Instil Bio Inc

Previous wording

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, our expectations regarding our clinical trials, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

Current wording

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, our expectations regarding our collaborations and clinical trials, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

Previous wording

We are a clinical-stage biopharmaceutical company focused on developing a pipeline of novel therapies. We seek to in-license/acquire and develop novel therapeutic candidates in diseases with significant unmet medical need. Our first such program is a tumor infiltrating lymphocyte (TIL) cell therapy for the treatment of cancer, which we acquired in 2020.

Current wording

We are a clinical-stage biopharmaceutical company focused on developing a pipeline of novel therapies. We are advancing the development of our lead product candidate, AXN-2510/IMM2510, a bispecific antibody targeting both programmed death-ligand 1, or PD-L1, and the family of vascular endothelial growth factors, or VEGFs, in solid tumor cancers, and we seek to in-license or acquire and develop additional novel therapeutic candidates in diseases with significant unmet medical need.

Previous wording

Since inception, we have had significant operating losses. Our net loss was $156.1 million and $223.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $581.0 million. As of December 31, 2023, we had cash, cash equivalents, restricted cash, marketable securities and long-term investments of $175.0 million, which consisted of $9.2 million in cash and cash equivalents, $1.5 million in restricted cash, $141.2 million in marketable securities and $23.2 million in long-term investments. We expect to continue to incur net losses for the foreseeable future. We expect our research and development expenses, general and administrative expenses, and capital expenditures to temporarily decrease, and we anticipate research and development expenses to subsequently increase for clinical development.

Current wording

Since inception, we have had significant operating losses. Our net loss was $74.1 million and $156.1 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $655.1 million. As of December 31, 2024, we had cash, cash equivalents, restricted cash and marketable securities of $115.1 million, which consists of $8.8 million in cash and cash equivalents, $1.8 million of restricted cash and $104.5 million in marketable securities. We expect to continue to incur net losses for the foreseeable future.

Previous wording

Research and development expenses account for a significant portion of our operating expenses. Research and development expenses consist primarily of research and development, manufacturing, monitoring and other services payments and, to a lesser extent, salaries, benefits, and other personnel-related costs, including stock-based compensation, professional service fees and facility and other related costs. In addition, research and development expense is presented net of reimbursements from reimbursable tax and expenditure credits and grants from the UK government. For the years ended December 31, 2023 and 2022, we did not allocate our research and development expenses by program.

Current wording

Research and development expenses consist primarily of research and development, manufacturing, monitoring and other services payments and, to a lesser extent, salaries, benefits and other personnel-related costs, including stock-based compensation, professional service fees, and facility and other related costs. In addition, research and development expense is presented net of reimbursements from reimbursable tax and expenditure credits and grants from the UK government.

Previous wording

We expect our future research and development expenses to change in line with our clinical development activities for our Collaboration Product or other next-generation TIL technologies, other potential business development activities, and changes in the size of our company. Our expenditures on future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including:

Current wording

We expect our future research and development expenses to change in line with our clinical development activities for AXN-2510/IMM2510, AXN-27M/IMM27M and other potential business development activities. Our expenditures on future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including:

Previous wording

The process of conducting the necessary clinical research to obtain regulatory approval from the FDA, MHRA, European Medicines Agency, or EMA, and comparable foreign authorities is costly and time consuming and the successful development of product candidates is highly uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in the section of this Annual Report titled “Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.

Current wording

The process of conducting the necessary clinical research to obtain regulatory approval from the FDA, Medicines and Healthcare Products Regulatory Agency, or MHRA, European Medicines Agency, or EMA, and comparable foreign authorities is costly and time consuming and the successful development of product candidates is highly uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in the section of this Annual Report titled “Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.

Previous wording

Additionally, we expect to continue to incur expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, director and officer insurance expenses, and any investor relations related expenses, as well as other administrative and professional services.

Current wording

We expect to continue to incur expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, director and officer insurance expenses, and any investor relations related expenses, as well as other administrative and professional services.

Previous wording

•building and asset impairment charges related to our facility in Tarzana, which we have ceased using as a manufacturing facility;

Current wording

•for the year ended December 31, 2023, asset impairment charges related to our facility in Tarzana;

Previous wording

•contract terminations, including contract terminations related to the Tarzana and Thousand Oaks facilities; and

Current wording

•contract terminations related to our facilities; and

Previous wording

Our 2022 Plan and 2023 Plan were designed to reduce costs and reallocate resources to focus on advancing our CoStAR platform and other next-generation TIL technologies and consolidate our manufacturing activities to one facility. As part of the Plan, in 2022 our ITIL-168 development program was discontinued, and in 2023 we transitioned clinical manufacturing and trial operations of ITIL-306 to the United Kingdom and, as a result, in 2023 we reduced our U.S. workforce by approximately 96% and our UK workforce by approximately 42%. Subsequently, in early 2024, we decided to close our UK manufacturing and clinical operations and we expect additional restructuring and impairment charges in 2024 as a result of our 2024 Plan.

Current wording

As part of a restructuring plan adopted in January 2023, we transitioned clinical manufacturing and trial operations of our former ITIL-306 program to the United Kingdom from the United States, and as a result, in 2023 we reduced our U.S. workforce by approximately 96% and our UK workforce by approximately 42%. Subsequently, in January 2024, we decided to initiate closure of our UK manufacturing and clinical operations, and in September 2024 we decided to close most of our remaining Manchester, UK operations, which resulted in the elimination of the majority of the remaining UK workforce, with the remaining reduction substantially completed by the end of 2024, which collectively we refer to as the 2024 Plan. As a result of the 2024 Plan, we incurred charges of $7.5 million during the year ended December 31, 2024.

Previous wording

Interest income consists of interest income from funds held in our cash and cash equivalent accounts, and marketable securities.

Current wording

Interest income consists of interest income from funds held in our cash and cash equivalent accounts, marketable securities and long-term investments.

Previous wording

Interest expense consists of interest expense on our note payable and amortization of loan origination costs.

Current wording

Interest expense consists of interest expense on our debt and amortization of loan origination costs.

Previous wording

Other income (expense), net consists primarily of derivative instrument fair value gain or loss, foreign exchange remeasurement gain or loss and other expenses and income.

Current wording

Other expense, net consists primarily of derivative financial instrument fair value gain or loss, foreign exchange remeasurement gain or loss, debt extinguishment loss and other expenses and income.

Previous wording

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty of the business in which we operate, projections of future profitability are difficult and past profitability is not necessarily indicative of future profitability. At December 31, 2023, we maintained a full valuation allowance against net deferred tax assets for the United States and the United Kingdom. The valuation allowance has been provided based on the positive and negative evidence relative to our company, including the existence of cumulative net operating losses, or NOLs, since our inception, and the inability to carryback these NOLs to prior periods. Furthermore, we determined that it is more likely than not that the benefit of these assets would not be realized in the foreseeable future. The timing and the reversal of the valuation allowance will continue to be monitored.

Current wording

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty of the business in which we operate, projections of future profitability are difficult and past profitability is not necessarily indicative of future profitability. We maintain full valuation allowance against net deferred tax assets for the United States and the United Kingdom. The valuation allowance has been provided based on the positive and negative evidence relative to our company, including the existence of cumulative net operating losses, or NOLs, since our inception, and the inability to carryback these NOLs to prior periods. Furthermore, we have determined that it is more likely than not that the benefit of these assets would not be realized in the foreseeable future. The timing and the reversal of our valuation allowance will continue to be monitored.

Previous wording

•$60.4 million decrease in costs from reduced headcount, consisting primarily of decreases of $45.4 million in wages and benefits, $10.3 million in stock-based compensation expense and $2.2 million for other employee-related expenses in relation to our research and development personnel and $2.5 million in professional services;

Current wording

•$12.8 million decrease in costs from reduced headcount, consisting primarily of decreases of $12.3 million in wages and benefits, $0.2 million for other employee-related expenses in relation to our research and development personnel, and $0.8 million in professional services, offset by a $0.5 million increase in stock-based compensation expense due to forfeitures related to our reduction in force in 2023;

Previous wording

•$25.5 million decrease in costs related to research and clinical development activities, and our clinical trials resulting from our discontinuation of our ITIL-168 clinical manufacturing activities; and

Current wording

•$5.7 million decrease in costs related to research and clinical development activities and our clinical trials resulting from our discontinuation of our ITIL-168 clinical manufacturing activities; and

Previous wording

•$15.6 million decrease in expenses related to facilities, overhead, depreciation, and other expenses due to strategic reductions made in these areas.

Current wording

•$9.3 million decrease in expenses related to facilities, overhead, depreciation, and other expenses due to strategic reductions made in these areas.

Previous wording

•$13.7 million decrease in costs resulting from decrease in headcount and personnel related costs, including a decrease in stock-based compensation expense of $2.0 million; and

Current wording

•$3.0 million decrease in costs resulting from decreases in headcount and personnel related costs, including a decrease in stock-based compensation expense of $1.4 million; and

Previous wording

•$5.3 million decrease in consulting and professional service costs, mainly consisting of costs of information technology and facility consultants of $3.2 million, and costs of business operations consultants of $2.1 million; offset by

Current wording

•$0.4 million decrease in consulting and professional service costs, mainly consisting of costs of business operations consultants of $0.6 million, offset by an increase of costs of information technology and facility consultants of $0.2 million; offset by

Previous wording

•$4.3 million increase in insurance expense, depreciation, and other office expenses.

Current wording

•$0.1 million increase in insurance expense, depreciation, and other office expenses.

Previous wording

Restructuring and impairment charges were approximately $72.0 million and $23.2 million for the years ended December 31, 2023 and 2022, respectively. The net increase of $48.8 million was primarily due to:

Current wording

Restructuring and impairment charges were approximately $7.5 million and $72.0 million for the years ended December 31, 2024 and 2023, respectively. The net decrease of $64.5 million was primarily due to:

Previous wording

•$16.3 million increase in costs resulting from impairment charge of assets held for sale;

Current wording

•$11.9 million decrease in costs resulting from impairments of assets identified as held for sale;

Previous wording

•$7.7 million increase in leased assets impairment charge;

Current wording

•$6.9 million decrease in leased assets impairment charge;

Previous wording

•$1.4 million increase in leasehold improvement impairment charge; offset by

Current wording

•$2.3 million decrease in leasehold improvement impairment charge; and

Previous wording

•$0.4 million decrease in costs associated with termination of contracts;

Current wording

•$2.7 million decrease in costs associated with termination of contracts; offset by

Previous wording

•$1.2 million decrease in costs consisting of severance payments and benefits continuation costs; and

Current wording

•$0.8 million increase in costs consisting of severance payments and benefits continuation costs.

Previous wording

Interest Income, Interest Expense and Other Expense, Net

Current wording

Interest Income, Interest Expense, Other Rental Income and Other Expense, Net

Previous wording

Interest income, interest expense and other expense, net was $3.1 million and $1.2 million of income for the years ended December 31, 2023 and 2022, respectively. The increase in income of $1.9 million was primarily due to:

Current wording

Interest income, interest expense other rental income and other expense, net was $0.6 million of expense and $3.1 million of income for the years ended December 31, 2024 and 2023, respectively. The increase in expense of $3.7 million was primarily due to:

Previous wording

•$5.2 million of interest income related to our investments;

Current wording

•$1.9 million decrease of interest income related to our investments;

Previous wording

•$2.2 million of gain on foreign currency transactions; offset by

Current wording

•$0.9 million increase of loss on foreign currency transactions;

Previous wording

•$4.4 million of interest expense from our note payable; and

Current wording

•$3.8 million increase of interest expense from our debt; and

Previous wording

•$1.1 million other losses, including changes in fair value from derivative instrument.

Current wording

•$1.3 million increase of other losses, including changes in fair value and termination of derivative financial instrument and debt extinguishment; offset by

Previous wording

Since our inception, we have not generated any revenue from product sales and we have incurred significant operating losses. We do not have any products that have achieved regulatory marketing approval and we do not expect to generate revenue from sales of any product candidates for at least several years, if ever.

Current wording

Since our inception, we have not generated any revenue from product sales and we have incurred significant operating losses. We do not have any products that have achieved regulatory marketing approval and we do not expect to generate revenue from commercial sales of any product candidates for several years, if ever.

Previous wording

As of December 31, 2023, we had cash, cash equivalents, restricted cash, marketable securities and long-term investments of $175.0 million, which consisted of $9.2 million in cash and cash equivalents, $1.5 million in restricted cash, $141.2 million in marketable securities and $23.2 million in long-term investments. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Current wording

As of December 31, 2024, we had cash, cash equivalents, restricted cash and marketable securities of $115.1 million, which consisted of $8.8 million in cash and cash equivalents, $1.8 million in restricted cash and $104.5 million in marketable securities. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Previous wording

Prior to our initial public offering, or IPO, we funded our operations primarily through the issuance and sale of convertible preferred stock. From our inception through March 2021, we raised net cash proceeds of $380.1 million from the issuance and sale of our convertible preferred stock.

Current wording

Prior to our initial public offering, or IPO, we funded our operations primarily through the issuance and sale of convertible preferred stock. From our inception through March 2021, prior to our IPO, we raised net cash proceeds of $380.1 million from the issuance and sale of our convertible preferred stock.

Previous wording

In June 2022, our wholly-owned subsidiary, Complex Therapeutics Mezzanine LLC, and our wholly owned indirect subsidiary, Complex Therapeutics LLC, entered into a mortgage construction loan and mezzanine construction loan, or together, the Loan, secured by our Tarzana, California land and building. Construction of the Tarzana facility has been completed. The initial principal amount of the Loan was $52.1 million, with additional future principal of up to $32.9 million to fund then ongoing construction costs. As of December 31, 2023, the outstanding principal amount under the Loan was $82.8 million and unamortized debt issuance costs were $1.4 million.

Current wording

In June 2022, our wholly owned subsidiary, Complex Therapeutics Mezzanine LLC, and our wholly owned subsidiary, Complex Therapeutics LLC, entered into a mortgage construction loan and mezzanine construction loan, or together, the Construction Loan Agreements, secured by our Tarzana, California land and building. Construction of the Tarzana facility has been completed and the facility has been leased to AstraZeneca. The initial principal amount of the Construction Loan Agreements was $52.1 million, with additional future principal of up to $32.9 million to fund then ongoing construction costs. During the year ended December 31, 2024, we refinanced the outstanding principal amount under the Construction Loan Agreements and treated it as an extinguishment for accounting purposes. On December 20, 2024, our wholly owned subsidiary, Complex Therapeutics LLC, entered into a Term Loan Agreement and related loan documents with Midland National Life Insurance Company, or the Lender, pursuant to which Lender loaned Complex Therapeutics LLC a term loan in the principal amount of $85.6 million, or the Loan, to refinance loans secured by the facility in Tarzana, California owned by Complex

Previous wording

We are evaluating opportunities for a potential sale or lease of the Tarzana manufacturing site, as well as subleases of other facilities under lease, which may further extend our expected cash runway. We have based this estimate on assumptions that may prove to be wrong, we may not be successful in securing a sale or lease of the Tarzana facility or subleases of the other facilities on favorable terms, or at all and we could utilize our available capital resources sooner than we expect. We expect to continue to expend significant resources for the foreseeable future.

Current wording

Based on our current operating plan, we believe our existing cash, cash equivalents, restricted cash and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements beyond 2026. We are evaluating opportunities for a potential sale of our Tarzana facility, which is leased to AstraZeneca, and AstraZeneca has the right of first offer to purchase the Tarzana facility. If we are successful in selling the Tarzana facility, such a transaction could extend our expected cash runway. We have based this estimate on assumptions that may prove to be wrong, we may not be successful in securing a sale of the Tarzana facility, or at all, and we could utilize our available capital resources sooner than we expect.

Previous wording

We use our cash to fund operations, primarily to fund our business development, research and development expenditures and related personnel costs. We expect our expenses to continue to be significant as we invest in research and development activities, particularly as we advance our product candidates into later stages of development and conduct larger clinical trials, seek regulatory approvals for and commercialize any product candidates that successfully complete clinical trials, hire personnel and invest in and grow our business, expand and protect our intellectual property portfolio, and operate as a public company. Because of the numerous risks and uncertainties associated with research, development and commercialization of our product candidates, we are unable to estimate the exact timing and amount of our funding requirements. Our future operating expenditures will depend on many factors, including:

Current wording

We use our cash to fund operations, primarily to fund our business development, research and development expenditures and related personnel costs. We expect our expenses to continue to be significant as we invest in research and development activities, particularly as we in-license or acquire product candidates, advance product candidates into later stages of development and conduct clinical trials, seek regulatory approvals for and commercialize any product candidates that successfully complete clinical trials, hire personnel and invest in and grow our business, expand and protect our intellectual property portfolio, and operate as a public company. Because of the numerous risks and uncertainties associated with acquiring product candidates, and the research, development and commercialization of product candidates, we are unable to estimate the exact timing and amount of our funding requirements. Our future operating expenditures will depend on many factors, including:

Previous wording

•the number and characteristics of any additional product candidates we develop or acquire;

Current wording

•the results of our collaboration with ImmuneOnco and the number and characteristics of any product candidates we develop or acquire;

Previous wording

•the results of our collaboration and the scope, rate of progress, costs and results of our clinical and preclinical development activities, and the results of our discussions with the MHRA, the FDA and other regulatory agencies;

Current wording

•the scope, rate of progress, costs and results of future clinical and preclinical development activities;