ImmunityBio, Inc. — Q2 2022 Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2022. The company is a clinical-stage biotechnology business developing cancer and infectious-disease therapies and vaccines; it reported minimal revenue and no approved products for commercial sale.
Financial performance and position
| Metric | Q2 2022 | Six months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | $35,000 | $49,000 | $339,000 and $478,000, respectively |
| Research and development expense | $63.1 million | $118.5 million | $53.8 million and $94.9 million |
| Selling, general and administrative expense | $16.6 million | $57.2 million | $32.4 million and $77.7 million |
| Net loss | $94.8 million | $197.8 million | $89.4 million and $169.9 million |
| Net loss per share, basic and diluted | $0.24 | $0.50 | $0.23 and $0.44 |
| Cash used in operating activities | Not separately stated in the supplied cash flow data | $166.2 million | $130.1 million for the six months |
Six-month operating expenses rose 2% to $175.6 million. No meaningful product-sales margin is available: revenue was negligible and came from legacy licensing, bioreactor-related activity and grants. At June 30, cash and cash equivalents were $61.9 million and marketable securities were $21.0 million current plus $0.9 million noncurrent. Combined cash, cash equivalents and marketable securities were $83.9 million, down from $317.9 million at December 31, 2021.
Total assets were $317.7 million, total liabilities $739.7 million, and stockholders’ deficit $422.0 million. Related-party promissory notes and accrued interest, net of unamortized issuance costs, totaled $612.6 million. A $300 million related-party note was due December 17, 2022; the remaining approximately $312.5 million was due September 30, 2025. The December note bore a 7.29% rate at quarter-end.
Changes versus the prior comparable period
- Six-month revenue fell 90% to $49,000, primarily because of lower warranty revenue from a related party.
- Six-month R&D expense increased 25%, reflecting higher personnel, regulatory and consulting costs, and manufacturing-facility spending; lower stock compensation partly offset the increase.
- Six-month SG&A expense decreased 26%, primarily due to lower merger-related legal, consulting and insurance costs and reduced stock compensation, partly offset by higher personnel costs.
- Six-month net loss widened to $197.8 million from $169.9 million. Higher interest expense, investment losses and the Amyris joint-venture loss more than offset the lower SG&A expense.
- Operating cash use increased by $36.1 million year over year. Capital spending on property, plant and equipment was $43.3 million, versus $15.1 million in the first half of 2021.
Outlook, risks and unusual items
- Regulatory milestone: The company submitted a BLA in May 2022 for N-803 plus BCG for BCG-unresponsive non-muscle invasive bladder cancer with carcinoma in situ. In July 2022, after quarter-end, the FDA accepted the application and set a May 23, 2023 PDUFA target date. Approval is not assured.
- Funding and going concern: The company disclosed substantial doubt about its ability to continue as a going concern without additional funding or financial support. Management nevertheless believed available liquidity, possible equity issuance and potential borrowing from affiliates would fund operations for at least 12 months after issuance of the statements, relying substantially on the Executive Chairman’s intent and ability to provide support. The company had $330.8 million available under its ATM program, which it had paused and could reactivate; no ATM shares were issued in the first half of 2022.
- Expected spending: Management anticipated significantly higher R&D spending and continuing operating losses as trials, regulatory work and manufacturing expansion progress. The filing gives no specific earnings or revenue guidance.
- Dunkirk facility: The company acquired a leasehold interest in a 409,000-square-foot manufacturing facility for approximately $40.5 million. It committed to $1.52 billion of operating expenditures over the initial 10-year term, hiring 450 employees within five years, and potentially another $1.50 billion of operating expenditures if it renews. Failure to meet obligations could lead to termination or recoupment of certain benefits.
- Other commitments: Approximately $100.6 million of commitments were expected to be paid within one year; additional milestone-based commitments could total up to $578.2 million. These amounts are distinct from the Dunkirk operating-spend commitments.
- Contingent value rights: Altor-related CVRs include approximately $304 million tied to N-803 regulatory approval by December 31, 2022 and approximately $304 million tied to worldwide annual sales exceeding $1 billion by December 31, 2026. Some holders may elect cash; the Executive Chairman and related party irrevocably elected shares for their approximately $279.5 million of CVRs. The FDA’s announced target action date is after the stated regulatory CVR deadline, and whether that milestone is achieved is uncertain.
- Litigation: A court-approved Altor appraisal settlement resulted in issuance of 2,229,296 shares in July 2022. A separate $5 million class settlement was accrued at June 30, subject to court approval. Other Sorrento disputes and a Beike arbitration remained unresolved; the company said it could not estimate a possible loss range for certain matters.
- Governance and related parties: The Executive Chairman and affiliates beneficially owned approximately 78.7% of shares at June 30, and the company relies on related-party financing, services, leases and other arrangements. These create control, conflict-of-interest and financing-concentration risks.
Key investor verification points
- Verify the status and terms of the $300 million note due December 2022, including repayment, refinancing, or potential conversion into shares at $5.67 per share.
- Track cash burn, available liquidity, ATM usage and any affiliate funding; management’s 12-month liquidity assessment depends partly on anticipated support and financing access.
- Monitor FDA review of the N-803 BLA against the May 23, 2023 target date and clarify how the review timing relates to the December 31, 2022 regulatory CVR deadline.
- Assess progress, costs and compliance with the Dunkirk facility’s substantial operating-spend and hiring commitments, as well as manufacturing build-out requirements.
- Check court approval and payment of the $5 million class settlement, and developments in the remaining litigation and arbitration.
- Review future dilution and related-party exposure, including potential equity issuance, CVR share settlement and the Executive Chairman’s voting control.