Immunic, Inc.: Form 10-Q for the period ended Sep 30, 2024

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited interim condensed consolidated financial statements and notes thereto included in Item 1 “Financial Statements” in this Quarterly Report and audited Consolidated Financial Statements for the years ended December 31, 2023 and 2022 of Immunic, Inc. filed with the Securities and Exchange Commission ("SEC"), in our Annual Report on Form 10-K on February 22, 2024. As used in this report, unless the context suggests otherwise, “we,” “us,” “our,” “the Company” or “Immunic” refer to Immunic, Inc. and its subsidiaries.

Forward-Looking Statements

In addition to historical information, this Quarterly Report includes forward-looking statements within the meaning of federal securities laws. Forward-looking statements are subject to certain risks and uncertainties, many of which are beyond our control. Such statements include, but are not limited to, statements preceded by, followed by or that otherwise include the words, “believe,” “may,” “might,” “can,” “could,” “will,” “would,” “should,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “potential,” “predicts,” or similar expressions and the negatives of those terms.

Forward-looking statements discuss matters that are not historical facts. Our forward-looking statements involve assumptions that, if they ever materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. In this Quarterly Report, for example, we make forward-looking statements, among others, regarding potential strategic options; financial estimates and projections; and the sufficiency of our capital resources to fund our operations.

The inclusion of any forward-looking statements in this Quarterly Report should not be regarded as a representation that any of our plans will be achieved. Our actual results may differ from those anticipated in our forward-looking statements as a result of various factors, including those noted below under the caption “Part II, Item 1A-Risk Factors,” and the differences may be material. These risk factors include, but are not limited to statements relating to our two development programs and the targeted diseases; the potential for vidofludimus calcium and IMU-856 to safely and effectively target diseases; the nature, strategy and focus of the Company; expectations regarding our capitalization and financial resources; the development, timing and commercial potential of any product candidates of the Company; and our ability to attract and retain certain personnel important to our ongoing operations and to maintain effective internal control over financial reporting.

Although our forward-looking statements reflect the good faith judgment of our management, these statements are based only on facts and factors currently known by us. As a result, investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, and we undertake no obligation to revise or update such statements to reflect events or circumstances after the date hereof, except as required by law.

Overview

Immunic, Inc. ("Immunic," “we,” “us,” “our” or the "Company") is a biotechnology company developing a clinical pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune diseases. We are headquartered in New York City with our main operations in Gräfelfing near Munich, Germany. We had approximately 85 employees as of November 1, 2024.

We are pursuing clinical development of orally administered, small molecule programs, each of which has unique features intended to directly address the unmet needs of patients with serious chronic inflammatory and autoimmune diseases. These include the vidofludimus calcium (IMU-838) program, which is in Phase 3 and Phase 2 clinical development for patients with relapsing and progressive multiple sclerosis (“MS”), respectively, and which has shown therapeutic activity in Phase 2 clinical trials in patients suffering from relapsing-remitting MS, progressive MS and moderate-to-severe ulcerative colitis (“UC”); the IMU-856 program, which is targeted to regenerate bowel epithelium and restore intestinal barrier function, which could potentially be applicable in numerous gastrointestinal diseases, such as celiac disease, inflammatory bowel disease (“IBD”) and Graft-versus-Host-Disease ("GvHD"); and the IMU-381 program, which is a next generation molecule being developed to specifically address the needs of gastrointestinal diseases.

The following table summarizes the potential indications, clinical targets and clinical development status of our three product candidates:

Our most advanced drug candidate, vidofludimus calcium (IMU-838), is being tested in several ongoing MS trials as part of its overall clinical program in order to support a potential approval for patients with MS in major markets. The Phase 3 ENSURE program of vidofludimus calcium in relapsing multiple sclerosis (“RMS”), comprising twin studies evaluating efficacy, safety, and tolerability of vidofludimus calcium versus placebo, and the Phase 2 CALLIPER trial of vidofludimus calcium in progressive multiple sclerosis (“PMS”), designed to corroborate vidofludimus calcium’s neuroprotective potential, are ongoing. On October 9, 2023, we announced positive interim data from the CALLIPER trial, showing biomarker evidence that vidofludimus calcium’s activity extends beyond the previously observed anti-inflammatory effects, thereby further reinforcing its neuroprotective potential. Top-line data from the CALLIPER trial, for which the recruitment of in total 467 patients was completed in August 2023, is expected to be available in April 2025. Moreover, on October 22, 2024, we announced a positive outcome of an interim analysis of the ENSURE program, with an unblinded Independent Data Monitoring Committee ("IDMC") confirming that the predetermined futility criteria have not been met and recommending that both ENSURE trials should continue without changes, including no need for a potential upsizing of the sample size. Completion of the first of the ENSURE trials is currently anticipated in the second quarter of 2026; and the second ENSURE trial in the second half of 2026. Although we currently believe that each of these goals is achievable, they are each dependent on numerous factors, most of which are not under our direct control and can be difficult to predict. We plan to periodically review this assessment and provide updates of material changes as appropriate.

If approved, we believe that vidofludimus calcium, with combined neuroprotective, anti-inflammatory, and antiviral effects, has the potential to be a unique treatment option targeted to the complex pathophysiology of MS. Preclinical data showed that vidofludimus calcium activates the neuroprotective transcription factor nuclear receptor related 1 (“Nurr1”), which is associated with direct neuroprotective properties and may enhance the potential benefit for patients. Additionally, vidofludimus calcium is a known inhibitor of the enzyme dihydroorotate dehydrogenase (“DHODH”), which is a key enzyme in the metabolism of overactive immune cells and virus-infected cells. This mechanism is associated with the anti-inflammatory and antiviral effects of vidofludimus calcium. We believe that the combined mechanisms of vidofludimus calcium are unique in the MS space and support the therapeutic performance shown in our Phase 2 EMPhASIS trial in relapsing-remitting MS patients, in particular, via data illustrating the potential to reduce magnetic resonance imaging (“MRI”) lesions, prevent relapses, reduce the rate of disability progression, and reduce levels of serum neurofilament light chain (“NfL”), an important biomarker of neuronal damage. Vidofludimus calcium has shown in clinical trials reported to date a consistent pharmacokinetic, safety and tolerability profile and has already been exposed to more than 1,800 human subjects and patients in either of the drug’s formulations.

IMU-856 is an orally available and systemically acting small molecule modulator that targets Sirtuin 6 (“SIRT6”), a protein which serves as a transcriptional regulator of intestinal barrier function and regeneration of bowel epithelium. Based on preclinical data, we believe this compound may represent a unique treatment approach, as the mechanism of action targets the restoration of the intestinal barrier function and bowel wall architecture in patients suffering from gastrointestinal diseases such as celiac disease, IBD, GvHD and other intestinal barrier function associated diseases. Based on preclinical investigations demonstrating no suppression of immune cells, IMU-856 may have the potential to maintain immune surveillance for patients during therapy, which would be an important advantage versus immunosuppressive medications and may allow the potential for combination with available treatments in gastroenterological diseases.

Data from a Phase 1b clinical trial in celiac disease patients during periods of gluten-free diet and gluten challenge demonstrated positive effects for IMU-856 over placebo in four key dimensions of celiac disease pathophysiology: protection of the gut architecture, improvement of patients’ symptoms, biomarker response, and enhancement of nutrient absorption. IMU-856 was also observed to be safe and well-tolerated in this trial. We are currently preparing clinical Phase 2 testing of IMU-856 in patients with ongoing active celiac disease (“OACD”) despite gluten-free diet, while also considering further potential clinical applications in other gastrointestinal disorders.

Immunic has selected IMU-381 as a development candidate to specifically address the needs of gastrointestinal diseases. IMU-381 is a next generation molecule with improved overall properties, supported by a series of chemical derivatives. IMU-381 is currently in preclinical testing.

Additional research and development activities remain ongoing through preclinical research examining the potential to treat a broad set of neuroinflammatory, autoimmune and viral diseases with new molecules leveraging our chemical and pharmacological research platform as well as generated intellectual property in these areas.

We expect to continue to lead most of our research and development activities from our Gräfelfing, Germany location, where dedicated scientific, regulatory, clinical and medical teams conduct their activities. Due to these teams' key relationships with local and international service providers, we anticipate that this should result in more timely and cost-effective execution of our development programs. In addition, we are using our subsidiary in Melbourne, Australia to perform research and development activities in the Australasia region. We also conduct preclinical work in Halle/Saale, Germany through a collaboration with the Fraunhofer Institute.

Our business, operating results, financial condition and growth prospects are subject to significant risks and uncertainties, including delays in clinical trials, the failure of our clinical trials to meet their endpoints, failure to obtain regulatory approval and failure to obtain needed additional funding on acceptable terms, if at all, to complete the development and commercialization of our three development programs.

Strategy

We are focused on the development of new molecules that maximize the therapeutic benefits for patients by uniquely addressing biologically relevant immunological targets. We take advantage of our established research and development infrastructure and operations in Germany and Australia to more efficiently develop our product candidates in indications of high unmet need and where the product candidates have the potential to elevate the standard of care for the benefit of patients. Given the mechanisms of action and the data generated for our product candidates, to date, we continue to execute on the clinical development of our programs for established indications as well as explore additional indications where patients could potentially benefit from the unique profiles of each product candidate.

We are currently focused on maximizing the potential of our development programs through the following strategic initiatives:

• Executing the ongoing Phase 3 ENSURE and Phase 2 CALLIPER clinical trial programs of vidofludimus calcium in RMS and PMS, respectively.
• Executing the IMU-856 development program, including preparation of a Phase 2 clinical trial.
• Continuing preclinical research to complement the existing clinical activities, explore additional indications for future development and generating additional molecules for potential future development.
• Facilitating readiness for potential commercial launch of our product candidates through targeted and stage-appropriate pre-commercial activities.
• Evaluating potential strategic collaborations for each product candidate in order to complement our existing research and development capabilities and to facilitate potential commercialization of these product candidates by taking advantage of the resources and capabilities of strategic collaborators in order to enhance the potential and value of each product candidate.

Financial Condition, Liquidity and Going Concern

We have no products approved for commercial sale and have not generated any revenue from product sales. We have never been profitable and have incurred operating losses in each year since inception in 2016. We have an accumulated deficit of approximately $486.2 million as of September 30, 2024 and $410.9 million as of December 31, 2023. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to incur significant expenses and increasing operating losses for the foreseeable future as we initiate and continue the development of our product candidates and add personnel necessary to advance our pipeline of product candidates. We expect that our operating losses will fluctuate significantly from quarter-to-quarter and year-to-year due to timing of development programs.

From inception through September 30, 2024, we have raised net cash of approximately $430.9 million from private and public offerings of preferred stock, common stock, pre-funded warrants and tranche rights. As of September 30, 2024, we had cash and cash equivalents of approximately $59.1 million. With these funds, the Company does not have adequate liquidity to fund its operations for at least twelve months from the issuance of these consolidated financial statements without raising additional capital but, such actions are not solely within the control of the Company. If the Company is unable to obtain additional capital, it would have a material adverse effect on the operations of the Company, its clinical development program, and the Company may have to cease operations altogether. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Key Status Updates

Private Placement of up to $240 Million (the "January 2024 Financing")

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

• The first tranche, which closed on January 8, 2024, resulted in the purchase by the Investors of an aggregate of $80 million of Common Stock (or pre-funded warrants) from the Company at a price of $1.43 per share;
• The second tranche is a conditional mandatory purchase by the Investors of an additional $80 million of Common Stock (or pre-funded warrants) from the Company at a price of $1.716 per share, equal to 120% of the price paid in the first tranche and is subject to the satisfaction of three conditions:
• release by the Company of topline data from its Phase 2b clinical trial of vidofludimus calcium (IMU-838) in progressive multiple sclerosis, which data is currently expected in or around April 2025;
• the 10-day volume-weighted average price of the Common Stock is at least $8.00 per share during the 6 months following the data release; and
• aggregate trading volume during the same 10-day period is at least $100 million.
• The third tranche must occur no later than three years after the second tranche and is conditioned on the same volume-weighted average share price and minimum trading volumes as the second tranche. The third tranche provides for the issuance of $80 million of shares of common stock (or pre-funded warrants) at the same price per share as the second tranche, but permits investors to fund their purchase obligations on a “cashless” or net settlement basis, which would reduce the cash proceeds to be raised by the Company in the January 2024 Financing.

Any of the conditions in the second or third tranches can be waived by holders of a majority of the outstanding securities (including the lead investor). The fair value methodology used by the Company assumed the conditions will be waived if the trading price of the stock exceeds the purchase price.

The January 2024 Financing resulted in gross proceeds to the Company of approximately $80 million in the first tranche, and an additional $80 million if and when the second tranche occurs. If the second tranche is completed and conditions for the third tranche are satisfied or waived, the Company could receive up to an additional $80 million in the third tranche. However, the amount of cash received in the third tranche would depend on the extent to which the Investors elect to fund the third tranche through a “cashless” or net settlement basis. Therefore, total gross proceeds from the offering to the Company could actually be between $80 million and $240 million. Gross proceeds to the Company will be reduced by fees paid to the placement agents, capital markets advisors and payments of transaction expenses. The Company intends to use the net proceeds from the January 2024 Financing to fund the ongoing clinical development of its three lead product candidates, vidofludimus calcium (IMU-838), IMU-856 and IMU-381, and for other general corporate purposes.

As of the closing date of the transaction of January 8, 2024, the Company did not have enough authorized shares to be able to issue the potential shares for tranche 2 and tranche 3 (collectively referred to hereafter as "the tranche rights"). Therefore, the Company recorded the value associated to the tranche rights as a liability of $23.6 million and allocated the remainder of the $80 million received (or $56.4 million) from the common stock and pre-funded warrants to equity. On March 4, 2024, the stockholders voted to increase the Company's authorized common shares from 130 million to 500 million shares. As a result of the ability to issue shares in satisfaction of the tranche rights, the instrument was reclassified to stockholders' equity. The Company allocated the transaction cost across the instruments on a relative fair value basis. As a result $4.0 million was netted against the equity proceeds and $1.7 million was recorded in other expense in the Consolidated Statements of Operation for the nine months ended September 30, 2024.

The financing was led by BVF Partners L.P., and included participation from new and existing investors, including Avidity Partners, Janus Henderson Investors, Soleus Capital, RTW Investments and Adage Capital Partners LP. Leerink Partners acted as the lead placement agent and Ladenburg Thalmann acted as a placement agent in connection with the offering. Piper Sandler, B. Riley Securities and Brookline Capital Markets, a division of Arcadia Securities, LLC, acted as capital markets advisors to the Company.

The Company registered for resale by the investors in the January 2024 Financing up to 55,944,850 shares of common stock issued (or issuable upon exercise of pre-funded warrants) in the first tranche. The Company will not receive any proceeds from the sale of these shares of common stock. These shares are registered on a registration statement on Form S-3 (registration No. 333-277040), which was declared effective by the SEC on April 30, 2024.

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

On March 20, 2024, we announced Notice of Allowance from the United States Patent and Trademark Office (“USPTO”) for patent application 16/981,122, entitled, “Calcium salt polymorphs as anti-inflammatory, immunomodulatory and anti-proliferative agents,” covering the composition-of-matter of a specific polymorph of vidofludimus calcium and a related method of production of the material. The claims are expected to provide protection into 2039, unless extended further. The patent was previously granted to the company in Australia, Canada, Indonesia, Japan and Mexico.

Publication of Extended Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in Relapsing-Remitting Multiple Sclerosis in the Peer Reviewed Journal, Neurology® Neuroimmunology & Neuroinflammation

On April 30, 2024, we announced that data from our Phase 2 EMPhASIS trial of vidofludimus calcium in patients with relapsing-remitting MS has been published online on April 25, 2024 in Neurology® Neuroimmunology & Neuroinflammation, an official journal of the American Academy of Neurology. The paper, lead authored by coordinating investigator, Robert J. Fox, M.D., Staff Neurologist, Mellen Center for Multiple Sclerosis, Vice-Chair for Research, Neurological Institute, Cleveland Clinic, Cleveland, Ohio, is entitled, “Safety and Dose-Response of Vidofludimus Calcium in Relapsing Multiple Sclerosis: Extended Results of a Placebo-Controlled Phase 2 Trial.”

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

On July 9, 2024, we announced that seasoned biopharmaceutical executive, Jason Tardio, will be joining the company as Chief Operating Officer and President, effective July 12, 2024. In the newly created role, Mr. Tardio leads internal efforts to prepare for the potential launch of vidofludimus calcium. Jason also works closely with Patrick Walsh, Chief Business Officer, to prepare the Company for a range of potential partnership outcomes for vidofludimus calcium, as well as our other drug candidates.

On July 9, 2024, we also reported that Werner Gladdines, former Vice President, Program Management & Clinical Development Operations, has been promoted to Chief Development Officer. In his new role, Mr. Gladdines takes over additional strategic and operational responsibility for our overall clinical operations functions.

Appointment of Simona Skerjanec to Board of Directors

On July 24, 2024, we announced the appointment of Simona Skerjanec, M.Pharm, MBA, a thought-leader in brain health with decades of experience in drug development and commercialization, as a member of our Board of Directors, effective as of July 22, 2024. As a Class I director, Ms. Skerjanec’s term lasts until the Company’s 2027 annual meeting of stockholders.

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

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

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

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

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

On September 18, 2024, we announced the presentation of key data at the 40th Congress of the European Committee for Treatment and Research in Multiple Sclerosis (“ECTRIMS”), highlighting vidofludimus calcium’s therapeutic potential in MS. The data was presented in an oral poster presentation and three ePosters at this conference in Copenhagen, Denmark.

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

On October 22, 2024, we announced a positive outcome of an interim analysis of our Phase 3 ENSURE program, investigating vidofludimus calcium for the treatment of RMS. An unblinded IDMC confirmed that the predetermined futility criteria have not been met and recommended that both ENSURE trials should continue without changes. The IDMC considered if a sample size adjustment would be appropriate for either of the two trials based on factors that include statistical analysis and ultimately recommended that the sample sizes for both trials remain unchanged.

Components of Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates or achieving market acceptance and commercial success for any product that does receive regulatory approval.

Research and Development Expenses

Research and development expenses consist of costs associated with our research activities, including our product discovery efforts and the development of our product candidates. Our research and development expenses include:

• external research and development expenses and milestone payments incurred under arrangements with third parties, such as CROs, contract manufacturing organizations, collaborations with partners, consultants, and our scientific advisors; and
• internal personnel expenses.

We expense research and development costs as incurred. Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized as prepaid expenses and expensed when the service has been performed or when the goods have been received.

Since our inception in March 2016, we have spent a total of approximately $356.5 million in research and development expenses through September 30, 2024.

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, IMU-856 and IMU-381. We have spent the majority of our research and development resources on vidofludimus calcium, our lead development program, for clinical trials in MS and UC.

In August 2019, Immunic AG received a grant of up to approximately $726,000 from the German Federal Ministry of Education and Research, in support of the InnoMuNiCH (Innovations through Munich-Nippon Cooperation in Healthcare) project. The grant funds have been used to fund a three-year research project relating to autoimmune diseases by us and our three project partners. Since the inception of the grant, we have recorded $726,000 of income in total which was classified in Other Income in the accompanying consolidated statement of operations. No income was recorded for the periods ended September 30, 2024 and 2023. The funding of this grant is now completed.

Our research and development expenses are expected to increase in the foreseeable future as we continue to conduct ongoing research and development activities, initiate new preclinical and clinical trials and build our pipeline of product candidates. Our research and development expenses may also increase in the foreseeable future due to the current inflationary environment as well as supply chain shortages, which result in increased costs. The process of conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving regulatory approval for any of our product candidates.

Successful development of product candidates is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict. We anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the development and regulatory success of each product candidate, and ongoing assessments as to each product candidate’s commercial potential.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, professional fees for legal, accounting, tax and business consulting services, insurance premiums and stock-based compensation.

Other Income (Expense), Net

Interest Income

Interest income consists of interest earned on our money market funds and bank accounts which are a portion of our cash and cash equivalents balance. Our interest income is expected to decrease as our money market funds balance has decreased and U.S. interest rates have started to and are expected to continue to decrease in the near future.

Change in the Fair Value of the Tranche Rights

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

Other Income (Expense), Net

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

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

The following table summarizes our operating expenses for the three months ended September 30, 2024 and 2023:

(dollars in thousands)

(unaudited)

Research and development expenses increased by $1.6 million during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase reflects (i) a $1.4 million increase in external development costs related to the vidofludimus calcium trials, (ii) a $0.3 million increase in external development costs related to IMU-856, (iii) $0.3 million increase in personnel costs due to an increase in headcount and (iv) a $0.3 million increase related costs across numerous categories. The increases were offset by a decrease of $0.7 million from deprioritizing the izumerogant program in psoriasis and castration-resistant prostate cancer.

General and administrative expenses increased by $0.6 million during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase was primarily due to a $0.6 million increase in personnel expense in general and administrative, $0.2 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount.

Interest income remains unchanged at $0.8 million during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

Other income increased by $0.5 million during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase was primarily attributable to a $0.6 million increase in research and development tax incentives for clinical trials in Australia.

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table summarizes our operating expenses for the nine months ended September 30, 2024 and 2023:

(dollars in thousands)

(unaudited)

Research and development expenses decreased by $5.5 million during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease reflects (i) a decrease of $4.1 million from deprioritizing the izumerogant program in psoriasis and castration-resistant prostate cancer, (ii) a $2.6 million decrease in external development costs related to IMU-856 due to the completion of the phase 1 clinical trial in celiac disease and (iii) a $0.5 million decrease related costs across numerous categories. The decreases were offset by (i) a $1.2 million increase in personnel costs, $0.2 million of which is related to non-cash stock compensation and the remainder of which is due to an increase in headcount and (ii) a $0.5 million increase in external development costs related to the vidofludimus calcium program.

General and administrative expenses increased by $2.1 million during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The increase was primarily due to (i) a $1.7 million increase in personnel expense in general and administrative, $0.9 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, (ii) $0.3 million in legal and consultancy expenses and (iii) a $0.1 million increase related to costs across numerous categories.

Interest income increased by $0.4 million during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023 due to higher interest rates.

The change in fair value of the tranche rights of $4.8 million was a non-cash charge related to the change in value of the tranche rights associated with the January 2024 Financing from January 8, 2024 until March 4, 2024. These tranches were initially classified as a liability but were reclassified to equity on March 4, 2024, when stockholders approved the increase in our authorized shares from 130 million to 500 million shares of common stock and therefore the tranche 2 and tranche 3 rights needed to be revalued to fair value upon the reclass to equity.

Other income (expense) decreased by $2.3 million during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease was primarily attributable to (i) a $1.7 million expense related to the portion of deal costs from the January 2024 Financing related to the tranche rights that were established at the time of the deal closing, (ii) the German Federal Ministry of Finance grant of $1.1 million being recognized in the fourth quarter of 2023 which was one quarter earlier than in the prior year that was recognized in the first quarter of 2023 and (iii) a $0.4 million decrease in other grants which were received in 2023. The decrease was offset by a $0.9 million increase in foreign exchange gains.

Liquidity and Capital Resources

Financial Condition, Liquidity and Going Concern

We have no products approved for commercial sale and have not generated any revenue from product sales. We have never been profitable and have incurred operating losses in each year since inception in 2016. We have an accumulated deficit of approximately $486.2 million as of September 30, 2024 and $410.9 million as of December 31, 2023. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we initiate and continue the preclinical and clinical development of our product candidates and add personnel necessary to operate as a company with an advanced clinical pipeline of product candidates. To the extent additional funds are necessary to meet long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of indebtedness, additional equity financings or a combination of these potential sources of funds, although we can provide no assurance that these sources of funding will be available on reasonable terms, if at all.

From inception through September 30, 2024, we have raised net cash of approximately $430.9 million from private and public offerings of preferred stock, common stock, pre-funded warrants and tranche rights. As of September 30, 2024, we had cash and cash equivalents of approximately $59.1 million. With these funds, the Company does not have adequate liquidity to fund its operations for at least twelve months from the issuance of these consolidated financial statements without raising additional capital and such actions are not solely within the control of the Company. If the Company is unable to obtain additional capital, it would have a material adverse effect on the operations of the Company, its clinical development program, and the Company may have to cease operations altogether. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

In December 2020, the Company filed a Prospectus Supplement to the shelf registration statement on Form S-3 filed on November 13, 2020 and declared effective on November 24, 2020 (the "2020 Shelf Registration Statement") for the offering, issuance and sale of up to a maximum aggregate offering price of $50.0 million of common stock that may be issued and sold under an at-the-market sales agreement with SVB Leerink LLC (now Leerink Partners LLC) as agent ("December 2020 ATM"). The Company used the net proceeds from the December 2020 ATM to fund the ongoing clinical development of our product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The December 2020 ATM terminated in May 2024.

In May 2022, the Company filed a Prospectus Supplement to the 2020 Shelf Registration Statement for the offering, issuance and sale of up to a maximum aggregate offering price of $80.0 million of common stock to be issued and sold under another at-the-market sales agreement ("May 2022 ATM") with Leerink Partners LLC (formerly SVB Leerink LLC) as agent. The 2020 Shelf Registration Statement expired in November 2023.

In November 2023, we filed a shelf registration statement on Form S-3 (the "2023 Shelf Registration Statement"). The 2023 Shelf Registration Statement permits the offering, issuance and sale of up to $250.0 million of common stock, preferred stock, warrants, debt securities, and/or units in one or more offerings and in any combination of the foregoing. The 2023 Registration Statement was declared effective on May 31, 2024. Unsold securities from the expired 2020 Shelf Registration Statement can continue to be sold under the 2023 Shelf Registration Statement resulting in a total S-3 shelf availability of $412.3 million as of September 30, 2024.

In May 2024, we filed a Prospectus Supplement to the 2023 Shelf Registration Statement for the offering, issuance and sale of up to a maximum aggregate offering price of $80.0 million of common stock that may be issued and sold under an at-the-market sales agreement with Leerink Partners LLC as agent ("May 2024 ATM"), which rolls over the $80.0 million of unsold common stock from the May 2022 ATM. We intend to use the net proceeds from the May 2024 ATM to continue to fund the ongoing clinical development of our product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The May 2024 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through Leerink Partners LLC on the terms and subject to the conditions set forth in the May 2024 ATM or (ii) termination of the May 2024 ATM as otherwise permitted thereby. The May 2024 ATM may be terminated at any time by either party upon ten days’ prior notice, or by Leerink Partners LLC at any time in certain circumstances, including the occurrence of a material adverse effect on us. As of September 30, 2024, $80.0 million in capacity remains under the May 2024 ATM.

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

For the nine months ended September 30, 2024, we raised gross proceeds of $0.2 million pursuant to the December 2020 ATM through the sale of 150,000 shares of common stock at a weighted average price of $1.31 per share. The net proceeds from the December 2020 ATM were $0.2 million after deducting sales agent commissions of $6,000. We did not have any ATM activity for the three months ended September 30, 2024.

In the three and nine months ended September 30, 2023, we raised gross proceeds of $0.3 million pursuant to the December 2020 ATM through the sale of 107,012 shares of common stock at a weighted average price of $2.72 per share. The net proceeds from the December 2020 ATM were $0.3 million after deducting underwriter commissions of $9,000.

Equity Offerings

Private Placement of up to $240 Million

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

The first tranche, which closed on January 8, 2024, resulted in the purchase by the Investors of an aggregate of $80 million of Common Stock (or pre-funded warrants) from the Company at a price of $1.43 per share; The second tranche is a conditional mandatory purchase by the Investors of an additional $80 million of Common Stock (or pre-funded warrants) from the Company at a price of $1.716 per share, equal to 120% of the price paid in the first tranche and is subject to the satisfaction of three conditions:

• release by the Company of topline data from its Phase 2b clinical trial of vidofludimus calcium (IMU-838) in progressive multiple sclerosis, which data is currently expected in or around April 2025;
• the 10-day volume-weighted average price of the Common Stock is at least $8.00 per share during the 6 months following the data release; and
• aggregate trading volume during the same 10-day period is at least $100 million.

The third tranche must occur no later than three years after the second tranche and is conditioned on the same volume-weighted average share price and minimum trading volumes as the second tranche. The third tranche provides for the issuance of $80 million of shares of common stock (or pre-funded warrants) at the same price per share as the second tranche, but permits investors to fund their purchase obligations on a “cashless” or net settlement basis, which would reduce the cash proceeds to be raised by the Company in the January 2024 Financing.

Any of the conditions in the second or third tranches can be waived by holders of a majority of the outstanding securities (including the lead Investor). The fair value methodology used by the Company assumed the conditions will be waived if the trading price of the stock exceeds the purchase price.

The January 2024 Financing resulted in gross proceeds to the Company of approximately $80 million in the first tranche, and an additional $80 million if and when the second tranche occurs. If the second tranche is completed and conditions for the third tranche are satisfied or waived, the Company could receive up to an additional $80 million in the third tranche. However, the amount of cash received in the third tranche would depend on the extent to which the Investors elect to fund the third tranche through a “cashless” or net settlement basis. Therefore, total gross proceeds from the offering to the Company could actually be between $80 million and $240 million. Gross proceeds to the Company will be reduced by fees paid to the placement agents, capital markets advisors and payments of transaction expenses. The Company intends to use the net proceeds from the January 2024 Financing to fund the ongoing clinical development of its three lead product candidates, vidofludimus calcium (IMU-838), IMU-856 and IMU-381, and for other general corporate purposes.

Future Capital Requirements

As noted above, we have not generated any revenue from product sales and we do not know when, or if, we will generate any revenue from product sales. We will not be able to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize any of our product candidates. We expect our expenses to continue to increase as we continue the ongoing research, development, manufacture and clinical trials of, and seek regulatory approval for, our product candidates. We also incur additional costs associated with operating as a public company. In addition, subject to obtaining regulatory approval of any of our product candidates, we anticipate that we will need substantial additional funding in connection with our continuing operations.

Our future expenses and capital requirements are difficult to forecast and will depend on many factors, including, but not limited to:

• the timing and structure of any strategic options and transactions, if any;
• personnel-related expenses, including salaries, benefits, stock-based compensation expense and other compensation expenses related to retention and termination of personnel;
• the scope, progress, duration, results and costs of research and development and ongoing clinical trials;
• the cost and timing of future regulatory submissions;
• the cost and timing of developing and validating the manufacturing processes for any potential product candidates;
• the cost and timing of any commercialization activities, including reimbursement, marketing, sales and distribution costs;
• our ability to establish new collaborations, licensing or other arrangements and the financial terms of such agreements;
• the number and characteristics of any future product candidates we pursue;
• the costs involved with being a public company;
• the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such litigation;
• the cost, timing and outcome of any future litigation; and
• the timing, receipt and amount from the sales of, or royalties on, any future products.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of stock offerings, debt financings, strategic alliances, collaborations and licensing arrangements. We do not expect to achieve revenue from product sales prior to the use of all the net proceeds from our public and private offerings to date. We do not have any committed external source of funds. Additional funds may not be available on acceptable terms, if at all. To the extent that we raise additional capital through the sale of equity securities, the ownership interest of our stockholders will be diluted and it may be on terms that are not favorable to us or our stockholders. Sales of equity securities will also be more difficult for at least the foreseeable future because of general volatility in the equity markets for companies like us. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt or other terms that are not favorable to us or our stockholders. Also, the cost of debt financing has increased due to the rise in interest rates over the past few years. If we raise additional funds through collaborations and licensing arrangements with third parties, we would expect to relinquish substantial rights to our technologies or our future products, or grant licenses on terms that may not be favorable to us. If we were to complete a merger, or other business combination, we may relinquish all control over the organization and could experience detrimental tax effects. If we are unable to raise adequate funds, we may have to curtail our product development programs and liquidate some or all of our assets. Any of these factors could harm our operating results and could result in substantial declines in the trading price of our common stock.

As of September 30, 2024, we had cash and cash equivalents of approximately $59.1 million.

Cash Flows

The following table shows a summary of our cash flows for the nine months ended September 30, 2024 and 2023:

(in thousands)

(unaudited)

Operating activities

During the nine months ended September 30, 2024, operating activities used $61.8 million of cash. The use of cash primarily resulted from (i) our net loss of $75.3 million adjusted for non-cash charges of $6.6 million related to stock-based compensation and depreciation and amortization, $4.8 million related to a change in the fair value of the tranche rights, $1.7 million for fees expensed as part of the January 2024 financing and (ii) a net increase in operating assets and liabilities of $0.5 million. Changes in our operating assets and liabilities during the nine months ended September 30, 2024 consisted primarily of (i) a $1.5 million increase in our other current assets and prepaid expenses and (ii) a decrease of $1.0 million in our other current liabilities.

During the nine months ended September 30, 2023, operating activities used $56.8 million of cash. The use of cash primarily resulted from (i) our net loss of $72.0 million adjusted for non-cash charges of $6.3 million related to $0.7 million for an unrealized foreign currency loss and $5.6 million related to stock-based compensation and depreciation and amortization and a $9.0 million net increase in operating assets and liabilities. Changes in our operating assets and liabilities during the nine months ended September 30, 2023 consisted primarily of (i) a $3.9 million increase in our other current assets and prepaid expenses and (ii) an increase of $5.1 million in our other current liabilities.

Investing activities

During the nine months ended September 30, 2024, net investing activities used $0.3 million due to the purchase of property and equipment.

During the nine months ended September 30, 2023, net investing activities provided $9.6 million of cash, primarily due to the sale of $9.8 million of time deposits partially offset by the purchase of $169,000 of property and equipment.

Financing Activities

Net cash provided by financing activities was $74.4 million during the nine months ended September 30, 2024 primarily

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

Net cash provided by financing activities was $0.4 million during the nine months ended September 30, 2023 consisting primarily of net cash proceeds from the sale of common stock under our 2020 ATM facility.

Off-Balance Sheet Arrangements

Through September 30, 2024, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose.

Contractual Obligations

Maturities of the operating lease obligation are as follows as of September 30, 2024:

As of September 30, 2024, we have non-cancelable contractual obligations under certain agreements related to our development programs IMU-838, IMU-935 and IMU-856 totaling approximately $3.2 million, all of which is expected to be paid in 2024 and 2025.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP. The preparation of our unaudited condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. We have reviewed these critical accounting policies and related disclosures with the Audit Committee of our Board.

During the first three months of 2024, we updated our warrants and tranche rights accounting policy which is described along with our other significant accounting policies in more detail in (i) Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report and (ii) Note 2 to our audited consolidated financial statements for the years ended December 31, 2023 and 2022 filed in our Annual Report on Form 10-K on February 22, 2024.

Recently Issued Accounting Standards

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

Interest Rate Sensitivity

We had cash and cash equivalents of $59.1 million as of September 30, 2024, which were held for working capital purposes. We do not enter into investments for trading or speculative purposes. We do not believe that we have any material exposure to changes in the fair value of these investments as a result of changes in interest rates due to their short-term nature. Decreases or increases in interest rates, however, will reduce or increase future investment income, respectively, to the extent we have funds available for investment.

Foreign Currency Exchange Risk

Our primary research and development operations are conducted in our facilities in Germany. We have entered into and may continue to enter into international agreements, primarily related to our clinical studies. Accordingly, we have exposure to foreign currency exchange rates and fluctuations between the U.S. dollar and foreign currencies, primarily the Euro and the Australian dollar, which could adversely affect our financial results, including income and losses as well as assets and liabilities. To date, we have not entered into, and do not have any current plans to enter into, any foreign currency hedging transactions or derivative financial transactions. Our exposure to foreign currency risk will fluctuate in future periods as our research and clinical development activities in Europe and Australia change. We currently maintain a significant amount of our assets outside of the U.S.

The functional currencies of our foreign subsidiaries are the applicable local currencies. Accordingly, the effects of exchange rate fluctuations on the net assets of these operations are accounted for as translation gains or losses in accumulated other comprehensive income (loss) within stockholders’ equity. Foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future are recorded in Other Income (Expense). Our German subsidiary is currently a significant portion of our business and, accordingly, a change of 10% in the currency exchange rates, primarily the Euro, could have a material impact on our financial position or results of operations.

Although operating in local currencies may limit the impact of currency rate fluctuations on the results of operations of our German and Australian subsidiaries, rate fluctuations may impact the consolidated financial position as the assets and liabilities of our foreign operations are translated into U.S. dollars in preparing our condensed consolidated balance sheets. As of September 30, 2024, our German and Australian subsidiaries had net current liabilities (defined as current assets less current liabilities), subject to foreign currency translation risk, of $0.5 million. An increase of approximately $50,000 in net current liabilities would result as of September 30, 2024, from a hypothetical 10% adverse change in quoted foreign currency exchange rates, primarily due to the Euro. In addition, a 10% change in the foreign currency exchange rates for the nine months ended September 30, 2024 would have impacted our net loss by approximately $5.8 million, primarily due to the Euro.

Effects of Inflation

We have experienced a general increase in costs as a result of global inflation, however, we do not believe that inflation and changing prices had a material impact on our results of operations for any periods presented herein.

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out, under the supervision of and with the participation of our management, including our Chief Executive Officer and our Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15 (e)) under the Securities Exchange Act of 1934, as amended ("the Exchange Act"), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and our Principal Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the nine months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

You should carefully consider the risk factors included in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 22, 2024 and the other information in this Report, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in our Annual Report, and the following risk factor and the risks described in our Form 10-K and elsewhere in this Report occur, our business, operating results and financial condition could be seriously harmed. This Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described in our Annual Report and elsewhere in this Report.

Clinical failure can occur at any stage of clinical development. because the results of earlier clinical trials are not necessarily predictive of future results, any product candidate we advance through clinical trials may not have favorable results in later clinical trials or receive marketing approval.

Clinical failure can occur at any stage of clinical development. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials.

A number of pharmaceutical companies have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical or preclinical testing. For example, we announced in October 2022 the analysis of interim group-level data of our Phase 1b clinical trial of IMU-935 in patients with moderate-to-severe psoriasis did not separate from placebo. Following this announcement, our stock price declined significantly, which caused us to record a full impairment of our goodwill in the quarter ended December 31, 2022. Data obtained from trials are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent marketing approval of our product candidates. In addition, the design of a clinical trial can determine whether its results will support approval of a product, or approval of a product for desired indications, and flaws or shortcomings in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to properly design and execute a clinical trial to support marketing approval for our desired indications. Further, clinical trials of product candidates often reveal that it is not practical or feasible to continue development efforts. If one of our product candidates is found to be unsafe or lack efficacy, we will not be able to obtain marketing approval for such product candidate and our business would be harmed. If the results of our clinical trials of our product candidates do not achieve pre-specified endpoints, we are unable to provide primary or secondary endpoint measurements deemed acceptable by the FDA or comparable foreign regulators, or we are unable to demonstrate an acceptable level of safety relative to the efficacy associated with our proposed indications, the prospects for approval of our product candidates would be materially and adversely affected. A number of companies in the pharmaceutical industry, including those with greater resources and experience than we, have suffered significant setbacks in Phase 2 and Phase 3 clinical trials, even after seeing promising results in earlier clinical trials.

In October 2024, an independent data monitoring committee, or IDMC, conducted a non-binding, interim futility analysis of our phase IMU-838 3 ENSURE program for the treatment of RMS and reported that the trials are not futile and should continue as planned. In addition, the IDMC recommended that we continue the trials without any adjustment to the sample sizes of each trial. There can be no assurances that the observations made at the interim regarding futility will be consistent with the final study results for various reasons, including that the final study results based upon the full sample size may not be consistent with the results achieved by the limited sample size used to conduct the interim analysis and the current sample size of approximately 1,050 adult patients with active RMS patients for each trial may not be sufficiently large to demonstrate efficacy.