UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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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
As of August 8, 2024, the registrant had
Table of Contents
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PART I. |
1 |
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Item 1. |
1 |
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1 |
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Consolidated Statements of Operations and Comprehensive Loss |
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3 |
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4 |
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5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
Item 3. |
29 |
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Item 4. |
30 |
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PART II. |
31 |
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Item 1. |
31 |
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Item 1A. |
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Item 2. |
85 |
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Item 3. |
85 |
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Item 4. |
85 |
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Item 5. |
85 |
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Item 6. |
86 |
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87 |
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i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “would,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:
ii
These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, Part II, Item 1A - “Risk Factors” in this Quarterly Report on Form 10-Q, and those described elsewhere in this Quarterly Report on Form 10-Q and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Quarterly Report on Form 10-Q also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates, and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by third parties, industry, medical and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.
Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “IO Biotech,” and the “Company” refer to IO Biotech, Inc. and, where appropriate, its consolidated subsidiaries.
Trademarks
The Company has applied for various trademarks that we use in connection with the operation of its business. This Quarterly Report on Form 10-Q includes trademarks, service marks, and trade names owned by us or other companies. All trademarks, service marks, and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
iii
PART I—FINANCIAL INFORMATION
Item 1. Interim Financial Statements (Unaudited)
IO BIOTECH, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(unaudited)
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June 30, |
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December 31, |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Right of use lease asset |
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Other non-current assets |
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Total non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Lease liability - current |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Lease liability - non-current |
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Total non-current liabilities |
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Total liabilities |
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Stockholders’ equity |
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Preferred stock, par value of $ |
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Common stock, par value of $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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Accumulated other comprehensive loss |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to the unaudited interim consolidated financial statements.
1
IO BIOTECH, INC.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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Other income (expense) |
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Currency exchange (loss) gain, net |
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( |
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Interest income |
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Total other income (expense), net |
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Loss before income tax expense |
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( |
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( |
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Income tax expense |
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Net loss |
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( |
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Net loss attributable to common shareholders |
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( |
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Net loss per common share, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Weighted-average number of shares used in computing net loss per common share, basic and diluted |
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Other comprehensive loss |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Foreign currency translation |
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Total comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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See accompanying notes to the unaudited interim consolidated financial statements.
2
IO BIOTECH, INC.
(In thousands, except share amounts)
(unaudited)
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Common Stock |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance, January 1, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance, June 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Balance, January 1, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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See accompanying notes to the unaudited interim consolidated financial statements.
3
IO BIOTECH, INC.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
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Six Months Ended |
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2024 |
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2023 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
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Adjustment to reconcile net loss to net cash used in operating activities |
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Depreciation |
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Equity-based compensation |
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Amortization of right of use lease asset |
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Foreign currency loss (gain) |
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( |
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Changes in operating assets and liabilities |
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Prepaid expenses and other current assets |
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( |
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Other non-current assets |
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( |
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Accounts payable |
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Lease liability |
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( |
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( |
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Accrued expenses and other current liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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Cash flows from investing activities |
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Purchase of property and equipment |
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( |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Net cash provided by financing activities |
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Net decrease in cash, cash equivalents and restricted cash |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
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$ |
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$ |
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Components of cash, cash equivalents, and restricted cash |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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See accompanying notes to the unaudited interim consolidated financial statements.
4
Notes to Consolidated Financial Statements
(unaudited)
1. Description of Business, Organization and Liquidity
Business
IO Biotech, Inc. is a clinical-stage biopharmaceutical company developing novel, immune-modulating therapeutic cancer vaccines based on our T-win® platform. As used in these financial statements, unless the context otherwise requires, references to the “Company,” “we,” “us,” and “our” refer to IO Biotech, Inc. and its subsidiaries.
Corporate Reorganization
IO Biotech ApS was incorporated in Denmark in December 2014. In November 2021, we completed a corporate reorganization (the “Corporate Reorganization”) whereby IO Biotech ApS became a wholly-owned subsidiary of the Company. In connection with the corporate reorganization, each issued and outstanding Class A ordinary share ($
IO Bio US, Inc., a wholly owned subsidiary of IO Biotech ApS, was incorporated in Delaware in May 2021. IO Biotech Limited, a wholly owned subsidiary of IO Biotech ApS, was incorporated in the UK in August 2021. In November 2021, the Company engaged in a series of transactions, referred to collectively as the Corporate Reorganization. As a result of the Corporate Reorganization, IO Biotech ApS became a wholly-owned subsidiary of IO Biotech, Inc. IO Biotech, Inc. is a holding company formed in October 2021, which, prior to our initial public offering (“IPO”), had nominal assets and no liabilities, contingencies, or commitments, and which has not conducted any operations prior to our IPO other than acquiring the entire issued and outstanding stock of IO Biotech ApS. The Company, IO Biotech ApS, and the holders of all of the issued and outstanding equity interests of IO Biotech ApS entered into a Share Contribution and Exchange Agreement, dated as of October 29, 2021, pursuant to which the Corporate Reorganization was effected.
IPO
In November 2021, we completed our IPO, selling an aggregate of
Immediately prior to the consummation of the IPO, all outstanding shares of our Class A ordinary shares and Class B and Class C convertible preference shares were converted into
On November 9, 2021, we amended and restated the certificate of incorporation of IO Biotech, Inc. to authorize the issuance of
August 2023 Private Placement
On August 9, 2023, the Company completed a private placement transaction (the “Private Placement”), pursuant to which we sold an aggregate of
5
At-The-Market Equity Program
On February 15, 2023, we filed a new prospectus supplement with the U.S. Securities and Exchange Commission (the “SEC”) with respect to the offer and sale of shares of our Common Stock, with an aggregate offering price of up to $
Risks and Uncertainties
We are subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance reporting capabilities.
Our product candidates are in preclinical research and clinical development. There can be no assurance that our research and development will be successfully completed, that adequate protection for our intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if our product development efforts are successful, it is uncertain when, if ever, we will generate significant revenue from product sales. We operate in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, we are dependent upon the services of our employees and consultants.
Liquidity Considerations and Going Concern Basis of Accounting
Since inception, we have devoted substantially all of our efforts to business planning, conducting research and development, recruiting management and technical staff, and raising capital. We have financed our operations primarily through the issuance of convertible preference shares, convertible notes, our IPO and the Private Placement.
Our continued discovery and development of product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if product development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.
As of June 30, 2024, we had an accumulated deficit of $
6
2. Summary of Significant Accounting Policies
There have been no changes to the significant accounting policies disclosed in Note 2 to the Company’s annual financial statements for the years ended December 31, 2023 and 2022 included in its Annual Report on Form 10-K filed with the SEC.
Unaudited Financial Information
The accompanying unaudited interim consolidated financial statements included herein have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the SEC. In the Company’s opinion, the information furnished herein reflects all adjustments, all of which are of a normal and recurring nature and necessary for a fair presentation of the financial position and results of operations for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period. Unaudited interim financial statements and footnotes should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report filed on Form 10-K for the fiscal year ended December 31, 2023.
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current U.S. GAAP. Convertible instruments that continue to be subject to separation models are (i) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (ii) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for us beginning after December 15, 2023. The Company has
Recently Issued Accounting Standards
In October 2023, the FASB issued ASU 2023-06, Accounting Standards Update 2023-06—Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. ASU 2023-06 will eliminate disclosure requirements that are redundant, duplicative, overlapping, outdated, or superseded as a result of subsequent changes to SEC disclosure requirements, U.S. GAAP or technology. ASU 2023-06 is intended to better align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP. The disclosure requirements would apply prospectively in the financial statements. ASU 2023-06 will be effective for us on the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, if we are already subject to the SEC’s current disclosure requirements. For those current disclosure requirements we are not subject to, ASU 2023-06 will become effective two years after the date of such removal by the SEC. We are currently assessing the impact adoption of ASU 2023-06 will have on our financial statements and disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 will improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 will also enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements. The enhanced segment disclosure requirements apply retrospectively to all prior periods presented in the financial statements. ASU 2023-07 will be effective for us in the annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently assessing the impact adoption of ASU 2023-07 will have on our financial statements and disclosures, but do not expect a material impact on the financial statements or disclosures.
7
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 will require disclosure of additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state and foreign income taxes. ASU 2023-09 will also require information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. ASU 2023-09 will be effective for us in the 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. We are currently assessing the impact adoption of ASU 2023-09 will have on our financial statements and disclosures.
Other than the items noted above, there have been no new accounting pronouncements not yet effective or adopted in the current year that we believe have a significant impact, or potential significant impact, to our unaudited interim consolidated financial statements.
3. Fair Value Measurements
The following table presents information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):
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June 30, 2024 |
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Total |
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Level 1 |
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Level 2 |
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Level 3 |
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Assets |
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Money market funds(1) |
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$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
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||
Total assets measured at fair value |
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$ |
|
|
$ |
|
|
$ |
— |
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|
$ |
— |
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||
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December 31, 2023 |
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Total |
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Level 1 |
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Level 2 |
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Level 3 |
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||||
Assets |
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|
|
|
|
|
|
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|
||||
Money market funds(1) |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Total assets measured at fair value |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
(1) Money market funds with maturities of 90 days or less at the date of purchase are included within cash and cash equivalents in the accompanying consolidated balance sheets and are recognized at fair value.
As of June 30, 2024 and December 31, 2023, the Company only held Level 1 financial instruments.
There were
4. License and Collaboration Agreements
In February 2018, we entered into a clinical collaboration with MSD International GmbH (“MSDIG”) to evaluate IO102 in combination with KEYTRUDA® (“pembrolizumab”) in first-line treatment of patients with metastatic non-small cell lung cancer. Under the terms of the collaboration with MSDIG, we will conduct an international Phase 1/2 study to evaluate a combination therapy of IO102 and KEYTRUDA®. We will sponsor the clinical trial and MSDIG will provide KEYTRUDA® to be used in the clinical trial free of charge. We and MSDIG will be responsible for our own internal costs and expenses to support the study and we shall bear all other costs associated with conducting the study, including costs of providing IO102 for use in the study. The rights to the data from the clinical trial will be shared by us and MSDIG and we will maintain global commercial rights to IO102.
In September 2021, we entered into a clinical collaboration with MSDIG and MSD International Business GmbH (“MSDIB”), another affiliate of Merck (collectively, “MSD”) to evaluate IO102-IO103 in combination with KEYTRUDA® versus KEYTRUDA® alone in treatment of patients with metastatic (advanced) melanoma. Under the terms of the collaboration with MSD, we are conducting an international Phase 3 study to evaluate a combination therapy of IO102-IO103 and KEYTRUDA®. We are the sponsor of the clinical trial and MSD will provide KEYTRUDA® to be used in the clinical trial free of charge. We and MSD are responsible for our own internal costs and expenses to support the study and we will bear all other costs associated with conducting the study, including costs of providing IO102-IO103 for use in the study. The rights to the data from the clinical trial will be shared by us and MSD and we will maintain global commercial rights to IO102-IO103.
8
In December 2021, we entered into a clinical collaboration with MSD to evaluate IO102-IO103 in combination with KEYTRUDA® in previously untreated patients with three different tumor types— metastatic non-small cell lung cancer (“NSCLC”), squamous cell carcinoma of the head and neck (“SCCHN”), and urothelial bladder cancer (“UBC”). Under the terms of the collaboration with MSD, we are conducting an international Phase 2 study to evaluate a combination therapy of IO102-IO103 and KEYTRUDA®. We are the sponsor of the clinical trial and MSD will provide KEYTRUDA® to be used in the clinical trial free of charge. We and MSD are responsible for our own internal costs and expenses to support the study and we will bear all other costs associated with conducting the study, including costs of providing IO102-IO103 for use in the study. The rights to the data from the clinical trial will be shared by us and MSD and we will maintain global commercial rights to IO102-IO103.
In November 2022, we entered into a clinical collaboration with MSD to evaluate IO102-IO103 in combination with KEYTRUDA® as a neo-adjuvant/adjuvant therapy for patients with metastatic melanoma and SCCHN. Under the terms of the collaboration with MSD, we will conduct an international Phase 2 study to evaluate a combination therapy of IO102-IO103 and KEYTRUDA®. We will sponsor the clinical trial and MSD will provide KEYTRUDA® to be used in the clinical trial free of charge. We and MSD will be responsible for our own internal costs and expenses to support the study and we shall bear all other costs associated with conducting the study, including costs of providing IO102-IO103 for use in the study. The rights to the data from the clinical trial will be shared by us and MSD and we will maintain global commercial rights to IO102-IO103.
5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
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June 30, |
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December 31, |
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||
Prepaid contract research and development costs |
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$ |
|
|
$ |
— |
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Prepaid income taxes |
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Research and development tax credit receivable |
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Insurance |
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Value-added tax refund receivable |
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Other |
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Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
6. Property and Equipment, Net
Property and equipment, net consist of the following (in thousands):
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June 30, |
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December 31, |
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Laboratory equipment |
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$ |
|
|
$ |
|
||
Office furniture |
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Computer hardware |
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Less: accumulated depreciation |
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|
( |
) |
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|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
For the three months ended June 30, 2024 and 2023, the Company recognized $
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
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June 30, |
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December 31, |
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||
Accrued contract research and development costs |
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$ |
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$ |
|
||
Employee compensation costs |
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Professional fees |
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Other liabilities |
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Total accrued expenses and other current liabilities |
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$ |
|
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$ |
|
||
9
8. Leases
As of June 30, 2024, the Company is party to
The Company is party to an operating lease in Copenhagen, Denmark for office space that commenced in March 2021 with the initial term set to expire in January 2025. Base rent for this initial lease was $
Quantitative information regarding the Company’s leases for the six months ended June 30, 2024 and 2023 is as follows (in thousands):
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Six Months Ended |
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Six Months Ended |
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Lease Cost |
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June 30, 2024 |
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June 30, 2023 |
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Operating lease cost |
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$ |
|
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$ |
|
||
Operating cash flows paid for amounts included in the measurement of lease liabilities |
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$ |
|
|
$ |
|
||
Operating lease liabilities arising from obtaining right-of-use assets |
|
$ |
|
|
$ |
|
||
Remaining average lease term (years) |
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|
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Weighted average discount rate |
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|
% |
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|
% |
||
Future lease payments (undiscounted) under noncancelable leases are as follows at June 30, 2024 (in thousands):
Future Lease Payments |
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Amount |
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Remainder of 2024 |
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$ |
|
|
2025 |
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2026 |
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2027 |
|
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2028 |
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Thereafter |
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Total |
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$ |
|
|
The Company’s leases do not provide an explicit rate. Therefore, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company used the incremental borrowing rate on January 1, 2022 for operating leases that commenced prior to that date, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
9. Commitments and Contingencies
Legal Proceedings
From time to time, we may be party to litigation arising in the ordinary course of business. We were not subject to any material legal proceedings during the six months ended June 30, 2024 and the year ended December 31, 2023, and, to our knowledge, no material legal proceedings are currently pending or threatened.
10
Contractual Obligations and Commitments
We enter into contracts in the ordinary course of business with third-party service providers for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts generally provide for termination upon notice of
Indemnification Agreements
We enter into certain types of contracts that contingently require us to indemnify various parties against claims from third parties. These contracts primarily relate to procurement, service, consultancy or license agreements under which we may be required to indemnify vendors, service providers or licensees for certain claims, including claims that may be brought against them arising from our acts or omissions with respect to our products, technology, intellectual property or services. The Company, as permitted under Delaware law and in accordance with its amended and restated certificate of incorporation and amended and restated bylaws and pursuant to indemnification agreements with certain of its officers and directors, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, in which the officer or director incurs losses or expenses because he or she is or was serving at the Company’s request in such capacity. At the 2023 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to, and the Company subsequently amended, its amended and restated certificate of incorporation to extend the indemnification of officers pursuant to recent amendments to the General Corporation Law of the State of Delaware.
From time to time, we may receive indemnification claims under existing contracts in the normal course of business. In the event that one or more of these matters were to result in a claim against us, an adverse outcome, including a judgment or settlement, may cause a material adverse effect on our future business, operating results or financial condition. It is not possible to estimate the maximum amount potentially payable under these contracts since we have no history of prior indemnification claims and the unique facts and circumstances involved in each particular claim will be determinative.
10. Stockholders' Equity
Common and Preferred Stock
Upon the closing of our IPO in November 2021, we filed an amended and restated certificate of incorporation, which authorized us to issue
The Private Placement
On August 7, 2023, the Company entered into the Purchase Agreement, pursuant to which the Company agreed to sell and issue (i)
The Warrants are exercisable at an exercise price of $
The Private Placement closed on August 9, 2023. The Company received $
11
The Warrants were classified as a component of permanent stockholders’ equity within additional paid-in-capital and were recorded at the issuance date using a relative fair value allocation method. The Warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, permit the holders to receive a fixed number of common shares upon exercise, are indexed to the Company’s common stock and meet the equity classification criteria. In addition, such Warrants do not provide any guarantee of value or return. The Company valued the Warrants at issuance using the Black-Scholes valuation model and allocated proceeds from the sale proportionately to the Common Stock and Warrants, of which $
In connection with the execution of the Purchase Agreement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers. Under the terms of the Registration Rights Agreement, the Company has filed the Registration Statement with the SEC to register for resale the Common Stock issued under the Purchase Agreement and the shares of Common Stock issuable upon conversion of the Warrants issued pursuant to the Purchase Agreement (the “Registrable Securities”), which Registration Statement was declared effective on September 8, 2023. The Company may be required to pay certain liquidated damages under the terms of the Registration Rights Agreement in the event sales cannot be made pursuant to the Registration Statement.
As of June 30, 2024 and December 31, 2023, the Company had
11. Equity-Based Compensation
2021 Equity and Incentive Plan
In November 2021, our Board adopted, and our stockholders approved, the 2021 Equity and Incentive Plan (“2021 Equity Plan”), which became effective on November 4, 2021. The 2021 Equity Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, awards of restricted stock, restricted stock units and other stock-based awards. The number of shares of our common stock reserved for issuance under the 2021 Equity Plan is equal to
2021 Employee Stock Purchase Plan
In November 2021, our Board adopted and our stockholders approved the 2021 Employee Stock Purchase Plan (“2021 ESPP”), which became effective on November 4, 2021. The number of shares of our common stock reserved for issuance under the 2021 ESPP is equal to
2023 Inducement Award Plan
In September 2023, our Board adopted the 2023 Inducement Award Plan (“2023 Inducement Plan”), which became effective on September 28, 2023. The 2023 Inducement Plan provides for the grant of non-statutory stock options, stock appreciation rights, awards of restricted stock, restricted stock units and other stock-based awards to eligible employees who satisfy the standards for inducement grants under Nasdaq Global Market rules. The number of shares of our common stock reserved for issuance under the 2023 Inducement Plan is equal to
12
The following table summarizes our stock options activity for the six months ended June 30, 2024:
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Number of |
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Weighted- |
|
|
Weighted- |
|
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Aggregate |
|
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Outstanding, January 1, 2024 |
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$ |
|
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$ |
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Granted |
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$ |
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$ |
— |
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Cancelled or forfeited |
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( |
) |
|
$ |
|
|
|
|
|
$ |
— |
|
||
Outstanding, June 30, 2024 |
|
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|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable, June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Equity-Based Compensation
All share-based awards granted are measured based on the fair value on the date of the grant and compensation expense is recognized with respect to those awards over the requisite service period, which is generally the vesting period of the respective award. Forfeitures related to equity-based compensation awards are recognized as they occur, and we reverse any previously recognized compensation cost associated with forfeited awards in the period the forfeiture occurs.
As of June 30, 2024, there was $
The fair values of the stock options granted during the period ended June 30, 2024 were estimated based on the Black-Scholes model, using the following assumptions:
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Six Months Ended |
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June 30, 2024 |
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Expected volatility |
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Risk-free interest rate |
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Expected term (in years) |
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Expected dividend yield |
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% |
|
|
Equity-based compensation expense recorded as research and development and general and administrative expenses is as follows (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
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||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total equity-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
We did
12. Income Taxes
We are subject to taxes for earnings generated in multiple jurisdictions, both inside and outside of the United States and our tax expense is primarily affected by unrecognized tax benefits in Denmark due to the full valuation allowance. We recorded expense for income taxes of $
We have evaluated the positive and negative evidence involving our ability to realize our deferred tax assets. We have considered our history of cumulative net losses incurred since inception and our lack of any commercial products. We have concluded that it is more likely than not that we will not realize the benefits of our deferred tax assets in IO Biotech ApS, IO Bio US, Inc. and IO Biotech, Inc. We reevaluate the positive and negative evidence at each reporting period.
13
13. Net Loss Per Share
Basic and diluted net loss per common share is calculated as follows (in thousands except share and per share amounts):
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Three Months Ended |
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Six Months Ended |
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|
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2024 |
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2023 |
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|
2024 |
|
|
2023 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to common shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per common share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average number of shares used in computing net loss per common share, basic and diluted |
|
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|
|
|
|
|
|
|
|
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|
||||
The following outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per common share, as their effect is anti-dilutive:
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Three Months Ended |
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Six Months Ended |
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|
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2024 |
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2023 |
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2024 |
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|
2023 |
|
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Stock options to purchase common stock |
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|
|
|
|
|
|
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|
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Warrants issued in Private Placement |
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|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
14. Subsequent Events
We have evaluated subsequent events through the date on which the consolidated financial statements were issued. The Company has concluded that no subsequent events have occurred that require disclosure to the consolidated financial statements.
14
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 financial statements and related notes included in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 5, 2024 and Part II, Item 1A. "Risk Factors" of our Quarterly Report on Form 10-Q for the three months ended March 31, 2024 filed with the SEC on May 14, 2024, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” in our Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are a clinical-stage biopharmaceutical company developing novel, immune-modulating therapeutic cancer vaccines based on our T-win® platform. Our T-win product candidates are designed to kill both tumor cells and immune-suppressive cells in the tumor microenvironment (“TME”) by stimulating the activation and expansion of T cells against target positive cells, which results in the modulation of the TME, creating a more pro-inflammatory environment, and the potentiation of anti-tumor activity by unleashing the tumor killing by effector T cells. We believe this could represent a paradigm shift in the management of cancer and that our product candidates have the potential to advance the oncology treatment paradigm, amplifying treatment effects across the spectrum of melanoma and other tumor types.
Our lead therapeutic cancer vaccine candidate, IO102-IO103, is designed to target the immunosuppressive mechanisms mediated by indoleamine 2,3-dioxygenase (“IDO”) and programmed death ligand 1 (“PD-L1”). In a single-arm Phase 1/2 clinical trial of 30 patients with metastatic melanoma, IO102-IO103 in combination with nivolumab, an anti-programmed cell death 1 (“PD-1”) checkpoint inhibitor, demonstrated proof of concept by increasing the overall response rate (“ORR”) of what is reported with an anti-PD-1 antibody alone. The combination induced meaningful tumor regression and achieved rapid, deep and durable responses with a favorable tolerability profile without adding systemic toxicity to what is seen with an anti-PD-1 monotherapy in this patient population. Safety was the primary endpoint of this trial, immune response was the secondary endpoint and clinical efficacy was the tertiary endpoint. The clinical efficacy endpoints in this trial included objective response (“OR”), progression free survival (“PFS”) and overall survival (“OS”). In this trial, we observed a confirmed ORR of 73% as per RECIST 1.1, a complete response rate (“CRR”) of 50% and 25.5 months of PFS. Based on these results, IO102-IO103, in combination with pembrolizumab, was granted BTD by the FDA for treatment of unresectable/metastatic melanoma and we initiated a global Phase 3 trial.
We enrolled the first patient in a potentially registrational Phase 3 trial for IO102-IO103 in combination with pembrolizumab as a potential first-line treatment in advanced melanoma, the IOB-013/KN-D18 trial, in May of 2022. We reached randomization of 225 patients in June 2023. On June 14, 2023, we announced that we amended the protocol and increased the target number of patients to be enrolled in the Phase 3 trial from an original 300 patients to a revised 380 patients to potentially accelerate the timeline to reach the primary endpoint of PFS. The PFS analysis is event-driven and will be conducted when 226 events (progression or death) in the trial have occurred in the study. The primary endpoint of PFS is powered at 89% to detect a hazard ratio of 0.65. We completed target enrollment (380 patients) in the trial in November 2023, ahead of plan, with nearly half the patients enrolled during final 6 months of enrollment. We included all patients who met the study criteria and who were in screening when the target enrollment was achieved, resulting in a total of 407 patients being enrolled in our IOB-013/KN-D18 trial.
We expect the outcome of the PFS analysis in the first half of 2025 based on the actual aggregate PFS events observed (blinded to events per arm) to date. If the data are supportive based on the primary endpoint of PFS, we plan to submit marketing applications in a number of countries, including the U.S. and European Union.
The Phase 3 trial protocol also has a planned interim analysis of ORR to be conducted 12 months after the 225th patient have been randomized; if the investigational arm demonstrates a highly statistically significant improvement in ORR compared to the control arm, with a p-value<0.005, then the interim analysis could allow for potential submission of a Biologics License Application (“BLA”) for accelerated approval in the United States. When we designed the interim analysis, we assumed that patients treated with IO102-IO103 in combination with pembrolizumab would show an ~18-point improvement in ORR compared to the patients treated with pembrolizumab alone. There is a high statistical bar for the Phase 3 interim analysis (p≤0.005), which was set to preserve most of the alpha for the primary endpoint of PFS. Regardless of the outcome of the interim analysis, the trial is designed to continue to the primary PFS endpoint. The outcome of the interim analysis is expected in the third quarter of 2024.
15
Our T-win platform is a novel approach to cancer vaccines designed to activate pre-existing T cells to target immunosuppressive mechanisms. Our T-win product candidates are designed to employ a dual mechanism of action: (1) direct killing of immunosuppressive cells, including both tumor cells and genetically stable cells in the TME, that express IDO and/or PD-L1 (in the case of IO102-IO103), Arginase 1 (in the case of IO112) or transforming growth factor beta 1 (“TGFβ1”, in the case of IO170), and (2) modulation of the TME into a more pro-inflammatory, anti-tumor environment. Our T-win platform is built upon our team’s deep understanding of both the TME and a tumor’s ability to evade surveillance and destruction by the immune system. Our approach is in contrast to previous methods that have sought to either block singular immunosuppressive pathways or to direct the immune system against specific identified antigens expressed by tumor cells.
We are developing a pipeline of product candidates that leverage our T-win platform to address targets within the TME. In addition to melanoma, we are currently evaluating IO102-IO103 in multiple solid tumor indications to potentially expand the market opportunity for IO102-IO103. We are also focusing on additional targets that play key roles in immunosuppression and that are expressed in a broad range of solid tumors. Our current pipeline of product candidates and expected upcoming milestones are summarized in the tables below.
* In combination with pembrolizumab
NSCLC = non-small cell lung cancer, SCCHN = squamous cell carcinoma of the head and neck
Our lead product candidate, IO102-IO103, combines our two fully owned, novel immune-modulating vaccines, IO102 and IO103, which are designed to target IDO+ and PD-L1+ cells, respectively. IDO and PD-L1 are often dysregulated and over-expressed in a wide range of solid tumors, and result in the inhibition of the body’s natural pro-inflammatory anti-tumor response within the TME. IO102-IO103 is designed to employ our novel dual mechanism of action approach. This is in contrast to previous approaches which have sought to block singular immunosuppressive pathways or to direct the immune system against specific identified antigens expressed by tumor cells. By combining IO102 and IO103 in a single treatment regimen, we also aim to provide a synergistic therapeutic effect on tumors.
16
On December 14, 2020, the FDA granted us BTD for the IO102-IO103 cancer vaccine in combination with pembrolizumab for the treatment of patients with unresectable or metastatic melanoma based on data from the Phase 1/2 clinical trial, MM1636. A BTD enables us to solicit more frequent and intensive guidance from the FDA as to how to conduct an efficient development program for IO102-IO103. The MM1636 trial was an investigator-initiated, single-arm Phase 1/2 trial of 30 anti PD-1/PD-L1 naïve patients with metastatic melanoma receiving IO102-IO103 and nivolumab, an anti-PD-1 monoclonal antibody. As of the January 5, 2023 data cut as published in the May 2023 Journal for ImmunoTherapy of Cancer, 30 PD-1 naïve patients were enrolled with a minimum follow-up time of 45.3 months. Median OS was not reached, median PFS was 25.5 months, and 50% of patients (15/30) achieved a CR, or complete disappearance of their tumors, and we observed a confirmed ORR of 73% as per RECIST 1.1. Patients who were anti-PD-1 antibody therapy resistant and enrolled in cohort B in this study had no response to therapy, which we believe shows that our vaccine works best in front-line metastatic melanoma patients, as we expected in this setting. Overall safety and tolerability of the combination was favorable, with no significant added systemic toxicity from what has been reported with nivolumab alone. While a total of five patients (17%) experienced a treatment-related high-grade adverse event (grade 3-5), and 17% discontinued treatment with both nivolumab and IO102-IO103, data from this trial suggests a manageable tolerability profile for patients. In addition, we have observed treatment-induced infiltration of CD3+/CD8+ T cells into the tumor site in responding patients and detected IO102 and/or IO103-specific T cells in tumors after treatment in correlative biomarker data where this was analyzed.
In November 2023, we fully enrolled a Phase 3 potentially registrational trial for IO102-IO103, the IOB-013/KN-D18 trial, in combination with pembrolizumab in anti PD-1/PD-L1 treatment naïve patients with unresectable or metastatic melanoma. While the MM1636 trial investigated IO102-IO103 in combination with nivolumab, we have made the business decision to investigate IO102-IO103 in combination with pembrolizumab in the Phase 3 trial. Nivolumab and pembrolizumab are both immunoglobulin G4 (“IgG4”) subclass antibodies that target the PD-1 receptor. In a comparative data analysis by Moser (Annals of Oncology 2020), researchers found no difference between the effectiveness of frontline pembrolizumab and nivolumab in patients with advanced melanoma. The Phase 3 trial also includes a concurrent evaluation of the initial participants to allow for an assessment of safety (a safety run-in) for the combination of IO102-IO103 and pembrolizumab.
The pembrolizumab for this Phase 3 trial is being supplied by Merck pursuant to a Clinical Trial Collaboration and Supply Agreement that we entered into in September 2021. The independent data monitoring committee (“IDMC”) for the IOB-013/KN-D18 trial convened its fourth meeting in March 2024 and the IDMC recommended that the trial continue without modifications.
On April 9, 2024, a poster presentation of new non-clinical data further supporting the dual mechanism of action of the company’s lead cancer vaccine, IO102-IO103, was delivered at the American Association for Cancer Research Annual Meeting 2024 in San Diego, California. While further studies are needed to fully discern the relationship between IDO1+/PD-L1+ target populations within the TME and the impact of IDO1/PD-L1 targeted vaccination, we believe the data presented support the use of a dual antigen approach to reduce the immunosuppression and enhance anti-tumor effect.
We are also investigating IO102-IO103 in several other solid tumor indications. We are conducting a Phase 2 basket trial, the IOB-022/KN-D38 trial, which is investigating multiple first-line solid tumor indications in treatment naïve patients for metastatic disease. This basket trial is designed to investigate the safety and efficacy of IO102-IO103 in combination with pembrolizumab in patients with metastatic non-small cell lung cancer (“NSCLC”), adenocarcinoma histology, with PD-L1 TPS ≥ 50% (cohort A), and recurrent and/or metastatic squamous cell carcinoma of the head and neck (“SCCHN”) with CPS ≥ 20 (cohort B). We initiated the IOB-022/KN-D38 trial in April 2022 and completed enrollment as of June 30, 2024 with 37 patients enrolled in cohort A (31 evaluable) and 21 patients enrolled in cohort B (18 evaluable). As presented at the European Society for Medical Oncology (ESMO) conference held in October 2023, preliminary results from the IOB-022/KN-D38 Phase 1/2 study of IO102-IO103 in combination with pembrolizumab in metastatic NSCLC or recurrent and/or metastatic SCCHN were encouraging. Data from the SCCHN cohort has been accepted for poster presentation at the ESMO congress to be presented on September 14, 2024 in Barcelona. The safety profile observed to date in this study is consistent with prior clinical experience with IO102-IO103.
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In addition to first-line cancer indications, we have initiated a basket trial to investigate IO102-IO103 in combination with pembrolizumab in a perioperative setting, used before and after surgery as a neo-adjuvant/adjuvant therapy. In April 2023, the FDA cleared the Company’s Investigational New Drug (“IND”) application for the evaluation of IO102-IO103 in combination with pembrolizumab, given before (neo-adjuvant) and after (adjuvant) surgery in patients with resectable melanoma and SCCHN, the IOB-032/PN-E40 trial. The trial is a Phase 2, open-label, multi-cohort trial evaluating neo-adjuvant and adjuvant treatment with IO102-IO103 in combination with pembrolizumab in patients with resectable melanoma (cohorts A and C) or SCCHN (cohort B). Cohorts A and B are single-arm, whereas in cohort C ≥60 stage III melanoma, patients will be randomized 1:1 to neo-adjuvant treatment with either combination IO102-IO103/pembrolizumab or pembrolizumab alone. In the neo-adjuvant period, for all cohorts, treatment is every 3 weeks (Q3W) for 3 cycles (melanoma) or 2-3 cycles (SCCHN). Surgery will be performed between 1 and 3 weeks after the last neoadjuvant dose. After recovery from surgery and any risk based postoperative standard of care, all disease-free patients in all 3 cohorts will receive post surgery treatment with IO102 IO103 and pembrolizumab or pembrolizumab alone Q3W for a maximum of 15 cycles. Cohort C patients with poor pathological response to pembrolizumab alone in the neo-adjuvant phase (>10% residual viable tumor) may cross over to combination treatment post-surgery. The primary endpoint is major pathological response at surgery (≤10% residual viable tumor; central assessment). Safety, event-free survival (“EFS”) and disease-free survival are secondary endpoints. For translational research purposes, paired pre- and post-treatment tumor tissue and blood samples will be collected. The study has completed enrollment of all 15 patients in cohort A and is actively enrolling patients in cohort B and in cohort C in the IOB-032/PN-E40 trial.
Our development of the IO102-IO103 combination is based on our prior separate development of IO102 and IO103. IO102 is our fully owned novel product candidate containing a single IDO-derived peptide sequence designed to engage and activate IDO-specific human T cells. IDO small molecule inhibitors have shown clinical potential in combination with PD-1 antibodies in early clinical trials, but have not been able to demonstrate the same level of efficacy in later-stage clinical trials. Our Phase 1 non-randomized trial of IO101, our first-generation IDO therapy, in NSCLC resulted in proof of concept for our approach, with 47% of patients displaying clinical benefit and an OS of 26 months in the treatment arm compared to 8 months in the group receiving standard of care. There were no grade 3 or higher adverse events.
IO112 is our fully owned, novel product candidate containing a single Arginase 1-derived peptide designed to engage and activate Arginase 1-specific human T cells. IO112 is designed to target T cells that recognize epitopes derived from Arginase 1, which is an immunoregulatory enzyme highly expressed in difficult-to-treat tumors associated with high levels of myeloid-derived suppressor cells in various tumors. Arginase overexpression is a well-documented tumor escape mechanism. A peptide vaccine targeting Arginase 1 was tested in a single arm first-in-human Phase 1 trial in patients with solid tumors at the University Hospital of Herlev, Copenhagen. There were no significant safety concerns and no reported vaccine related Grade 3-4 events. 9 out of 10 patients had measurable peptide specific immune responses in peripheral blood. We plan to continue IND-enabling activities for IO112 in 2024 and expect to submit an IND in 2025.
In addition to IO102, IO103 and IO112, we are evaluating additional product candidates that we believe have potential for use in solid tumors. All our compounds in preclinical development are designed to target well-documented immunosuppressive molecules that are known to be overexpressed in the TME across a wide range of tumors. These targets provide additional opportunities across multiple cancer indications.
We believe that targeting TGFβ1 expressing cells in the TME via a vaccine approach presents a novel and attractive way to modulate the pathway and drive therapeutic benefit in the cancer setting. We are developing and characterizing TGFβ1-selective peptide vaccines capable of inducing strong immune responses. Preliminary evidence in mouse models showed that treatment with a TGFβ1 vaccine drives T cell infiltration in the TME and might promote in vivo targeted cell killing. We are currently conducting further experimental work to elucidate the cellular and molecular mechanisms of a TGFβ1 vaccine to support further development of a TGFβ1 vaccine (IO170) to modulate the TME for therapeutic benefit in a wide range of cancer indications. We are continuing preclinical studies for IO170 in 2024.
Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Our operations to date have been financed primarily by aggregate net proceeds of $360.6 million from the issuance of convertible preference shares, convertible notes, ordinary shares, our IPO and our Private Placement. On August 9, 2023, we completed the Private Placement, pursuant to which we raised $71.9 million in net proceeds after deducting offering expenses of $3.2 million. Since inception, we have had significant operating losses. Our net loss was $40.1 million for the six months ended June 30, 2024, and $86.1 million and $71.5 million for the years ended December 31, 2023 and December 31, 2022, respectively. As of June 30, 2024, we had an accumulated deficit of $304.0 million and $100.7 million in cash and cash equivalents.
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Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses. We expect to continue to incur net losses for the foreseeable future, and we expect to continue to incur significant research and development expenses and general and administrative expenses. In particular, we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as hire additional personnel, pay fees to outside consultants, lawyers and accountants, and incur other increased costs associated with being a public company. In addition, if and when we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
Based upon our current operating plan, we believe that our existing cash and cash equivalents of $100.7 million as of June 30, 2024, will be sufficient to continue funding our development activities into the fourth quarter of 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. To finance our operations beyond that point we will need to raise additional capital, which, though we were successful in raising additional capital through the Private Placement, cannot be assured and which we may not be able to pursue successfully again in the future.
To date, we have not had any products approved for sale and, therefore, have not generated any product revenue. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution, and associated regulatory and compliance costs. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.
Components of Operating Results
Operating Expenses
Our operating expenses since inception have consisted primarily of research and development expenses and general and administrative costs.
19
Research and Development
Our research and development expenses consist primarily of costs incurred for the development of our product candidates and our drug discovery efforts, which include:
We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.
From time to time, we obtain grants from public and private funds for our research and development projects. The grant income for a given period is recognized as a cost reimbursement and is typically based on the time and the costs that we have spent on the specific project during that period.
We have historically met the requirements to receive a tax credit in Denmark of up to 5.5 million Danish Kroner per year for losses resulting from research and development costs of up to 25 million Danish Kroner per year. The tax credit is presented as a reduction to research and development expense in the consolidated statements of operations.
We use our personnel and infrastructure resources across multiple research and development programs directed toward identifying and developing product candidates. We generally have not tracked our research and development expenses on a program-by-program basis. Substantially all of our direct research and development expenses in the years ended December 31, 2023 and 2022 and in the six months ended June 30, 2024 were on IO102-IO103 and consisted primarily of external costs, such as consultants, third-party contract organizations that conduct research and development activities on our behalf, costs related to production of preclinical and clinical materials, including fees paid to contract manufacturers, and laboratory and vendor expenses related to the execution of our ongoing and planned preclinical studies and clinical trials.
We expect to incur significant research and development expenses for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in conducting clinical trials, manufacturing and otherwise advancing our programs. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain.
Because of the numerous risks and uncertainties associated with product development and the current stage of development of our product candidates and programs, we cannot reasonably estimate or know the nature, timing and estimated costs necessary to complete the remainder of the development of our product candidates or programs. We are also unable to predict if, when, or to what extent we will obtain approval and generate revenues from the commercialization and sale of our product candidates. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:
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We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our preclinical studies and clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.
Research and development activities account for a significant portion of our operating expenses. We expect to incur significant research and development expenses for the foreseeable future as we continue to implement our business strategy, which includes advancing IO102-IO103 through clinical development and other product candidates further into clinical development, expanding our research and development efforts, including hiring additional personnel to support our research and development efforts, and seeking regulatory approvals for our product candidates that successfully complete clinical trials. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs, depreciation expense and other expenses for outside professional services, including legal fees relating to patent and corporate matters, human resources, audit and accounting services and facility-related fees not otherwise included in research and development expenses. Personnel costs consist of salaries, benefits and equity-based compensation expense, for our personnel in executive, finance and accounting, business operations and other administrative functions. We expect to continue to incur significant general and administrative expenses to support our continued research and development activities, manufacturing activities, and to continue to operate as a public company. These costs will likely include hiring and retaining key personnel, fees to outside consultants, lawyers and accountants, and costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer insurance premiums and investor relations costs.
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Other Income (Expense), Net
Our other income (expense), net is comprised of:
Results of Operations
Comparison of the three months ended June 30, 2024 and 2023
The following sets forth our results of operations:
|
|
For the Three Months |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(in thousands) |
|
|
|
|
||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
$ |
15,848 |
|
|
$ |
16,504 |
|
|
$ |
(656 |
) |
|
|
(4.0 |
)% |
General and administrative |
|
|
5,685 |
|
|
|
5,348 |
|
|
|
337 |
|
|
|
6.3 |
% |
Total operating expenses |
|
|
21,533 |
|
|
|
21,852 |
|
|
|
(319 |
) |
|
|
(1.5 |
)% |
Loss from operations |
|
|
(21,533 |
) |
|
|
(21,852 |
) |
|
|
319 |
|
|
|
(1.5 |
)% |
Other income |
|
|
1,221 |
|
|
|
1,206 |
|
|
|
15 |
|
|
|
1.2 |
% |
Loss before income tax expense |
|
|
(20,312 |
) |
|
|
(20,646 |
) |
|
|
334 |
|
|
|
(1.6 |
)% |
Income tax expense |
|
|
374 |
|
|
|
532 |
|
|
|
(158 |
) |
|
|
(29.7 |
)% |
Net loss |
|
$ |
(20,686 |
) |
|
$ |
(21,178 |
) |
|
$ |
492 |
|
|
|
(2.3 |
)% |
Research and Development Expenses
Research and development expenses were comprised of:
|
|
For the Three Months |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(in thousands) |
|
|
|
|
||||||||||
Preclinical studies and clinical trial-related activities |
|
$ |
6,932 |
|
|
$ |
7,283 |
|
|
$ |
(351 |
) |
|
|
(4.8 |
)% |
Chemistry, manufacturing and control |
|
|
2,994 |
|
|
|
4,933 |
|
|
|
(1,939 |
) |
|
|
(39.3 |
)% |
Personnel |
|
|
5,123 |
|
|
|
3,804 |
|
|
|
1,319 |
|
|
|
34.7 |
% |
Consultants and other costs |
|
|
799 |
|
|
|
||||||||||