10-Q 1 tmb-20240331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to        

Commission File Number: 001-39580

Immunome, Inc.

(Exact name of registrant as specified in its charter)

Delaware

77-0694340

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

18702 N. Creek Parkway, Suite 100

Bothell, WA

98011

(Address of principal executive offices)

(Zip Code)

(610) 321-3700

(Registrant’s telephone number, including area code)

Not applicable.

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbol(s)

    

Name of each exchange on which registered

Common Stock, $0.0001 par value

IMNM

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  

There were 59,968,868 shares of the registrant’s common stock outstanding as of May 6, 2024.

TABLE OF CONTENTS

    

    

Page

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

-    Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

3

-    Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023

4

-    Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023

5

-    Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

6

-    Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

20

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

29

Item 4.

Controls and Procedures.

30

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings.

30

Item 1A.

Risk Factors.

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

92

Item 3.

Defaults Upon Senior Securities.

92

Item 4.

Mine and Safety Disclosures.

92

Item 5.

Other Information.

92

Item 6.

Exhibits.

93

SIGNATURES

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

IMMUNOME, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(unaudited)

    

    

March 31, 2024

    

December 31, 2023

Assets

  

Current assets:

  

 

  

Cash and cash equivalents

$

269,723

$

98,679

Marketable securities

39,983

39,463

Prepaid expenses and other current assets

 

3,620

 

6,561

Total current assets

 

313,326

 

144,703

Property and equipment, net

 

4,302

 

2,073

Operating right-of-use assets

1,458

1,564

Restricted cash

 

100

 

100

Other long-term assets

568

100

Total assets

$

319,754

$

148,540

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

7,179

$

3,311

Accrued expenses and other current liabilities

 

10,844

 

8,025

Deferred revenue, current

12,745

10,493

Total current liabilities

 

30,768

 

21,829

Deferred revenue, non-current

2,208

5,489

Operating lease liabilities, net of current portion

 

1,206

 

1,340

Total liabilities

 

34,182

 

28,658

Commitments and contingencies (Note 6)

 

  

 

  

Stockholders’ equity:

 

 

  

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued or outstanding at March 31, 2024 and December 31, 2023

Common stock, $0.0001 par value; 300,000,000 and 200,000,000 shares authorized at March 31, 2024 and December 31, 2023, respectively; 59,694,243 and 43,251,778 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

6

4

Additional paid-in capital

 

637,861

 

342,663

Accumulated other comprehensive income

4

22

Accumulated deficit

 

(352,299)

 

(222,807)

Total stockholders’ equity

 

285,572

 

119,882

Total liabilities and stockholders’ equity

$

319,754

$

148,540

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

IMMUNOME, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Collaboration revenue

$

1,029

$

2,364

Operating expenses:

 

  

 

  

In-process research and development

111,954

Research and development

15,369

3,913

General and administrative

 

6,005

 

2,922

Total operating expenses

 

133,328

 

6,835

Loss from operations

 

(132,299)

 

(4,471)

Interest income

 

2,807

 

201

Net loss

$

(129,492)

$

(4,270)

Net loss per share, basic and diluted

$

(2.51)

$

(0.35)

Weighted-average shares outstanding, basic and diluted

 

51,544,383

 

12,182,478

Comprehensive loss:

Net loss

$

(129,492)

$

(4,270)

Unrealized loss on marketable securities

(18)

Comprehensive loss

$

(129,510)

$

(4,270)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

IMMUNOME, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

(unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders'

Shares

    

Amount

    

Capital

    

Income

      

Deficit

    

Equity

Balance at December 31, 2023

43,251,778

$

4

$

342,663

$

22

$

(222,807)

$

119,882

Share-based compensation expense

2,159

2,159

Issuance of common stock under Zentalis License Agreement

 

2,298,586

23,388

23,388

Issuance of common stock under the Ayala Asset Purchase Agreement

 

2,175,489

50,645

50,645

Issuance of common stock for public offering, net of commissions and offering costs of $14,592

11,500,000

2

215,408

215,410

Exercise of stock options

125,704

171

171

Exercise of common stock warrants

342,686

3,427

3,427

Unrealized loss on marketable securities

(18)

(18)

Net loss

 

(129,492)

(129,492)

Balance at March 31, 2024

 

59,694,243

$

6

$

637,861

$

4

$

(352,299)

$

285,572

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders'

    

Shares

    

Amount

    

Capital

      

Deficit

    

Equity

Balance at December 31, 2022

 

12,128,843

$

1

$

132,653

$

(116,001)

$

16,653

Share-based compensation expense

 

1,200

1,200

Issuance of common stock under ATM, net of $1 of issuance costs

5,925

34

34

Issuance of common stock

55,250

221

221

Vesting of restricted stock awards

4,166

24

24

Net loss

 

(4,270)

(4,270)

Balance at March 31, 2023

 

12,194,184

$

1

134,132

$

(120,271)

$

13,862

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

IMMUNOME, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Cash flows from operating activities:

 

  

  

Net loss

$

(129,492)

$

(4,270)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

Depreciation and amortization

 

157

 

94

Amortization of right-of-use asset

106

54

Accretion of discount related to marketable securities

(538)

Share-based compensation expense

 

2,159

 

1,224

Charge for purchase of in-process research and development assets

111,954

Changes in operating assets and liabilities:

 

 

Prepaid expenses and other assets

 

2,473

 

214

Accounts payable

 

2,396

 

687

Accrued expenses and other current liabilities

 

669

 

(1,404)

Deferred revenue

(1,029)

27,636

Operating lease liabilities

(25)

(62)

Net cash (used in) provided by operating activities

 

(11,170)

 

24,173

Cash flows from investing activities:

 

  

 

  

Cash paid in connection with Ayala asset acquisition

(20,060)

Cash paid in connection with Zentalis license agreement

(15,007)

Purchases of property and equipment

 

(2,164)

 

(106)

Net cash used in investing activities

 

(37,231)

 

(106)

Cash flows from financing activities:

 

  

 

  

Proceeds from public offering

230,002

Payment of offering costs

(14,155)

Proceeds from exercise of stock options

 

171

 

Proceeds from exercise of common stock warrants

3,427

Proceeds from issuance of common stock under ATM, net

34

Net cash provided by financing activities

 

219,445

 

34

Net increase in cash and cash equivalents and restricted cash

 

171,044

 

24,101

Cash and cash equivalents and restricted cash at beginning of period

 

98,779

 

20,423

Cash and cash equivalents and restricted cash at end of period

$

269,823

$

44,524

Reconciliation of cash and cash equivalents and restricted cash:

Cash and cash equivalents

$

269,723

$

44,424

Restricted cash

100

100

Total cash, cash equivalents, and restricted cash

$

269,823

$

44,524

Supplemental disclosures of non-cash investing and financing activities:

 

 

Issuance of common stock in exchange for in-process research and development

$

74,033

$

Liabilities assumed in Ayala asset acquisition

$

2,041

$

Purchase of in-process research and development assets in accounts payable

$

813

$

Public offering costs included in accounts payable

$

437

$

Issuance of common stock to certain board of directors in lieu of accrued compensation

$

$

221

Purchases of property and equipment in accounts payable

$

594

$

223

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

IMMUNOME, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of the business

Organization

Immunome, Inc., or the Company, is a biopharmaceutical company focused on the development of targeted oncology therapies. The Company believes that the pursuit of novel or underexplored targets will be central to the next generation of transformative therapies, and it is dedicated to developing targeted cancer therapies with first-in-class and best-in-class potential. The Company’s goal is to establish a broad pipeline of preclinical and clinical assets and successfully develop such assets into approved products for commercialization. To support that goal, the Company invests heavily in both business development and internal discovery platforms.

Immunome is advancing a program pipeline comprising one clinical and three preclinical assets. The clinical asset is AL102, an investigational gamma secretase inhibitor, or GSI, currently under evaluation in a Phase 3 trial for the treatment of desmoid tumors that was acquired from Ayala Pharmaceuticals, Inc. on March 25, 2024. The preclinical assets are IM-1021, a receptor tyrosine kinase-like orphan receptor 1, or ROR1, antibody-drug conjugate, or ADC; IM-3050, a fibroblast activation protein, or FAP, targeted radioligand therapy, or RLT, candidate; and IM-4320, an anti-IL-38 immunotherapy candidate.

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

Liquidity

The Company has incurred significant operating losses since inception and expects to continue to incur losses from operations for the foreseeable future as it pursues development of its therapeutic candidates and other programs. As of March 31, 2024, the Company had an accumulated deficit of $352.3 million, non-restricted cash and cash equivalents of $269.7 million, and marketable securities of $40.0 million. The Company has not generated any product revenue to date and does not expect to generate product revenue until it successfully completes development and obtains regulatory approval for at least one of its product candidates.

Through March 31, 2024, the Company has funded its operations primarily through sales of equity securities and strategic partnerships and transactions as well as expense reimbursements from a government contract that ended in 2022. The Company expects that its existing cash, cash equivalents and marketable securities at March 31, 2024 are sufficient to fund its current and planned operating expenses and capital expenditures for at least 12 months from the filing date of this Quarterly Report on Form 10-Q. Beyond that date, the Company may need to raise additional capital through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements to achieve its longer-term business objectives.

7

2. Summary of significant accounting policies

Basis of presentation

The accompanying unaudited interim financial statements have been prepared in accordance with the accounting principles generally accepted in the United States, or GAAP, and following the requirements of the Securities and Exchange Commission, or the SEC, for interim reporting. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual financial statements and related notes included in the Company’s Form 10-K filed with the SEC on March 28, 2024, which provide a more complete discussion of the Company’s accounting policies and certain other information. The December 31, 2023 condensed consolidated balance sheet has been derived from the Company’s annual financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments that management believes to be necessary for a fair presentation of the Company’s financial information. Interim results are not necessarily indicative of results for a full year or any future interim period.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements and the accompanying notes. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates. The Company’s significant accounting estimates include, but are not necessarily limited to, the expected volatility used to estimate fair value of stock options, accrued research and development expenses, the fair value of acquired in-process research and development assets, and revenue recognition.

Segment and geographic information

Operating segments are defined as components of an entity about which separate discrete information is available and regularly reviewed by the chief operating decision maker, its Chief Executive Officer, in deciding how to allocate resources and in assessing performance. The Company has determined that it operates as one operating and reporting segment exclusively in the United States.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and marketable securities. The Company maintains deposits in a financial institution in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at a financial institution that management believes to be of high credit quality, and the Company has not experienced any losses on these deposits. Management also believes that the Company is not exposed to significant credit risk as it relates to marketable securities because the Company only invests in U.S government securities.

Restricted cash

Restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facility in Bothell, Washington. Cash will be released from restriction upon termination of the lease. Restricted cash was $0.1 million at both March 31, 2024 and December 31, 2023.

8

Asset acquisitions

Acquisitions of assets or a group of assets that do not meet the definition of a business are accounted for as asset acquisitions, with a cost accumulation model used to determine the cost of the acquisition. Common stock issued as consideration in an acquisition of assets is generally measured based on the acquisition date fair value of the equity interests issued. Direct transaction costs are recognized as part of the cost of an acquisition of assets. Intangible assets that are acquired in an asset acquisition for use in research and development activities that have an alternative future use are capitalized as in-process research and development, or IPR&D. Acquired IPR&D that has no alternative future use is expensed immediately as a component of in-process research and development expense in the condensed consolidated statements of operations and comprehensive loss.

In addition to upfront consideration, acquisitions of assets may also include contingent consideration payments to be made for future milestone events or royalties on net sales of future products. The Company assesses whether such contingent consideration is subject to liability classification and fair value measurement or meets the definition of a derivative. Contingent consideration payments in an acquisition of assets not required to be accounted for as a liability at fair value are recognized when the contingency is resolved, and the consideration is paid or becomes payable. Contingent consideration payments made prior to regulatory approval are expensed as incurred.

Net loss per share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, including the effect of dilutive securities.

As the Company was in a net loss position for the three months ended March 31, 2024 and 2023, diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive securities are antidilutive.

The following potentially dilutive securities have been excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive (on an as-converted basis):

Three Months Ended March 31,

    

2024

    

2023

Stock options outstanding

8,531,683

2,493,410

Common stock warrants

157,314

1,303,112

Unvested restricted stock awards

20,834

8,688,997

3,817,356

Recent accounting standards not yet adopted

In December 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-09, Improvements to Income Tax Disclosures, which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is still in the process of determining the effect this ASU will have on the condensed consolidated financial statements.

9

In November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures. ASU 2023-07 requires disclosure of incremental segment information on an interim and annual basis and provides new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for all public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company adopted annual requirements under ASU 2023-07 on January 1, 2024 and plans to adopt interim requirements under ASU 2023-07 on January 1, 2025. The Company will begin including financial statement disclosures in accordance with ASU 2023-07 in its Annual Report on Form 10-K for the year ended December 31, 2024.

3. Fair value measurement

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

March 31, 2024

Level

    

Amortized Cost

    

Unrealized Gain

    

Unrealized Loss

 

Fair Value

Cash equivalents:

Money market funds

1

$

46,482

$

$

$

46,482

U.S. treasury securities

2

219,101

4

(1)

219,104

Marketable securities:

U.S. treasury securities

2

39,982

1

39,983

Total financial assets

$

305,565

$

5

$

(1)

$

305,569

December 31, 2023

Level

Amortized Cost

    

Unrealized Gain

    

Unrealized Loss

 

Fair Value

Cash equivalents:

Money market funds

1

$

73,988

$

$

$

73,988

U.S. treasury securities

2

22,993

22,993

Marketable securities:

U.S. treasury securities

2

39,441

22

39,463

Total financial assets

$

136,422

$

22

$

$

136,444

The Company’s marketable securities consist of U.S. treasury debt securities with a contractual maturity date of 6 months.

10

4. Collaboration agreement with AbbVie

In January 2023, the Company entered into a Collaboration and Option Agreement, or the Collaboration Agreement, with AbbVie Global Enterprises Ltd., or AbbVie, pursuant to which the Company is using its discovery platform to discover and validate targets derived from patients with three specified tumor types, and antibodies that bind to such targets, which may be the subject of further development and commercialization by AbbVie. Pursuant to the terms of the Collaboration Agreement, the Company granted AbbVie an exclusive option to purchase all rights to each novel target-antibody pair, or a Validated Target Pair or VTP, that the Company generates that meets certain mutually agreed criteria, up to a maximum of 10 in total, for all human and non-human diagnostic, prophylactic and therapeutic uses throughout the world, including the development and commercialization of certain products, or Products, derived from the assigned VTP.

AbbVie paid the Company a nonrefundable upfront payment of $30.0 million in January 2023 and will be required to pay certain additional platform access payments of up to $70.0 million in aggregate based on the Company’s use of its discovery platform in connection with activities under each stage of the research plan and delivery of VTPs to AbbVie. If AbbVie exercises its option to purchase a VTP, then AbbVie will be required to pay an option exercise fee in the low single-digit millions for each of up to 10 VTPs for which it exercises an option. For each Product, the Company is eligible to receive development and commercial based milestones of up to $120.0 million in the aggregate and sales milestones of up to $150.0 million in the aggregate for the achievement of specified levels of annual net sales. The Company is also eligible to receive tiered royalties at percentage rates in the low single digits on annual net sales of any Products that are commercialized by AbbVie.

AbbVie’s obligation to pay royalties will terminate, on a Product-by-Product and country-by-country basis, upon the earlier of (a) the later of (i) 10 years following the first commercial sale for such Product in such country, or (ii) expiration of all valid claims of patent rights covering the Product in such country, and (b) the expiration of all applicable regulatory exclusivities for such Product in such country. AbbVie may terminate the Collaboration Agreement at any time for convenience upon a specified period of prior written notice.

The Company determined that the Collaboration Agreement represents a contract with a customer and consists of one performance obligation to provide research and development services, or R&D services, to AbbVie. The Company evaluated the options to continue the R&D services and options to purchase licenses to each VTP and concluded that these options did not represent material rights.

The Company determined the initial transaction price of the single performance obligation to be $30.0 million, as the variable consideration for additional R&D services, option exercise payments, and development milestone payments are all subject to constraint at contract inception. At each reporting period, the Company will reevaluate the variable consideration subject to constraint and, if necessary, will adjust its estimate of the overall transaction price. For the sales-based royalties, the Company will recognize revenue when the related sales occur.

Revenue from the Collaboration Agreement will be recognized over the estimated performance of the R&D services using the cost-to-cost input method which the Company believes best depicts the transfer of control to the customer. Under the cost-to-cost input method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the performance obligation. The Company recognized $1.0 million and $2.4 million of collaboration revenue for the three months ended March 31, 2024 and 2023, respectively.

The following table summarizes the change in deferred revenue (in thousands):

Three Months Ended March 31, 2024

Balance as of December 31, 2023

$

15,982

Recognition of revenue

 

(1,029)

Balance as of March 31, 2024

$

14,953

11

As of March 31, 2024, the Company expects to recognize the deferred revenue associated with the non-refundable upfront fee over the estimated research and development period of approximately 1.25 years.

5. Balance sheet components

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

    

March 31, 2024

    

December 31, 2023

Research and development

$

6,445

$

1,680

Compensation and related benefits

1,032

2,734

Severance accruals

1,485

1,436

Professional fees

1,408

1,670

Short-term operating lease liability

419

310

Other

 

55

 

195

Total accrued expenses and other current liabilities

$

10,844

$

8,025

6. Commitments and contingencies

Employment agreements

The Company entered into employment agreements, or the Employment Agreements, with certain key personnel providing for compensation and severance in certain circumstances, as defined in the respective Employment Agreements. The Employment Agreements may be terminated by either the Company or the employees in accordance with the respective Employment Agreements (subject to the payment of severance upon certain terminations) and provide for annual pay adjustments and bonuses at the discretion of the Board of Directors.

Employee benefit plan

The Company maintains a defined-contribution plan under Section 401(k) of the Internal Revenue Code, or the 401(k) Plan. The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company assumes all administrative costs of the 401(k) Plan and makes matching contributions as defined in the 401(k) Plan document. The Company made matching contributions of $0.1 million to the 401(k) Plan for each of the three months ended March 31, 2024 and 2023.

7. Asset acquisitions

Ayala Pharmaceuticals

On March 25, 2024, the Company and Ayala Pharmaceuticals, Inc., or Ayala, completed an Asset Purchase Agreement, or the Ayala Purchase Agreement, initially entered into in February 2024, pursuant to which the Company acquired Ayala’s AL101 and AL102 programs and assumed certain liabilities associated with the acquired assets. The upfront consideration included (i) payment of approximately $20.0 million in cash, and (ii) the issuance of 2,175,489 unregistered shares of the Company’s common stock at an aggregate fair value of $50.6 million on the acquisition date. The fair value of the shares issued to Ayala was based on the closing stock price of the Company’s common stock on March 25, 2024 of $24.00 per share less a discount of 3.0% related to unregistered share restrictions.

The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in two programs that were grouped as a single identifiable IPR&D asset. The assets acquired in the transaction were measured based on the estimated fair value of the consideration paid of $71.3 million, which included direct transaction costs of $0.7 million.

12

The consideration paid and the relative fair values of the assets acquired and liabilities assumed were as follows (in thousands):

Amount

Common stock issued to Ayala

$

50,645

Upfront consideration paid to Ayala

20,039

Transaction costs

657

Consideration paid

$

71,341

Assets acquired:

In-process research and development

$

73,382

Total assets acquired

$

73,382

Liabilities assumed:

Accrued expenses

$

2,041

Total liabilities assumed

$

2,041

Net assets acquired

$

71,341

The cost attributable to the IPR&D was expensed in the Company’s condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 since the acquired IPR&D had no alternative future use.

Under the Ayala Purchase Agreement, the Company will be required to pay Ayala up to $37.5 million in the aggregate upon the achievement of certain development, regulatory and commercial milestone events. Any potential future milestone payment amounts will be accrued when the related contingency is resolved, and the milestone consideration becomes payable.

Atreca

In December 2023, the Company entered into an agreement with Atreca, Inc., or Atreca, on the terms of a cash acquisition pursuant to which the Company would acquire certain antibody-related assets and materials for an upfront payment of $5.5 million and up to $7.0 million in clinical development milestones. The closing of the transaction is subject to customary conditions, including the approval of Atreca’s stockholders. As of March 31, 2024, the transaction had not closed.

Morphimmune

On October 2, 2023, the Company completed its merger with Morphimmune, or the Merger, and acquired all of the outstanding equity interests of Morphimmune in exchange for 8,835,710 shares of the Company's common stock, based upon an exchange ratio of 0.3042 shares of the Company’s common stock for each outstanding share of Morphimmune capital stock. Under the terms of the Agreement and Plan of Merger and Reorganization dated as of June 28, 2023, the Company assumed Morphimmune’s 2020 Equity Incentive Plan and all outstanding options to purchase shares of Morphimmune capital stock were converted into 2,472,563 options to purchase shares of the Company’s common stock with a weighted average exercise price of $1.29 per share. All other terms and conditions associated with these options, including vesting and exercisability, are governed by the original terms and conditions of the Morphimmune 2020 Equity Incentive Plan.

13

The Company accounted for the acquisition of Morphimmune as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in two programs that were grouped as a single identifiable IPR&D asset. The assets acquired in the transaction were measured based on the estimated fair value of the consideration paid of $88.0 million, which included direct transaction costs of $0.8 million. The consideration paid consisted of $72.5 million of the Company’s common stock based on the closing stock price on October 2, 2023 of $8.20 per share and $14.7 million related to the value of Morphimmune’s share-based awards assumed by Immunome as of the same date. The cost of the acquisition allocated to the acquired IPR&D of $80.8 million was expensed since the acquired IPR&D had no alternative future use.

8. Licensing arrangements

Bristol-Myers Squibb

In connection with the closing of the Ayala Purchase Agreement in March 2024, the Company assumed a license agreement, the BMS License Agreement, with Bristol-Myers Squibb Company, or BMS, pursuant to which the Company obtained a worldwide, non-transferable, royalty-bearing, exclusive, sublicensable, license under certain patent rights and know-how of BMS to research, discover, develop, make, have made, use, sell, offer to sell, export, import and commercialize AL101 and AL102, or the BMS Licensed Compounds, and products containing AL101 or AL102, or the BMS Licensed Products, for all uses including the prevention, treatment or control of any human or animal disease, disorder or condition.

Under the BMS License Agreement, the Company is obligated to use commercially reasonable efforts to develop at least one BMS Licensed Product. The Company is also required to use commercially reasonable efforts to obtain regulatory approvals in certain major market countries for at least one BMS Licensed Product, as well as to affect the first commercial sale of and commercialize each BMS Licensed Product after obtaining such regulatory approval.

The Company is required to pay BMS up to approximately $142.0 million in the aggregate upon the achievement of certain clinical development or regulatory milestones for AL101 and AL102 across multiple indications. In addition, the Company is required to pay BMS up to $50.0 million in the aggregate upon the achievement of certain commercial milestones for each BMS Licensed Product. Any potential future milestone payment amounts will be accrued when the related contingency is resolved, and the milestone consideration becomes payable. BMS is also eligible to receive tiered royalties ranging from a high single-digit to a low teen percentage on annual worldwide net sales of any BMS Licensed Products. Royalty payments will be expensed in the period in which the underlying revenues are earned.

BMS has the right to terminate the BMS License Agreement in its entirety if the Company fails to fulfill its development and commercialization obligations within a defined period of time following written notice by BMS. The Company has the right to terminate the BMS License Agreement for convenience upon prior written notice to BMS. Upon termination of the BMS License Agreement by the Company for convenience or by BMS, the Company will grant an exclusive, non-transferable, sublicensable, worldwide license to BMS for certain patent rights that are necessary to develop, manufacture or commercialize the BMS Licensed Compounds or BMS Licensed Products. In exchange for such license, BMS will be obligated to pay the Company a low single-digit percentage royalty on net sales of the BMS Licensed Compounds and/or BMS Licensed Products by it or its affiliates, licensees or sublicensees, provided that the termination occurred after a specified developmental milestone for such BMS Licensed Compounds and/or BMS Licensed Products.

Zentalis Pharmaceuticals

On January 5, 2024, the Company entered into a license agreement with Zentalis Pharmaceuticals, Inc., or the Zentalis License Agreement, pursuant to which the Company received an exclusive, worldwide, royalty-bearing, sublicensable license under certain intellectual property relating to Zentalis’ proprietary antibody-drug conjugate, or ADC, platform technology, ROR1 antibodies and ADCs targeting ROR1 to exploit products covered by or incorporating the licensed intellectual property rights. Under the Zentalis License Agreement, the Company is required to use commercially reasonable efforts to develop an ADC targeting ROR1, two additional ADCs, and commercialize any product that has received regulatory approval.

14

As up front consideration for the license, the Company paid to Zentalis $15.0 million in cash and issued 2,298,586 unregistered shares of its common stock at an aggregate fair value of $23.4 million. The fair value of the common stock issued to Zentalis was based on the closing stock price of the Company’s common stock on January 5, 2024 of $11.12 per share less a discount of 8.5% related to unregistered share restrictions. The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable IPR&D asset. The consideration paid to acquire the license and intellectual property rights, which included transaction costs of $0.2 million, was immediately recognized as IPR&D expense in the Company’s condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2024 since the acquired IPR&D had no alternative future use.

Under the Zentalis License Agreement, the Company is obligated to pay Zentalis an aggregate of up to $150.0 million in development and regulatory milestones for the first product containing an ADC targeting ROR1, or a ROR1 ADC Product, to achieve such milestones, and commercial milestones on ROR1 ADC Products. The Company is also obligated to pay Zentalis mid-to-high single digit royalties on ROR1 ADC Products. In addition, the Company is obligated to pay Zentalis up to $25.0 million in development and regulatory milestones for the first product from each of the first five additional development programs using the licensed platform technology to generate products, and mid-single digit royalties on products from each such program. Any potential future milestone payment amounts will be accrued when the related contingency is resolved, and the milestone consideration becomes payable. The Company’s royalty payment obligation will commence, on a product-by-product and country-by-country basis, on the first commercial sale of such product in such country and will expire on the latest of (a) the 10-year anniversary of such first commercial sale for such product in such country, (b) the expiration of regulatory exclusivity for such product in such country, and (c) the expiration of the last-to-expire valid claim of a licensed patent covering such product in such country. Royalty payments will be expensed in the period in which the underlying revenues are earned.

The Zentalis License Agreement will continue until the expiration of all royalty payment obligations. The Zentalis License Agreement may be terminated early by (a) either party in its entirety upon (i) the other party’s uncured material breach, subject to a notice and cure period, (ii) any insolvency event of the other party or (iii) prolonged force majeure, (b) the Company, either in its entirety or in part, for convenience upon a specified period prior written notice, or (c) Zentalis (i) in its entirety if the Company challenges one of the licensed patents or (ii) fails to meet certain development activity benchmarks within specified time periods.

Purdue Research Foundation

Upon closing of the Merger, the Company assumed certain license agreements that Morphimmune had entered into prior to the Merger. In January 2022, Morphimmune entered into a Master License Agreement, or the Purdue License Agreement, with Purdue Research Foundation, or PRF. Under the Purdue License Agreement, PRF granted Morphimmune a royalty-bearing, transferable, worldwide, exclusive license, sublicensable through multiple tiers, under certain intellectual property owned by PRF to research, develop, manufacture, and commercialize the licensed products in all fields of use with limited exceptions.

Under the Purdue License Agreement, Morphimmune paid PRF a one-time upfront payment of $0.2 million upon execution and $0.1 million on each of the first and second anniversary of the effective date of the Purdue License Agreement. During the period commencing on the date of first commercial sale of a licensed product and ending upon the date of expiration of the last valid claim of the licensed patents covering such licensed product in a country, referred to as the royalty term, the Company will pay PRF an earned unit royalty of a low single-digit percentage on gross receipts from sale of the licensed product, and beginning with the first sale of a licensed product, a tiered minimum annual royalty from the low to mid six-digit figure range less the unit royalties due for the annual period. Upon the achievement of specified development and commercialization milestones, the Company will pay PRF the milestone payments as specified in the Purdue License Agreement, which may be up to $3.8 million in the aggregate. The Company is also required to pay PRF an annual maintenance fee ranging from a low five-digit figure to a low six-digit figure prior to first sale of a licensed product and a low double-digit percentage of sublicense income received for sublicenses of licensed intellectual property, the percentage depending upon the timing of execution of the sublicense.

15

The Purdue License Agreement expires on a licensed product-by-licensed product and country-by-country basis, upon expiration of the royalty term for such licensed product for the applicable country. The Company may terminate the Purdue License Agreement upon at least one month’s prior written notice to PRF. PRF may terminate the Purdue License Agreement and the licenses granted thereunder if the Company fails to cure a payment default or other material breach of the Purdue License Agreement after written notice from PRF, or if Morphimmune becomes insolvent.

Other License Agreements

The Company has entered into various other license agreements to further discover, develop and commercialize certain technologies and treatments. As of March 31, 2024, the Company may need to pay developmental and regulatory milestone payments of up to approximately $6.0 million. In addition, the Company may need to pay royalty rates on net product sales, a portion of certain sublicense and collaboration payments, and certain commercial milestone payments of up to approximately $7.5 million, if any.

The Company did not make any development, regulatory, or commercial milestone payments under these licensing agreements during the three months ended March 31, 2024 and 2023.

9. Leases

The Company currently leases approximately 11,000 square feet of office and laboratory space in Exton, Pennsylvania under a lease that expires on March 31, 2025, and approximately 14,000 square feet of office and laboratory space in Bothell, Washington, under a lease that expires on October 31, 2028.

Supplemental balance sheet information related to leases was as follows (in thousands):

March 31, 2024

December 31, 2023

Operating leases:

Operating lease right-of-use assets

$

1,458

$

1,564

Operating lease liabilities, current portion

$

419

$

310

Operating lease liabilities, net of current portion

1,206

1,340

Total operating lease liabilities

$

1,625

$

1,650

Operating lease liabilities, current portion is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets.

For each of the three months ended March 31, 2024 and 2023, the Company recorded operating lease expense of $0.1 million. Under the terms of the lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability. The Company did not incur significant variable lease costs for the three months ended March 31, 2024 and 2023.

Other information related to the Company’s operating leases was as follows:

March 31, 2024

December 31, 2023

Weighted-average remaining lease term (in years)

4.20

4.81

Weighted-average discount rate

8.3%

8.3%

Supplemental cash flow information related to the Company’s operating leases was as follows (in thousands):

Three Months Ended March 31, 

2024

    

2023

Cash paid for operating lease liabilities

$

63

$

61

16

The Company’s future minimum lease payments were as follows as of March 31, 2024 (in thousands):

Years ending December 31, 

    

Amount

2024 (represents remaining nine months in 2024)

$

388

2025

 

464

2026

412

2027

422

2028

433

Total lease payments

2,119

Less imputed interest

(494)

Present value of operating lease liabilities

$

1,625

10. Common stock

Common stock

The holders of common stock are entitled to one vote for each share of common stock. The holders of common stock shall be entitled to receive dividends out of funds legally available if and when declared by the Company’s board of directors. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of common stock shall be entitled to share ratably in the remaining assets of the Company available for distribution.

The Company has reserved the following shares of common stock for issuance, on an as-converted basis, as follows:

March 31, 2024

December 31, 2023

Stock options issued and outstanding under the Plans

8,531,683

7,978,291

Common stock warrants outstanding

157,314

500,000

Remaining shares available for issuance under the Plans

5,327,876

4,250,303

Remaining shares available for issuance under the ESPP

906,251

473,733

Total reserved common stock

14,923,124

13,202,327

Follow-on public offering

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

Warrants to acquire shares of common stock

The Company had 157,314 and 500,000 issued and outstanding common stock warrants as of March 31, 2024 and December 31 2023, respectively, with an exercise price of $10.00 per share and an expiration date of April 28, 2024. During the three months ended March 31, 2024, warrants to purchase 342,686 shares of common stock were exercised for proceeds of $3.4 million. No warrants were exercised during the three months ended March 31, 2023.

11. Share-based compensation

2020 Equity Incentive Plan

In September 2020, the Company adopted the 2020 Equity Incentive Plan, or the 2020 Plan, which supersedes all prior equity incentive plans. No further awards will be granted under the 2018 Equity Incentive Plan, or 2018 Plan. Awards forfeited, cancelled, or repurchased from the above plans are returned to the pool of shares of common stock available for issuance under the 2020 Plan. On January 1, 2024, the shares of common stock authorized for issuance under the 2020 Plan increased by 1,730,071 shares. As of March 31, 2024, there were 4,398,174 shares available for issuance under the 2020 Plan.

17

On October 2, 2023, the Morphimmune 2020 Equity Incentive Plan, or the Morphimmune Plan, (or collectively with the 2020 Plan, the Plans), was assumed by the Company in conjunction with the Merger (Note 7). There were 929,702 shares available for issuance under the Morphimmune Plan as of March 31, 2024.

2020 Employee Stock Purchase Plan

The Company adopted the 2020 Employee Stock Purchase Plan, or ESPP, in September 2020. On January 1, 2024, the shares of common stock authorized for issuance under the ESPP increased by 432,518 shares. As of March 31, 2024, there were 906,251 shares available for issuance under the ESPP. No shares of common stock have been issued under the ESPP as of March 31, 2024.

Stock options

A summary of option activity under the Plans during the three months ended March 31, 2024 is as follows:

Weighted

 

Weighted

average

Aggregate

average

remaining

Intrinsic

Number of

exercise price

contractual

Value

    

shares

    

per share

    

term (years)

(in thousands)

Outstanding at December 31, 2023

 

7,978,291

$

6.15

8.62

$

45,360

Granted

1,129,434

19.86

Exercised

 

(137,112)

6.22

Forfeited

(344,339)

8.26

Expired

 

(94,591)

20.86

Outstanding at March 31, 2024

 

8,531,683

$

7.71

8.33

$

146,173

Exercisable at March 31, 2024

 

3,115,238

$

5.38

6.62

$

61,212

Aggregate intrinsic value in the above table is calculated as the difference between the exercise price of the options and the Company’s fair value of its common stock as of period end.

The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2024 and 2023 was $14.62 and $4.18 per share, respectively. The aggregate intrinsic value of options exercised during the three months ended March 31, 2024 was $2.5 million. No options were exercised during the three months ended March 31, 2023.

The weighted average assumptions used in the Black-Scholes option-pricing model for stock options granted were:

Three Months Ended March 31, 

 

    

2024

    

2023

 

Expected volatility

 

84.1

%  

87.9

%

Risk-free interest rate

 

4.1

%  

3.9

%

Expected term (in years)

 

6.06

 

5.96

Expected dividend yield

 

%  

%

Share-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Three Months Ended March 31, 

    

2024

    

2023

Research and development

$

383

$

430

General and administrative

 

1,776

 

794

Total share-based compensation expense

$

2,159

$

1,224

18

Unrecognized share-based compensation related to stock options was $37.1 million as of March 31, 2024 and is expected to be recognized over a weighted average period of 1.9 years.

12. Subsequent events

2024 ATM Agreement

On May 14, 2024, the Company entered into a sales agreement, or the 2024 ATM Agreement, with TD Securities (USA) LLC, or TD Cowen, as sales agent, pursuant to which the Company may offer and sell from time to time shares of its common stock having an aggregate offering price of up to $200.0 million, or the ATM Shares. The sales of the ATM Shares, if any, will be made by any method permitted that is deemed to be an “at-the-market” equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Capital Market. The Company has agreed to pay TD Cowen a commission of up to 3.0% of the aggregate gross proceeds from any ATM Shares sold through the 2024 ATM Agreement. The Company has not yet sold any ATM Shares under the 2024 ATM Agreement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023. Unless otherwise indicated, all references in this Quarterly Report on Form 10-Q to “Immunome,” the “company,” “we,” “our,” “us” or similar terms refer to Immunome, Inc. and its subsidiary.  

Forward-Looking Statements 

In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions. 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements. 

Overview

We are a biopharmaceutical company focused on the development of targeted oncology therapies. We believe that the pursuit of novel or underexplored targets will be central to the next generation of transformative therapies, and we are dedicated to developing targeted cancer therapies with first-in-class and best-in-class potential. Our goal is to establish a broad pipeline of preclinical and clinical assets and successfully develop such assets into approved products for commercialization. To support that goal, we pair business development activity with significant investment in our internal discovery platforms.

We are advancing a program pipeline comprising one clinical and three preclinical assets. The clinical asset is AL102, an investigational gamma secretase inhibitor, or GSI, currently under evaluation in a Phase 3 trial for the treatment of desmoid tumors. The preclinical assets are IM-1021, a receptor tyrosine kinase-like orphan receptor 1, or ROR1, antibody-drug conjugate, or ADC; IM-3050, a fibroblast activation protein, or FAP, targeted radioligand therapy, or RLT, candidate; and IM-4320, an anti-IL-38 immunotherapy candidate.

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

Our current programs and strategic collaboration

AL-102 (Gamma Secretase Inhibitor)

Our clinical asset is AL102, an investigational GSI that we acquired from Ayala Pharmaceuticals, Inc., or Ayala, on March 25, 2024 pursuant to an Asset Purchase Agreement, or the Ayala Purchase Agreement. AL102 is currently under evaluation in a Phase 3 trial for the treatment of desmoid tumors.

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AL102 clinical activity was observed in two clinical trials that enrolled adult desmoid tumor patients. A Phase 1 dose-escalation clinical trial was conducted by Bristol-Myers Squibb, or BMS, in patients with solid tumors. In this trial, one patient with desmoid fibromatosis was enrolled. This patient demonstrated tumor shrinkage of 16.5% while on study. Based on these data and responses demonstrated with other GSIs, Ayala designed a seamless Phase 2/3 study called RINGSIDE to specifically evaluate the activity of AL102 in patients with progressing desmoid tumors who required therapy. RINGSIDE Part A enrolled 42 patients at three different dosing regimens of AL102: 2 mg once a day for two days every week, 4 mg once a day for two days every week or 1.2 mg once a day daily. Overall, the ORR in evaluable patients as measured by RECIST v1.1 by an independent radiologist was 61% for all doses tested. The 1.2 mg daily dosing cohort had an ORR of 75% in the evaluable population. AL102 was well tolerated overall with a safety profile consistent with that reported with other GSIs. These data were reported at ESMO in 2023.

Based upon the clinical activity observed in RINGSIDE Part A at the dose of 1.2 mg given once daily, and following consultation with the U.S. Food and Drug Administration, or FDA, the Phase 3 randomized registration trial, RINGSIDE Part B (NCT04871282) was initiated by Ayala in November 2022. Enrollment was completed in February 2024.

RINGSIDE Part B is a registrational Phase 3, global, double-blind, randomized, placebo-controlled clinical trial, conducted at 61 clinical sites in North America, Europe, Asia and Australia. It will evaluate the efficacy, safety and tolerability of AL102 compared to placebo in patients with progressing desmoid tumors. One hundred fifty-six patients with histologically confirmed desmoid tumors with progressive disease (defined as tumor growth of at least 20% within the past 12 months as measured by RECIST v1.1) were enrolled. Patients were either treatment-naïve with desmoid tumors not amenable to surgery or had refractory or recurrent disease after at least one line of therapy. Patients in the study were randomized to receive either AL102 at a dose of 1.2 mg given once daily or placebo and evaluated for tumor progression using RECIST v1.1. Patients who progress while on study are eligible to enter an open-label extension whereby they may receive AL102 at a dose of 1.2 mg once daily until disease progression or unacceptable toxicity. The primary endpoint of RINGSIDE Part B is progression free survival with secondary endpoints of ORR, duration of response and specific patient-reported outcomes.

We expect to publish topline data for RINGSIDE Part B in the second half of 2025. In parallel, we are evaluating and performing the additional manufacturing and pharmacology work required to support a new drug application, or NDA, submission.

IM-1021 (ROR1 ADC)

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

In preclinical studies, IM-1021 showed sustained tumor regression in a mouse model of triple-negative breast cancer. In this model, IM-1021 dosed weekly for three weeks at 2.5 mg/kg or 5.0 mg/kg demonstrated superior reductions in tumor volume compared with the same respective dose of a competitor, vedotin payload ROR1 ADC, with no meaningful weight loss observed.

Subject to obtaining an IND, our IM-1021 clinical strategy is designed to efficiently evaluate dose escalation in patients with solid tumors or lymphoma, followed by potential expansion of the solid tumor clinical program into targeted indications, potentially including non-small cell lung cancer, breast, prostate, pancreatic, and gastric cancer, and potential expansion of the lymphoma program into diffuse large B-cell lymphoma, mantle cell lymphoma, or other indications that are deemed to be appropriate. Concurrent with the dose escalation and expansion studies, we plan to conduct non-clinical studies evaluating IM-1021 in combination with other therapies, and to evaluate and develop potential companion diagnostics that could help identify patients most likely to respond to IM-1021. Our strategy is to pursue pivotal clinical studies in indications that have shown compelling clinical outcomes in earlier-stage trials, present significant commercial opportunities, have the potential for enhanced outcomes using a companion diagnostic, and offer potential for accelerated approval. We expect to submit an IND for the IM-1021 program to the FDA in the first quarter of 2025.

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IM-3050 (FAP Radioligand Therapy)

We are developing IM-3050, a FAP-targeted Lu-177 RLT development candidate for the treatment of solid tumors. FAP serves as a tumor-specific marker due to its expression in approximately 75% of solid tumors. FAP is predominantly expressed by cancer-associated fibroblasts, the most common tumor stromal cell. IM-3050 is designed to deliver radioactive Lu-177 directly to FAP-expressing cells, where the “bystander” effect of the radiation may damage or kill nearby tumor cells. We believe this RLT approach could overcome the limitations, such as poor internalization and low expression on tumor cells, that make FAP an unsuitable target for ADCs. IM-3050, our lead FAP-targeted RLT, has four functional domains:

A small molecule FAP-specific ligand 

A linker tuned to drive tumor-specific uptake 
An albumin-binding domain to improve tumor retention 
A chelator to deliver the radionuclide 

      We expect to submit an IND for the IM-3050 program to the FDA in the first quarter of 2025.

IM-4320 (Anti-IL-38 Immunotherapy)

We initiated our anti-IL-38 immunotherapy program on the basis of data generated by our proprietary memory B cell hybridoma screening technology.

IL-38 was identified as the target of an antibody isolated from a hybridoma library generated from the memory B cells of a patient with squamous head and neck cancer. Our query of public and proprietary databases of cancer gene expression revealed over-expression of IL-38 in multiple solid tumors. Furthermore, in some tumor types, we observed a correlation between high IL-38 expression and low levels of tumor-infiltrating immune effector cells, a hallmark of immune suppression, suggesting a role for IL-38 as an immune modulator.

Data obtained from preclinical testing indicated that blocking IL-38 function using inhibitory antibodies increased the immune response to the tumor and resulted in anti-tumor activity in select animal models, suggesting that anti-IL-38 antibodies could have therapeutic utility as single agents or in combination with other therapeutic modalities. Our recent analysis further confirms IL-38 expression is frequently elevated in samples of select patient tumor subtypes, in cancers such as head and neck, lung and gastroesophageal. We believe that this information could potentially guide patient selection for early clinical testing and may improve the overall probability of demonstrating clinical utility, thereby improving the probability of clinical success. We intend to submit an IND for the IM-4320 program to the FDA subsequent to our anticipated IND submissions for IM-3050 and IM-1021.

Other Programs and Platforms

In addition to the already described current programs, we expect to continue to invest in our proprietary discovery platform to expand our pipeline. The high output of antibody-target pairs resulting from our discovery platform may provide us with additional insights into the immune response against cancer and other diseases. We intend to continue to invest in our platform, with the goal of developing first-in-class and best-in-class targeted cancer therapies, including immunotherapies, radioligand therapies and ADCs. 

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Additionally, we plan to expand our intellectual property estate and infrastructure needed to discover and advance our platform and programs. We may in-license or acquire complementary intellectual property as needed or required, and we may continue to build our know-how and trade secrets. As an example, we may pursue both therapeutic and diagnostic applications of our antibodies through composition of matter and/or method of use patents. While the focus area of our current programs is oncology, we may invest in intellectual property in other therapeutic areas as well. We believe that our technology has broad utility and could enable the formation of attractive strategic partnerships. Therefore, to maximize the value of our platform we may, from time to time, contemplate and enter into various forms of collaborative agreements related to our platform, our programs and/or development candidates with third parties, including other companies, government agencies, academic institutions and non-profit groups.  

Components of our results of operations

Collaboration revenue

We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future. To date, we have generated our revenue through a Collaboration and Option Agreement, or the Collaboration Agreement, with AbbVie. Our collaboration revenue to date consists of payments from AbbVie that we recognize over the expected performance period under this agreement. We expect that revenues for the foreseeable future will be derived primarily from this agreement and any additional collaborations into which we may enter. We have not received any royalties under the Collaboration Agreement with AbbVie to date. 

In-process research and development expenses

Intangible assets acquired in an asset acquisition for use in research and development activities which have no alternative future use are expensed as in-process research and development, or IPR&D, expense on the acquisition date. IPR&D expenses for the three months ended March 31, 2024 relate to the acquisition of our license pursuant to the Zentalis Agreement and the acquisition of certain assets from Ayala.

Research and development expenses

Research and development expenses consist of costs incurred in performing research and development activities, which include:

personnel-related expenses, including salaries, bonuses, benefits and share-based compensation for employees engaged in research and development functions;

expenses incurred in connection with the advancement of our programs and development candidates, including under agreements with consultants, contractors, contract research organizations, or CROs, and other third-party vendors and suppliers;

expenses to conduct clinical trials including regulatory and quality assurance;

the cost of developing and validating our manufacturing process for use in our preclinical studies and clinical trials;

laboratory supplies and research materials and other infrastructure-related expenses; and

facilities, depreciation and amortization and other expenses which include direct and allocated expenses.

We expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the benefits are consumed.

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Research and development activities are central to our business model. We expect that our research and development expenses will increase substantially in connection with the continuation of our activities and new agreements.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation for personnel in our executive, business development, and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel, direct and allocated facility related expenses, and other operating costs.

We anticipate that our general and administrative expenses will increase in the future to support increased and progressed research and development activities and to operate as a public company.

Interest income

Interest income consists of interest earned on our marketable securities and on our cash and cash equivalent balances held with financial institutions.

Results of operations

Comparison of the three months ended March 31, 2024 and 2023

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

Three Months Ended March 31, 

    

2024

    

2023

    

Change

Collaboration revenue

$

1,029

$

2,364

$

(1,335)

Operating expenses:

In-process research and development

111,954

111,954

Research and development(1)

15,369

3,913

11,456

General and administrative(1)

 

6,005

 

2,922

 

3,083

Total operating expenses

 

133,328

 

6,835

 

126,493

Loss from operations

 

(132,299)

 

(4,471)

 

(127,828)

Interest income

 

2,807

 

201

 

2,606

Net loss

$

(129,492)

$

(4,270)

$

(125,222)

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

Three Months Ended March 31, 

2024

    

2023

Change

Research and development

$

383

$

430

$

(47)

General and administrative

1,776

794

982

Total share-based compensation expense

$

2,159

$

1,224

$

935

Collaboration revenue

Collaboration revenue decreased by $1.4 million, from $2.4 million for the three months ended March 31, 2023 to $1.0 million for the three months ended March 31, 2024. The decrease was primarily due to a decrease in certain research and development activities allocated to AbbVie during the three months ended March 31, 2024 compared to the same period in 2023.

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In-process research and development expenses

IPR&D expense for the three months ended March 31, 2024 was related to the write-off of IPR&D assets that were acquired from Zentalis and Ayala and determined to have no alternative future use. There was no IPR&D expense for the three months ended March 31, 2023.

Research and development expenses

Research and development expenses increased by $11.5 million, from $3.9 million for the three months ended March 31, 2023 to $15.4 million for the three months ended March 31, 2024.

We record direct research and development expenses, consisting principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials, and costs related to manufacturing, to specific product development and clinical programs. We do not allocate costs related to purchasing clinical trial materials, employee and contractor-related costs, and costs associated with our facility expenses, including depreciation or other indirect costs, to specific product candidates and clinical programs because these costs support multiple product programs. The table below shows our research and development expenses incurred with respect to each active program. 

Three Months Ended March 31,

2024

2023

Change

AL102 (1)

$

250

$

$

250

Pre-clinical programs (2)

5,038

424

4,614

Other research and development activities (3)

5,953

1,215

4,738

Indirect research and development (4)

4,128

2,274

1,854

Total

$

15,369

$

3,913

$

11,456

(1)

The increase in 2024 compared to 2023 was due to clinical trial activities related to AL102, which was acquired from Ayala during the three months ended March 31, 2024.

(2)

The increase in 2024 compared to 2023 was due primarily to increased outsourced research and materials pertaining to IM-1021, IM-3050, and IM-4320.

(3)

The increase in 2024 compared to 2023 was due primarily to increased ADC discovery activities.

(4)

The increase in 2024 compared to 2023 was due primarily to an increase in personnel and personnel-related costs associated with the Merger and our discovery platform.

General and administrative expenses

General and administrative expenses increased by $3.1 million, from $2.9 million for the three months ended March 31, 2023 to $6.0 million for the three months ended March 31, 2024. The increase was primarily a result of a $1.6 million increase in personnel-related costs, which included increases of $0.6 million in salary and benefits costs due to increased headcount associated with the Merger and $1.0 million in share-based compensation. In addition, professional fees increased $1.1 million related to accounting, legal and patent fees and other overhead related costs.

Interest income

Interest income increased by $2.6 million from $0.2 million for the three months ended March 31, 2023 to $2.8 million for the three months ended March 31, 2024. The increase was primarily a result of increased interest rates and higher cash and cash equivalent and marketable security balances.

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Liquidity and capital resources

Sources of liquidity

Since our inception in 2006, we have devoted substantially all our resources to research and development, raising capital, building our management team, building our intellectual property portfolio and entering and executing on collaborations and strategic transactions. To date, we have financed our operations primarily through sales of our equity securities, collaboration arrangements, strategic partnerships and transactions, and to a lesser extent, through expense reimbursements received from a governmental contract that ended in 2022.

To date, we have not generated any revenue from commercial sales and do not expect to generate revenue from commercial sale of products for the foreseeable future. Since inception, we have incurred significant operating losses and negative cash flows from operations. Our net losses were $129.5 million and $4.3 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had cash, cash equivalents and marketable securities of $309.7 million and an accumulated deficit of $352.3 million.  

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

In May 2024, we entered into a sales agreement, or the 2024 ATM Agreement, with TD Securities (USA) LLC, or TD Cowen, as sales agent, pursuant to which we may offer and sell from time to time shares of our common stock having an aggregate offering price of up to $200.0 million, or the ATM Shares. The sales of the ATM Shares, if any, will be made by any method permitted that is deemed to be an “at-the-market” equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Capital Market. We have agreed to pay TD Cowen a commission of up to 3.0% of the aggregate gross proceeds from any ATM Shares sold through the 2024 ATM Agreement. We have not yet sold any ATM Shares under the 2024 ATM Agreement.

Cash flows

The following table summarizes our sources and uses of cash for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31, 

    

2024

    

2023

Cash (used in) provided by operating activities

$

(11,170)

$

24,173

Cash used in investing activities

 

(37,231)

 

(106)

Cash provided by financing activities

 

219,445

 

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Net increase in cash and cash equivalents and restricted cash

$

171,044

$

24,101

Operating activities

Net cash used in operating activities for the three months ended March 31, 2024 was $11.2 million, consisting primarily of our net loss of $129.5 million, partially offset by noncash charges of $113.8 million and a net change in operating assets and liabilities of $4.5 million. The noncash charges primarily consisted of $112.0 million of in-process research and development assets acquired without alternative future use, and $2.2 million of share-based compensation. The change in operating assets and liabilities primarily consisted of a decrease in prepaid expense and other current assets of $2.5 million, an increase in accounts payable of $2.4 million, and an increase in accrued expenses and other current liabilities of $0.7 million, partially offset by a decrease in deferred revenue of $1.0 million.

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Net cash provided by operating activities for the three months ended March 31, 2023 was $24.2 million, consisting primarily of our net loss of $4.3 million, offset by noncash charges of $1.4 million and a net change in operating assets and liabilities of $27.1 million. The noncash charges primarily consisted of $1.2 million of share-based compensation. The change in operating assets and liabilities primarily consisted of an increase in deferred revenue of $27.6 million, an increase in accounts payable of $0.7 million, and a decrease in prepaid expenses and other current assets of $0.2 million, partially offset by a decrease in accrued expenses and other liabilities and other long-term liabilities of $1.5 million.

Investing activities

Net cash used in investing activities for the three months ended March 31, 2024 was $37.2 million, consisting primarily of $35.1 million in IPR&D assets acquired from Zentalis and Ayala and $2.2 million of purchases of property and equipment.

Net cash used in investing activities for the three months ended March 31, 2023 was $0.1 million, consisting primarily of purchases of property and equipment.

Financing activities

Net cash provided by financing activities for the three months ended March 31, 2024 was $219.4 million, consisting of net proceeds of $215.8 million from the 2024 Financing and $3.6 million from the exercise of options and common stock warrants.

Net cash provided by financing activities for the three months ended March 31, 2023 was $34,000, consisting of net proceeds from the sales of common stock under our prior ATM sales agreement that we terminated in November 2023.

Funding requirements

We expect our expenses to increase substantially in connection with our ongoing and future activities, particularly as we advance and expand our clinical development of AL102, seek regulatory approval for AL102, continue the preclinical and potential clinical development of IM-1021, IM-3050, IM-4320, and any other future product candidates, and continue to pursue our business development strategy. We expect that our primary uses of capital will be for clinical development services, non-clinical research, strategic transactions, manufacturing, legal and other regulatory compliance expenses, compensation and related expenses, risk management, and general overhead costs.

We expect that our existing cash, cash equivalents and marketable securities as of March 31, 2024 will enable us to fund our current and planned operating expenses and capital expenditures for at least 12 months from the filing date of this Quarterly Report on Form 10-Q. We will need additional financing to support our continuing operations and pursue our research and development strategy. We have based these estimates on assumptions that may prove to be imprecise, and we may exhaust our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our programs and development candidates.

Our future funding requirements will depend on many factors including:

the extent to which we acquire or in-license products, intellectual property, and other technologies, and the terms on which we acquire or in-license those assets; 

the scope, progress, results and costs of discovery, preclinical development, manufacturing and clinical trials for programs and development candidates that we currently own and those that we may acquire rights to in the future; 

the costs of continuing to operate and advance our discovery and ADC platforms; 

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the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights, and defending intellectual property-related claims and the success of our intellectual property portfolio;

the costs, timing, and outcome of regulatory review of the programs and development candidates we may develop;

the costs of future activities, including product sales, medical affairs, marketing, manufacturing, distribution, coverage and reimbursement for any programs or development candidates for which we receive regulatory approval;

the success of our existing and any future license agreements, collaborations and other strategic transactions and the achievement of milestones or occurrence of other developments that trigger payments to or from us under any such agreements and transactions; and

the costs of operating as a public company.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, including pursuant to the 2024 ATM Agreement, debt financings, collaborations, strategic alliances, and licensing arrangements. As a result of the war between Russia and Ukraine, conflict in the Middle East, bank failures, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic and political factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. There can be no assurance that deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. To the extent that we raise additional capital through the sale of equity, including pursuant to the 2024 ATM Agreement, or convertible debt securities, the ownership interest of any purchaser will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market programs and development candidates that we would otherwise prefer to develop and market ourselves. If we cannot obtain the necessary funding to support these activities on favorable terms, or at all, we will need to delay, scale back or eliminate some or all of our research and development programs, including our clinical and preclinical development of our product candidates.

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Contractual obligations and contingencies

We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis. Our expected material cash requirements do not include potential contingent payments that we may be required to pay upon the achievement of development, regulatory or commercial milestones under the terms of the Ayala Purchase Agreement, nor do they include potential contingent payments upon the achievement of development, regulatory and commercial milestones or royalty payments that we may be required to make under license agreements we have entered into or may enter into with various entities pursuant to which we have in-licensed certain intellectual property. For further details on the potential contingent payments related to asset acquisitions and license agreements, see Notes 7 and 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Critical accounting policies and estimates

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Form 10-K for the fiscal year ended December 31, 2023. For a discussion of our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical accounting policies and significant judgments” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2023.

Recent accounting pronouncements

See Note 2, Summary of significant accounting policies, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding recently issued accounting pronouncements.

JOBS Act

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions until the last day of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company earlier if we have more than $1.235 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than $1.0 billion of non-convertible debt securities over a three-year period. For so long as we remain an emerging growth company, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. We may choose to take advantage of some, but not all, of the available exemptions. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. Therefore, the reported results of operations contained in our financial statements may not be directly comparable to those of other public companies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information under this item is not required to be provided by smaller reporting companies.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2024, our disclosure controls and procedures were effective to ensure the timely disclosure of required information in our SEC filings.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting occurred during the quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. 

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Item 1A. Risk Factors

 RISK FACTOR SUMMARY 

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report and our other filings with the SEC before making investment decisions regarding our common stock. 

  

We are a biopharmaceutical company with a history of losses. We expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
We have a limited operating history, which may make it difficult to evaluate our drug development capabilities and predict our future performance. 

We have not yet demonstrated successful completion of clinical development, submitted a New Drug Application, obtained FDA approval for marketing, or successfully commercialized a drug product, and we may be unable to do so. Furthermore, AL102, which we recently acquired, is currently in Phase 3 development, but such acquisition and prior clinical success is not indicative of our ability to obtain new drug application, or NDA, approval or successfully commercialize AL102.

We may not be successful in our efforts to use and expand our discovery and ADC platforms to build and progress a pipeline.

We may be unable to advance any of our development candidates into and through clinical development, obtain regulatory approvals and ultimately commercialize them, or we could experience significant delays in doing so.

We may pursue particular programs or development candidates over others; these decisions may prove to be wrong and may adversely impact our business. 

Clinical trials are expensive, time-consuming and difficult to design and implement. 

If we or others identify undesirable side effects caused by a development candidate undergoing clinical trials, our ability to market and derive revenue from the program or development candidate could be compromised. 

  

If third parties on which we intend to rely to conduct our current and future preclinical and clinical studies do not perform as contractually required, fail to satisfy regulatory or legal requirements or miss expected deadlines, our programs could be delayed with material and adverse impacts on our business and financial condition.  

Because we may rely on third parties for manufacturing, supply and testing, some of which may be sole source vendors, for preclinical and clinical development materials and commercial supplies, our supply may become limited or interrupted or may not be of satisfactory quantity or quality. 

There is no guarantee that our collaboration with AbbVie will result in the successful discovery and validation of targets for further development and commercialization by AbbVie. 

It is difficult and costly to protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection.

   

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We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business. 

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. 

We may fail to realize the business benefits anticipated as a result of completed or pending strategic transactions.

The market price of our common stock is expected to be volatile, and purchasers of our common stock could incur substantial losses. 

RISK FACTORS 

As noted throughout this Quarterly Report on Form 10-Q, or this Quarterly Report, we are subject to a number of risks and uncertainties. You should consider and read carefully all the risks and uncertainties described below, as well as other information included in this Quarterly Report, including our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and our “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” The risks and uncertainties described below are not the only ones we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. This Quarterly Report also contains forward-looking statements and estimates. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below. We have marked with an asterisk (*) those risk factors that were not included as separate risk factors in, or reflect changes from the similarly titled risk factors included in, Item 1A of our Annual Report on Form 10-K, filed with the SEC on March 28, 2024. References to “we,” “us,” and “our” in this section refer to Immunome and its subsidiaries.  

Risks Related to Our Business  

We are a biopharmaceutical company with a history of losses. We expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.*

We are a biotechnology company with a history of losses. Since our inception, we have devoted substantially all of our resources to research and development, raising capital, pursuing strategic transactions, building our management team and building our intellectual property portfolio, and we have incurred significant operating losses. As of March 31, 2024, we had an accumulated deficit of $352.3 million. Our net loss for the year ended December 31, 2023 was $106.8 million and $129.5 million for the three months ended March 31, 2024. In 2023, the net loss included $80.8 million of in-process research and development (IPR&D) expense in relation to our acquisition of Morphimmune, which occurred in October 2023. In the first quarter of 2024, the net loss included $112.0 million of IPR&D expense inclusive of $73.4 million in relation to our asset purchase agreement with Ayala, and $38.6 million in relation to our licensing agreement with Zentalis. Substantially all our losses have resulted from IPR&D expense, from expenses incurred in connection with our research and development programs, and from general and administrative costs associated with our operations. To date, we have not generated any revenue from product sales, and we have not identified or sought or obtained regulatory approval for the marketing or sale of any product. Furthermore, we may not generate any revenue from product sales for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development activities and the regulatory approval process for our development candidates.

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We expect our net losses to increase substantially as we continue our operations; however, the amount of our future losses is uncertain. Our ability to achieve or sustain profitability, if ever, will depend on, among other things, successfully identifying and developing our development candidates, obtaining regulatory approvals for marketing and commercialization, manufacturing on commercially reasonable terms, performance as anticipated by our vendors, entering into additional potential future strategic partnerships and performing and meeting milestones on strategic partnerships, establishing a sales and marketing organization or suitable third-party alternatives for any approved product and raising sufficient funds to finance business activities. If we, or our present or potential future partners, are unable to commercialize one or more of our programs or development candidates, or if sales revenue from any program or development candidate that receives approval is insufficient, we will not achieve or sustain profitability, which could have a material and adverse effect on our business, financial condition, results of operations and prospects.

We have a limited operating history, which may make it difficult to evaluate our drug development capabilities and predict our future performance.

Other than our recent acquisition of AL102, a product candidate in late-stage clinical trials, we have not initiated clinical trials for any of our drug candidates. We have no drugs approved for commercial sale and have not generated any revenue from drug sales. Our ability to generate drug revenue, which may not occur for the foreseeable future, if ever, will depend on the successful development and eventual commercialization of our drug candidates, which may never occur. We may never be able to develop or commercialize a marketable drug.

Our current and future drug candidates require additional discovery research, preclinical development, clinical development, regulatory approval in multiple jurisdictions to market, manufacturing validation, obtaining current good manufacturing practice, or cGMP, manufacturing supply, capacity and expertise, building of a commercial and distribution organization, substantial investment and significant marketing efforts before we generate any revenue from drug sales.

 Our limited operating history may make it difficult to evaluate our drug candidates and predict our future performance. Our short history as an operating company makes any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early clinical-stage companies in evolving fields. If we do not address these risks successfully, our business will suffer. Similarly, we expect that our financial condition and operating results will fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. As a result, our stockholders should not rely upon the results of any quarterly or annual period as an indicator of future operating performance.

 In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown circumstances. As we advance our drug candidates, including AL102, we will need to transition from a company with a research focus to a company capable of supporting clinical development and if successful, commercial activities. We may not be successful in such a transition.

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We have not yet demonstrated successful completion of clinical development, submitted a New Drug Application, obtained FDA approval for marketing, or successfully commercialized a drug product, and we may be unable to do so. Furthermore, AL102, which we recently acquired, is currently in Phase 3 development, but such acquisition and prior clinical success is not indicative of our ability to obtain new drug application, or NDA, approval or successfully commercialize AL102.

As an organization, we have not yet demonstrated an ability to successfully complete clinical development, obtain regulatory approvals, manufacture a commercial-scale product, conduct sales and marketing activities necessary for successful commercialization, or arrange for a third party to do any of the foregoing on our behalf. Prior to obtaining approval to commercialize a product candidate in the United States or elsewhere, we or our collaborators must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. In 2022, we advanced IMM-BCP-01 into Phase 1 clinical trials for the treatment of SARS-CoV-2, but we since decided to cease further development of IMM-BCP-01 until we identify a partner to continue trials and further development. As such, AL102 is currently our only clinical trial candidate. We acquired this asset and have not yet conducted or completed any clinical trials for our current development candidates previously. We also have limited experience as a company in preparing and submitting marketing applications and have not previously submitted an NDA or other comparable foreign regulatory submission for any product candidate. In addition, we have had limited interactions with the FDA or other comparable foreign regulatory authorities and cannot be certain how many additional clinical trials of our development candidates will be required or how such additional trials should be designed. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to submission of an application for and obtaining regulatory approval of any of our development candidates. Notably, AL102's prior development was not conducted by us. As a result, our assumptions about AL102's development potential are based in large part on the data generated from clinical trials conducted by Ayala and we may observe materially and adversely different results in ongoing or future clinical trials. In addition, results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for AL102 is promising, compliance or data integrity issues may later arise and even if not, the data may not be sufficient to support approval by the FDA or comparable foreign regulatory authorities. Marketing approval of AL102 or any other applications that we may submit may be delayed by several years or may require us to expend significantly more resources than we have available. 

In addition, even if we were to obtain marketing approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may impose significant limitations in the form of narrow indications, warnings, or a post-marketing risk management strategy such as a Risk Evaluation and Mitigation Strategy, or REMS, or the equivalent in another jurisdiction. Regulatory authorities may grant approval contingent on the performance of costly post-marketing clinical trials or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for AL102 or our earlier-stage product candidates.

We will need to raise substantial additional funds to advance development of our development candidates and our discovery and ADC platforms, and we cannot guarantee that we will have sufficient funds available in the future to develop and commercialize any of our development candidates.*

The research and development of biotechnology products is capital-intensive. If our development candidates continue to advance through preclinical studies and clinical trials, we will need substantial additional funds to expand our development, regulatory, manufacturing, marketing and sales capabilities. We have used substantial funds to develop and acquire our development candidates and will require significant funds to continue to advance our discovery and ADC platforms and conduct further research and development, including preclinical studies and clinical trials, to seek regulatory approvals and to manufacture and market products, if any, that are approved for commercial sale. In addition, we incur additional costs associated with operating as a public company.

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Based on our current operating plan, we expect that our existing cash, cash equivalents and marketable securities as of March 31, 2024 will enable us to fund our current and planned operating expenses and capital expenditures for at least 12 months from the filing date of this Quarterly Report on Form 10-Q. Our future capital requirements and the period for which we expect our existing resources to support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing research and development and other corporate activities. Because the length of time and activities associated with successful research and development of biotechnology products is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities.

Any additional capital-raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and, if approved, commercialize our current and any future development candidates. Additional funding may not be available on acceptable terms, or at all. As a result of the war between Russia and Ukraine, conflict in the Middle East, bank failures, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic and political factors, the global credit and financial markets have experienced and may in the future experience extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. If the equity and credit markets deteriorate, including as a result of recent or future bank failures, it may make any necessary debt or equity financing more difficult to obtain in a timely manner on favorable terms or at all.

The timing and amount of our operating expenditures will depend largely on factors outside of our control, some of which are discussed in this section, including the following: