INMB - INmune Bio: Caution Still Warranted But Upgrading To Hold

2024-01-04 09:17:23 ET

Summary

• INmune Bio is a biotech company with therapies in development for neurological disorders and cancer.
• Their most advanced candidate, XPro, is being assessed in neurological disorders, including Alzheimer's disease.
• The company also has a product called INKmune in development for the treatment of acute myeloid leukemia and potentially castration-resistant prostate cancer.

Top-Line Summary

INmune Bio ( INMB ) is a developmental biotech straddling two lines of disease with their therapies. Their most advanced candidate is in neurological disorders, and they have a cell therapy in development for cancer. In my last article , I rated them a sell with some reservations about what I would like to see. This article explains why I am shifting to a "hold" recommendation, mainly due to ongoing cash concerns but the potential for important catalysts in 2024.

Pipeline Updates

XPro

INMB's dominant negative form of TNF-alpha, XPro, is current being assessed in neurological disorders. Most notably, this includes early Alzheimer's disease, for which they have an ongoing phase 2 rapidly approaching full accrual. In my last article, I highlighted some of the early signs of activity for XPro that the company has presented so far.

Without question, the biggest question mark for INMB has been the clinical hold put on their phase 2 trial in Alzheimer's disease that the company commented about on December 18 . This hold has been in place since 2022 relating to manufacturing issues, and they guided that they're still on track to complete enrollment of the study in early 2024 in spite of it. That said, the timeline to lifting has been slippery, as INMB in their most recent guidance said they were confident it would be lifted by the end of 2023 . It's one thing after another in the clinical hold saga, though it's a positive that they've been able to continue to move the study globally.

This ongoing hold remains a substantial source of potential risk as well as potential momentum. Doubtless, if and when the hold is lifted (as INMB continues to remain confident it will), that could be a big catalyst, even if it doesn't really impact the enrollment of the Alzheimer's disease trial (per their most recent guidance). Still, having that source of uncertainty lift would be a relief to shareholders.

There have been tiny dribbles of information coming out of scientific congresses with XPro. For example, using a technique called CDM, they were able to show putative enhancements in gray matter in their phase 1b study for Alzheimer's disease. In addition, they showed findings at the CTAD meeting suggesting that XPro was most effective in patients with the earliest signs of Alzheimer's. These are small but supportive pieces of information providing more color to the picture of XPro clinical efficacy. However, the lynchpin piece for XPro is going to come later in 2024, when INMB anticipates phase 2 data.

INMB also intends to begin a phase 2 study of XPro for the treatment of resistant depression in the first half of 2024, on the basis of observed increases in inflammatory markers like TNF-alpha in patients with depression.

INKmune

The other most advanced product INMB has in development is INKmune, a weakened, replication deficient tumor cell cocktail designed to prime natural killer cells that can then hopefully find and eliminate cancer cells in patients.

The main clinical trial being conducted with INKmune is in patients with acute myeloid leukemia (AML). Very early phase 1 data showed reasonable tolerability and persistence of primed NK cells in patients with AML.

The company has an approved IND to also begin study of INKmune in patients with castration-resistant prostate cancer. INMB has not announced that this study has moved forward, though they did guide that the first patient would be enrolled and treated by end of 2023 .

Financial Overview

Per their Q3 2023 quarterly filing, INMB held $45.6 million in total current assets, including $41.8 million in cash and equivalents. Their net losses reached $8.6 million for the quarter. Given these figures, the company has approximately 4 to 5 quarters of cash on hand to fund operations.

It is notable that the company did not perform an equity raise in 2023, which to me is a signal that this is an option on the table to raise some cash to get them out of the hole.

Strengths and Risks

As net losses are increasing (and have no reason to slow down growth, either), cash is going to become a serious concern for INMB in the near future. Within a quarter or two, I'd expect the company to act in some way, most likely via an equity raise. Considering their current total valuation on the marketplace, they need to produce a large catalyst for that raise to occur under some kind of position of strength.

Adding to that, Alzheimer's disease is a notoriously tough nut to crack, and the chances of any given therapy achieving a meaningful improvement are low. To me, there is inherent risk in any clinical trial involving this disease. The flipside is that there is massive reward for any company that can achieve it. And INMB has not shown any major cracks in the armor from what I can tell. All I can say is that I won't be shocked if their phase 2 trial succeeds or if it fails.

Diversity of their platforms is another mixed blessing. INKmune has potential (although heeding caution about the numerous failures of NK-based immunotherapies in the past; there have been no breakthroughs despite many attempts), and it would be good to have a fallback in case XPro ends up not helping patients. But it is costly to run this many parallel studies, and that may be one of the reasons INMB has been so slow to get them started. Cash is and will remain a key concern for this company for the foreseeable future, barring an unexpected lucrative partnership of takeover.

Bottom-Line Summary: Why the Change in Rating?

In my last article, I rated INMB a sell because of concerns around timing, that some more de-risking was required before I could consider a position. We're moving into a potentially catalyst-rich year, and at a $200 million market cap, they have potential to capitalize on that in terms of share price appreciation. However, cash concerns loom large, and we don't have a genuine signal of efficacy for their therapies still. Therefore, it's still too risky to outright recommend a buy, but for the risk-tolerant investors out there, INMB offers potential.

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