INFLARX N.V.

UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS – MARCH 31, 2020

 

These unaudited condensed financial statements are consolidated financial statements for the group consisting of InflaRx N.V. and its wholly-owned subsidiaries InflaRx GmbH, and InflaRx Pharmaceutical Inc., Ann Arbor, Michigan, United States (together, the “Group”). The financial statements are presented in Euro (€).

 

InflaRx N.V. is a company limited by shares, incorporated and domiciled in Amsterdam, The Netherlands.

Its registered office and principal place of business is in Germany, Jena, Winzerlaer Str. 2.

 

Exhibit 99.2

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This management’s discussion and analysis is designed to provide you with a narrative explanation of our financial condition and results of operations. We recommend that you read this discussion together with our unaudited condensed consolidated financial statements, including the notes thereto, as of and for the three-month periods ended March 31, 2020 and 2019 included as Exhibit 99.1 to the Report on Form 6-K to which this discussion is attached as Exhibit 99.2. We also recommend that you read our management’s discussion and analysis and our audited consolidated financial statements for fiscal year 2019, and the notes thereto, which appear in our Annual Report on Form 20-F for the year ended December 31, 2019 (the “Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”). In addition, we recommend that you read any public announcements made by InflaRx N.V.

 

The following discussion is based on our financial information prepared in accordance with IFRS as issued by the IASB, which may differ in material respects from generally accepted accounting principles in the United States and other jurisdictions. We maintain our books and records in euros. Unless otherwise indicated, all references to currency amounts in this discussion are in euros. We have made rounding adjustments to some of the figures included in this discussion and analysis. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them.

 

The following discussion includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described under “Risk factors” in the Annual Report.

 

Unless otherwise indicated or the context otherwise requires, all references to “InflaRx” or the “company,” “we,” “our,” “ours,” “us” or similar terms refer to InflaRx N.V. and its subsidiaries InflaRx GmbH and InflaRx Pharmaceuticals, Inc.

 

Overview

 

We are a clinical-stage biopharmaceutical company focused on applying our proprietary anti-C5a technology to discover and develop first-in-class, potent and specific inhibitors of the complement activation factor known as C5a. C5a is a powerful inflammatory mediator involved in the progression of a wide variety of autoimmune and other inflammatory diseases. Our lead product candidate, IFX-1, is a novel intravenously delivered first-in-class anti-C5a monoclonal antibody that selectively binds to free C5a and has demonstrated disease-modifying clinical activity and tolerability in multiple clinical settings.

 

We have been developing IFX-1 for the treatment of HS, a chronic debilitating systemic inflammatory skin disease. In June 2019, we announced that our Phase IIb clinical trial of IFX-1 in HS did not meet its primary endpoint. On July 18, 2019 we published a post-hoc analysis showing multiple signals of efficacy for the IFX-1 high dose group compared to the placebo group within the initial phase of the SHINE study. On November 6, 2019, we reported additional data from the open label extension (OLE) phase of the international SHINE Phase IIb study. In March 2020, we submitted a request for an end of Phase II meeting to the FDA to discuss a potential Phase III program based on the results of the SHINE study. This meeting has been scheduled for mid-year 2020. The company plans to provide an update on the results of the end of Phase II meeting and potential further development steps with IFX-1 in HS in the second half of 2020. We are also developing IFX-1 in severe COVID-19 induced pneumonia with an adaptive randomized open label multicenter trial in Europe. On March 31, 2020, the Company initiated a clinical development program with IFX-1 in COVID-19 patients with severely progressed pneumonia.  Part 1 of this study is fully enrolled with 30 patients as of April 2020.  We intend to develop IFX-1 and other proprietary antibodies and molecules, and evaluate other technologies as well, to address a wide array of complement-mediated and other diseases with significant unmet needs, including Anca associated vasculitis, or AAV, a rare, life-threatening autoimmune disease, Pyoderma Gangaenosum, or PG, a rare inflammatory skin disorder and indications in oncology and potentially other indications and diseases.

 

Since our inception in December 2007, we have devoted substantially all of our resources to establishing our company, raising capital, developing our proprietary anti-C5a technology, identifying and testing potential product candidates and conducting clinical trials of our lead product candidate, IFX-1. To date, we have not generated any product revenue and have financed our operations primarily through public offerings, private placements and other income from various grants. As of March 31, 2020, we had raised an aggregate of approximately €206.75 million, comprised of €49.2 million in net proceeds from a follow-on public offering in May 2018, €81.8 million in net proceeds from our initial public offering, €74.0 million in gross proceeds from private placements of our securities and €1.75 million in payments in connection with various grants. As of March 31, 2020, we had cash and cash equivalents of €21.1 million and marketable securities of €86.3 million. As of March 31, 2020, we had an accumulated deficit of €142.5 million. We have incurred significant net operating losses in every year since our inception and expect to continue to incur net operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year.

 

We anticipate that our expenses might increase if and as we:

 

 

 

 

 

 

 

 

 

 

 

Our expenses in any quarter may not be indicative of our expenses in future periods, and in particular we expect that our expenses, and therefore our net losses, could vary depending on the going forward strategy relating to the clinical development of IFX-1 in HS, AAV, PG, COVID 19 and additional indications as well as any potential addition of a technology platform or asset.

 

We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate, which we expect will take a number of years and is subject to significant uncertainty. If we obtain regulatory approval for any product candidate, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we may seek to further fund our operations through public or private equity or debt financings or other sources, including strategic collaborations. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed, would have a negative impact on our financial condition and our ability to develop IFX-1 or any additional product candidates.

 

Recent Developments

 

We have submitted a request for an end of Phase II meeting to the FDA in March 2020 to discuss a potential Phase III program based on the results of the SHINE study. A meeting has been scheduled for mid-year 2020. The Company plans to provide an update on the results of the end of Phase II meeting and potential further development steps with IFX-1 in HS in the second half of.

 

In February 2020, the Company announced positive initial data from the first five patients dosed in the ongoing Phase IIa open label study. Of these five initial patients dosed with IFX-1, two patients achieved complete closure of the target ulcer and complete healing of all other PG ulcers. Patients continue to enroll in higher dose groups.

 

We recently reported that the first part of our European Phase II IXCHANGE study with IFX-1 in patients with AAV the study has already been fully enrolled. After analyzing the impact of COVID-19 on the study, we conducted a blinded interim analysis of Part 1. Based on our analysis, we intend to continue with Part 2 of the study but decrease the number of enrolled patients. We also recently reported, that based on a blinded interim analysis and assessment of the potential impact of the COVID-19 pandemic, the Company has decided to stop the US Phase II IXPLORE study and to read out the existing results earlier than initially planned as part of a strategy to align and streamline the US and EU AAV development program.

 

The Company entered into a clinical collaboration agreement with Merck & Co, Inc., Kenilworth, NJ, USA (known as MSD outside the US and Canada) to evaluate the combination of IFX-1 and Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab) in patients with an undisclosed tumor type. Under the terms of the agreement, InflaRx will conduct a Phase IIa clinical study with two IFX-1 arms, including one with KEYTRUDA®. KEYTRUDA® is a registered trademark of Merck Sharp & Dohme Corp., Whitehouse Station, New Jersey, U.S.A, a subsidiary of Merck & Co., Inc., Kenilworth, NJ, USA.

 

On March 31, 2020, the Company initiated a clinical development program with IFX-1 in COVID-19 patients with severely progressed pneumonia. The Company reported the full enrollment with 30 patients of the first part of this study as of April 1, 2020.

 

Research and Development Expenses

 

Research and development expenses have consisted principally of:

 

 

 

 

We anticipate that our total research and development expenses in 2020 might increase compared to our expenses in 2019. Such increased research and development expenses primarily relate to the following key programs:

 

 

 

 

In 2019, we incurred €44.6 million of research and development expense. For the three months ended March 31, 2020 and 2019, we incurred research and development expenses of €7.3 million and €7.7 million, respectively. The principal driver of the slight decrease in our research and development expenses was the Phase IIb clinical development of IFX-1 in HS since this study has been completed in 2019. Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including due to timing of clinical trial initiation and potential enrollment. Research and development expenses are expected to increase as we advance the clinical development of IFX-1 and IFX-2 and further advance the research and development of our preclinical product candidates.

 

We expense research and development costs as incurred. We recognize costs for certain development activities, such as preclinical studies and clinical trials, based on an evaluation of the progress to completion of specific tasks. We use information provided to us by our vendors such as patient enrollment or clinical site activations for services received and efforts expended. Research and development activities are central to our business model. We anticipate that our research and development expenses might increase for the foreseeable future as our current development programs progress and new programs are added.

 

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, any of our product candidates. For a discussion of our other key financial statement line items, please see “Management’s discussion and analysis of financial condition and results of operations—Financial operations overview” in the Annual Report.

 

Results of Operations

 

The numbers below were derived from our consolidated financial statements included elsewhere herein. The discussion below should be read along with these consolidated financial statements, and it is qualified in its entirety by reference to them.

 

We use our employee and infrastructure resources across multiple research and development programs directed toward developing IFX-1 and IFX-2. We manage certain activities such as contract research and manufacturing of IFX-1 and our discovery programs through our third-party vendors.

 

Research and development expenses incurred for the three months ended March 31, 2020 decreased over the corresponding period in 2019 by €0.4 million. This decrease is primarily attributable to a €0.3 million decrease in non-cash share-based compensation expenses.

 

General and administrative expenses decreased by €0.7 million to €2.6 million for the three months ended March 31, 2019, from €3.3 million for the three months ended March 31, 2019. This decrease is primarily attributable to decreasing expenses associated with non-cash share-based compensation (€0.9 million). Legal, consulting and other expenses increased by €0.1 million to €1.1 million for the three months ended March 31, 2020, from €1.0 million for the three months ended March 31, 2019.

 

Net financial result increased by €0.4 million to €1.5 million for the three months ended March 31, 2019, from €1.1 million for the three months ended March 31, 2019. This increase is mainly attributable to (a) higher foreign exchange gains, which increased by €0.8 million and (b) interest on marketable securities, which decreased by €0.4 million.

 

Liquidity and Capital Resources

 

Since inception, we have incurred significant operating losses. For the three months ended March 31, 2020, we incurred a net loss of €8.2 million. To date, we have financed our operations primarily through the sale of our securities. As of March 31, 2020, we had cash and cash equivalents of €21.1 million, plus marketable securities of €86.3 million. Our cash and cash equivalents primarily consist of bank deposit accounts and fixed U.S. Dollar term deposits. Our quoted debt securities have AAA credit ratings.

 

Net Cash Used in Operating Activities

 

The use of cash in all periods resulted primarily from our net losses, adjusted for non-cash charges and changes in components of working capital.

 

Net cash used in operating activities increased from to €10.5 million in the three months ended March 31, 2020, from €8.5 million in the three months ended March 31, 2019, mainly due to the increase of cash expenses, such as third-party expenses for manufacturing and clinical trials for our lead program IFX-1 and higher personnel costs.

 

Net Cash used in Investing Activities

 

Net cash from investing activities increased by €2.5 million in the three months ended March 31, 2020 mainly due to higher reinvestments in marketable securities in 2020 compared to 2019.

 

Net Cash used in Financing Activities

 

Net cash used in financing activities (€(0.1) million) for the three months ended March 31, 2020, is nearly at the same level compared to the three months ended March 31, 2019 (€(0.1) million).

 

Funding Requirements

 

In 2020 we anticipate that our expenses might increase in connection with our ongoing activities. In particular, we anticipate that we will continue and complete Phase II clinical trials in AAV, PG, COVID-19 and an oncology indication, we might start Phase III clinical trials in HS and COVID-19 and might pursue additional indications. We also want to continue preclinical development of IFX-2. We plan to initiate new research and preclinical development efforts and we may seek marketing approval for any product candidates that we successfully develop and where we receive approval. Should we commence further clinical development with IFX-1 in HS, there may be additional costs in connection with such development. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to establishing sales, marketing, distribution and other commercial infrastructure to commercialize such products. The Company does not expect marketing approval in the next 12 to 24 months. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. We believe that our existing cash and cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements under our current business plan for at least the next 24 months.

 

Until such time, if ever, that we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, royalty-based financings, future collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include voting or other rights that adversely affect your rights as a common shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

 

For more information as to the risks associated with our future funding needs, see “Risk factors” in the Annual Report.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2020, and during the periods presented, we did not have any off-balance sheet arrangements other as described under “Management’s discussion and analysis of financial condition and results of operations—Off-balance sheet arrangements” in the Annual Report.

 

Contractual Obligations and Commitments

 

As of the date of this discussion and analysis, we do not have any, and during the periods presented we did not have any, contractual obligations and commitments other than as described under “Management’s discussion and analysis of financial condition and results of operations—Contractual obligations and commitments” in the Annual Report.

 

Quantitative and Qualitative Disclosures about Market Risk

 

During the three months ended March 31, 2020, there were no significant changes to our quantitative and qualitative disclosures about market risk from those reported in “Management’s discussion and analysis of financial condition and results of operations–Quantitative and qualitative disclosures about market risk” in the Annual Report.

 

Critical Judgments and Accounting Estimates

 

There have been no material changes to the significant accounting policies and estimates described in “Management’s discussion and analysis of financial condition and results of operations—Critical judgments and accounting estimates” in the Annual Report.

 

JOBS Act Exemptions

 

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” As an emerging growth company, we are not required to provide an auditor attestation report on our system of internal controls over financial reporting. This exemption will apply for a period of five years following the completion of our initial public offering or until we no longer meet the requirements of being an “emerging growth company,” whichever is earlier. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, have more than $700 million in market value of our common shares held by non-affiliates as of the specified testing date or issue more than $1.0 billion of non-convertible debt over a three-year period.

 

Cautionary Statement Regarding Forward Looking Statements

 

This discussion contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “estimate,” “believe,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions intended to identify statements about the future. These statements speak only as of the date of this discussion and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. 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 include, without limitation, statements about the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. You should refer to the “ITEM 3. KEY INFORMATION: - D. Risk factors” section of the Annual Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our 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 management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this discussion will prove to be accurate. 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. You should, however, review the factors and risks and other information we describe in the reports we will file from time to time with the SEC after the date of this discussion.

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InflaRx Reports Q1 2020 Financial & Operating Results

 

 

Jena, Germany, 21 May 2020 – InflaRx (Nasdaq: IFRX), a clinical-stage biopharmaceutical company developing anti-inflammatory therapeutics by targeting the complement system, announced today financial results for the three months ended March 31, 2020.

 

“InflaRx continues to make progress with its clinical development programs for IFX-1 and recently reported encouraging initial results in Pyoderma Gangraenosum, the second neutrophil-driven devastating skin disease we are pursuing,” said Prof. Niels C. Riedemann, Chief Executive Officer and Founder of InflaRx. “With the upcoming scheduled FDA End of Phase II meeting for development in Hidradenitis Suppurativa, the Company is keeping a strong focus on potentially advancing into Phase III development in this disease.”

 

Prof. Riedemann continued, “We are currently analyzing results from the first 30 patients in our ongoing adaptive randomized COVID-19 pneumonia trial, which will serve as the basis for the decision to potentially continue into a confirmatory larger second part of the study.”

 

R&D highlights – Q1 2020

 

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IFX-1 in ANCA-associated vasculitis (AAV): Part 1 of the European Phase II IXCHANGE study has been fully enrolled. After analyzing the impact of COVID-19 on the study, a blinded interim analysis of Part 1 has been completed. Based on the analysis, the Company intends to continue with Part 2 of the study but decrease the number of enrolled patients. Following a blinded interim analysis of the US Phase II IXPLORE study with IFX-1 in patients with AAV and an assessment of the potential impact of the COVID-19 pandemic, the Company has decided to stop the study and read out the existing results earlier than initially planned as part of a strategy to align and streamline the US and EU AAV development programs.

Financial highlights - Q1 2020

 

Research and development expenses decreased by €0.4 million in the three months ended March 31, 2020 compared to the three months ended March 31, 2019. This decrease is primarily attributable to a €0.3 million decrease in expenses from non-cash share-based compensation.

 

General and administrative expenses decreased by €0.7 million to €2.6 million for the three months ended March 31, 2020, from €3.3 million for the three months ended March 31, 2019. This decrease is primarily attributable to a €0.9 million decrease in non-cash share-based compensation expense.  Legal, consulting and other expenses increased by €0.1 million to €1.1 million for the three months ended March 31, 2020, from €1.0 million for the three months ended March 31, 2019.

Net financial result increased by €0.4 million to €1.5 million for the three months ended March 31, 2020, from €1.1 million for the three months ended March 31, 2019. This increase is mainly attributable to (a) higher foreign exchange gains, which increased by €0.8 million and (b) interest on marketable securities, which decreased by €0.4 million.

 

Net loss for the three months ended March 31, 2020 was €8.2 million or €(0.32) per common share, compared to €9.8 million or €(0.38) per common share for the three months ended March 31, 2019. On March 31, 2020, the Company’s total funds available were approximately €108.0 million, mostly composed of cash and cash equivalents (€21.1 million) and marketable securities (€86.3 million).

 

Net cash used in operating activities increased to €10.5 million for the three months ended March 31, 2020, from €8.5 million in the three months ended March 31, 2019, mainly due to the increase of cash expenses, such as third-party expenses for manufacturing and clinical trials for our lead program IFX-1 and higher personnel costs.

 

Additional information regarding these results is included in the notes to the consolidated financial statements as of March 31, 2020, as well as the financial statements as of December 31, 2019 in “ITEM 18. Financial statements,” which is included in InflaRx’s Annual Report on Form 20-F as filed with the U.S. Securities and Exchange Commission (SEC).

 

InflaRx N.V. and subsidiary

Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2020 and 2019

 

InflaRx N.V. and subsidiary

Consolidated Statements of Financial Position as of March 31, 2020 and December 31, 2019

 

InflaRx N.V. and subsidiary

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2020 and 2019