SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Delaware		56-2358443
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1200 Avenue of the Americas
Suite 200
New York,	NY	10036
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	IMUX	The Nasdaq Stock Market LLC

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

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 ☒

On ~~May 2,~~July 31, 2022, ~~30,540,383~~30,564,995 shares of common stock, $0.0001 par value, were outstanding.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	95,710	$	86,863	Cash and cash equivalents	$	88,078	$	86,863
Other current assets and prepaid expenses	Other current assets and prepaid expenses	20,169		18,125		Other current assets and prepaid expenses	16,683		18,125
Total current assets	Total current assets	115,879		104,988		Total current assets	104,761		104,988
Property and equipment, net	Property and equipment, net	155		152		Property and equipment, net	139		152
Goodwill	Goodwill	32,970		32,970		Goodwill	32,970		32,970
Right-of-use assets, net	Right-of-use assets, net	874		948		Right-of-use assets, net	745		948
Other long-term assets	Other long-term assets	42		42		Other long-term assets	42		42
Total assets	Total assets	$	149,920	$	139,100	Total assets	$	138,657	$	139,100
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	3,288	$	3,745	Accounts payable	$	4,117	$	3,745
Accrued expenses	Accrued expenses	7,520		7,071		Accrued expenses	5,741		7,071
Other current liabilities	Other current liabilities	649		585		Other current liabilities	544		585
Total current liabilities	Total current liabilities	11,457		11,401		Total current liabilities	10,402		11,401
Long-term liabilities
Long term liabilities						Long term liabilities
Operating lease liabilities	Operating lease liabilities	502		584		Operating lease liabilities	407		584
Total long-term liabilities	Total long-term liabilities	502		584		Total long-term liabilities	407		584
Total liabilities	Total liabilities	11,959		11,985		Total liabilities	10,809		11,985
Commitments and contingencies (Note 4)	Commitments and contingencies (Note 4)	0		0		Commitments and contingencies (Note 4)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.0001 par value; 20,000,000 authorized and no shares issued or outstanding as of March 31, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par value; 130,000,000 shares authorized and 29,240,383 and 26,335,418 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		3		3
Preferred stock, $0.0001 par value; 20,000,000 authorized and no shares issued or outstanding as of June 30, 2022 and December 31, 2021						Preferred stock, $0.0001 par value; 20,000,000 authorized and no shares issued or outstanding as of June 30, 2022 and December 31, 2021	—		—
Common stock, $0.0001 par value; 130,000,000 shares authorized and 30,564,995 and 26,335,418 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively						Common stock, $0.0001 par value; 130,000,000 shares authorized and 30,564,995 and 26,335,418 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	3		3
Additional paid-in capital	Additional paid-in capital	355,949		324,237		Additional paid-in capital	368,087		324,237
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(310)		(252)		Accumulated other comprehensive loss	(660)		(252)
Accumulated deficit	Accumulated deficit	(217,681)		(196,873)		Accumulated deficit	(239,582)		(196,873)
Total stockholders’ equity	Total stockholders’ equity	137,961		127,115		Total stockholders’ equity	127,848		127,115
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	149,920	$	139,100	Total liabilities and stockholders’ equity	$	138,657	$	139,100

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

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)


		Three Months Ended March 31,						Three Months Ended June 30,	Six Months Ended June 30,
			2022		2021				2022		2021		2022		2021
Operating expenses:	Operating expenses:						Operating expenses:
Research and development	Research and development		$	17,445	$	11,519	Research and development		$	16,538	$	15,738	$	33,983	$	27,257
General and administrative	General and administrative		3,990		3,618		General and administrative		4,072		3,432		8,062		7,050
4SC Royalty Settlement (See Note 4)			—		17,250
4SC royalty settlement (see Note 4)							4SC royalty settlement (see Note 4)		—		—		—		17,250
Total operating expenses	Total operating expenses		21,435		32,387		Total operating expenses		20,610		19,170		42,045		51,557
Loss from operations	Loss from operations		(21,435)		(32,387)		Loss from operations		(20,610)		(19,170)		(42,045)		(51,557)
Other income (expense):	Other income (expense):						Other income (expense):
Interest income	Interest income		7		28		Interest income		106		13		113		41
Other income (expense), net	Other income (expense), net		620		(2,175)		Other income (expense), net		(1,397)		1,223		(777)		(952)
Total other income (expense)	Total other income (expense)		627		(2,147)		Total other income (expense)		(1,291)		1,236		(664)		(911)
Net loss	Net loss		$	(20,808)	$	(34,534)	Net loss		$	(21,901)	$	(17,934)	$	(42,709)	$	(52,468)

Net loss per share, basic and diluted	Net loss per share, basic and diluted		$	(0.74)	$	(1.63)	Net loss per share, basic and diluted		$	(0.72)	$	(0.82)	$	(1.49)	$	(2.44)

Weighted-average common shares outstanding, basic and diluted	Weighted-average common shares outstanding, basic and diluted		28,127,288		21,174,698		Weighted-average common shares outstanding, basic and diluted		30,248,767		21,749,439		28,686,910		21,463,656

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

Condensed Consolidated Statements of Comprehensive Loss


		Three Months Ended March 31,						Three Months Ended June 30,	Six Months Ended June 30,
			2022		2021				2022		2021		2022		2021
Net loss	Net loss		$	(20,808)	$	(34,534)	Net loss		$	(21,901)	$	(17,934)	$	(42,709)	$	(52,468)
Other comprehensive income (loss):	Other comprehensive income (loss):						Other comprehensive income (loss):
Foreign currency translation	Foreign currency translation		(58)		2,991		Foreign currency translation		(350)		(277)		(408)		2,714

Total comprehensive loss	Total comprehensive loss		$	(20,866)	$	(31,543)	Total comprehensive loss		$	(22,251)	$	(18,211)	$	(43,117)	$	(49,754)

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

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except ~~shares)~~share amounts)

(Unaudited)


Three Months Ended March 31, 2022
Six Months Ended June 30, 2022													Six Months Ended June 30, 2022
		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
		Shares	Amount											Shares	Amount
Balance at January 1, 2022	Balance at January 1, 2022	26,335,418	$	3	$	324,237	$	(252)	$	(196,873)	$	127,115	Balance at January 1, 2022	26,335,418	$	3	$	324,237	$	(252)	$	(196,873)	$	127,115
Net loss	Net loss	—	—		—		—		(20,808)		(20,808)		Net loss	—	—		—		—		(20,808)		(20,808)
Stock-based compensation	Stock-based compensation	—	—		2,069		—		—		2,069		Stock-based compensation	—	—		2,069		—		—		2,069
Foreign exchange translation adjustment	Foreign exchange translation adjustment	—	—		—		(58)		—		(58)		Foreign exchange translation adjustment	—	—		—		(58)		—		(58)
Shares issued in connection with the Company's stock option plan	Shares issued in connection with the Company's stock option plan	852	—		5		—		—		5		Shares issued in connection with the Company's stock option plan	852	—		5		—		—		5
Issuance of common stock - At The Market Sales Agreement net of issuance costs of $918		2,904,113	—		29,638		—		—		29,638
Issuance of common stock - at the market Sales Agreement net of issuance costs of $918													Issuance of common stock - at the market Sales Agreement net of issuance costs of $918	2,904,113	—		29,638		—		—		29,638
Balance at March 31, 2022	Balance at March 31, 2022	29,240,383	$	3	$	355,949	$	(310)	$	(217,681)	$	137,961	Balance at March 31, 2022	29,240,383	$	3	$	355,949	$	(310)	$	(217,681)	$	137,961
Net loss													Net loss	—	—		—		—		(21,901)		(21,901)
Stock-based compensation													Stock-based compensation	—	—		2,062		—		—		2,062
Foreign exchange translation adjustment													Foreign exchange translation adjustment	—	—		—		(350)		—		(350)
Shares issued in connection with the Company's Employee stock purchase plan													Shares issued in connection with the Company's Employee stock purchase plan	24,612	—		130		—		$	—	130
Issuance of common stock - at the market Sales Agreement net of issuance costs of $308													Issuance of common stock - at the market Sales Agreement net of issuance costs of $308	1,300,000	—		9,946		$	—	$	—	9,946
Balance at June 30, 2022													Balance at June 30, 2022	30,564,995	$	3	$	368,087	$	(660)	$	(239,582)	127,848

Three Months Ended March 31, 2021
Common Stock Additional
Paid-In
Capital Accumulated
Other
Comprehensive
Income (Loss) Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
Balance at January 1, 2021 21,168,240 $ 2 $ 266,823 $ (4,112) $ (103,928) $ 158,785
Net loss — — — — (34,534) (34,534)
Stock-based compensation — — 1,579 — — 1,579
Foreign exchange translation adjustment — — — 2,991 — 2,991
Issuance of common stock in connection with the 4SC royalty settlement (see Note 4) 581,199 — 8,625 — — 8,625
Balance at March 31, 2021 21,749,439 2 $ 277,027 $ (1,121) $ (138,462) $ 137,446


Six Months Ended June 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at January 1, 2021	21,168,240	2		266,823		(4,112)		(103,928)		158,785
Net loss	—	—		—		—		(34,534)		(34,534)
Stock-based compensation	—	—		1,579		—		—		1,579
Foreign exchange translation adjustment	—	—		—		2,991		—		2,991
Issuance of common stock in connection with the 4SC royalty settlement (see Note 4)	581,199	—		8,625		—		—		8,625
Balance at March 31, 2021	21,749,439	2		$	277,027	$	(1,121)	$	(138,462)	$	137,446
Net loss	—	—		—		—		(17,934)		(17,934)
Stock-based compensation	—	—		1,507		—		—		1,507
Foreign exchange translation adjustment	—	—		—		(277)		—		(277)
Balance at June 30, 2021	21,749,439	$	2	$	278,534	$	(1,398)	$	(156,396)	$	120,742

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

Condensed Consolidated Statements of Cash Flows


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(20,808)	$	(34,534)	Net loss	$	(42,709)	$	(52,468)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	21		14		Depreciation and amortization	41		29
Unrealized foreign currency loss	Unrealized foreign currency loss	149		2,505		Unrealized foreign currency loss	2,103		1,905

Stock-based compensation	Stock-based compensation	2,069		1,579		Stock-based compensation	4,131		3,086
Common Stock issued in connection with the 4SC royalty settlement (see Note 4)	Common Stock issued in connection with the 4SC royalty settlement (see Note 4)	—		8,625		Common Stock issued in connection with the 4SC royalty settlement (see Note 4)	—		8,625
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Other current assets and prepaid expenses	Other current assets and prepaid expenses	(2,267)		410		Other current assets and prepaid expenses	139		(8,683)
Accounts payable	Accounts payable	(350)		6,773		Accounts payable	826		483
Accrued expenses	Accrued expenses	558		1,714		Accrued expenses	(861)		2,011
Other liabilities	Other liabilities	(53)		(34)		Other liabilities	(114)		3,059
Net cash used in operating activities	Net cash used in operating activities	(20,681)		(12,948)		Net cash used in operating activities	(36,444)		(41,953)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Purchases of property and equipment	Purchases of property and equipment	(12)		(10)		Purchases of property and equipment	(40)		(28)

Net cash used in investing activities	Net cash used in investing activities	(12)		(10)		Net cash used in investing activities	(40)		(28)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from public offering of common stock through At The Market Sales Agreement, net	Proceeds from public offering of common stock through At The Market Sales Agreement, net	29,638		—		Proceeds from public offering of common stock through At The Market Sales Agreement, net	39,584		—
Proceeds from exercise of stock options	Proceeds from exercise of stock options	5		—		Proceeds from exercise of stock options	5		—

Proceeds from shares issued in connection with the Company's employee stock purchase plan						Proceeds from shares issued in connection with the Company's employee stock purchase plan	130		—
Net cash provided by financing activities	Net cash provided by financing activities	29,643		—		Net cash provided by financing activities	39,719		—
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(103)		345		Effect of exchange rate changes on cash and cash equivalents	(2,020)		1,704
Net change in cash and cash equivalents	Net change in cash and cash equivalents	8,847		(12,613)		Net change in cash and cash equivalents	1,215		(40,277)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	86,863		127,452		Cash and cash equivalents, beginning of period	86,863		127,452
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	95,710	$	114,839	Cash and cash equivalents, end of period	$	88,078	$	87,175

Supplemental disclosure of noncash investing and financing activities:	Supplemental disclosure of noncash investing and financing activities:					Supplemental disclosure of noncash investing and financing activities:

Common Stock issued in connection with the 4SC royalty settlement (see Note 4)	Common Stock issued in connection with the 4SC royalty settlement (see Note 4)	$	—	$	8,625	Common Stock issued in connection with the 4SC royalty settlement (see Note 4)	$	—	$	8,625
Operating lease right-of use asset obtained in exchange for lease obligation	Operating lease right-of use asset obtained in exchange for lease obligation	$	—	$	435	Operating lease right-of use asset obtained in exchange for lease obligation	$	—	$	435

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

Notes to Condensed Consolidated Financial Statements

1. Description of Business and Basis of Financial Statements

Description of Business

Immunic, Inc. ("Immunic" or the "Company") is a clinical-stage biopharmaceutical company with a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune ~~diseases, including relapsing multiple sclerosis (“RMS”), ulcerative colitis (“UC”), Crohn’s disease (“CD”) and psoriasis.~~diseases. The Company is headquartered in New York City with its main operations in Gräfelfing near Munich, Germany. The Company currently has approximately 5560 employees.

The Company is currently pursuing 3 development programs. These include the vidofludimus calcium (IMU-838) program, which is focused on the development of oral formulations of a small molecule inhibitor of the enzyme dihydroorotate dehydrogenase (“DHODH”); the IMU-935 program, which is focused on an inverse agonist of retinoic acid receptor-related orphan nuclear receptor gamma truncated (“RORγt”), an immune cell-specific isoform of RORγ; and the IMU-856 program, which involves the development of a drug targeting the restoration of intestinal barrier function and regeneration of bowel epithelium. These product candidates are being developed to address diseases such as ~~RMS, UC, CD,~~multiple sclerosis ("MS"), psoriasis and ~~psoriasis.~~gastrointestinal diseases. In addition to these large markets, these products are also being developed to address certain rare diseases with high unmet medical needs, such as primary sclerosing cholangitis (“PSC”), as well as metastatic castration-resistant prostate cancer (“mCRPC”).

The Company’s business, operating results, financial condition and growth prospects are subject to significant risks and uncertainties, including the failure of its clinical trials to meet their endpoints, failure to obtain regulatory approval and ~~needing~~the inability to obtain on acceptable terms, if at all, additional funding to complete the development and commercialization of the Company's three development programs.

Liquidity and Financial Condition

Immunic has no products approved for commercial sale and has not generated any revenue from product sales. It has never been profitable and has incurred operating losses in each year since inception in 2016. The Company has an accumulated deficit of approximately ~~$217.7~~$239.6 million as of ~~March 31,~~June 30, 2022 and $196.9 million as of December 31, 2021. Substantially all of Immunic's operating losses resulted from expenses incurred in connection with its research and development programs and from general and administrative costs associated with its operations.

Immunic expects to incur significant expenses and increasing operating losses for the foreseeable future as it initiates and continues the preclinical and clinical development of its product candidates and adds personnel necessary to advance its clinical pipeline of product candidates. Immunic expects that its operating losses will fluctuate significantly from quarter-to-quarter and year-to-year due to timing of clinical development programs.

From inception through ~~March 31,~~June 30, 2022, Immunic has raised net cash of approximately ~~$289.2~~$299.1 million from private and public offerings of preferred and common stock. As of ~~March 31,~~June 30, 2022, the Company had cash and cash equivalents of approximately ~~$95.7 million and has raised an additional $10.0 million using the December 2020 ATM facility in the second quarter of 2022.~~$88.1 million. With these funds, Immunic expects to be able to fund its operations beyond twelve months from the date of the issuance of the accompanying condensed consolidated financial statements.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles, ("U.S. GAAP") and include the accounts of Immunic and its wholly-owned subsidiaries, Immunic AG and Immunic Research GmbH (which both began operations in 2016) and Immunic Australia Pty Ltd. (which began operations in 2018). All intercompany accounts and transactions have been eliminated in consolidation. Immunic manages its operations as a single reportable segment for the purposes of assessing performance and making operating decisions. ~~Certain prior period amounts have been reclassified to conform to the current basis of presentation.~~

Unaudited Interim Financial Information

Immunic has prepared the accompanying interim unaudited condensed consolidated financial statements in accordance with United States generally accepted accounting principles, (“US GAAP”), for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These interim unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals which, in the opinion of management, are necessary to present fairly Immunic’s consolidated financial position, consolidated results of operations, consolidated statement of stockholders’ equity and consolidated cash flows for the periods and as of the dates presented. The Company’s fiscal year ends on December 31. The condensed consolidated balance sheet as of December 31, 2021 was derived from audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto included onin the Company's Annual Report on Form 10-K filed on February 24, 2022. The nature of Immunic’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

2. Summary of Significant Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements. The most significant estimates in the Company’s financial statements and accompanying notes relate to clinical trial expenses and share-based compensation. Management believes its estimates to be reasonable under the circumstances. Actual results could differ materially from those estimates and assumptions.

Foreign Currency Translation and Presentation

The Company’s reporting currency is United States (“U.S.”) dollars. Immunic AG and Immunic Research GmbH’s operations are located in Germany with the ~~euro~~Euro being their functional currency. Immunic Australia Pty Ltd.’s functional currency is the Australian dollar. All amounts in the financial statements where the functional currency is not the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows:

• assets and liabilities at reporting period-end rates;

• income statement accounts at average exchange rates for the reporting period; and

• components of equity at historical rates.

Gains and losses from translation of the financial statements into U.S. dollars are recorded in stockholders’ equity as a component of accumulated other comprehensive income (loss). Realized and unrealized gains and losses resulting from foreign currency transactions denominated in currencies other than the functional currency are reflected as general and administrative expenses in the Consolidated Statements of Operations. Foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future are recorded in Other Income (Expense). The Consolidated Statements of Cash Flows were prepared by using the average exchange rate in effect during the reporting period which reasonably approximates the timing of the cash flows.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Cash and cash equivalents consist of cash on hand and deposits in banks located in the U.S., Germany and Australia. The Company maintains cash and cash equivalent balances denominated in Euro and U.S. dollars with major financial institutions in the U.S. and Germany in excess of the deposit limits insured by the government. Management periodically reviews the credit standing of these financial institutions and believes that the Company is not exposed to any significant credit risk. The Company currently deposits its cash and cash equivalents with 2two large financial institutions.

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities. Level 1 assets consisted of money market funds for the periods presented. The Company had no Level 1 liabilities for the periods presented.

Level 2— Inputs other than observable quoted prices for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. The Company had no Level 2 assets or liabilities for the periods presented.

Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 3 assets or liabilities for the periods presented.

The carrying value of cash and cash equivalents, other current assets and prepaid expenses, accounts payable, accrued expenses, and other current liabilities approximates fair value due to the short period of time to maturity.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the straight-line method based on the estimated service lives of the assets, which range from three to thirteen years. Depreciation expense was ~~$21,000~~$20,000 and ~~$14,000~~$15,000 for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively. Depreciation expense was $41,000 and $29,000 for the six months ended June 30, 2022 and 2021, respectively

Impairment of Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Impaired assets are then recorded at their estimated fair value. There were 0 impairment losses during the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

Business combinations are accounted for under the acquisition method. The total purchase price of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, probabilities of success, discount rates, and asset lives, among other items. Assets acquired and liabilities assumed are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, industry market conditions, an adverse regulatory action, sustained decrease in stock price or unanticipated competition.

~~The~~When conducting the Company’s interim goodwill impairment assessment, we considered the Company’s history of reported losses and negative cash flows from operating activities, along with the downturn in macroeconomic conditions and the broader mid-cap and micro-cap equity markets in 2022. Given the relatively short period of time between the commencement of the downturn in macroeconomic and general equity market conditions as of June 30, 2022, management believes that the recent reduction in prices of our common stock, consistent with the broader market, is not other-than-temporary and not indicative of any fundamental change in the value or prospects of the underlying business as of the measurement date.

As another data point, the Company ~~assesses qualitative factors~~also performed a quantitative goodwill impairment analysis comparing the estimated fair value of the Company’s reporting unit to ~~determine whether~~its carrying or book value as of the ~~existence of events or circumstances would indicate that it is more likely than not that~~current period presented herein. In performing the quantitative analysis, the Company compared the fair value of the reporting unit ~~is less than~~to its carrying ~~amount. If after assessing the totality of events~~ or ~~circumstances, the Company were~~book value to determine ~~that it is more likely than not that~~if the fair value of the reporting unit ~~is less than~~exceeded its carrying ~~amount, then~~value as of the ~~Company~~testing date, in which case the standard indicates that goodwill would ~~perform~~not be impaired, and no further testing is required. The fair value of a ~~quantitative test~~reporting unit refers to the price that ~~compares~~would be received to sell the reporting unit as a whole in an orderly transaction between market participants at the measurement date. Quoted market prices in active markets are considered to be the best evidence of fair value and should be used as the basis for fair value measurement, if available. When using quoted market prices to estimate the fair value of a reporting unit, we consider all available evidence. In certain circumstances, such as a distressed market, it may be appropriate to ~~its carrying value~~consider recent trends in the Company’s stock price, instead of a single day’s stock price in evaluating fair value. In these circumstances, averages over relatively short periods of time are used to determine representative market values.

Based on the ~~amount of any impairment. Impairment testing for~~qualitative analysis and other data points described above, the Company concluded that goodwill ~~is done at the reporting unit level. The Company has determined that it operates in a single operating segment and has a single reporting unit. The Company has determined there~~ was ~~no goodwill impairment~~not “more likely than not” impaired as of ~~March 31,~~June 30, 2022.

As described above, we have significant goodwill recorded on our consolidated balance sheets. We will continue to evaluate the recoverability of the carrying amount of goodwill on an ongoing basis. There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions as to prices, costs, holding periods or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result. The closing stock prices for our common stock subsequent to June 30, 2022, consistent with the broader market, have continued to trend downward. If the decline in our stock price persists throughout the three month period ending September 30, 2022, we will perform an interim goodwill impairment assessment as of September 30, 2022, consistent with the methodology and approach described above.

Research and Development Expenses

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, IMU-935 and IMU-856. Immunic has spent the majority of its research and development resources on vidofludimus calcium, the Company's lead development program for clinical trials in RRMS, UC, COVID-19, and PSC.

Research and development expenses consist of expenses incurred in research and development activities, which include clinical trials, contract research services, certain milestone payments, salaries and related employee benefits, allocated facility costs and other outsourced services. Research and development expenses are charged to operations as incurred.

The Company enters into agreements with contract research organizations (“CROs”) to provide clinical trial services for individual studies and projects by executing individual work orders governed by a Master Service Arrangement (“MSA”). The MSAs and associated work orders provide for regular recurrent payments and payments upon the completion of certain milestones. The Company regularly assesses the timing of payments against actual costs incurred to ensure a proper accrual of related expenses in the appropriate accounting period.

Collaboration Arrangements

Certain collaboration and license agreements may include payments to or from the Company of one or more of the following: non-refundable or partially refundable upfront or license fees; development, regulatory and commercial milestone payments; payment for manufacturing supply services; partial or complete reimbursement of research and development costs; and royalties on net sales of licensed products. The Company assesses whether such contracts are within the scope of Financial Accounting Standards Board (FASB) Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers” and ASU No. 2018-18, “Collaborative Arrangements”, ("ASU 2018-18"). ASU 2018-18, clarifies that certain elements of collaborative arrangements could qualify as transactions with customers in the scope of ASC 606.

In October 2018, the Company entered into an option and license agreement (the "Daiichi Sankyo Agreement") with Daiichi Sankyo Co., Ltd. ("Daiichi Sankyo") which granted the Company the right to license a group of compounds, designated by the Company as IMU-856, as a potential new oral treatment option for gastrointestinal diseases such as celiac disease, inflammatory bowel disease, irritable bowel syndrome with diarrhea and other barrier function associated diseases. During the option period, the Company performed agreed upon research and development activities for which it was reimbursed by Daiichi

Sankyo up to a maximum agreed-upon limit. Such reimbursement was recorded as other income. There are no additional research and development reimbursements expected under this agreement.

On January 5, 2020, the Company exercised its option to obtain the exclusive worldwide right to commercialization of IMU-856. Among other things, the option exercise grants Immunic AG the rights to Daiichi Sankyo’s patent application related to IMU-856. In connection with the option exercise, the Company paid a one-time upfront licensing fee to Daiichi Sankyo. Under the Daiichi Sankyo Agreement, Daiichi Sankyo is also eligible to receive future development, regulatory and sales milestone payments, as well as royalties related to IMU-856.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, business development and other support functions. Other general and administrative expenses include, but are not limited to, stock-based compensation, insurance costs, professional fees for legal, accounting and tax services, consulting, related facility costs and travel.

Stock-Based Compensation

The Company measures the cost of employee and non-employee services received in exchange for equity awards based on the grant-date fair value of the award recognized generally as an expense (i) on a straight-line basis over the requisite service period for those awards whose vesting is based upon a service condition, and (ii) on an accelerated method for awards whose vesting is based upon a performance condition, but only to the extent it is probable that the performance condition will be met. Stock-based compensation is (i) estimated at the date of grant based on the award’s fair value for equity classified awards and (ii) final measurement date for liability classified awards. Forfeitures are recorded in the period in which they occur.

The Company estimates the fair value of stock options using the Black-Scholes-Merton option-pricing model ("BSM"), which requires the use of estimates and subjective assumptions, including the risk-free interest rate, the fair value of the underlying common stock, the expected dividend yield of the Company’s common stock, the expected volatility of the price of the Company’s common stock, and the expected term of the option. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future.

The Company leases office space and office equipment. The underlying lease agreements have lease terms of less than 12 months and up to 60 months. Leases with terms of 12 months or less at inception are not included in the operating lease right of use asset and operating lease liability.

The Company has 2 existing leases for office space. At inception of a lease agreement, the Company determines whether an agreement represents a lease and at commencement each lease agreement is assessed as to classification as an operating or financing lease. The Company's 2 leases have been classified as operating leases and an operating lease right-of-use asset and an operating lease liability have been recorded on the Company’s balance sheet. A right-of-use lease asset represents the Company’s right to use the underlying asset for the lease term and the lease obligation represents its commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company has used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The right-of-use lease asset includes any lease payments made prior to commencement and excludes any lease incentives. The lease term used in estimating future lease payments may include options to extend when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or changes in expectations regarding the lease term. Variable lease costs such as common area costs and property taxes are expensed as incurred. Leases with an initial term of twelve months or less are not recorded on the balance sheet.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Accumulated other comprehensive income (loss) has been reflected as a separate component of stockholders’ equity in the accompanying Consolidated Balance Sheets and consists of foreign currency translation adjustments (net of tax).

The Company is subject to corporate income tax laws and regulations in the U.S., Germany and Australia. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment in their application.

The Company utilizes the asset and liability method of accounting for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the audited consolidated financial statements. Deferred income tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not some portion or the entire deferred tax asset will not be realized. As of ~~March 31,~~June 30, 2022 and 2021, respectively, the Company maintained a full valuation allowance against the balance of deferred tax assets.

It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company is subject to U.S. federal, New York, California, Texas, German and Australian income taxes. The Company is subject to U.S. federal or state income tax examination by tax authorities for tax returns filed for the years 2003

and forward due to the carryforward of NOLs. Tax years 2016 through 2021 are subject to audit by German and Australian tax authorities. The Company is not currently under examination by any tax jurisdictions.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of common shares and, if dilutive, common stock equivalents outstanding for the period determined using the treasury-stock method. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Potentially dilutive securities, not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive, are as follows:
As of March 31,
2022 2021
Options to purchase common stock 3,423,482 1,717,219


	As of June 30,
	2022	2021
Options to purchase common stock	3,713,248	2,064,839

Recently Issued and/or Adopted Accounting Standards

There are no recently issued accounting standards that would have a significant impact on the ~~Company's~~company's consolidated financial statements.

3. Balance Sheet Details

Other Current Assets and Prepaid Expenses

Other Current Assets and Prepaid ~~Expense~~Expenses consist of (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Prepaid clinical and related costs	Prepaid clinical and related costs	$	15,406	$	14,853	Prepaid clinical and related costs	$	11,895	$	14,853
VAT receivable	VAT receivable	585		279		VAT receivable	397		279
Australian research and development tax incentive	Australian research and development tax incentive	2,630		1,871		Australian research and development tax incentive	2,875		1,871
Other	Other	1,548		1,122		Other	1,516		1,122
Total	Total	$	20,169	$	18,125	Total	$	16,683	$	18,125

Accounts Payable consist of (in thousands):
March 31, 2022 December 31, 2021
Clinical costs $ 2,885 $ 3,427
Legal and audit costs 182 72
Other 221 246
Total $ 3,288 $ 3,745



	June 30, 2022		December 31, 2021
Clinical costs	$	3,807	$	3,427
Legal and audit costs	102		72

Other	208		246
Total	$	4,117	$	3,745

Accrued expenses consist of (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Accrued clinical and related costs	Accrued clinical and related costs	$	6,970	$	6,214	Accrued clinical and related costs	$	4,974	$	6,214
Accrued legal and audit costs	Accrued legal and audit costs	85		96		Accrued legal and audit costs	69		96
Accrued compensation	Accrued compensation	314		674		Accrued compensation	608		674
Accrued other	Accrued other	151		87		Accrued other	90		87
Total	Total	$	7,520	$	7,071	Total	$	5,741	$	7,071

Other Current Liabilities

Other Current Liabilities consist of (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Lease liabilities	Lease liabilities	$	404	$	408	Lease liabilities	$	366	$	408

Other	Other	245		177		Other	178		177
Total	Total	$	649	$	585	Total	$	544	$	585

4. Commitments and Contingencies

Operating ~~Lease~~Leases

The Company leases certain office space under non-cancelable operating leases. The leases terminate on April 30, 2023 for the New York City office and on June 30, 2025 for the Gräfelfing, Germany office. These leases include both lease (e.g., fixed rent) and non-lease components (e.g., common-area and other maintenance costs). The non-lease components are deemed to be executory costs and are therefore excluded from the minimum lease payments used to determine the present value of the operating lease obligation and related right-of-use asset. The New York City lease has renewal options, but they were not included in calculating the right of use asset and liabilities. On April 7, 2020, the Company signed a five year lease for its facility in Gräfelfing, Germany. On March 1, 2021, the Company added additional lease space at the Gräfelfing, Germany office. Renewal options were not included in calculating the right of use asset and liabilities for this facility. The leases do not have concessions, leasehold improvement incentives or other build-out clauses. Further, the leases do not contain contingent rent provisions. The New York City lease had a six month rent holiday at the beginning of the lease. There were net additions to right of use assets of $435,000 as a result of signing for additional lease space at the Gräfelfing, Germany office in March 2021.

The leases do not provide an implicit rate and, due to the lack of a commercially salable product, the Company is generally considered unable to obtain commercial credit. Therefore, the Company estimated its incremental interest rate to be 6%, considering the quoted rates for the lowest investment-grade debt and the interest rates implicit in recent financing leases. Immunic used its estimated incremental borrowing rate and other information available at the lease commencement date in determining the present value of the lease payments.

Immunic’s operating lease costs and variable lease costs were ~~$130,000~~$136,000 and ~~$94,000~~145,000 for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively and $266,000 and $239,000 for the six months ended June 30, 2022 and 2021, respectively. Variable lease costs consist primarily of common area maintenance costs, insurance and taxes which are paid based upon actual costs incurred by the lessor.

Maturities of the operating lease obligation are as follows as of ~~March 31,~~June 30, 2022 (in thousands):
2022 $ 339
2023 303
2024 228
2025 114
2026 —
Thereafter —
Total 984
Interest 78
PV of obligation $ 906


2022						219
2023						289
2024						214
2025						107
2026						—
Total						829
Interest						62
PV of obligation						767

Contractual Obligations

As of ~~March 31,~~June 30, 2022, the Company has non-cancelable contractual obligations under certain agreements related to its development programs for vidofludimus calcium, IMU-935 and IMU-856 totaling approximately ~~$3.0~~$2.6 million, all of which is expected to be paid in ~~2022.~~the next twelve months.

Other Commitments and Obligations

In May 2016, the Company entered into a purchase agreement (the “Agreement”) with 4SC AG, whereby the Company acquired certain assets, including the rights to patents and patent applications, trademarks and know-how. This transaction has been accounted for as an asset acquisition under Accounting Standards Update 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business. The Agreement included payments (Tranches III and IV) that were contingent upon the occurrence of certain events and required the Company to pay royalties equal to 4.4% of the aggregated net sales for a certain period as defined in the Agreement (Tranche III) upon commercialization of the acquired assets. Effective April 12, 2019, the parties agreed to settle Tranche IV by issuing 120,070 shares of the Company’s common stock, immediately following the ~~Transaction,~~

transaction, to 4SC AG while keeping Tranche III in effect. Approximately $1.5 million of expense was recorded as a result of the issuance of these shares on April 12, 2019.

On March 31, 2021, Immunic AG and 4SC AG entered into a Settlement Agreement, pursuant to which Immunic AG settled its remaining obligation of the 4.4% royalty on net sales for $17.25 million (Tranche III of the Agreement). The payment was made 50% in cash and 50% in shares of Immunic’s common stock (the “Shares”). Pursuant to the Agreement, the Company filed a resale shelf registration statement on Form S-3 covering the resale of the Shares. With the execution of the Agreement, no further payment obligations remain between Immunic AG and 4SC AG.

Daiichi Sankyo Agreement

The Company is not currently a party to any litigation, nor is it aware of any pending or threatened litigation, that it believes would materially affect its business, operating results, financial condition or cash flows. However, its industry is characterized by frequent claims and litigation including securities litigation, claims regarding patent and other intellectual property rights and claims for product liability. As a result, in the future, the Company may be involved in various legal proceedings from time to time.

The following fair value hierarchy tables present information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands):


	Fair Value Measurement at June 30, 2022
	Fair Value		Level 1		Level 2		Level 3
Assets
Money market funds	$	63,241	$	63,241	$	—	$	—
Total assets at fair value	$	63,241	$	63,241	$	—	$	—

Fair Value Measurement at March 31, 2022
Fair Value Level 1 Level 2 Level 3
Assets
Money market funds $ 60,637 $ 60,637 $ — $ —
Total assets at fair value $ 60,637 $ 60,637 $ — $ —

There were no transfers between Level 1, Level 2 or Level 3 assets during the periods presented.

For the Company’s money market funds, which are included as a component of cash and cash equivalents on the consolidated balance sheet, realized gains and losses are included in interest income (expense) on the consolidated statements of operations.

The carrying amounts of other current assets and prepaid expenses, accounts payable, accrued expenses, and other current liabilities approximate their fair values due to their short-term nature. The fair value and book value of the money market funds presented in the table above are the same.

Shelf Registration Statement

In November 2020, Immunic filed a shelf registration statement on Form S-3. The 2020 Shelf Registration Statement permits the offering, issuance and sale of up to $250.0 million of common stock, preferred stock, warrants, debt securities, and/or units in one or more offerings and in any combination of the foregoing. As of ~~May 5,~~July 31, 2022, there is $75.0 million remaining on this shelf registration statement

In December 2020, the Company filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $50.0 million of common stock that may be issued and sold under another at-the-market sales agreement ("December 2020 ATM") with SVB Leerink as agent. The Company has used, and intends to continue to use the net proceeds from the offering to continue to fund the ongoing clinical development of its product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The December 2020 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth in the December 2020 ATM or (ii) termination of the December 2020 ATM as otherwise permitted thereby. The December 2020 ATM may be terminated at any time by either party upon ~~ten~~10 days’ prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on the Company. As of ~~May 5,~~July 31, 2022, $8.4 million in capacity remains under the December 2020 ATM.

In May 2022, the Company filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $80.0 million of common stock that may be issued and sold under another at-the-market sales agreement ("May 2022 ATM") with SVB Leerink as agent. The Company intends to use the net proceeds from the offering to continue to fund the ongoing clinical development of its product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The May 2022 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth

in the May 2022 ATM or (ii) termination of the May 2022 ATM as otherwise permitted thereby. The May 2022 ATM may be terminated at any time by either party upon ~~ten~~10 days’ prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on the Company. As of ~~May 5,~~July 31, 2022, $80.0 million in capacity remains under the May 2022 ATM.

The Company has agreed to pay SVB Leerink a commission equal to 3.0% of the gross proceeds from the sales of common shares pursuant to both ATM's and has agreed to provide SVB Leerink with customary indemnification and contribution rights.

In the three months ended March 31, 2022, the Company raised gross proceeds of $30.6 million pursuant to the December 2020 ATM through the sale of 2,904,113 shares of common stock at a weighted average price of $10.54 per share. The net proceeds from the December 2020 ATM were $29.7 million after deducting underwriter commissions of $0.9 million. During the second quarter ofJune 30, 2022, the Company raised gross proceeds of $10.3 million pursuant to the December 2020 ATM through the sale of 1,300,000 shares of common stock at a weighted average price of $7.90 per share. The net proceeds from the December 2020 ATM were $10.0 million after deducting underwriter commissions of $0.3 million. In the six months ended June 30, 2022, the Company raised gross proceeds of $40.9 million pursuant to the December 2020 ATM through the sale of 4,204,113 shares of common stock at a weighted average price of $9.72 per share. The net proceeds from the December 2020 ATM were $39.6 million after deducting underwriter commissions of $1.2 million.

The Company did not have any ATM activity during the three or six months ended ~~March 31,~~June 30, 2021.

As of ~~March 31,~~June 30, 2022, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 130,000,000 shares of common stock, par value of $0.0001 per share. The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of any holders of preferred stock.

Each share of common stock entitles the holder to 1one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any. Through ~~March 31,~~June 30, 2022, no cash dividends had been declared or paid.

The Company’s certificate of incorporation, as amended and restated, authorizes the Company to issue 20 million shares of $0.0001 par value preferred stock, having rights and preferences to be set by the Board of Directors. No preferred shares were outstanding as of ~~March 31,~~June 30, 2022.

Stock Reserved for Future Issuance

Shares reserved for future issuance at ~~March 31,~~June 30, 2022 are as follows:


			Number of Shares
Common stock reserved for issuance for:
2021 Employee ~~stock purchase plan~~Stock Purchase Plan			~~187,242~~162,630
Outstanding stock options			~~3,423,482~~3,713,248
Common stock options available for future grant:
2014 Equity Incentive Plan			43,311
2017 Inducement Equity Incentive Plan			46,250
2019 Omnibus Equity Incentive Plan			~~556,861~~267,095
Total common shares reserved for future issuance			~~4,257,146~~4,232,534

7. Stock-Based Compensation Plans

2021 Employee Stock Purchase Plan

On April 25, 2021, the Company adopted the 2021 Employee Stock Purchase Plan ("ESPP"), which was approved by stockholder vote at the 2021 Annual Meeting of Stockholders held on June 10, 2021. The ~~plan~~ESPP provides eligible employees of the Company with an opportunity to purchase common stock of the Company through accumulated payroll deductions, which are included in other current liabilities until they are used to purchase Company shares. Eligible employees participating in the bi-annual offering period can choose to have up to the lesser of 15% of their annual base earnings or the IRS annual share purchase limit of $25,000 in aggregate market value to purchase shares of the Company’s common stock. The purchase price of the stock is the lesser of (i) 85% of the closing market price on the date of purchase and (ii) the closing market price at the beginning of the bi-annual offering period. The maximum number of shares reserved for delivery under the plan is 200,000 shares.

The ~~first enrollment period under the plan commenced on August 1, 2021 and the~~ Company ~~has~~ issued ~~12,758~~24,612 shares under the ESPP for the ~~twelve~~three and six months ended ~~December 31, 2021.~~June 30, 2022 and 37,370 shares life to date. The Company ~~has not issued any new shares under~~recognized $25,000 and $53,000 of expense related to the ESPP during the three and six months ended ~~March 31,~~June 30, 2022. ~~The Company recognized $28,000 of expense related to the plan during the three months ended March 31, 2022.~~

Stock Option Programs

In July 2019, the Company’s stockholders approved the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) which was adopted by the Board with an effective date of June 14, 2019. The 2019 Plan allows for the grant of equity awards to employees, consultants and non-employee directors. An initial maximum of 1,500,000 shares of the Company’s common stock ~~are~~were available for grant under the 2019 Plan. The 2019 Plan includes an evergreen provision that allows for the annual addition of up to 4% of the Company’s fully-diluted outstanding stock, with a maximum allowable increase of 4,900,000 shares over the term of the 2019 Plan. In accordance with this provision, the shares available for grant were increased in 2020 through 2022 by a total of 2,481,195 shares. The 2019 Plan is currently administered by the Board, or, at the discretion of the Board, by a committee of the Board, which determines the exercise prices, vesting schedules and other restrictions of awards under the 2019 Plan at its discretion. Options to purchase stock may not have an exercise price that is less than the fair market value of underlying shares on the date of grant, and may not have a term greater than ten years. Incentive stock options granted to employees typically vest over four years. Non-statutory options granted to employees, officers, members of the Board, advisors, and consultants of the Company typically vest over three or four years.

Shares that are expired, terminated, surrendered or canceled under the 2019 Plan without having been fully exercised will be available for future awards.

Movements during the year

The following table summarizes stock option activity for the ~~quarters~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively, for the 2019 Plan:


		Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value			Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2022	Outstanding as of January 1, 2022	2,157,460	$	13.54				Outstanding as of January 1, 2022	2,157,460	$	13.54
Granted	Granted	1,301,513	$	10.90				Granted	1,702,513	$	9.29
Exercised	Exercised	(852)	$	5.67	—			Exercised	(852)	$	5.67	—
Forfeited or expired	Forfeited or expired	(34,639)	$	12.68				Forfeited or expired	(145,873)	$	11.88
Outstanding as of March 31, 2022		3,423,482	$	12.55	9.00	$	1,464,329
Options vested and expected to vest as of March 31, 2022		3,423,482	$	12.55	9.00	$	1,464,329
Options exercisable as of March 31, 2022		952,888	$	13.85	8.25	$	215,617
Outstanding as of June 30, 2022								Outstanding as of June 30, 2022	3,713,248	$	11.66	8.86	$	23,870
Options vested and expected to vest as of June 30, 2022								Options vested and expected to vest as of June 30, 2022	3,713,248	$	11.66	8.86	$	23,870
Options exercisable as of June 30, 2022								Options exercisable as of June 30, 2022	1,127,085	$	13.83	8.00	$	—

The weighted-average assumptions used in the BSM option pricing model to determine the fair value of the employee and non-employee stock option grants relating to the 2019 Plan were as follows:

Risk-Free Interest Rate

The risk-free rate assumption is based on U.S. Treasury instruments with maturities similar to the expected term of the stock options.

Expected Dividend Yield

The Company has not issued any dividends and does not expect to issue dividends over the life of the options. As a result, the Company has estimated the dividend yield to be zero.

Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company estimates expected volatility based on the historical volatility of its own stock combined with a group of comparable companies that are publicly traded. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards.

The expected term of options is estimated considering the vesting period at the grant date, the life of the option and the average length of time similar grants have remained outstanding in the past.

The weighted-average grant date fair value of stock options granted under the 2019 Plan during the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 was ~~$8.48~~$7.25 and ~~$12.00,~~$11.36, respectively. The following are the underlying assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options granted to employees and to non-employees under this stock plan:
Three Months Ended March 31,
2022 2021
Risk-free interest rate 1.53% 0.92%
Expected dividend yield 0% 0%
Expected volatility 97.4% 94.6%
Expected term of options (years) 6.02 6.08


	Six Months Ended June 30,
	2022	2021
Risk-free interest rate	1.95%	0.88%
Expected dividend yield	0%	0%
Expected volatility	97.9%	92.3%
Expected term of options (years)	6.00	5.94

Stock-Based Compensation Expense

Total stock-based compensation expense for all stock awards recognized in the accompanying unaudited condensed consolidated statements of operations is as follows:

As of ~~March 31,~~June 30, 2022, there was ~~$21.1~~$19.4 million in total unrecognized compensation expense relating to the 2019 Plan to be recognized over a weighted average period of ~~3.19~~3.06 years.

Summary of Equity Incentive Plans Assumed from Vital Therapies

Upon completion of the Transaction with Vital Therapies ("Vital") on April 12, 2019, Vital’s 2012 Stock Option Plan (the “2012 Plan”), Vital’s 2014 Equity Incentive Plan (the “2014 Plan”) and Vital’s 2017 Inducement Equity Incentive Plan (the “Inducement Plan”), were assumed by the Company. All awards granted under these plans have either been forfeited or expired.

There remain 43,311 shares available for grant under the 2014 Plan as of ~~March 31,~~June 30, 2022.

In September 2017, Vital’s board of directors approved the Inducement Plan, which was amended and restated in November 2017. Under the Inducement Plan 46,250 shares of Vital’s common stock were reserved to be used exclusively for non-qualified grants to individuals who were not previously employees or directors as an inducement material to a grantee's entry into employment within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

No expense was recorded for the plans assumed from Vital during the three and six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

8. ~~Subsequent Events~~Related Party Transactions

Executive Chairman Agreement with Duane Nash

On April 15, 2020, the compensation committee of the Board of Directors of the Company independently reviewed and approved entering into an employment agreement with the current Chairman of the Board, Duane Nash, MD, JD, MBA (the “Executive Chairman Agreement”) and pursuant to such approval, on April 17, 2020, the Company and Dr. Nash entered into the Executive Chairman Agreement. The Executive Chairman Agreement establishes an “at will” employment relationship pursuant to which Dr. Nash serves as Executive Chairman and contemplated a term that ends on October 15, 2020, which was subsequently extended to April 15, 2021. On April 15, 2021, the Company and Dr. Nash entered into an addendum (the ~~“Agreement”~~“Addendum”) to extend the term of the Executive Chairman Agreement to April 15, 2022.In connection with the ~~Agreement,~~Addendum, the Company made a one-time award to Dr. Nash of an option to purchase 90,000 shares of Company common stock, which ~~will vest~~vests monthly commencing on May 15, 2021, and to increase Dr. Nash’s monthly base salary to $27,960 from $25,417. Effective March 15, 2022, the Company extended the ~~Term~~term of ~~Employment~~employment from April 15, 2022 to December 31, 2022 with a ~~Base Salary~~base salary of $29,358 per month (which includes the cash retainer payable for serving on the Company’s Board or for acting as the Chairman of the Board). In connection with ~~the Agreement,~~this extension, the Company made a one-time award to Dr. Nash of an option to purchase 75,000 shares of the Company’s common stock, which ~~will vest~~vests monthly commencing on April 10, 2022.All other terms of the ~~Employment~~Executive Chairman Agreement ~~shall~~ remain the same.

9. Subsequent Events

Changes in Board of Directors

On July 6, 2022, the Company announced the appointment of Monika Maria Törnsén as a member of the Board of Directors of the Company, effective as of July 5, 2022. As a Class III director, Ms. Törnsén’s term lasts until the Company’s 2023 annual meeting of stockholders. Ms. Törnsén is not a party to, and does not have any direct or indirect material interest in, any transaction requiring disclosure under Item 404(a) of Regulation S-K. There are no arrangements or understandings between Ms. Törnsén and any other persons pursuant to which she was selected as a director.

In connection with her appointment as director, Ms. Törnsén was granted a long-term equity incentive grant in the form of an option to purchase a total of 30,000 shares of the Company’s common stock, with an exercise price of $4.30 per share, which is equal to the closing price of the Company's common stock on The Nasdaq Stock Market on the date of grant, July 8, 2022. The option to purchase 10,000 shares vests in monthly increments over a period of one year from the grant date, and the option to purchase 20,000 shares vests in monthly increments over a period of three years from the grant date.

20Additionally, Ms. Törnsén and the Company entered into the Company’s standard form of indemnification agreement for directors and executive officers.

Concurrently, the Company also announced that current Class III director, Jan Van den Bossche, resigned from the Board. The Board accepted Mr. Van den Bossche’s resignation effective July 5, 2022. Mr. Van den Bossche’s decision to resign did not result from any disagreement with the Company on any matter relating to Company operations, policies or practices.

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

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited interim condensed consolidated financial statements and notes thereto included in Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q (the "Quarterly Report") and the audited Consolidated Financial Statements ~~for the years ended December 31, 2021 and 2020 of Immunic, Inc.~~in our Annual Report on Form 10-K. filed with the Securities and Exchange Commission ("SEC"), ~~on our Annual Report on Form 10-K~~ on February 24, 2022. As used in this report, unless the context suggests otherwise, “we,” “us,” “our,” “the Company” or “Immunic” refer to Immunic, Inc. and its subsidiaries.

Forward-Looking Statements

In addition to historical information, this Quarterly Report includes forward-looking statements within the meaning of federal securities laws. Forward-looking statements are subject to certain risks and uncertainties, many of which are beyond our control. Such statements include, but are not limited to, statements preceded by, followed by or that otherwise include the words, “believe,” “may,” “might,” “can,” “could,” “will,” “would,” “should,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “project,” “expect,” “potential,” “predicts,” or similar expressions and the negatives of those terms.

Forward-looking statements discuss matters that are not historical facts. Our forward-looking statements involve assumptions that, if they ~~never~~ever materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. In this Quarterly Report, for example, we make forward-looking statements, among others, regarding potential strategic options; financial estimates and projections; and the sufficiency of our capital resources to fund our operations.

The inclusion of any forward-looking statements in this Quarterly Report should not be regarded as a representation that any of our plans will be achieved. Our actual results may differ from those anticipated in our forward-looking statements as a result of various factors, including those noted below under the caption “Part II, Item 1A-Risk Factors,” and the differences may be material. These risk factors include, but are not limited to statements relating to our three development programs and the targeted diseases; the potential for vidofludimus calcium, ~~(IMU-838),~~ IMU-935 and IMU-856 to safely and effectively target diseases; the nature, strategy and focus of the Company; expectations regarding our capitalization and financial resources; the development and commercial potential of any product candidates of the Company; and our ability to retain certain personnel important to our ongoing operations and to maintain effective internal control over financial reporting.

Although our forward-looking statements reflect the good faith judgment of our management, these statements are based only on facts and factors currently known by us. As a result, stockholders are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, and we undertake no obligation to revise or update such statements to reflect events or circumstances after the date hereof, except as required by law.

Overview

Immunic, Inc. ("Immunic," “we,” “us,” “our” or the "Company") is a clinical-stage biopharmaceutical company with a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune ~~diseases, including relapsing multiple sclerosis (“RMS”), ulcerative colitis (“UC”), Crohn’s disease (“CD”) and psoriasis.~~diseases. We are headquartered in New York City with our main operations in Gräfelfing near Munich, Germany. We currently have approximately 5560 employees.

We are currently pursuing three development programs. These include the vidofludimus calcium (IMU-838) program, which is focused on the development of oral formulations of a small molecule inhibitor of the enzyme dihydroorotate dehydrogenase (“DHODH”); the IMU-935 program, which is focused on an inverse agonist of retinoic acid receptor-related orphan nuclear receptor gamma truncated (“RORγt”), an immune cell-specific isoform of RORγ; and the IMU-856 program, which involves the development of a drug targeting the restoration of intestinal barrier function and regeneration of bowel epithelium. These product candidates are being developed to address diseases such as ~~RMS, UC, CD,~~multiple sclerosis ("MS"), psoriasis and ~~psoriasis.~~gastrointestinal diseases. In addition to these large markets, these products are also being developed to address certain rare diseases with high unmet medical needs, such as primary sclerosing cholangitis (“PSC”), as well as metastatic castration-resistant prostate cancer (“mCRPC”).

The following table summarizes the potential indications, clinical targets and clinical development status of our three product candidates:

Our most advanced drug candidate, vidofludimus calcium (IMU-838), targets DHODH, a key enzyme in the intracellular metabolism of immune cells in the body. In the third quarter of 2020, we reported positive results from our Phase 2 EMPhASIS trial of vidofludimus calcium in relapsing-remitting multiple sclerosis (“RRMS”), achieving both primary and key secondary endpoints with high statistical significance. The first patient in our Phase 3 ENSURE program of vidofludimus calcium in ~~RMS,~~relapsing multiple sclerosis (“RMS”), comprising twin studies evaluating efficacy, safety, and tolerability of vidofludimus

calcium versus placebo, was enrolled in November 2021. The first patient in our supportive Phase 2 CALLIPER trial of vidofludimus calcium in progressive multiple sclerosis (“PMS”) was enrolled in September 2021. InWe have carefully analyzed the impact that current events in Ukraine and Russia may have on our ongoing clinical programs. Based on this assessment, our current goal is to report data from the interim analysis of the CALLIPER trial in the second half of 2023 and to read-out top-line data at the end of 2024. Moreover, the read-out of the first ~~quarter~~ of ~~2021,~~the ENSURE trials is currently targeted for end of 2025. Although we ~~announced~~currently believe that ~~vidofludimus calcium showed evidence~~each of ~~clinical activity in~~these goals is achievable, they are each dependent on numerous factors which are not under our ~~Phase 2 CALVID-1 trial in hospitalized patients with moderate coronavirus disease 2019 ("COVID-19"). Also, in~~direct control and can be difficult to predict. We plan to periodically review this assessment and provide updates of material changes as appropriate.

In the first quarter of 2021, we reported positive top-line data from an investigator-sponsored Phase 2 proof-of-concept clinical trial of vidofludimus calcium in primary sclerosing cholangitis which was conducted in collaboration with the Mayo Clinic. ~~In addition,~~Also, in the first quarter of 2021, we announced that vidofludimus calcium ~~is currently being tested~~showed evidence of clinical activity in aour Phase 2 CALVID-1 trial in hospitalized patients with moderate coronavirus disease 2019 ("COVID-19"). Top-line results of our Phase 2 CALDOSE-1 trial of vidofludimus calcium in patients with moderate-to-severe ulcerative colitis ~~(CALDOSE-1 trial), for which we expect top-line data to be available~~(“UC”) were reported in June ~~of 2022.~~2022, showing an interaction with chronic concurrent steroid use and, therefore, missing the trial’s primary endpoint. We announced that our development programs in the inflammatory bowel disease (“IBD”) indications will not be continued without a partner. Additional ~~antiviral directed~~antiviral-directed development activities remain ongoing through ~~an investigator-sponsored Phase 2 clinical trial of vidofludimus calcium in moderate-to-severe COVID-19 as well as~~ preclinical research examining the potential to treat a broad set of viral indications with vidofludimus calcium and other DHODH inhibitors ~~in combination with nucleoside analogues.~~and further antiviral molecules. Immunic is exploring several options to support further development of our antiviral portfolio, including a potential spin-off into a new or existing company and potential licensing transactions.

If approved, we believe that vidofludimus calcium has the potential to be a ~~highly selective first-in-class DHODH inhibitor in inflammatory bowel disease (“IBD”) and~~ best-in-class DHODH inhibitor in RMS. Importantly, vidofludimus calcium has an attractive pharmacokinetic, safety and tolerability profile and has already been exposed to ~~approximately~~more than 1,100 human subjects and patients in either of the drug’s formulations.

Our second drug candidate, IMU-935, is a highly potent and selective inverse agonist of a transcription factor called RORγt. We believe that the nuclear receptor RORγt is ~~the~~a main driver for the differentiation of T-helper 17 (“Th17”) cells and the release of cytokines involved in various inflammatory and autoimmune diseases. We believe this target is an attractive alternative to approved antibodies ~~for targets, such~~ as acting on interleukin-23 (“IL-23”), the IL-17 receptor and ~~IL-17 itself.~~IL-17. We have observed strong cytokine inhibition targeting both Th1 and Th17 responses in preclinical testing, as well as indications of activity in animal models for psoriasis, graft versus host disease, MS and IBD. Preclinical experiments indicated that, while leading to a potent inhibition of Th17 differentiation and inhibition of cytokine secretion, IMU-935 did not affect thymocyte maturation, one of the important physiological functions of RORγt that should be maintained. Based on these preclinical data and the selectivity of the effect maintaining important physiological functions while providing the desired anti-Th17 effect, we believe that IMU-935 has potential to be a best-in-class therapy for various autoimmune diseases. AThe final portion of a Phase 1 clinical trial exploring safety, pharmacodynamics and pharmacokinetics of IMU-935 in ~~healthy human subjects and~~ psoriasis patients is currently ~~ongoing. While~~ongoing and we expect initial results to be available in the ~~studies~~fourth quarter of 2022. An exploratory Phase 1 trial investigating the drug-drug interaction (“DDI”) potential of IMU-935 was completed in ~~healthy human subjects have been completed with results reported in December 2021,~~ the ~~enrollment~~second quarter of ~~psoriasis patients in part C of the trial is ongoing.~~2022. Additionally, IMU-935 has been shown in preclinical models to target an established mechanism of treatment resistance to androgen receptor therapy, making it a potential treatment option for patients with resistant CRPC. A Phase 1 clinical trial exploring safety and tolerability of increasing doses of IMU-935 to establish the maximum tolerated dose and the recommended Phase 2 dose is currently ongoing in patients with mCRPC.

Our third program, IMU-856, which we believe to be novel, is an orally available small molecule modulator that targets a protein which serves as a transcriptional regulator of intestinal barrier function and regeneration of bowel epithelium. We have not yet disclosed the molecular target for ~~IMU-856.~~IMU-856 to the public. Based on preclinical data, we believe this compound may represent a new treatment approach, as the mechanism of action targets the restoration of the intestinal barrier function and bowel wall

architecture in patients suffering from gastrointestinal diseases such as celiac disease, IBD, irritable bowel syndrome with diarrhea and other intestinal barrier function associated diseases. We believe that, because IMU-856 has been shown in preclinical investigations to avoid suppression of immune cells, it may therefore have the potential to maintain immune surveillance for patients during therapy, an important advantage versus chronic treatment with potentially immunosuppressive medications. A Phase 1 clinical trial exploring safety, pharmacodynamics and pharmacokinetics of IMU-856 in healthy human subjects and celiac disease patients is currently ongoing. Unblinded safety data from the single and multiple ascending dose parts in healthy human subjects are expected to be available in the third quarter of 2022.

We expect to continue to lead most of our research and development activities from our Gräfelfing, Germany location, where dedicated scientific, regulatory, clinical and medical teams conduct their activities. Due to these teams' key relationships with local and international service providers, we anticipate that this will result in timely, cost-effective execution of our development programs. In addition, we are using our subsidiary in Melbourne, Australia to expedite the early clinical trials for IMU-935 and IMU-856. We also conduct preclinical work in Halle/Saale, Germany through a collaboration with the Fraunhofer Institute.

Our business, operating results, financial condition and growth prospects are subject to significant risks and uncertainties, including the failure of our clinical trials to meet their endpoints, failure to obtain regulatory approval and ~~needing~~failure to obtain needed additional funding on acceptable terms, if at all, to complete the development and commercialization of our three development programs.

Liquidity and Financial Condition

We have no products approved for commercial sale and have not generated any revenue from product sales. We have never been profitable and have incurred operating losses in each year since our inception in 2016. We have an accumulated deficit of approximately ~~$217.7~~$239.6 million as of ~~March~~June 30, 2022 and $196.9 million as of December 31, ~~2022.~~2021. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to incur significant expenses and increasing operating losses for the foreseeable future as we initiate and continue the preclinical and clinical development of our product candidates and add personnel necessary to advance our clinical pipeline of product candidates. We expect that our operating losses will fluctuate significantly from quarter-to-quarter and year-to-year due to timing of clinical development programs.

From inception through ~~March 31,~~June 30, 2022, we have raised net cash of approximately ~~$289.2~~$299.1 million from private and public offerings of preferred and common stock. As of ~~March 31,~~June 30, 2022, we had cash and cash equivalents of approximately ~~$95.7 million and have raised an additional $10.0 million using our December 2020 ATM facility in the second quarter of 2022.~~$88.1 million. With these funds, we expect to be able to fund our operations beyond twelve months from the date of the issuance of the accompanying condensed consolidated financial statements.

Recent Events

~~CALDOSE-1 Baseline Characteristics~~

~~On February 18, 2022, we announced the main blinded baseline characteristics of our CALDOSE-1 trial of vidofludimus calcium in moderate-to-severe UC, including:~~

•263 moderate-to-severe UC patients were enrolled in 78 study sites with the Ukraine and Poland representing the countries with highest number of patients and U.S. sites contributing 12.5% of the overall enrollment.

•~~Of the 263 patients, 148 (56.3%) were male and 115 (43.7%) were female patients. The mean age at baseline was 41.7 (18-77) years.~~

•All patients had to have failed at least one prior therapy option. Of the 263 patients, 83% were biologically naïve and 17% were biologically experienced (received at least 1 prior treatment with any biological agent approved in the UC indication).

•~~Enrolled patients had to show evidence of active moderate-to-severe UC disease. This is reflected in their baseline characteristics for patient-reported outcomes:~~

◦~~The baseline Mayo stool frequency scores were: (i) score of 3 for 59% of patients, (ii) score of 2 for 36% of patients and (iii) score of 1 for 5% of patients.~~

◦~~The Mayo rectal bleeding scores were: (i) score of 3 in 10% of patients, (ii) score of 2 for 54% of patients and (iii) score of 1 for 31% of patients.~~

◦~~The average value for fecal calprotectin at baseline was approximately 1,320 μg/g for currently available, yet incomplete data.~~

•~~The trial employed a central independent reader to evaluate the endoscopic eligibility criteria and the following modified Mayo endoscopic scores were assessed at baseline:~~

◦~~55% of patients with a score of 3; and~~

◦~~45% of patients with a score of 2.~~

•At week 10 (the time point of the primary efficacy analysis), an adjudication procedure was used for endoscopy assessments. In the case of disagreement between two independent readers, a third independent reader was used for adjudication.

~~We believe that these blinded baseline characteristics of randomized patients and the methodology regarding endoscopic assessments contributes to ensuring an optimized study read-out.~~

Phase 1 Clinical Trial of IMU-935 in Healthy Human Subjects and ~~Moderate to Severe~~Moderate-to-Severe Psoriasis Patients

On July 12, 2021, we provided an update on our IMU-935 program, including new preclinical and clinical data. The main result from preclinical investigations was that IMU-935 inhibits cytokine production (thought to be a pre-condition for its use in immunological and autoimmune diseases) while maintaining the known and required physiological functions of maturing T lymphocytes. In ex vivo mouse cell differentiation and maturation assays, IMU-935 was ~~recently~~ observed to selectively inhibit RORγt-dependent gene expression during Th17 differentiation without affecting either RORγt-dependent gene regulation relevant to thymocyte development, or the viability of these cells. In third-party research, impairment of thymocyte development has been shown to be associated with serious safety issues, including, among others, T cell malfunction and potential lymphoma formation. We believe that IMU-935's observed selectivity may enable it to inhibit both the generation of Th17 cells and the production of IL-17 cytokines that are responsible for the development of autoimmune diseases, without impairing thymocyte development, which is associated with the potential risk of lymphoma seen with other, third-party RORγt programs.

On December 14, 2021, we provided an update on the preclinical and clinical development of IMU-935, announcing that:

•Unblinded data from the single ascending dose part of the ongoing Phase 1 clinical trial of a new powder-in-capsule formulation of IMU-935, in which healthy human subjects were treated with 100 mg, 200 mg, 300 mg and 400 mg of this new formulation or placebo, found these single ascending daily doses of IMU-935 to be safe and well-tolerated, and no maximum tolerated dose was reached. No serious adverse events occurred. A dose-proportional pharmacokinetic profile was observed across the investigated dose range.

•Unblinded data from the multiple ascending dose part of the ongoing Phase 1 clinical trial, in which healthy human subjects were dosed for 14 days with 150 mg either once or twice daily doses of IMU-935 or placebo, found these multiple ascending doses of IMU-935 to be safe and well-tolerated, and no maximum tolerated dose was reached. Treatment emergent adverse events were generally mild in severity, with moderate treatment emergent adverse events reported in one of eleven IMU-935 treated subjects, compared with one of four subjects on placebo. No serious adverse events were reported. No dose-dependent changes in laboratory values (including no effects on liver enzymes or in hematological parameters), vital signs or in electrocardiographic evaluations were found. Pharmacokinetic analysis showed that stable steady-state plasma concentrations were achieved within the first week of dosing with an accumulation factor for IMU-935 allowing predictable trough levels during daily dosing.

•Based on the favorable safety and tolerability data observed in healthy human subjects, our Phase 1 clinical trial of IMU-935 was expanded in October 2021 to include a third portion, part C, in which ~~moderate to severe~~moderate-to-severe psoriasis patients are ~~to be~~ randomized to 28-day treatment of IMU-935 or placebo. Planned assessments include safety, tolerability, pharmacokinetic and pharmacodynamic markers, as well as skin evaluations. ~~Recruitment of part~~Part C ~~depends on several external factors which are not under our direct control, including, in particular, the relatively restrictive COVID-19-related rules in effect~~is ongoing in Australia, and New Zealand. This situation has and may further influence our ability to enroll study participants and/or perform on-site monitoring at clinical sites in those locations. In light of this, we have already initiated remedial measures, including the potential addition of sites outside of Australia and New Zealand ~~for the ongoing part C of IMU-935 in psoriasis patients. As a result, initial~~and Bulgaria. Initial results ~~from the third portion of the Phase 1 clinical trial in patients with moderate-to-severe psoriasis~~ are ~~now~~ expected to be available in the ~~second half of 2022, instead of at the end of the second~~fourth quarter of ~~2022, as previously announced.~~2022.

•In previous preclinical in vitro data, it was shown that IMU-935 selectively inhibits Th17 differentiation and IL-17 production, whereas RORγt was unaffected by IMU-935 during thymocyte maturation and, therefore, does not harm normal thymocyte maturation. ~~Newly obtained data~~Data from acute and chronic treatment of mice corroborated in vivo that

IMU-935 is the first molecule observed to impact neither thymus size, thymocyte numbers, nor the maturation status of thymocytes, in contrast to two other known inhibitors of RORγt.

IMU-935 Composition-of-Matter Patents Granted

On February 2, 2022, we received a Notice of Allowance from the U.S. Patent and Trademark Office ~~(USPTO)~~("USPTO") for patent application 16/644581, entitled, “IL-17 and IFN-gamma inhibition for the treatment of autoimmune diseases and chronic inflammation”. We also received notice of allowance of patent application EP18762111.5 in Europe, and notice of grant of patent application 2018330633 in Australia. All three patents cover composition-of-matter of IMU-935 and related formulations, and are expected to provide protection into at least 2038, without accounting for potential Patent Term Extension ~~(PTE)~~("PTE") in the United States or Supplementary Protection Certificates ~~(SPC)~~("SPC") in Europe, respectively.

Results of Exploratory Phase 1 DDI Study of IMU-935

An exploratory Phase 1 study was completed in 15 evaluable healthy human subjects to assess the DDI potential of IMU-935. No relevant signals for DDI potential were observed and treatment was safe and well-tolerated.

Update on Phase 1 Clinical Trial of IMU-935 in mCRPC – Initial Safety Data Available

The first two dose cohorts of the phase 1 clinical trial of IMU-935 in mCRPC have been fully recruited, with 6 patients enrolled in the 300 mg cohort and 6 patients in the 600 mg cohort. Of these patients, all have completed the 28-day dose limiting toxicity (“DLT”) observation period. The third, 900 mg cohort will be started after analysis of the cohort 2 data of the DLT observation period.

Initial safety data available so far show a promising safety profile of IMU-935 in mCRPC, with only benign adverse events and no dose limiting toxicities. We plan to provide a more comprehensive update on safety and also on potential signs of anti-tumor activity of IMU-935 in this trial as soon as data from the planned dose expansion part are available.

The phase 1 clinical trial of IMU-935 in mCRPC is structured in two portions: a dose-escalation part and an optional expansion part. A total of between 18 and 24 patients are planned to be enrolled in the dose-escalation part at three dose levels, 300 mg, 600 mg and 900 mg of daily IMU-935, to be given for three cycles of 28 days each. At each of the three dose levels a safety analysis after 28 days and an interim analysis after three months of treatment will be performed. The main analysis for this trial is planned after the last patient has received six months of study treatment. The primary objective is to evaluate the safety and tolerability of increasing doses of IMU-935 to establish the maximum tolerated dose and the recommended phase 2 dose. The trial will also evaluate the anti-tumor activity of IMU-935 by means of prostate-specific antigen (“PSA”) levels, circulating tumor cell (“CTC”) numbers, and radiographic response assessments of tumor progression. Patients who receive a benefit from IMU-935 will have the option to continue treatment until progression. Following completion of all dose-escalation cohorts, an expansion cohort at one or two therapeutically active dose levels with up to 18 additional patients may be performed to support selection of a recommended phase 2 dose. The trial’s Principal Investigator is Johann Sebastian de Bono, M.D., Ph.D., Regius Professor of Cancer Research and Professor in Experimental Cancer Medicine, The Institute of Cancer Research, London, and The Royal Marsden NHS Foundation Trust, London.

Start of Patient Cohorts in Phase 1 Clinical Trial of IMU-856 in Celiac Disease

On May 5, 2022, we announced the start of the patient cohorts in our ongoing ~~phase~~Phase 1 clinical trial of IMU-856 in patients with celiac disease. Part C is structured as a 28-day, double-blind, placebo-controlled trial designed to assess the safety and tolerability of IMU-856 in patients with celiac disease during periods of gluten-free diet and gluten challenge. Approximately 42 patients are planned to be enrolled in two consecutive cohorts with IMU-856 given once-daily over 28 days. Secondary objectives include pharmacokinetics and disease markers, including those evaluating gastrointestinal architecture and inflammation. Approximately 10 sites in Australia and New Zealand are expected to participate in Part C.

Publication of Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in RRMS in Peer Reviewed Journal

On June 15, 2022, we announced that data from our Phase 2 EMPhASIS trial of vidofludimus calcium in patients with RRMS has been published in the peer reviewed journal, Annals of Clinical and Translational Neurology. The paper, authored by coordinating investigator, Robert J. Fox, M.D., Staff Neurologist, Mellen Center for Multiple Sclerosis, Vice-Chair for Research, Neurologic Institute, Cleveland Clinic, Cleveland, Ohio, is entitled, “Safety and efficacy of vidofludimus calcium, a selective dihydroorotate dehydrogenase inhibitor, in relapsing-remitting multiple sclerosis (EMPhASIS): a double-blind, randomized, placebo-controlled Phase 2 trial.”

Update on the Use of Steroids in the Phase 2 EMPhASIS Trial in RRMS

Based on the observed interaction between vidofludimus calcium and chronic steroid use in the CALDOSE-1 trial in ulcerative colitis patients, we performed a post-hoc analysis of our Phase 2 EMPhASIS data in RRMS patients to explore the potential influence of steroids on these study results. As anticipated, steroid use was rare and among those RRMS patients who received any steroids, the majority received only short steroid courses following relapse events or acute neurological events. Only four patients received any steroids for reasons other than relapse (COVID-19 infection, eczema, acute bronchitis, and contact urticaria, one patient each). Most patients only had one single short course of steroids, and only nine patients had two or more steroid courses. The average duration of steroid treatment in this RRMS trial was 4.4 days with a maximum duration of 10 days. This indicates to us that steroids are rarely used in MS patients and mostly for a very short duration. In conclusion, comparing patients who received at least one dose of corticosteroids with those who did not, we do not see any difference in clinical parameters or any evidence that the rare, short-term use of steroids in RRMS patients has any influence on the effectiveness of vidofludimus calcium in this patient population.

Top-Line Data from Phase 2 CALDOSE-1 Trial of Vidofludimus Calcium in Patients with Moderate-to-Severe Ulcerative Colitis

On June 2, 2022, we reported top-line data from our Phase 2 CALDOSE-1 trial of vidofludimus calcium in patients with moderate-to-severe ulcerative colitis (“UC”). The trial did not achieve the primary endpoint of clinical remission for the pooled 30 and 45 mg/day active dose groups of vidofludimus calcium versus placebo at week 10. In addition, no meaningful differences were observed between the three active dose groups for the overall intent-to-treat patient population (10 mg/day: 14.9%, 30 mg/day: 10.6%, 45 mg/day: 13.6%, placebo: 12.5%) or for the trial’s other secondary endpoints, including symptomatic remission, or endoscopic healing.

Consistent with prior data sets in other patient populations, administration of vidofludimus calcium in this trial was observed to be safe and well-tolerated. No new safety signals were observed. As compared to placebo, there were no increased rates of infections and infestations, no elevated rates of liver events or liver enzyme elevations, and no elevated rates for changes in hematology-related laboratory variables. The most common adverse events in this trial were anemia (15/263 patients, 5.7%), headache (9/263 patients, 3.4%) and COVID-19 (7/263 patients, 2.7%). Most adverse events were generally mild in severity.

As is common for the design of clinical trials in UC, the use of oral systemic corticosteroids (≤20 mg/day prednisolone equivalent) was allowed in CALDOSE-1 in patients who had been treated with corticosteroids for at least four weeks before randomization. Doses of corticosteroids were required to be kept constant throughout the induction phase (weaning was not allowed in this phase of the trial), and the distribution of patients using corticosteroids was equal throughout all treatment groups. Surprisingly, CALDOSE-1 data suggest a previously unknown treatment interference between the efficacy of vidofludimus calcium and the concurrent use of corticosteroids in the UC patient population. More specifically, the non-steroid patient population showed an 11.4% advantage in clinical remission for vidofludimus calcium over placebo (pooled vidofludimus calcium treatment groups at week 10: 14.7%, placebo: 3.3%). Such a difference in clinical remission between active treatment and placebo would traditionally be considered as confirming therapeutic activity. In contrast, patients

concomitantly taking vidofludimus calcium and corticosteroids during induction treatment had a lower rate of clinical remission at week 10 (11.5%) than placebo patients (20.6%) and also lower than the group of vidofludimus calcium monotherapy without concurrent use of steroids (14.7%). This treatment interference between vidofludimus calcium and corticosteroids was not expected by currently available preclinical or clinical data.

Based on these results, we announced that our development programs in the IBD indications will not be continued without a partner.

Investigator-Sponsored Phase 2 IONIC Trial in Moderate-to-Severe COVID-19 is Closing Down

On June 23, 2022, sponsor and lead site, University Hospitals Coventry and Warwickshire NHS Trust, London, United Kingdom, informed us that the investigator-sponsored Phase 2 IONIC trial for the treatment of patients with moderate-to-severe COVID-19 is being closed down. Recruitment for the trial ended on May 20, 2022 and the last patient follow-up is due on September 21, 2022. The trial was a prospective, randomized, parallel-group, open-label Phase 2b trial, designed to evaluate efficacy and safety of vidofludimus calcium in combination with the neuraminidase inhibitor, Oseltamivir (TamifluⓇ), in approximately 120 adult patients with moderate-to-severe COVID-19.

Changes in Board of Directors

On July 6, 2022, we announced the appointment of Monika Maria Törnsén as a member of our Board of Directors, effective as of July 5, 2022. As a Class III director, Ms. Törnsén’s term lasts until the Company’s 2023 annual meeting of stockholders. Concurrently, we also announced that current Class III director, Jan Van den Bossche, resigned from the Board. The Board accepted Mr. Van den Bossche’s resignation effective July 5, 2022. Mr. Van den Bossche’s decision to resign did not result from any disagreement with the Company on any matter relating to Company operations, policies or practices.

Executive Chairman Agreement with Duane Nash

On April 15, 2020, the compensation committee of the Board of Directors of the Company independently reviewed and approved entering into an employment agreement with the current Chairman of the Board, Duane Nash, MD, JD, MBA (the “Executive Chairman Agreement”) and pursuant to such approval, on April 17, 2020, the Company and Dr. Nash entered into the Executive Chairman Agreement. The Executive Chairman Agreement establishes an “at will” employment relationship pursuant to which Dr. Nash serves as Executive Chairman and contemplated a term that ends on October 15, 2020, which was subsequently extended to April 15, 2021. On April 15, 2021, the Company and Dr. Nash entered into an addendum (the ~~“Agreement”~~“Addendum”) to extend the term of the Executive Chairman Agreement to April 15, 2022. In connection with the ~~Agreement,~~Addendum, the Company made a one-time award to Dr. Nash of an option to purchase 90,000 shares of Company common stock, which ~~will vest~~vests monthly commencing on May 15, 2021, and to increase Dr. Nash’s monthly base salary to $27,960 from $25,417. Effective March 15, 2022, the Company extended the ~~Term~~term of ~~Employment~~employment from April 15, 2022 to December 31, 2022 with a ~~Base Salary~~base salary of $29,358 per month (which includes the cash retainer payable for serving on the Company’s Board or for acting as the Chairman of the Board). In connection with ~~the Agreement,~~this extension, the Company made a one-time award to Dr. Nash of an option to purchase 75,000 shares of the Company’s common stock, which ~~will vest~~vests monthly commencing on April 10, 2022. All other terms of the ~~Employment~~Executive Chairman Agreement ~~shall~~ remain the same.

~~Appointment of Glenn Whaley as Chief Financial Officer~~

On March 10, 2022, Glenn Whaley was appointed Chief Financial Officer of the Company. Previously, Mr. Whaley was the Company’s Principal Financial and Accounting Officer. In connection with the appointment, we made a one-time award to Mr. Whaley of an option to purchase 40,000 shares of our common stock, which 25% of the shares will vest on March 10, 2023, with the remainder vesting monthly thereafter.

Components of Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product ~~candidates.~~

candidates or achieving market acceptance and commercial success for any product that does receive regulatory approval.

Research and Development Expenses

Research and development expenses consist of costs associated with our research activities, including our product discovery efforts and the development of our product candidates. Our research and development expenses include:

•external research and development expenses and milestone payments incurred under arrangements with third parties, such as CROs, contract manufacturing organizations, collaborations with partners, consultants, and our scientific advisors; and

•internal personnel expenses.

We expense research and development costs as incurred. Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized as prepaid expenses and expensed when the service has been performed or when the goods have been received.

Since our inception in March 2016, we have spent a total of approximately ~~$160.8~~$177.3 million in research and development expenses through ~~March 31,~~June 30, 2022.

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, IMU-935 and IMU-856. We have spent the majority of our research and development resources on vidofludimus calcium, our lead development program for clinical trials in MS, UC, COVID-19 and PSC.

In August 2019, Immunic AG received a grant of up to approximately $730,000 from the German Federal Ministry of Education and Research, in support of the InnoMuNiCH (Innovations through Munich-Nippon Cooperation in Healthcare) project. The grant funds will be used to fund a three-year research project relating to autoimmune diseases by us and our three project partners. Since the inception of the grant, we have recorded ~~$415,000~~$457,000 of income in total of which ~~$59,000~~$100,000 and $178,000 of which were recorded in 2022 and 2021, respectively, and were classified in Other Income in the accompanying consolidated statement of operations.

Our research and development expenses ~~may~~are expected to increase in the foreseeable future as we continue to conduct ongoing regulatory and development activities, initiate new preclinical and clinical trials and build our ~~pipeline.~~pipeline of product candidates. The process of ~~commercialization,~~ conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving regulatory approval for any of our product candidates.

Successful development of product candidates is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict. We anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the development and regulatory success of each product candidate, and ongoing assessments as to each product candidate’s commercial potential.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, professional fees for legal, accounting, tax and business consulting services, insurance premiums and stock-based compensation.

Other Income (Expense), Net

Interest Income

Interest income consists of interest earned on our money market funds and bank accounts which are a portion of our cash and cash equivalents balance. Our interest income has not been significant due to low interest rates earned on invested balances.

Other Income (Expense), Net

Other income (expense) consists primarily of a research and development tax incentive related to clinical trials performed in Australia and foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future.

Results of Operations

Comparison of the Three Months Ended ~~March 31,~~June 30, 2022 and 2021

The following table summarizes our operating expenses for the three months ended ~~March 31,~~June 30, 2022 and 2021:


		Three Months Ended March 31,				Change					Three Months Ended June 30,				Change
		2022		2021		$		%			2022		2021		$		%
(dollars in thousands)	(dollars in thousands)	(unaudited)								(dollars in thousands)	(unaudited)
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	$	17,445	$	11,519	$	5,926	51	%	Research and development	$	16,538	$	15,738	$	800	5	%
General and administrative	General and administrative	3,990		3,618		372		10	%	General and administrative	4,072		3,432		640		19	%
4SC Royalty Settlement (See Note 4)		—		17,250		(17,250)		(100)	%
4SC royalty settlement (see Note 4)										4SC royalty settlement (see Note 4)	—		—		—		N/A
Total operating expenses	Total operating expenses	21,435		32,387		(10,952)		(34)	%	Total operating expenses	20,610		19,170		1,440		8	%
Loss from operations	Loss from operations	(21,435)		(32,387)		10,952		(34)	%	Loss from operations	(20,610)		(19,170)		(1,440)		8	%
Total other income (expense)	Total other income (expense)	627		(2,147)		2,774		(129)	%	Total other income (expense)	(1,291)		1,236		(2,527)		(204)	%
Net loss	Net loss	$	(20,808)	$	(34,534)	$	13,726	(40)	%	Net loss	$	(21,901)	$	(17,934)	$	(3,967)	22	%

Research and development expenses increased by ~~$5.9~~$0.8 million during the three months ended ~~March 31,~~June 30, 2022, as compared to the three months ended ~~March 31,~~June 30, 2021. The increase reflects (i) a ~~$3.9~~$1.5 million increase in external development costs related to the Phase 3 program of vidofludimus calcium in relapsing multiple sclerosis, (ii) a ~~$2.0~~$0.9 million increase in external development costs related to the Phase 2 trial of vidofludimus calcium in progressive multiple sclerosis, (iii) a ~~$1.1~~$1.2 million increase in external development costs related to the clinical studies of IMU-935, (iv) a ~~$1.1~~$0.7 million increase in personnel expense in research and development, $0.3 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, and (v) $0.4 million related to increased costs across numerous categories. The increases were partially offset by (i) a $1.4 million decrease in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in COVID-19, (ii) a decrease of $1.3 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in ulcerative colitis, (iii) a decrease of $0.5 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in relapsing-remitting multiple sclerosis, and (iv) a decrease of $0.7 million across numerous categories.

General and administrative expenses increased by $0.6 million during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The increase was primarily due to a $0.6 million increase in personnel expense in general and administrative, $0.3 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase of headcount.

Other income decreased by $2.5 million during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The decrease was primarily attributable to (i) a $2.3 million increase in the loss on an intercompany loan between Immunic, Inc. and Immunic AG as a result of changes in currency exchange rates, (ii) a $0.2 million foreign exchange loss in the second quarter of 2022 on an intercompany loan between Immunic AG and Immunic Australia Pty Ltd.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table summarizes our operating expenses for the six months ended June 30, 2022 and 2021:


	Six Months Ended June 30,				Change
	2022		2021		$		%
(dollars in thousands)	(unaudited)
Operating expenses:
Research and development	$	33,983	$	27,257	$	6,726	25	%
General and administrative	8,062		7,050		1,012		14	%
4SC royalty settlement (see Note 4)	—		17,250		(17,250)		N/A
Total operating expenses	$	42,045	$	51,557	$	(9,512)	(18)	%
Loss from operations	(42,045)		(51,557)		9,512		(18)	%
Total other income (expense)	(664)		(911)		247		(27)	%
Net loss	(42,709)		$	(52,468)	$	9,759	(19)	%

Research and development expenses increased by $6.7 million during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase reflects (i) a $5.4 million increase in external development costs related to the Phase 3 program of vidofludimus calcium in relapsing multiple sclerosis, (ii) a $2.9 million increase in external development costs related to the Phase 2 trial of vidofludimus calcium in progressive multiple sclerosis, (iii) a $3.1 million increase in external development costs related to the clinical studies of IMU-935, (iv) a $1.8 million increase in personnel expense in research and development, $0.7 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, (v) a ~~$0.6~~$0.5 million increase in external development costs related to the Phase 1 clinical trial of IMU-856, and (vi) ~~$0.6~~$0.2 million related to increased costs across numerous categories. The increases were partially offset by (i) a ~~$1.7~~$3.1 million decrease in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in COVID-19, (ii) a decrease of ~~$0.9 million in drug supply costs for vidofludimus calcium and (iii) a decrease of $0.8~~$2.0 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in ulcerative ~~colitis.~~colitis, (iii) a decrease of $1.2 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in relapsing-remitting multiple sclerosis, and (iv) a decrease of $0.9 million in external development costs across numerous categories.

General and administrative expenses increased by ~~$0.4~~$1.0 million during the ~~three~~six months ended ~~March 31,~~June 30, 2022, as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021.The increase was primarily due to (i) a ~~$0.3~~$0.9 million increase in personnel expense in general and administrative, $0.3 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, and (ii) a $0.1 million increase across numerous categories.

Other ~~income increased~~expense decreased by ~~$2.8~~$0.2 million during the ~~three~~six months ended ~~March 31,~~June 30, 2022, as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021. The ~~increase~~decrease was primarily attributable to (i) a $1.9 million decrease in the loss on an intercompany loan between Immunic, Inc. and Immunic AG (ii) a $0.4 million foreign exchange gain in the first quarter of 2022 on a intercompany loan between Immunic AG and Immunic Australia Pty Ltd., (iii) a $0.3 million increase in research and development tax incentives for clinical trials in Australia as a result of increased spending on clinical trials in Australia, and ~~(iv)~~(ii) a $0.2 million ~~related to increased income across numerous categories.~~ foreign exchange gain in the first two quarters of 2022 on an intercompany loan between Immunic AG and Immunic Australia Pty Ltd. The increase was partially offset by a $0.3 million increase in the loss on an intercompany loan between Immunic, Inc. and Immunic AG.

Liquidity and Capital Resources

Financial Condition

We have no products approved for commercial sale and have not generated any revenue from product sales. We have never been profitable and have incurred operating losses in each year since our inception in 2016. We have an accumulated deficit of approximately ~~$217.7~~$239.6 million at ~~March 31,~~June 30, 2022 and $196.9 million as of December 31, 2021. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we initiate and continue the ~~pre-clinical~~preclinical and clinical development of our product candidates and add personnel necessary to operate as a company with an advanced clinical pipeline of product candidates. To the extent additional funds are necessary to meet long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of indebtedness, additional equity financings or a combination of these potential sources of funds, although we can provide no assurance that these sources of funding will be available on reasonable terms.

From inception through ~~March~~July 31, 2022, we have raised net cash of approximately ~~$289.2~~$299.1 million from private and public offerings of preferred and common stock. As of ~~March 31,~~June 30, 2022, we had cash and cash equivalents of approximately ~~$95.7 million and have raised an additional $10.0 million using the December 2020 ATM facility in the second quarter of 2022.~~$88.1 million. With these funds, we expect to be able to fund our operations beyond twelve months from the date of the issuance of the accompanying condensed consolidated financial statements.

In November 2020, we filed a shelf registration statement on Form S-3 (the "2020 Shelf Registration Statement"). The 2020 Shelf Registration Statement permits the offering, issuance and sale of up to $250.0 million of common stock, preferred stock, warrants, debt securities, and/or units in one or more offerings and in any combination of the foregoing.

In December 2020, we filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $50.0 million of common stock that may be issued and sold under an ~~additional~~ at-the-market sales agreement with SVB Leerink as agent. We have used and intend to continue to use the net proceeds from the offering to continue to fund the ongoing clinical development of our product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The December 2020 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth in the December 2020 ATM or (ii) termination of the December 2020 ATM as otherwise permitted thereby. The December 2020 ATM may be terminated at any time by either party upon ten days’ prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on us. As of ~~May 5,~~July 31, 2022, $8.4 million in capacity remains under the December 2020 ATM.

In May 2022, we filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $80.0 million of common stock that may be issued and sold under another at-the-market sales agreement ("May 2022 ATM") with SVB Leerink as agent. We intend to use the net proceeds from the offering to continue to fund the ongoing clinical development of ~~its~~our product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The May 2022 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth in the May 2022 ATM or (ii) termination of the May 2022 ATM as otherwise permitted thereby. The May 2022 ATM may be terminated at any time by either party upon ten days’ prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on the Company. As of ~~May 5,~~July 31, 2022, $80.0 million in capacity remains under the April 2022 ATM.

In the three months ended March 31, 2022, we raised gross proceeds of $30.6 million pursuant to the December 2020 ATM through the sale of 2,904,113 shares of common stock at a weighted average price of $10.54 per share. The net proceeds from the December 2020 ATM were $29.7 million after deducting underwriter commissions of $0.9 million. During the second quarter ofJune 30, 2022, we raised gross proceeds of $10.3 million pursuant to the December 2020 ATM through the sale of 1,300,000 shares of common stock at a weighted average price of $7.90 per share. The net proceeds from the December 2020 ATM were $10.0 million after deducting underwriter commissions of $0.3 million. In the six months ended June 30, 2022, we raised gross proceeds of $40.9 million pursuant to the December 2020 ATM through the sale of 4,204,113 shares of common stock at a weighted average price of $9.72 per share. The net proceeds from the December 2020 ATM were $39.6 million after deducting underwriter commissions of $1.2 million.

WeThe Company did not have any ATM activity during the three or six months ended ~~March 31,~~June 30, 2021.

Future Capital Requirements

As noted above, we have not generated any revenue from product sales and we do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize any of our product candidates. At the same time, we expect our expenses to increase as we continue the ongoing research, development, manufacture and clinical trials of, and seek regulatory approval for, our product candidates. We expect to incur additional costs associated with operating as a public company. In addition, subject to obtaining regulatory approval of any of our product candidates, we anticipate that we will need substantial additional funding in connection with our continuing operations.

Our future expenses and capital requirements are difficult to forecast and will depend on many factors, including, but not limited to:

•the timing and structure of any strategic options and transactions, if any;

•the cost, timing and outcome of any future ~~litigation costs;~~litigation;

•personnel-related expenses, including salaries, benefits, stock-based compensation expense and other compensation expenses related to retention and termination of personnel;

•the scope, progress, results and costs of research and development and ongoing clinical trials;

•the cost and timing of future regulatory submissions;

•the cost and timing of developing and validating the manufacturing processes for any potential product candidates;

•the cost and timing of any commercialization activities, including reimbursement, marketing, sales and distribution costs;

•our ability to establish new collaborations, licensing or other arrangements and the financial terms of such agreements;

•the number and characteristics of any future product candidates we pursue;

•the costs involved with being a public company;

•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such litigation; and

•the timing, receipt and amount from the sales of, or royalties on, any future products.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of stock offerings, debt financings, strategic alliances, collaborations and licensing arrangements. We do not expect to achieve revenue from product sales prior to the use of the net proceeds from our public and private offerings to date. We do not have any committed external source of funds. Additional funds may not be available on acceptable terms, if at all. To the extent that we raise additional capital through the sale of equity securities, the ownership interest of our stockholders will be diluted and it may be on terms that are not favorable to us or our stockholders. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt or other terms that are not favorable to us or our stockholders. If we raise additional funds through collaborations and licensing arrangements with third parties, we would expect to relinquish substantial rights to our technologies or our future products, or grant licenses on terms that may not be favorable to us. If we were to complete a merger, we may relinquish all control over the organization and could experience detrimental tax effects. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets. Any of these factors could harm our operating ~~results.~~results and could result in substantial declines in the trading price of our common stock.

As of ~~March 31,~~June 30, 2022, we had ~~approximately $95.7 million in~~ cash and cash ~~equivalents.~~

equivalents of approximately $88.1 million.

Cash Flows

The following table shows a summary of our cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021:


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
(in thousands)	(in thousands)	(unaudited)				(in thousands)	(unaudited)
Cash (used in) provided by:	Cash (used in) provided by:					Cash (used in) provided by:
Operating activities	Operating activities	$	(20,681)	$	(12,948)	Operating activities	$	(36,444)	$	(41,953)
Investing activities	Investing activities	(12)		(10)		Investing activities	(40)		(28)
Financing activities	Financing activities	29,643		—		Financing activities	39,719		—

Operating activities

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, operating activities used ~~$20.7~~$36.4 million of cash. The use of cash primarily resulted from (i) our net loss of ~~$20.8~~$42.7 million adjusted for non-cash charges of ~~$2.2~~$6.3 million related to $2.1 million for an unrealized foreign currency loss and $4.2 million related to stock-based compensation and depreciation and amortization while our net change in operating assets and liabilities remained flat. Changes in our operating assets and liabilities during the six months ended June 30, 2022 consisted primarily of (i) a $0.1 million increase in our other current assets and prepaid expenses partially offset by an decrease of $0.1 million in our other current liabilities.

During the six months ended June 30, 2021, operating activities used $42.0 million of cash. The use of cash primarily resulted from (i) our net loss of $52.5 million adjusted for non-cash charges of $8.6 million related to common stock issued for the 4SC AG transaction, $1.9 million for an unrealized foreign currency loss, $3.1 million related to stock-based compensation and depreciation and amortization ~~and (ii)~~as well as a ~~$2.1~~$3.1 million net increase in our operating assets and liabilities. Changes in our operating assets and liabilities during the ~~three~~six months ended March 31, 2022 consisted primarily of an increase of $2.3 million increase in our other current assets and prepaid expenses as a result of the continued startup of our Phase 3 trials in relapsing multiple sclerosis and a Phase 2 trial in progressive multiple sclerosis, partially offset by an increase of $0.2 million in accounts payable and other accrued expenses.

During the three months ended March 31, 2021, operating activities used $12.9 million of cash. The use of cash primarily resulted from (i) our net loss of $34.5 million adjusted for non-cash charges of $8.6 million related to common stock issued for the 4SC AG transaction, (ii) $2.5 million for an unrealized foreign currency loss, (iii) $1.6 million related to stock-based compensation and depreciation and amortization and (iv) a $8.9 million net increase in our operating assets and liabilities. Changes in our operating assets and liabilities during the three months ended March 31,June 30, 2021 consisted primarily of (i) an increase of ~~$8.5 million in our other current liabilities as a result of an~~ $8.6 ~~million payable due to 4SC AG, partially offset by an increase of $0.4~~ million in other current assets and prepaid ~~expenses.~~expenses, partially offset by an increase of $5.5 million in our other current liabilities

Investing activities

Net cash used in investing activities was ~~$12,000~~$40,000 and ~~$10,000~~$28,000 during the ~~three~~six months ended ~~March 31,~~June 30, 2022, and 2021, respectively, which was related to the purchase of property and equipment.

Financing Activities

Net cash provided by financing activities was ~~$29.6~~$39.7 million during the ~~three~~six months ended ~~March 31,~~June 30, 2022 consisting primarily of net cash proceeds from the sale of common stock under ~~the ATM.~~our ATM facility.

There were no cash based financing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2021.

Off-Balance Sheet Arrangements

Through ~~March 31,~~June 30, 2022, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose.

Contractual Obligations

Maturities of the operating lease obligation are as follows as of ~~March 31,~~June 30, 2022:


2022	2022	$	339,000	2022	$	219,000
2023	2023		303,000	2023		289,000
2024	2024		228,000	2024		214,000
2025	2025		114,000	2025		107,000
2026	2026		—	2026		—
Total	Total		984,000	Total		829,000
Interest	Interest		78,000	Interest		62,000
PV of obligation	PV of obligation	$	906,000	PV of obligation	$	767,000

As of ~~March 31,~~June 30, 2022, we have non-cancelable contractual obligations under certain agreements related to our development programs vidofludimus calcium, IMU-935 and IMU-856 totaling approximately ~~$3.0~~$2.6 million, all of which is expected to be paid in ~~2022.~~the next twelve months.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP. The preparation of our unaudited condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. We have reviewed these critical accounting policies and related disclosures with the Audit Committee of our Board.

During the first ~~three~~six months of 2022, there were no significant changes in our critical accounting policies or in the methodology used for estimates. Our significant accounting policies are described in more detail in (i) Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report and (ii) our audited consolidated financial statements for the years ended December 31, 2021 and 2020 filed in our Annual Report on Form 10-K on February 24, 2022.

Recently Issued Accounting Standards

There are no recently issued accounting standards that would have a significant impact on the company's consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

We had cash and cash equivalents of ~~$95.7~~$88.1 million as of ~~March 31,~~June 30, 2022, which were held for working capital purposes. We do not enter into investments for trading or speculative purposes. We do not believe that we have any material exposure to changes in the fair value of these investments as a result of changes in interest rates due to their short-term nature. However, ~~$26.1~~$23.9 million of these funds are held in German bank accounts that were earning ~~negative~~no interest ~~of 0.5%~~ as of ~~March~~July 31, 2022. ~~Declines~~Decreases or increases in interest rates, however, will reduce or increase future investment income, respectively, to the extent we have funds available for investment.

Foreign Currency Exchange Risk

Our primary research and development operations are conducted in our facilities in Germany. We have entered and may continue to enter into international agreements, primarily related to our clinical studies. Accordingly, we have exposure to foreign currency exchange rates and fluctuations between the U.S. dollar and foreign currencies, primarily the euro and the Australian dollar, which could adversely affect our financial results, including income and losses as well as assets and liabilities. To date, we have not entered into, and do not have any current plans to enter into, any foreign currency hedging transactions or derivative financial transactions. Our exposure to foreign currency risk will fluctuate in future periods as our research and clinical development activities in Europe and Australia change. We currently maintain a significant amount of our assets outside of the U.S.

The functional currencies of our foreign subsidiaries are the applicable local currencies. Accordingly, the effects of exchange rate fluctuations on the net assets of these operations are accounted for as translation gains or losses in accumulated other comprehensive income (loss) within stockholders’ equity. Foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future are recorded in Other Income (Expense). Our German subsidiaries are currently a significant portion of our business and, accordingly, a change of 10% in the currency exchange rates, primarily the euro, could have a material impact on their financial position or results of operations.

Although operating in local currencies may limit the impact of currency rate fluctuations on the results of operations of our German and Australian subsidiaries, rate fluctuations may impact the consolidated financial position as the assets and liabilities of our foreign operations are translated into U.S. dollars in preparing our condensed consolidated balance sheets. As of ~~March 31, 2021,~~June 30, 2022, our German and Australian subsidiaries had net current assets (defined as current assets less current liabilities), subject to foreign currency translation risk, of ~~$36.7~~$30.6 million. A decrease of approximately ~~$3.7~~$3.1 million in net current assets would result as of ~~March 31,~~June 30, 2022, from a hypothetical 10% adverse change in quoted foreign currency exchange rates, primarily due to the euro. In addition, a 10% change in the foreign currency exchange rates for the ~~three~~six months ended ~~March 31,~~June 30, 2022, would have impacted our net loss by approximately ~~$1.6~~$3.5 million, primarily due to the euro.

Effects of Inflation

We do not believe that inflation and changing prices had a significant impact on our results of operations for any periods presented herein.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out, under the supervision of and with the participation of our management, including our Chief Executive Officer and our Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15 (e)) under the Securities Exchange Act of 1934 ("the Exchange Act"), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and our Principal Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the ~~quarter~~six months ended ~~March 31,~~June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any litigation, nor are we aware of any pending or threatened litigation against us, that we believe would materially affect our business, operating results, financial condition or cash flows. Our industry is characterized by frequent claims and litigation including securities litigation, claims regarding patent and other intellectual property rights and claims for product liability. ~~In particular, in connection with the Transaction with Immunic AG, pursuant to which Immunic AG became our wholly-owned subsidiary, it~~It is not uncommon for lawsuits to be filed alleging lack of process or breach of fiduciary duties by directors, and we may face such suits in the future. As a result, in the future, we may be involved in various legal


		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	78
	Notes to Condensed Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2122
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3135
Item 4.	Controls and Procedures	3236

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	3236
Item 1A.	Risk Factors	3336
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3337
Item 3.	Defaults Upon Senior Securities	3337
Item 4.	Mine Safety Disclosures	3337
Item 5.	Other Information	3337
Item 6.	Exhibits	3337


		Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value			Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2021	Outstanding as of January 1, 2021	1,117,160	$	12.96				Outstanding as of January 1, 2021	1,117,160	$	12.96
Granted	Granted	600,059	$	15.73				Granted	961,059	$	15.27
Exercised	Exercised	—	$	—				Exercised	—	$	—
Forfeited or expired	Forfeited or expired	—	$	—				Forfeited or expired	(13,380)	$	12.11
Outstanding as of March 31, 2021		1,717,219	$	13.93	9.24	$	3,653,706
Options vested and expected to vest as of March 31, 2021		1,717,219	$	13.93	9.24	$	3,653,706
Options exercisable as of March 31, 2021		373,702	$	13.56	8.82	$	994,908
Outstanding as of June 30, 2021								Outstanding as of June 30, 2021	2,064,839	$	14.04	9.16	$	411,563
Options vested and expected to vest as of June 30, 2021								Options vested and expected to vest as of June 30, 2021	2,064,839	$	14.04	9.16	$	411,563
Options exercisable as of June 30, 2021								Options exercisable as of June 30, 2021	462,022	$	13.59	8.65	$	227,848


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Three Months Ended March 31, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at January 1, 2021	21,168,240	$	2	$	266,823	$	(4,112)	$	(103,928)	$	158,785
Net loss	—	—		—		—		(34,534)		(34,534)
Stock-based compensation	—	—		1,579		—		—		1,579
Foreign exchange translation adjustment	—	—		—		2,991		—		2,991
Issuance of common stock in connection with the 4SC royalty settlement (see Note 4)	581,199	—		8,625		—		—		8,625
Balance at March 31, 2021	21,749,439	2		$	277,027	$	(1,121)	$	(138,462)	$	137,446


	As of March 31,
	2022	2021
Options to purchase common stock	3,423,482	1,717,219


		Fair Value Measurement at December 31, 2021									Fair Value Measurement at Fair Value Measurement at December 31, 2021
		Fair Value		Level 1		Level 2		Level 3			Fair Value		Level 1		Level 2		Level 3
Assets	Assets									Assets
Money market funds	Money market funds	$	31,630	$	31,630	$	—	$	—	Money market funds	$	31,630	$	31,630	$	—	$	—
Total assets at fair value		$	31,630	$	31,630	$	—	$	—
Total assets										Total assets	$	31,630	$	31,630	$	—	$	—


+			Indicates a management contract or compensatory plan or arrangement.
*			In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.