INmune Bio: An Opportunity In The Freefall (NASDAQ:INMB)

Topline Summary and Update

INmune Bio (NASDAQ:INMB) is a company focused on developing drugs in two different disease areas: neurology and cancer medicine. I’ve previously covered this company in two articles, and I was a cautious optimist in my latest outing, with main reservations related to their cash burn rate and the challenges of developing drugs for Alzheimer disease, which is their most advanced focus. This article is an update providing a picture of how the story has continued to evolve over the past several months, particularly in light of the recent freefall in share valuation that INMB has experienced in the last month, giving back almost all the gains it’s made since last November.

I am upgrading my rating from a Hold (previously rated when the stock price was $11 per share) to a “Strong Buy,” indicating that I see a significant opportunity at these prices at this time, given the potential catalysts for 2024. It’s not for everyone, but there are a lot of people in this space who would find the risk/reward ratio here very enticing, given the recent rollercoaster that has been biotech investing.

Pipeline Overview

XPro

The most advanced product candidate being developed by INMB remains XPro 1595, an inactivated form of tumor necrosis factor-alpha (TNF-a for short) that is designed to block this inflammatory marker implicated in all kinds of diseases. This includes (as the name of the molecule would imply) cancer, but also a variety of diseases thought to be linked to inflammation.

The main shot on deck for XPro is Alzheimer’s disease, in which INMB has been conducting a phase 2 clinical trial that was on hold for well over a year. As of my last article back in January, this hold was still in place. As expected, this hold was finally lifted on January 30. This puts the company on track to get to full enrollment by June, with a top-line data readout guided for mid-2024. At this time, INMB is anticipating beginning a randomized, phase 3 trial sometime in 2025.

Following that lift, we heard from INMB back in March about a small group of patients (n = 7) with moderate-to-severe Alzheimer’s disease who had apparent improvements in electroencephalography readings, with statistically significant improvement in alpha wave power and frequency. Loss of alpha wave function is thought to correspond with functional impairment in patients as Alzheimer’s diseases progresses, so this is an encouraging, though early, readout suggesting some kind of functional improvement could be achieved with XPro.

There are currently no changes to the plan to initiate a phase 2 trial of XPro in patients with treatment-resistant depression, although there have been no substantive updates on this front.

The platform is also being evaluated in oncology, with the most notable data readouts coming for breast cancer in recent months. In this setting, the soluble TNF-a antagonist is called INB03, with preclinical work being published and presented focusing on the impact of blocking TNF and reprogramming of immune cells. At SABCS last year, INB03 treatment was shown to correspond with increased uptake of trastuzumab deruxtecan in models of HER2-positive breast cancer.

We have not heard much else on the plans for clinical development of INB03, and no formal guidance on it from INMB in their latest filings, but there is clearly something in the works along this line.

INKmune

INMB’s oncology focus is a tumor cell cocktail designed to engage natural killer cell activity in patients with different blood cancers and solid tumors. Most of what we’ve heard from this program has been early clinical trial readouts in cancers like AML, demonstrating tolerability and some correlates associated with primed natural killer cells.

The company has initiated a phase 1 trial in patients with metastatic castration-resistant prostate cancer, with the first patient being enrolled and treated at the end of 2023, per their latest guidance. INMB anticipates a data readout coming later in 2024, with enrollment expected to be completed for the phase 2 portion in 2025, signifying accelerating progress in this space.

Financial Overview

In their latest financial filing, INMB held $39.9 million in current assets, mostly in the form of cash and equivalents ($35.8 million). For the fiscal year 2023, their operating loss was $29.7 million, with negligible revenues brought in from their licensing activity.

At this burn rate, INMB has somewhere around 1 year of assets on hand to fund operations. It would be unsurprising to see some kind of dilutive cash raise come to pass this year, although on what terms would be anyone’s guess. No equity raise was done in 2023, for reference.

Strengths and Risks

Strength – Diversity of pipeline

INMB has kept their cash burn relatively under control as they’ve moved through clinical development for Alzheimer’s disease. Couple that with developing technologies in cancer, as well, and I’d say their stewardship of funds has been admirable. 2024 has the potential to be an important year for data-related catalysts, so if I were a shareholder (or considering becoming one), this is a year I’d be excited to follow.

Risk – Cash is going to be an issue in 2024

About the only thing I’m certain of for INMB is that the cash concerns are going to need to be addressed by the end of 2024. The only question mark surrounding that would be timing, and whether they can raise money in some kind of transaction that offers any position of strength. There are a few anticipated data readouts that could be the catalyst for a favorable fundraising effort.

And it should be kept in mind that a prostate cancer readout could end up being the fuel needed to vault the valuation of this company further. I’m looking at companies like Janux Therapeutics that were able to raise hundreds of millions while maintaining a $2+ billion market capitalization, mostly on the back of a tentatively favorable data read in prostate cancer. The opportunity could be there, although I would consider it far from a guarantee.

Bottom-Line Summary

The near-50% haircut from recent highs in the share price presents a potential opportunity for would-be investors in INMB. I would caution anyone to keep in mind that their two main clinical platforms are focused on areas that have historically been difficult to prove the concept (i.e., any treatment for Alzheimer’s disease, and any treatment based on priming natural killer cells), so there is a lot of room for failure.

However, if they are able to show any signs of life with their 2 platform projects, the current stock price could very well be a bottom. On that basis, I would consider this equity a high risk/high reward opportunity worth checking out more deeply, and I would consider initiating a small position, since the upside is extremely high. Keep in mind that they’re in danger of drifting into microcap territory, though, and that they may need to perform a destructive, highly dilutive capital raise from a position of weakness.