Immunocore Holdings Plc annual report, FY2023

Business context and reporting period

Immunocore Holdings plc is a commercial-stage biotechnology company developing TCR bispecific immunotherapies through its ImmTAX platform. This Form 10-K covers the fiscal year ended December 31, 2023; it also includes unaudited quarterly 2023 results. KIMMTRAK (tebentafusp) is its only marketed product, approved for unresectable or metastatic uveal melanoma in 38 countries.

Financial performance and position

Revenue grew 43%; therapy sales rose 70%, with U.S. sales up 75% to $169.8 million and European sales up 58% to $67.6 million. Collaboration revenue fell 68% to $10.7 million. R&D expense increased 60% to $163.5 million, while SG&A rose 17% to $144.5 million. Cost of product revenue was $1.0 million; on that basis, product gross margin was approximately 99.6%. Operating and net margins remained negative, approximately 23.9% and 22.2%, respectively, of revenue.

At December 31, 2023, the company reported $48.0 million of Pharmakon borrowings, bearing fixed interest at 9.75%, and total liabilities of $228.2 million. In February 2024 it issued $402.5 million of 2.50% convertible notes, receiving net proceeds of $389.3 million. The company intended to use part of the proceeds to repay Pharmakon; it had not done so as of the filing date. No cash-flow statement line-item detail for free cash flow is provided here; operating cash flow was positive, while investing activities used $5.4 million.

Material changes versus the prior period

• Commercial growth improved operating cash flow from a $49.2 million use in 2022 to $2.9 million provided in 2023, although the company remained loss-making.
• Higher PRAME clinical activity drove much of the R&D increase; commercial and administrative headcount and launch costs increased SG&A.
• U.K. R&D tax credits recognized as a reduction to R&D expense declined by $9.3 million, primarily because the company no longer qualified for the SME program.
• Foreign currency results swung from a $14.2 million gain in 2022 to a $13.2 million loss in 2023, principally reflecting U.S. dollar movements against sterling on cash held by the U.K. subsidiary.
• The company retrospectively presented financial statements under U.S. GAAP after transitioning from IFRS for U.S. domestic issuer reporting. Deloitte issued unqualified opinions on the 2023 financial statements and internal controls.

Outlook, commentary, risks and unusual items

Management expects operating losses and expenses to continue as it expands KIMMTRAK commercialization and advances its pipeline. It stated that year-end cash, expected KIMMTRAK revenue and the February 2024 notes proceeds should fund operations and capital needs for at least 12 months from the filing date, while cautioning that estimates depend on assumptions and additional financing may be needed longer term. No specific revenue, earnings or margin guidance is provided.

2024 priorities include growing KIMMTRAK sales and pursuing additional indications; advancing IMC-F106C in a Phase 3 first-line advanced cutaneous melanoma trial; developing candidates for HIV and HBV; and beginning GMP manufacturing for two autoimmune programs. Management expected the TEBE-AM Phase 2 topline results in the fourth quarter of 2024 and anticipated other clinical updates and submissions during 2024; these are forward-looking plans, not assured outcomes.

Key risks include continued losses and dependence on KIMMTRAK acceptance, coverage, pricing and reimbursement; clinical, regulatory and safety uncertainty; competition; reliance on third-party manufacturers and CROs, including single-source API suppliers; intellectual-property challenges; foreign-exchange exposure; and geopolitical, inflation and supply-chain disruption. KIMMTRAK carries a boxed warning for cytokine release syndrome and requires specified patient monitoring. The company reported no material pending legal proceedings.

Revenue deductions are a notable estimate: accrued rebates, chargebacks, fees and returns totaled $66.7 million at year-end, including $61.7 million tied to estimates subject to greater uncertainty. Management said a 20% change in specified rebate and chargeback assumptions would change 2023 therapy revenue by $12.3 million. The auditor identified government rebate estimates as a critical audit matter. The selected quarterly table reports Q4 revenue of $70.2 million, operating expenses of $87.2 million and net loss of $19.7 million (basic loss per share $0.40). The table’s Q1 revenue presentation appears inconsistent with annual totals; the filing text does not provide a clear reconciliation.

Investor facts to verify

• Reconcile the quarterly revenue table with the annual $249.4 million total, including the Q1 figure and quarterly collaboration revenue.
• Track KIMMTRAK demand, reimbursement and pricing negotiations, and whether rebate accruals differ from eventual claims.
• Confirm repayment of Pharmakon debt from the notes proceeds, the resulting debt and interest burden, and the company’s cash runway.
• Monitor progress, enrollment and results for PRISM-MEL-301, TEBE-AM and other disclosed pipeline milestones.
• Assess customer and receivables concentration: four customers accounted for 88% of year-end receivables, and four customers generated 88% of 2023 therapy sales.