Immunome Inc. - Quarter Report: 2020 September (Form 10-Q)

Table of Contents

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to        

Commission File Number: 001-39580

Immunome, Inc.

(Exact name of registrant as specified in its charter)

​

​

​

(610) 321-3700

(Registrant’s telephone number, including area code)

​

Not applicable.

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

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

​

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

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

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

​

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

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

There were 10,541,629 shares of the registrant’s common stock outstanding as of October 31, 2020.

​

​

​

Table of Contents

IMMUNOME, INC.

Quarterly Report on Form 10-Q for the Quarterly Period ended September 30, 2020

Table of Contents

​

​

​

​

2

Table of Contents

​

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

IMMUNOME, INC.

Condensed Balance Sheets

(Unaudited; In thousands, except share and per share data)

​

​

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

​

3

Table of Contents

IMMUNOME, INC.

Condensed Statements of Operations

(Unaudited; In thousands, except share and per share data)

​

​

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

​

4

Table of Contents

IMMUNOME, INC.

Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit

(Unaudited; In thousands, except share data)

​

​

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

​

​

5

Table of Contents

IMMUNOME, INC.

Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit

(Unaudited; In thousands, except share data)

​

​

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

​

6

Table of Contents

​

IMMUNOME, INC.

Condensed Statements of Cash Flows

(Unaudited; In thousands)

​

​

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

7

Table of Contents

IMMUNOME, INC.

Notes to Condensed Financial Statements

(Unaudited)

​

1. Nature of the business and basis of presentation

Organization

Immunome, Inc. (“Immunome” or the “Company”) was incorporated as a Pennsylvania corporation on March 2, 2006 and was converted to a Delaware corporation on December 2, 2015. The Company is a biotechnology company focused on identifying novel cancer and infectious disease immunotherapies utilizing a patented process to immortalize human B cells.

Since its inception, the Company has devoted substantially all of its resources to research and development, raising capital, building its management team and building its intellectual property portfolio. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant 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. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Initial public offering

On October 6, 2020, the Company closed its initial public offering (“IPO”) in which the Company issued and sold 3,250,000 shares of its common stock at a public offering price of $12.00 per share. On October 13, 2020, the underwriters exercised their option to purchase an additional 487,500 shares of the Company’s common stock at a purchase price of $12.00 per share. The Company received net proceeds of $41.7 million after deducting underwriting discounts and commissions of $3.1 million but before deducting other offering expenses. The Company’s common stock is listed on the Nasdaq Capital Market under the trading symbol “IMNM.” In addition, upon the closing of the IPO on October 6, 2020, (i) all of the Company’s outstanding shares of convertible preferred stock converted into 5,670,184 shares of common stock and (ii) all of the Company’s outstanding warrants to purchase convertible preferred stock converted into warrants to purchase common stock. On October 6, 2020, the Company filed an amended and restated certificate of incorporation to, among other things, increase the number of shares of common stock, $0.0001 par value per share, authorized for issuance to 200,000,000 and authorize the Company’s board of directors to issue up to 10,000,000 shares of “blank check” preferred stock, $0.0001 par value per share. As of September 30, 2020, the Company capitalized $2.5 million of deferred IPO costs, which are included in other assets on the condensed balance sheet, and which will be reclassified to additional paid-in capital upon the closing of the IPO.

Liquidity

The Company has incurred net losses since inception, including net losses of $13.8 million for the nine months ended September 30, 2020, and it expects to generate losses from operations for the foreseeable future primarily due to research and development for its potential product candidates. As of September 30, 2020, the Company had an accumulated deficit of $50.3 million. Prior to the IPO, the Company has funded its operations with proceeds from the issuance of debt and the sale of preferred stock. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.

The Company expects that its cash as of September 30, 2020 and proceeds from its IPO will be sufficient to fund its operations for at least the next twelve months from the date these financial statements are issued and, therefore, the conditions raising substantial doubt in prior periods have been alleviated. The Company has sufficient cash to fund its operations into the first quarter of 2022 and will need additional financing thereafter to support its continuing operations

8

Table of Contents

and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If the Company raises additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, it may have to relinquish valuable rights to technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable. If the Company is unable to raise additional funds through equity or debt financings or other arrangements when needed, it may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that the Company would otherwise prefer to develop and market.

The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms, or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy.

If the Company cannot obtain the necessary funding, it will need to delay, scale back or eliminate some or all of its research and development programs or enter into collaborations with third parties to commercialize potential products or technologies that it might otherwise seek to develop or commercialize independently; consider other various strategic alternatives, including a merger or sale of the Company; or cease operations. Additionally, volatility in the capital markets and general economic conditions in the United States may be a significant obstacle to raising the required funds. Our ability to continue as a going concern is dependent on our ability to raise capital to fund our future business plans.

Operations of the Company are subject to certain risks and uncertainties including various internal and external factors that will affect whether and when the Company’s product candidates become approved products and how significant their market share will be, some of which are outside of the Company’s control. The length of time and cost of developing and commercializing these product candidates and/or failure of them at any stage of the drug approval process will materially affect the Company’s financial condition and future operations. On March 11, 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic. Although there is significant uncertainty as to the likely effects this disease may have in the future, to date there has not yet been a significant impact to the Company’s operations or financial statements.

​

2. Summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).

Unaudited interim results

These unaudited condensed financial statements and accompanying notes should be read in conjunction with the Company’s annual financial statements and the notes thereto included in the Company’s IPO prospectus filed with the Securities and Exchange Commission on October 5, 2020. The accompanying condensed financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 are unaudited but include all adjustments that management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2019 have been derived from the audited financial statements as of that date.

9

Table of Contents

Reverse stock split

The Company’s board of directors approved a one-for-six reverse stock split of its issued and outstanding common stock, stock options, convertible preferred stock and convertible preferred stock warrants legally effective as of September 22, 2020. Accordingly, all convertible preferred shares and common stock shares, per share amounts, and additional paid-in capital amounts for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the fair value of the Company’s common stock in connection with share-based compensation arrangements and the fair value of the Company’s liability-classified warrants. Actual results could differ from these estimates.

Fair value of financial instruments

ASC Topic 820, Fair Value Measurement (ASC 820), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the assets or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tiered value hierarchy that distinguishes between the following:

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

Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

Level 3 — Unobservable inputs for the asset or liability (i.e. supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgement. Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Government contract funding

The Company accounts for amounts received under its U.S. Department of Defense expense reimbursement contract as contra-research and development expenses in the condensed statements of operations.

Warrant liability

The Company issued warrants to purchase shares of Series A convertible preferred stock in connection with the June 2020 Series A convertible preferred stock sale. The warrants were classified as a liability on the condensed balance sheet at September 30, 2020 as the underlying Series A convertible preferred stock is contingently redeemable and outside of the Company’s control (see Note 11, Warrants to acquire shares of Series A convertible preferred stock). The fair value of the warrants on the date of issuance was recorded as a reduction of the carrying value of the Series A convertible preferred stock and as a long-term liability in the condensed balance sheet. The warrants will be

10

Table of Contents

subsequently remeasured to fair value at each balance sheet date. Changes in the fair value of the warrants are recognized as other income or expense in the statements of operations. The change in fair value of the warrants during the three and nine months ended September 30, 2020 was $5.5 million.

The Company used the Black Scholes option pricing model, which incorporated assumptions and estimates, to value the Series A convertible preferred stock warrants. Estimates and assumptions impacting the fair value measurement of the warrants included the fair value per share of the underlying Series A convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying Series A convertible preferred stock. The Company historically determined the fair value per share of the underlying Series A convertible preferred stock by taking into consideration the most recent sales of its Series A convertible preferred stock, results obtained from third party valuations and additional factors that were deemed relevant. As of September 30, 2020, the Company utilized the $12.00 per share IPO price to value the Series A convertible preferred stock warrants. The Company historically had been a private company and lacked company specific historical and implied volatility information of its stock. Therefore, it estimated the expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants at the time. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. Expected dividend yield was determined based on the fact that the Company had never paid cash dividends and did not expect to pay any cash dividends in the foreseeable future.

Research and development costs

Research and development costs are charged to expense as incurred. Research and development costs consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation and amortization, preclinical expenses, consulting and other contracted services. Additionally, under the terms of the license agreements to which the Company is a party, the Company is obligated to make future payments should certain development and regulatory milestones be achieved. No such costs have been incurred for the three or nine months ended September 30, 2020 and 2019. Costs for certain research and development activities are recognized based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the condensed financial statements as a prepaid or accrued expense.

Net loss per share

The Company follows the two-class method when computing net loss per share, as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share of common stock is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share of common stock is computed by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

11

Table of Contents

The following potentially dilutive securities outstanding as of September 30, 2020 and 2019 have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

​

The Company’s Series A convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to participating securities. In periods in which the Company reports a net loss per share of common stock, diluted net loss per share of common stock is the same as basic net loss per share of common stock since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss per share of common stock for the three and nine months ended September 30, 2020 and 2019.

Segment and geographic information

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The CODM is the Company’s Chief Executive Officer. The Company views its operations as and manages its business in one operating segment operating exclusively in the United States.

3. Fair value measurements

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis in the condensed balance sheet as of September 30, 2020 (in thousands):

​

​

The Company did not transfer any financial instruments into or out of Level 3 classification during the three or nine months ended September 30, 2020. See Note 11, Warrants to acquire shares of Series A convertible preferred stock for a summary of the inputs used to calculate the warrant liability.

12

Table of Contents

A reconciliation of the change in the fair value of the warrant liability for the nine months ended September 30, 2020 is as follows (in thousands):

​

​

​

4. U.S. Department of Defense (“DoD”) expense reimbursement contract

In July 2020, the Company entered into an Other Transaction Authority for Prototype Agreement (the “OTA Agreement”) with the DoD to fund the Company’s efforts in developing Biosynthetic Convalescent Plasma (“BCP”) to treat COVID-19. Under the OTA Agreement, the Company intends to develop BCP for use in the U.S. military population and the U.S. population as a whole, subject to approval by the U.S. Food and Drug Administration (“FDA”). The amount of funding being made available to the Company under this expense reimbursement contract is $13.3 million which, based on the Company’s anticipated expenditures, is expected to be received through mid-2021. The Company recorded contra-research and development expense in the amount of $0.6 million for each of the three and nine months ended September 30, 2020 in the condensed statements of operations. As of September 30, 2020, the Company had an expense reimbursement receivable balance of $0.3 million due from the DoD in prepaid expenses and other current assets on the condensed balance sheet.

​

5. Accrued expenses

Accrued expenses consisted of the following:

​

​

​

​

6. Convertible promissory notes

From January 2019 through July 2019, the Company issued $6.8 million of non-interest bearing convertible promissory notes to several existing Series A Preferred shareholders and new investors. These notes were scheduled to mature on February 2, 2020, if not converted or otherwise settled prior to maturity. Upon completion a qualified equity financing event, as defined in the notes, the notes automatically convert into shares of the stock sold in such qualified financing and at a price equal to 80% of the subscription price. In the event that the Company were to sell additional shares of Series A Preferred prior to a qualified financing event, the notes will automatically convert into shares of Series A Preferred at a discount to the $9.00 per share subscription price. The discount is equal to 1% for each month that has lapsed from the initial note issuance date to the date in which the extended sale of Series A Preferred is consummated.

In November 2019, the Company completed the sale of its Series A Preferred and the notes automatically converted into 821,657 shares of Series A Preferred. The effective conversion price of the notes was less than the fair value of the Series A Preferred and therefore, no beneficial conversion feature was recorded for the discount.

13

Table of Contents

The Company accounted for the conversion upon a qualified financing event as a bifurcated redemption feature as settlement under this feature would be in a variable number of shares and at a substantial discount. At issuance and over the term of the note, the Company determined the probability of settlement pursuant to the qualified financing event to be remote. As such, the estimated fair value of the redemption feature was de minimis.

​

7. Equipment loan payables

During 2016 through 2018, the Company entered into various equipment financing agreements (the Agreements) to purchase laboratory equipment. The Agreements provide for 36 to 38 monthly payments ranging from $1,000 to $8,000. Interest rates for the Agreements range from 9.03% to 12.08%. Interest expense related to the equipment financing agreements was $10,000 and $11,000 for the three months ended September 30, 2020 and 2019, respectively, and $20,000 and $38,000 for the nine months ended September 30, 2020 and 2019, respectively.

Future payments for the Agreements are as follows as of September 30, 2020 (in thousands):

​

​

​

​

8. Long-term debt

On April 30, 2020, the Company entered into a loan agreement with Silicon Valley Bank as the lender (“Lender”) for a loan in an aggregate principal amount of $0.5 million (the “Loan”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and implemented by the U.S. Small Business Administration. The Loan matures in two years and bears interest at a rate of 1% per year, with all payments deferred through the six-month anniversary of the date of the Loan. Principal and interest are payable monthly commencing on October 30, 2020 and may be prepaid by the Company at any time prior to maturity without penalty. Interest expense for the nine months ended September 30, 2020 was de minimis. The Company may apply for forgiveness of amounts due under the Loan, with the amount of potential loan forgiveness to be calculated in accordance with the requirements of the PPP based on payroll costs, any mortgage interest payments, any covered rent payments and any covered utilities payments during the 8-week period after the origination date of the Loan. The Company is using the proceeds of the Loan for payroll and other qualifying expenses. While the Company believes that its use of the loan proceeds will meet the conditions of forgiveness of the loan, it cannot be assured that actions taken could cause the Company to be ineligible for forgiveness of the loan, in whole or in part. Proceeds received are recorded as long-term debt. In the event the debt is forgiven in a future period, the Company will recognize a gain on extinguishment in the statement of operations.

The following table sets forth the Company’s future principal payments as of September 30, 2020 (in thousands):

​

​

​

​

14

Table of Contents

​

9. Commitments and contingencies

Operating leases

In May 2017, the Company entered into a 62-month office and laboratory space lease for approximately 11,000 square feet of space in Exton, Pennsylvania. The Company has an option to extend the lease for two additional five-year terms or to early terminate the lease at the end of the 38th month of the lease. The lease is subject to fixed rate escalation increases and the landlord waived the Company’s rent obligation for the first two months of the lease. Deferred rent is $11,000 and $18,000 as of September 30, 2020 and December 31, 2019, respectively, and is being amortized as a reduction in rent expense over the term of the lease. The Company recognizes rent expense on a straight-line basis over the expected lease term.

Future minimum lease payments for the Company’s facility are as follows as of September 30, 2020 (in thousands):

​

​

Rent expense was $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Capital leases

During 2016 and 2017, the Company entered into multiple capital leases for laboratory equipment. The leases provide for 36 to 38 monthly payments ranging from $2,000 to $32,000. Interest rates for the leases range from 9.43% to 11.35%. Interest expense related to the leases was $7,000 and $34,000 for the nine months ended September 30, 2020 and 2019, respectively. The leases ended in July 2020.

Employment agreements

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

Employee benefit plan

The Company maintains a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the 401(k) Plan). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company assumes all administrative costs of the 401(k) Plan and makes matching contributions as defined in the 401(k) Plan document.

​

10. Convertible preferred stock and stockholders’ deficit

Series A convertible preferred stock

During the year ended December 31, 2019, the Company sold 512,826 shares of its Series A Preferred at $9.00 per share in exchange for $4.6 million in gross proceeds and incurred $35,000 of related issuance costs. In November 2019, the Company issued 821,657 shares of Series A Preferred in connection with the conversion of the promissory notes of $6.8 million (see Note 6). In June 2020, the Company sold an additional 1,226,925 shares of Series A Preferred at $9.00

15

Table of Contents

per share for $11.0 million in gross proceeds and incurred $27,000 of related issuance costs. In addition to the shares of Series A Preferred, the Company issued warrants to purchase 1,035,196 shares of the Company’s Series A Preferred. The warrants are exercisable at any time and have an exercise price of $9.00 per share and will terminate at the earlier of (i) three years from the date of issuance, (ii) upon liquidation or deemed liquidation of the Company and (iii) upon the Company’s securities trading at $27.00 per share for at least 10 days out of a consecutive 20 day trading period beginning after the first anniversary of an initial public offering of the Company’s common stock. The Company allocated $1.5 million of the gross proceeds from the June 2020 sale of the Series A Preferred to the warrant liability (see Note 11, Warrants to acquire shares of Series A convertible preferred stock), which represents the fair value of the warrants as of the date of grant.

The Series A convertible preferred stock has the following key terms:

Dividends — The holders of Series A Preferred shall be entitled to receive, when, as, and if declared by the Board of Directors, such dividends as may be declared from time to time by the Board of Directors. No cash dividends shall be declared and/or paid with respect to common stock until all declared but unpaid dividends on the preferred stock have been paid in full. Additionally, in the event that the Company declares, pays or sets aside any dividends on shares of common stock, the holders of Series A Preferred participate in such dividends on an as-converted basis. No dividends had been declared through September 30, 2020.

Voting Rights — Holders of preferred stock have voting rights equal to the number of shares of common stock on a converted basis and have certain protective voting rights as a class.

Liquidation — In the event of any liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, or any deemed liquidation event, each holder of Series A Preferred shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock by reason of their ownership thereof, in respect of each share of Series A Preferred owned by such holder, an amount per share equal to the greater of the following: (i) the sum of (A) $9.00, being the original purchase price for such share (as adjusted for any stock splits, stock dividends, reverse stock splits, stock combinations, and other similar capitalization changes) plus (B) any dividends declared but unpaid thereon or (ii) such amount per share of Series A Preferred as would have been payable had all shares of Series A Preferred been converted into common stock immediately prior to such liquidation, dissolution or deemed liquidation event.

Conversion Rights — The Series A Preferred is convertible at any time at the option of the holder into shares of common stock at a conversion price equal to $9.00 per share. Upon an event specified by vote or consent by the requisite holders or upon a public offering meeting the criteria specified in the certificate, the shares of Series A Preferred will be automatically converted into shares of common stock. The conversion price is subject to adjustment for certain events, including traditional dilutive events as well as weighted average down-round protection.

Redemption — Upon the occurrence of a deemed liquidation event which does not result in the dissolution of the Company, as defined in the Company’s articles of incorporation, the Series A Preferred may be redeemed at the greater of (i) the original issuance price plus any declared but unpaid dividends and (ii) the estimated fair value of the Company’s common stock into which the Series A Preferred would convert into immediately prior to redemption. The Company classifies Series A Preferred as temporary equity in the accompanying balance sheets as certain deemed liquidation events are outside the Company’s control.

Future Tranche Right Feature — In connection with the Company’s initial offering of its Series A Preferred in 2015, a future milestone closing provision (the Future Milestone) was included requiring the Company to sell, on the same terms and conditions as the initial offering, an aggregate of $3.5 million of additional Series A Preferred upon achievement of certain development and strategic milestones, as defined in the purchase agreement and at $9.00 per share, or 388,888 shares of Series A Preferred. The Future Milestone was not achieved as of September 30, 2020, and the Company’s obligations to sell the shares terminated upon completion of the Company’s IPO.

The Company determined that the Future Tranche Right did not meet the definition of a freestanding financial instrument as it was not legally detachable. The Future Tranche Right was also evaluated as an embedded derivative and

16

Table of Contents

the Company determined it did not meet the definition of a derivative instrument for which bifurcation would be required.

As discussed in Note 1, all of the Company’s outstanding Series A Preferred converted into 5,670,184 shares of common stock upon the closing of the IPO on October 6, 2020.

Common stock

The holders of common stock are entitled to one vote for each share of common stock. Subject to the approval of the majority of Series A Preferred stockholders, and payment in full of all preferential dividends to which the holders of the Series A Preferred are entitled, the holders of common stock shall be entitled to receive dividends out of funds legally available. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, after the payment or provision for payment of all debts and liabilities of the Company and all preferential amounts to which the holders of Series A Preferred are entitled with respect to the distribution of assets in liquidation, the holders of common stock shall be entitled to share ratably in the remaining assets of the Company available for distribution.

At September 30, 2020, the Company had reserved 10,146,643 shares of common stock for conversion of Series A Preferred and warrants and exercise of stock options.

​

11. Warrants to acquire shares of Series A convertible preferred stock

Liability-classified warrants consist of 1,035,196 warrants to acquire shares of Series A convertible preferred stock issued in connection with the June 2020 sale of the Company’s Series A convertible preferred stock. These warrants are liability-classified as the underlying Series A convertible preferred stock is contingently redeemable and outside of the Company’s control. The warrants become exercisable for shares of the Company’s common stock upon completion of an IPO.

The fair value of the warrants was estimated using a Black-Scholes pricing model with the following inputs:

​

​

​

​

12. Share-based compensation

In July 2008, the board of directors adopted the 2008 Equity Incentive Plan (the “2008 Plan”) which provided for the grant of qualified incentive stock options and nonqualified stock options, restricted stock or other awards to the Company’s employees, officers, directors, advisors, and outside consultants for the issuance or purchase of shares of the Company’s common stock. The 2008 Plan was replaced in July 2018 with the Immunome, Inc. 2018 Equity Incentive Plan (the 2018 Plan and collectively with the 2008 Plan, the Plans). At the time that the 2008 Plan was terminated, there were 388,748 shares of the Company’s common stock available for grant that were transferred to the 2018 Plan. Any additional shares that become available for grant under the 2008 Plan after June 18, 2018 are automatically transferred to and made available for grant under the 2018 Plan. On September 24, 2020, the Plans were terminated and replaced with the 2020 Equity Incentive Plan (the 2020 Plan). The remaining 298,277 shares available for grant under the Plans will be available for issuance under the 2020 Plan and an additional 1,701,723 shares were authorized under the 2020 Plan.

The Company also adopted the 2020 Employee Stock Purchase Plan (the “ESPP Plan”) on September 18, 2020 which provides for the grant of purchase rights to purchase shares of the Company’s common stock to eligible employees, as defined by the ESPP Plan. The maximum number of shares of common stock that may be issued under the ESPP Plan will not exceed 125,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1st of each calendar year for a period of up to ten years, commencing on the first January 1 following the year in which an IPO occurs and ending on, and including, January 1, 2030, in an amount equal

17

Table of Contents

to the lesser of (i) 1% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, and (ii) 1,000,000 shares of common stock. No awards have been granted under the ESPP Plan as of September 30, 2020.

The 2020 Plan and the ESPP Plan are administered by the board of directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors. Stock options awarded under the Plans generally expire 10 years after the grant date unless the board of directors sets a shorter term. Vesting periods for awards under the Plans and the 2020 Plan are determined at the discretion of the board of directors. Incentive stock options and non-statutory stock options granted to employees, officers, members of the board of directors and consultants of the Company typically vest over two to four years. Certain options provide for accelerated vesting if there is a change in control, as defined in the Plans and the 2020 Plan.

Share-based compensation expense recorded as research and development and general and administrative expenses in the condensed statements of operations is as follows (in thousands):

​

​

Unrecognized compensation cost related to unvested options was $1.5 million as of September 30, 2020 and will be recognized over an estimated weighted average period of 2.82 years.

Stock options

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

​

​

A summary of option activity during the nine months ended September 30, 2020 is as follows:

​

​

The weighted-average grant date fair value per share of stock options granted during the nine months ended September 30, 2020 and 2019 was $0.87 and $0.24, respectively. The aggregate intrinsic value of stock options

18

Table of Contents

exercised during the nine months ended September 30, 2020 was $0.3 million. The aggregate intrinsic value of stock options outstanding at September 30, 2020 is $14.5 million.

​

In August 2020, the Company granted a total of 92,169 stock options to two of its officers, which option awards included both performance-based and service-based vesting conditions. These option awards were subsequently modified in September 2020 to eliminate the performance-based criteria. As a result of the modification, only service-based vesting conditions remained. All other terms and conditions of these option awards remain unchanged. Since the performance condition was not considered probable of being achieved prior to the modification, no share-based compensation expense was recorded prior to the modification. At the time of the modification, the fair value of these options awards was recalculated at $8.69 per option, and the resulting share-based compensation expense of $0.8 million will be recognized ratably over the requisite service period to the Company.

​

​

13. Related party transactions

License agreements

The Company has entered into license agreements with certain stockholders of the Company. Expenses with these related parties were de minimis and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and de minimis and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively. There were no amounts owed to these related parties as of September 30, 2020 and December 31, 2019.

Convertible promissory notes

During the nine months ended September 30, 2019, the Company received $6.8 million upon issuing convertible promissory notes, of which $3.8 million was from several of its existing preferred stock investors. All of the convertible promissory notes were converted into shares of Series A Preferred (see Note 6).

Broadband services agreement

During November 2015, the Company entered into a Master Services Agreement (MSA) with BCM Advisory Partners LLC, Broadband Capital Partners LLC and Broadband Advisory (collectively, Broadband) pursuant to which Broadband agreed to provide corporate finance, strategic planning, and management services to the Company. The Company issued shares of common stock to Broadband and, starting May 1, 2016, is required to pay Broadband a cash fee of $20,000 per month for Broadband’s advisory services. The Company recorded $0.1 million and $0.1 million during the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million during the nine months ended September 30, 2020 and 2019, respectively, related to the Broadband MSA which is included in general and administrative expenses in the statements of operations.

​

14. Subsequent events

On October 6, 2020, the Company closed its IPO in which the Company issued and sold 3,250,000 shares of its common stock at a public offering price of $12.00 per share. On October 13, 2020, the underwriters exercised their option to purchase an additional 487,500 shares of the Company’s common stock at a purchase price of $12.00 per share. The Company received net proceeds of $41.7 million after deducting underwriting discounts and commissions of $3.1 million but before deducting other offering expenses. The Company’s common stock is listed on the Nasdaq Capital Market under the trading symbol “IMNM.” In addition, upon the closing of the IPO on October 6, 2020, (i) all of the Company’s outstanding shares of convertible preferred stock converted into 5,670,184 shares of common stock and (ii) all of the Company’s outstanding warrants to purchase convertible preferred stock converted into warrants to purchase common stock. On October 6, 2020, the Company filed an amended and restated certificate of incorporation to, among other things, increase the number of shares of common stock, $0.0001 par value per share, authorized for issuance to 200,000,000 and authorize the Company’s board of directors to issue up to 10,000,000 shares of “blank check” preferred stock, $0.0001 par value per share.

​

19

Table of Contents

​

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

The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with our unaudited interim financial statements and related notes thereto included elsewhere herein. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties, assumptions 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,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “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 “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our initial public offering (IPO) prospectus filed with the Securities and Exchange Commission (SEC) on October 5, 2020. 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. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Overview

Since our inception in 2006, we have devoted substantially all of our resources to research and development, raising capital, building our management team and building our intellectual property portfolio. To date, we have financed our operations primarily through the sale of our Series A convertible preferred stock and warrants and convertible promissory notes. Through September 30, 2020, we have raised an aggregate of $50.4 million from the sale of our Series A convertible preferred stock and warrants and convertible promissory notes and in April 2020, we received $0.5 million in cash pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act implemented by the U.S. Small Business Administration.

On October 6, 2020, we closed our initial public offering (“IPO”) in which we issued and sold 3,250,000 shares of our common stock at a public offering price of $12.00 per share. On October 13, 2020, the underwriters exercised their option to purchase an additional 487,500 shares of our common stock at a purchase price of $12.00 per share. We received net proceeds of $41.7 million after deducting underwriting discounts and commissions of $3.1 million but before deducting other offering expenses. Our common stock is listed on the Nasdaq Capital Market under the trading symbol “IMNM.” In addition, upon the closing of the IPO on October 6, 2020, (i) all of our outstanding shares of convertible preferred stock converted into 5,670,184 shares of common stock and (ii) all of our outstanding warrants to purchase convertible preferred stock converted into warrants to purchase common stock. On October 6, 2020, we filed an amended and restated certificate of incorporation to, among other things, increase the number of shares of common stock, $0.0001 par value per share, authorized for issuance to 200,000,000 and authorize our board of directors to issue up to 10,000,000 shares of “blank check” preferred stock, $0.0001 par value per share.

20

Table of Contents

We are a development stage company, and all of our programs are at a preclinical stage of development. To date, we have not generated any revenue from product sales and do not expect to generate revenue from the sale of products for the foreseeable future. Since inception we have incurred significant operating losses. Our net losses for the three months ended September 30, 2020 and 2019 were $8.4 million and $2.7 million, respectively. Our net losses for the nine months ended September 30, 2020 and 2019 were $13.8 million and $7.5 million, respectively.

As of September 30, 2020, we had a cash balance of $6.7 million, and we received $38.9 million in net proceeds from the IPO in October 2020. We expect to continue to incur losses for the foreseeable future. We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities related to our portfolio of programs as we continue our preclinical development of product candidates; advance these product candidates toward clinical development; further develop our product candidates; perform research activities as we seek to discover and develop additional product candidates; carry out maintenance, expansion enforcement, defense, and protection of our intellectual property portfolio; and hire research and development, clinical and commercial personnel. If we cannot obtain the necessary funding, we will need to delay, scale back or eliminate some or all of our research and development programs or enter into collaborations with third parties to commercialize potential products or technologies that we might otherwise seek to develop or commercialize independently; consider other various strategic alternatives, including a merger or sale of the Company; or cease operations. If we engage in collaborations, we may receive lower consideration upon commercialization of such products than if we had not entered into such arrangements or if we entered into such arrangements at later stages in the product development process. Our ability to continue as a going concern is dependent on our ability to raise capital to fund our future business plans. Additionally, volatility in the capital markets and general economic conditions in the United States may be a significant obstacle to raising the required funds. In addition, after the closing of the IPO we expect to incur additional costs associated with operating as a public company.

We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities, particularly if and as we:

Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.

As a result of these anticipated expenditures, we will need substantial additional financing to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of any purchaser will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital

21

Table of Contents

expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

We expect that our cash as of September 30, 2020 and the proceeds from our IPO will be sufficient to fund our operations into the first quarter of 2022. We have based these estimates on assumptions that may prove to be imprecise, and we may exhaust our available capital resources sooner than we currently expect. See “— Liquidity and capital resources.” Due to the numerous risks and uncertainties associated with the development of our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease, or COVID-19, emerged in Wuhan, Hubei Province, China. As of September 2020, COVID-19 spread to Europe, the United States and many other countries, and has been declared a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and the United States, including in Pennsylvania where our headquarters are located, Europe and Asia have implemented severe travel restrictions, social distancing requirements and stay-at-home orders, among other restrictions, which, in some cases, have had the effect of delaying the commencement or continuation of various non-COVID-19-related clinical trials throughout the world. As a result, the COVID-19 pandemic has caused significant disruptions to the U.S., regional and global economies and has contributed to significant volatility and negative pressure in financial markets.

We have been carefully monitoring the COVID-19 pandemic and its potential impact on our business and have taken important steps to help ensure the safety of our employees and their families and to reduce the spread of COVID-19. We have established a work-from-home policy for all employees, other than those performing or supporting business-critical operations, such as certain members of our laboratory and facilities staff. For those employees, we have implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic. We have taken these precautionary steps while maintaining business continuity so that we can continue to progress our programs. The effect of the COVID-19 pandemic on our development timelines and its effect on our preclinical research and development is uncertain.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The future impact of the COVID-19 pandemic on our industry, the healthcare system and our current and future operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

22

Table of Contents

Components of our results of operations

Research and development expenses

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

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

In the early phases of development, our research and development costs are often devoted to product platform and proof-of-concept studies that are not necessarily allocable to a specific target, and therefore, we have not yet begun tracking our expenses on a program-by-program basis.

Research and development activities are central to our business model. We expect that our research and development expenses will increase substantially in connection with our planned preclinical and future clinical development activities.

In July 2020, we entered into an Other Transaction Authority for Prototype Agreement (the “OTA Agreement”) with the DoD to fund our efforts in developing Biosynthetic Convalescent Plasma (“BCP”) to treat COVID-19. In connection with the OTA Agreement, we record contra-research and development expenses in the same period the underlying expenses are incurred.

General and administrative expenses

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

We anticipate that our general and administrative expenses will increase in the future to support increased research and development activities. We also expect to incur increased costs associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs and investor and public relations costs.

Change in fair value of warrant liability

Prior to our initial public offering, our outstanding warrants to purchase shares of our convertible preferred stock were classified as liabilities, recorded at fair value and were subject to remeasurement at each balance sheet date until they were exercised, expired or were otherwise settled. The change in fair value of our preferred stock warrant liability

23

Table of Contents

reflects a non-cash charge primarily driven by changes in the fair value of our underlying Series A preferred stock. All outstanding warrants to purchase shares of our preferred stock were converted into warrants to purchase shares of our common stock upon consummation of our IPO.

Interest expense, net

Interest expense, net consists of interest expense related to our capital lease obligations, equipment loans payable and long-term debt, offset by interest income earned on our cash.

Results of operations

Comparison of the three months ended September 30, 2019 and 2020

​

​

Research and development expenses

Research and development expenses were $1.6 million and $2.2 million for the three months ended September 30, 2020 and 2019, respectively. Research and development expenses shown reflect the recognition of contra-research and development expenses related to the OTA Agreement with the DoD in the amount of $0.6 million for the three months ended September 30, 2020. Excluding the effect of the OTA Agreement, the slight increase in research and development expenses for the three months ended September 30, 2020 was primarily the result of an increase of $0.1 million in personnel-related costs due to an increase in headcount and stock-based compensation and an increase of $0.1 million in facility related costs, including depreciation and amortization, related to our leased facility and equipment, offset by a decrease of $0.2 million in outsourced services as the Company’s research and development activities were limited as a result of a decrease in available cash and the COVID-19 pandemic.

Research and development expenses are expected to increase in the future as we continue our current research programs, initiate new research programs, continue our preclinical development of product candidates and conduct future clinical trials for any of our product candidates.

General and administrative expenses

General and administrative expenses increased by $0.7 million to $1.2 million for the three months ended September 30, 2020 from $0.5 million for the three months ended September 30, 2019. The increase was primarily a result of a $0.2 million increase in personnel-related costs due to an increase in headcount and stock-based compensation and $0.5 million increase in professional fees and consulting services for legal, recruiting and to supplement our internal workforce.

Change in fair value of warrant liability

For the three months ended September 30, 2020, we recognized a non-cash charge of $5.5 million due to the change in the fair value of the convertible preferred stock warrant liability. The warrants were not outstanding prior to 2020.

24

Table of Contents

Interest expense, net

Interest expense, net consists of interest expense related to our capital lease obligations, equipment loan payables and long-term debt, offset by interest income related to our cash.

Comparison of the nine months ended September 30, 2019 and 2020

​