat patients with

high risk MDS/AML, a form of leukemia.

Two patients were treated in the Phase I trial for MDS, three patients have been treated compassionately

During March 2024, the Company decided to terminate further enrollment in the MDS/AML trial due to recruitment difficulties in

the European trial sites.

However, in the patients who were treated, INKmune therapy was shown to be safe, and induced development of

cancer killing memory-like NK cells that were found in the patient’s circulation for up to 4 months.

The Company initiated a separate

Phase I/2 trial of INKmune in a metastatic castrate resistant prostate cancer in 8 trials sites across the US.

The open label trial enrolled

the first patient in December 2023, opened the second cohort in June 2024, and expects to open the third cohort to patient enrollment

in November 2024.

The Phase I/II trial using

INKmune™ to treat patients with metastatic castrate resistant prostate cancer (mCPRC) is an open label trial.

Biomarker data from

the patients will be visible as patients are treated.

Primary end-points include both clinical and neuroimaging measures.

The TRD trial is expected to start enrollment during 2025 once NIMH funds have been released.

developed by INmune Bio circa 2020, represents a breakthrough in mesenchymal stem cell technology.

The CORDStrom platform leverages, among

other things, proprietary screening, pooling and expansion techniques to create off-the-shelf, allogeneic, pooled human umbilical cord

-derived mesenchymal stromal cells (HucMSCs) as medicines to treat complex inflammatory diseases.

CORDStrom products are designed to provide

high-quality, off-the-shelf, batch-to-batch consistent, scalable, cGMP manufactured, potent cellular medicines that can be produced at

low cost and with repeatable specification independent of donor characteristics.

Initially developed at the INKmune manufacturing facilities

utilizing United Kingdom academic grant funding, CORDStrom is a product platform that shows promise as a therapy for RDEB and many other

debilitating conditions.

While the first generation CORDStrom product is agnostic to indication, the platform enables creation of indication-specific

products, which can be tuned for optimization of anti-inflammatory, immunomodulatory, wound healing, and other characteristics.

CORDStrom product platform shares many similarities, including starting materials, equipment, and procedures, with the Company’s

INKmune oncology product, enabling the Company to leverage economies of scale, experienced staff, and other resources to strategically

manufacture both products in a rotational campaign with resource and environmental efficiencies.

with RDEB have skin that is damaged by even the smallest amount of friction which causes severe blistering, deep wounds, and scars.

is caused by a fault in a gene that makes collagen, a protein that holds the skin layers together.

There are limited options available

for treatment, none that adequately meet the needs of patients, and the condition gets worse over time with most children reliant on a

wheelchair as they move into their teenage years.

Many of those with an RDEB diagnosis will also go on to develop aggressive life-threatening

skin cancer in adulthood caused by the accumulated damage to their skin.

The Company estimates roughly 2,000 people suffer from RDEB

in the US, United Kingdom and EU representing a large unmet opportunity to potentially provide routine clinical care to these children.

2020, the Company has supplied CORDStrom HucMSCs as an investigational medical product to the Great Ormond Street Hospital (“GOSH”),

London, in connection with the MissionEB study, which was primarily funded by a grant from the National Institute for Health and

Care Research (“NIHR”) in the United Kingdom.

INmune Bio was compensated for CORDStrom used in the trial and was not a sponsor

of the Mission EB study.

Investigators recently concluded a double blinded, placebo-controlled arm of the study, which evaluated the safety

and efficacy of CORDStrom in 30 pediatric patients (less than 16 years old) in the United Kingdom with intermediate and severe RDEB using

a novel cross-over clinical trial design.

Patients were randomized to CORDStrom or placebo arms and received 2, intravenous infusions

two weeks apart and then followed for 9 months.

Each child then crossed over to the other arm and received two doses of placebo or CORDStrom

two weeks apart with a further 9-month follow-up.

patients were treated as day-cases and no CORDStrom related serious adverse events were reported through the study.

Top-line results showed

the treatment was easily administered, well tolerated and there were beneficial effects across all types of patients receiving CORDStrom

with respect to Itch Man Scale, iscorEB clinician score and iscorEB skin involvement.

Most notably, CORDStrom significantly reduced

itch scores as measured by the Itch Man Scale.

In patients with the most severe disease activity, CORDStrom reduced itch at 3 months and

led to a sustained reduction of over 27% at 6 months.

These results demonstrate a clinically meaningful reduction in itch severity sustained

Intermediate group patients showed a broader range of improvements, including reduced skin involvement and less pain as well

as large reduction in itch.

The younger patients (less than 10 years old) showed improvements in skin score, indicating better skin

integrity and reduced disease activity.

Interviews with patients and caregivers on completing follow up strongly support the clinical

benefits of the therapy;

both caregivers and patients were able to correctly identify which treatment had been CORDStrom and which had

been placebo.

Those who completed the study are asking to continue on therapy, which the Company intends to pursue as an open-label study.

The Mission EB data form the basis of a license that was entered into

between INmune Bio and GOSH, whereby the Company gains exclusive access to the clinical study data for commercial uses in exchange for

payment of an initiation milestone of £250,000 (approximately $0.3 million at March 31, 2025) and a single development milestone

of approximately £6 million (approximately $7.8 million at March 31, 2025) due on receipt of first marketing authorization from

the FDA, EMA, or MHRA, which has not occurred yet, and an ongoing commitment to supply CORDStrom to patients enrolled in an open label

arm of the Mission EB trial, subject to certain limitations.

reviewing results of the Mission EB study, the Company initiated a Type C meeting with the FDA to obtain CMC and regulatory feedback and

submitted information, data and requests for Rare Pediatric Disease and Orphan Drug Designations (RPDD/ODD).

FDA granted RPDD to the Company’s CORDStrom product on December 13, 2024, ahead of the sunset period under Section 529(b)(5) of

the Federal Food, Drug, and Cosmetic Act.

As such, CORDStrom remains eligible to receive a Priority Review Voucher (PRV) if approved by

the FDA on or prior to September 30, 2026.

If granted, a PRV can be redeemed to receive priority review for a different product.

Alternatively,

a PRV may be transferred or sold to another sponsor.

FDA granted ODD to the Company’s CORDStrom product on January 6, 2025.

Benefits of ODD include certain tax credits and eligibility

for select grants, waiver of FDA user fees, including the BLA application fees, access to frequent meetings with the FDA for efficient

drug development, and eligibility for seven (7) years of market exclusivity post approval.

company plans to prepare for and hold a pre-BLA meeting to discuss particulars of its planned BLA submission, with intent to submit a

BLA this year seeking approval of CORDStrom for treatment of RDEB.

Concurrently, the company will also seek to submit MAAs to the EU and

United Kingdom in 2026.

We believe that INKmune improves

the ability of the patient’s own NK cells to attack their tumor.

INKmune interacts with the patient’s NK cells to convert

them from inert resting NK cells into memory-like NK cells that kill the patient’s cancer cells.

INKmune is a replication incompetent

proprietary cell line that is given to the patient after determining that i) the patient has adequate NK cells in their circulation and

ii) those NK cells are functional when exposed to INKmune in vitro.

INKmune is designed to be given to patients after their immune system

has recovered after cytotoxic chemotherapy to target the residual disease that remains after treatment with cytotoxic therapy.

INKmune can be used to treat numerous hematologic malignancies and solid tumors including leukemia, multiple myeloma, lymphoma, lung,

ovary, breast, renal and prostate cancer.

The Company had a Phase I trial using INKmune to treat patients with high risk MDS/AML, a form

Two patients were treated in the Phase I trial for MDS, three patients have been treated compassionately in AML and another

MDS patient is expected to be treated shortly.

During March 2024, the Company decided to terminate further enrollment in the MDS/AML trial.

In the patients, INKmune therapy is safe, produces memory-like NK cells that kill cancer in vitro, and promotes development of cancer

killing memory-like NK cells that can be found in the patient’s circulation of 4 months.

The Company initiated a separate Phase

I/2 trial of INKmune in a metastatic castrate resistant prostate cancer.

The open label trial enrolled the first patient in December 2023.

The Phase I/II trial using INKmune to treat patients with metastatic

castrate resistant prostate cancer (mCPRC) is an open label trial.

Biomarker data from the patients will be visible as patients are treated.

The Company will report data from each cohort as it becomes available.

to clinical data, the Company will communicate when the Phase I portion of the trial has completed follow-up.

The limited immunologic

data was reported from the low dose Phase I cohort during the third quarter of 2024 and showed an increase in functional memory like NK

cells in the patient’s circulation.

Because of the modified Bayesian design, the Company estimates trial enrollment will be completed

during the first half of 2025 with top-line data available 6 months later.

Topline data are divided into immunologic and tumor response

Because of the modified Bayesian design, the Company estimates

the trial will be completely enrolled 1H25 with top-line data available 6 months later.

Topline data is divided into immunologic and tumor

response variables.

The most important immunologic response variable is related to memory like NK cell persistence.

Persistence is how long are

This is how long are

the number of mlNK cells in patients’ blood compared to baseline.

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Ideally, the levels of all three variables decrease

with treatment, but, in this patient group with advanced disease, absence of progression will be a notable achievement.

We do not expect

this 6-month trial to provide survival data.

We continue to look for ways to

utilize our unique manufacturing and biologic capabilities to optimize clinical application of cell therapies.

We believe that we have

developed a way to manufacture human mesenchymal stromal cells for the medical research and biotech community that offers large volumes

of high-quality, low passage human umbilical cord mesenchymal stromal cells with minimal batch-to-batch variability.

We have established

a reliable supply of human umbilical cords based on our agreement with the Anthony Nolan Cord Blood Bank in the United Kingdom and may

seek additional supplies from US sources in the future.

We have developed a validated manufacturing process that reliably produces clinical

grade (“cGMP”) quality mesenchymal stromal cells that we call CORDstrom.

The manufacturing process is currently performed

at a contract manufacturing site under the direction of Mark Lowdell, the Company’s CSO.

To date, we are supporting a multicenter

academic clinical trial in the UK with CORDstrom.

This is a Phase I/IIb trial sponsored by the Great Ormond Street Children’s Hospital

in London treating children with the most severe form of Epidermolysis Bullosa (“EB”), a disfiguring and sometimes fatal skin

disease that is similar to a second-degree burn.

INmune Bio is supplying the clinical product for treatment of these patients.

identified contract manufacturers in the UK that have the capability to produce cGMP stem cells.

We expect the commercial arrangement

with academic laboratories or biopharma companies to be a combination of fee-for-service and licensing that does not require additional

investment by us.

We will be opportunistic in pursuing therapeutic opportunities for our own portfolio with this platform in the future

if resources become available.

The regulatory path for therapeutic applications of the mesenchymal stem cell products is well established

and similar to the regulatory approval process for other cell therapies.

We will only be responsible for regulatory compliance related

to manufacturing of the mesenchymal stromal cells when the product is being developed by a third party.

When developing a therapeutic

product for the Company’s commercial portfolio, the Company will be responsible for all aspects of the regulatory process.

with treatment.

We do not expect this 6-month trial to provide survival data.

We continue to incur significant

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We reported a

net loss of $32.9 million for the nine months ended September 30, 2024.

As of September 30, 2024 and December 31, 2023, we had cash and

cash equivalents of $33.6 million and $35.8 million, respectively.

We expect to continue to incur significant losses for the foreseeable

future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our

product candidates.

The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability

to generate revenues, if any.

net loss of $9.7 million for the three months ended March 31, 2025.

As of March 31, 2025 and December 31, 2024, we had cash and cash equivalents

of $19.3 million and $20.9 million, respectively.

We expect to continue to incur significant losses for the foreseeable future, and we

expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates.

The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues,

Our recurring net losses and

negative cash flows from operations raised substantial doubt regarding our ability to continue as a going concern within one year after

the issuance of our unaudited condensed consolidated financial statements for the nine months ended September 30, 2024.

the issuance of our unaudited condensed consolidated financial statements for the three months ended March 31, 2025.

Until we can generate

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its operations.

As a company with less than

$1.235 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the JOBS Act.

emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally

to public companies.

These provisions include:

two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

disclosure about our executive compensation arrangements;

non-binding advisory votes on executive compensation or golden parachute arrangements;

from the auditor attestation requirement in the assessment of our internal control over financial reporting;

the adoption of new or revised accounting standards that have different effective dates for public and private companies until those

standards apply to private companies.

We have elected to take advantage

of the above-referenced exemptions and we may take advantage of these exemptions for up to five years or such earlier time that we are

no longer an emerging growth company.

We would cease to be an emerging growth company if we have more than $1.235 billion in annual revenues,

we have more than $700 million in market value of our stock held by non-affiliates, or we issue more than $1 billion of non-convertible

debt over a three-year period.

We may choose to take advantage of some but not all of these reduced burdens.

Other Developments

administration has announced or imposed a series of tariffs on U.S.

trading partners.

In response, several countries have threatened

or imposed retaliatory measures.

At this time, we do not anticipate the tariffs and changes in trade policies in place as of the filing

of this Quarterly Report on Form 10-Q to have a significant adverse effect on our business or operations.

Following recent changes more broadly within the NIH and FDA, we have

not noticed any disruption of communications with the NIH and FDA to date and continue to maintain productive interactions.

To date, there has been no impact to the Company’s operations due to any changes at the NIH or FDA.

Research and Development

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Three Months Ended

Nine Months Ended

September 30,

External Costs

DN-TNF - Alzheimer’s disease

INKmune - High Risk MDS/AML & Prostate cancer

INKmune – (High Risk MDS/AML & Prostate cancer) and CORDStrom

Preclinical and other programs

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incur additional legal, accounting and other expenses in operating as a public company.

General and Administrative Expenses

General and administrative

expenses consist principally of payroll and personnel expenses, including stock-based compensation;

professional fees for legal, consulting,

accounting and tax services;

overhead, including rent and utilities;

and other general operating expenses not otherwise classified as

research and development expenses.

Other income (expense)

Other income (expense) consists

primarily of interest expense incurred on debt and interest income on investments in money market accounts.

Results of Operations

Comparison of the Three Months Ended September

Comparison of the Three Months Ended March

31, 2025 and 2024

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Three Months Ended

September 30,

(in thousands)

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Loss from operations

Other income (expense), net

The Company had no sales during the three months ended September 30,

During the three months ended September 30, 2023, the Company sold Mesenchymal stem cells to one third-party and recognized $43,000

Research and Development

Research and development expenses

were approximately $10.1 million during the three months ended September 30, 2024, compared to approximately $6.0 million during

the three months ended September 30, 2023.

The change in research and development expenses during the three months ending September 30,

2024 compared to the three months ending September 30, 2023 is largely due to incurring $3.8 million more expenses with our Alzheimer’s

clinical program due to the advancement of enrollment in the clinical trial.

General and Administrative

Other expense, net

During the three months ended

March 31, 2025 and 2024, the Company sold MSC’s to third-parties and recognized $50,000 and $14,000, respectively, of revenues.

General and Administrative

expenses were approximately $2.2 and $2.6 million during the three months ended September 30, 2024 and 2023, respectively.

in general and administrative expenses was mainly due to the Company incurring $0.3 million lower consulting expenses in 2024.

Other Income (Expense), net

The Company’s other

income, net is higher during the three months ended September 30, 2024, due to the Company earning interest income on its money market

accounts and incurring less interest expense compared to 2023 due to a reduction in the amount of debt owed.

Comparison of the Nine Months Ended September

30, 2024 and 2023

The following table summarizes

our results of operations for the periods indicated:

Nine Months Ended

September 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense), net

During the nine months ended September 30, 2024, and 2023, the Company

sold Mesenchymal stem cells to one third-party and recognized $14,000 and $127,000, respectively, of revenues.

expenses were approximately $2.3 million during each of the three months ended March 31, 2025 and 2024, respectively.

Research and Development

Research and development expenses

were approximately $25.8 million and $14.3 million during the nine months ended September 30, 2024 and 2023, respectively.

in research and development expenses during the nine months ending September 30, 2024 compared to the nine months ending September 30,

2023 is mainly due to the advancement of our clinical trials which include incurring $10.3 million of higher expenses with our Alzheimer’s

clinical program as a result of higher enrollment, $1.8 million of higher expenses with our INKmune clinical programs as a result of progress

in our metastatic castration-resistant prostate cancer clinical trial and 0.7 million higher salaries and stock-based compensation, partially

offset by a $1.0 million increase in our accrued research and development rebate accrual.

General and Administrative

General and administrative

expenses were approximately $7.4 million and $7.2 million during the nine months ended September 30, 2024 and 2023, respectively.

$0.2 million increase in general and administrative expenses was mainly due to higher compensation expense in 2024.

Other Income (Expense), net

The Company’s other

income, net is higher during the nine months ended September 30, 2024, due to the Company earning interest income on its money market

accounts and incurring less interest expense compared to 2024 due to a reduction in the amount of debt owed.

were approximately $7.6 million during the three months ended March 31, 2025, compared to approximately $8.7 million during the three

months ended March 31, 2024.

The change in research and development expenses during the three months ending March 31, 2025 compared to

the three months ending March 31, 2024 is largely due to incurring $1.5 million less expenses related to our Alzheimer’s clinical

program due to the Company nearing the completion of the Phase 2 clinical trial, partially offset by $0.3 million of higher employee compensation

costs and a decrease of $0.2 million of accrued rebate.

Other Expense, net

During the three months ended

March 31, 2025, the Company recorded $0.2 million of other income due to the Company earning interest income on its cash investments.

The increase in other income from the prior year is due to the Company paying off its debt in 2024.

Liquidity and Capital Resources

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on an ongoing basis.

incurred a net loss of $32.9 million and $21.6 million for the nine months ended September 30, 2024 and 2023, respectively.

Net cash used

in operating activities was $22,348,000 and $8,579,000 for the nine months ended September 30, 2024 and 2023, respectively.

Since inception,

we have funded our operations primarily with proceeds from the sales of our common stock and warrants.

As of September 30, 2024, we had

cash and cash equivalents of $33,552,000.

We anticipate that operating losses and net cash used in operating activities will increase

over the next few years as we advance our products under development.

During the nine months ending

September 30, 2024, the Company sold 247,126 shares of common stock at an average price of $9.85 for gross proceeds of approximately $2.4 million

under the at the market offerings.

During September 2024,

the Company entered into securities purchase agreements with investors whereby the Company sold 2,341,260 shares of the Company’s

common stock and warrants to purchase an additional 2,341,260 shares of the Company’s common stock exercisable six months from the

issuance date in a registered direct offering in exchange for gross proceeds of $13.0 million (net proceeds of approximately $12.0 million).

Directors and officers that participated in the offering paid a combined offering price of

$6.50 per share and warrant, and other investors paid $5.50 per share and warrant.

The exercise price of the warrants is $6.40, and are

exercisable beginning on March 16, 2025 and will terminate on March 16, 2030 unless accelerated pursuant to the terms of the warrant agreements.

On April 24, 2024, the Company entered into a securities purchase agreement with an investor in which the Company sold 986,000 shares

of common stock and warrants to purchase 986,000 shares of common stock for gross proceeds of approximately $9.7 million (net proceeds

of approximately $8.9 million).

The exercise price of the warrants is $9.84, and the term is the earlier of two years from the issuance

of the warrants and thirty trading days following the release of top line data in the Phase 2 Alzheimer’s program.

On April 19, 2024, the Company entered into securities purchase agreements with purchasers in which the Company sold 571,592 shares of

common stock and warrants to purchase 571,592 shares of common stock for aggregate gross proceeds of approximately $4.8 million (net proceeds

of approximately $4.5 million).

The exercise price of the warrants is $9.152, and the term is the earlier of two years from the issuance

of the warrants and thirty trading days following the release of top line data in the Phase 2 Alzheimer’s program, provided that

directors and officers of the Company that are subject to a blackout with respect to trading in the Company’s stock will have an

additional 60 days from the termination of the blackout date to exercise the warrant.

Directors and officers that participated in the

offering paid a combined offering price of $8.445 per share and warrant, and other investors paid $8.32 per share and warrant.

We incurred a net loss of

$9.7 million and $11.0 million for the three months ended March 31, 2025 and 2024, respectively.

Net cash used in operating activities

was $6,824,000 and $7,476,000 for the three months ended March 31, 2025 and 2024, respectively.

Since inception, we have funded our operations

primarily with proceeds from the sales of our common stock.

As of March 31, 2025, we had cash and cash equivalents of $19,336,000.

anticipate that operating losses and net cash used in operating activities will increase over the next few years as we advance our products

under development.

During the period from April 1, 2025 through May 8, 2024, the Company sold 279,966 shares of common stock at an average price of $7.62

for gross proceeds of approximately $2.1 million under the ATM offering.

primary uses of capital are, and we expect will continue to be, third-party clinical and preclinical research and development services,

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that strategy is appropriate.

As of September 30, 2024, the cash balance held by our foreign subsidiaries with currencies other than the

United States dollar was approximately $0.9 million.

As of March 31, 2025, the cash balance held by our foreign subsidiaries with currencies other than the United

States dollar was approximately $0.1 million.

recurring net losses and negative cash flows from operations, as well as forecast of continued losses and negative cash flows from operations,

raised substantial doubt regarding our ability to continue as a going concern within one year after the issuance of our unaudited condensed

consolidated financial statements for the year ended September 30, 2024.

consolidated financial statements for the year ended March 31, 2025.

Until we can generate sufficient revenue from the commercialization

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third parties.

Our cash and cash equivalents were $33.6 million and total current assets were $35.9 million at September 30, 2024, which

the Company is projecting will be insufficient to sustain its operations through one year following the date that the financial statements

Our cash and cash equivalents were $19.3 million and total current assets were $21.0 million at March 31, 2025, which the

Company is projecting will be insufficient to sustain its operations through one year following the date that the financial statements

capital may not be available on reasonable terms, if at all.

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our cash flows for the periods indicated:

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

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Operating Activities

cash used in operating activities was primarily driven by our net loss.

activities used approximately $22.3 million of cash during the nine months ended September 30, 2024, resulting from our loss of $32.9

million, partially offset by changes in our net operating assets and liabilities of $4.6 million and non-cash stock-based compensation

of $5.8 million.

The change in our net operating assets and liabilities was mainly due to an increase in accounts payable and accrued

liabilities of $2.7 million, a decrease in research and development tax receivable of $0.8 million, a decrease in prepaid expenses of

$0.6 million and a decrease in other tax receivable of $0.2 million.

Operating activities used approximately $6.8 million of cash during the three months ended March 31, 2025, and was primarily due to our

loss of $9.7 million, partially offset by non-cash stock-based compensation of $2.1 million and changes in our net operating assets and

liabilities of $0.8 million which is mainly due to an increase in accounts payable and accrued liabilities of $0.7 million.

Operating activities used

approximately $8.6 million of cash during the nine months ended September 30, 2023, resulting from our loss of $21.6 million, partially

offset by changes in our net operating assets and liabilities of $7.4 million and non-cash stock-based compensation of $5.5 million.

change in our net operating assets and liabilities was mainly due to a decrease in research and development tax credit receivable of $6.0

million and a decrease in prepaid expenses of $2.5 million, partially offset by a decrease in accounts payable and accrued liabilities

of $1.5 million.

approximately $7.5 million of cash during the three months ended March 31, 2024, resulting from our loss of $11.0 million, partially offset

by changes in our net operating assets and liabilities of $1.7 million and non-cash stock-based compensation of $1.8 million.

in our net operating assets and liabilities was mainly due to an increase in accounts payable and accrued liabilities of $1.4 million

and a decrease in prepaid expenses of $0.4 million.

Financing Activities

the nine months ended September 30, 2024, the Company sold 247,126 shares of its common stock under its ATM programs for net proceeds

of approximately $2.4 million.

the nine months ended September 30, 2024, the Company sold 3,898,852 shares of its common stock and 3,898,852 warrants to purchase its

common stock in registered direct offerings for net proceeds of approximately $25.4 million.

During the nine months ended

September 30, 2023, the Company sold 75,697 shares of its common stock for net proceeds of $775,000 under the Company’s ATM program

the nine months ended September 30, 2024 and 2023, the Company repaid $7.5 and $2.5 million, respectively, of its debt.

During the three months ended

March 31, 2025, the Company sold 649,860 shares of common stock in exchange for net proceeds of $5.3 million.

During the three months ended

March 31, 2024, the Company repaid $2.5 million of its debt.

Critical Accounting Policies and Estimates

Our discussion and analysis

of our financial condition and results of operations is based upon our unaudited consolidated financial statements, which have been prepared

in accordance with generally accepted accounting principles in the United States, or GAAP.

The preparation of these financial statements

requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.

Actual results may differ

from these estimates.

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year

ended December 31, 2023, and there have been no material changes during the nine months ended September 30, 2024.

of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have

been prepared in accordance with generally accepted accounting principles in the United States, or GAAP.

The preparation of these financial

statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.

Actual results

may differ from these estimates.

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the

fiscal year ended December 31, 2024, and there have been no material changes during the three months ended March 31, 2025.

Quantitative and Qualitative Disclosures

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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-Q

Item 2. Management’s Discussion and Analysis