IOVANCE BIOTHERAPEUTICS, INC. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020; filed August 6, 2020. Iovance is a clinical-stage cell-therapy company developing tumor-infiltrating lymphocyte (TIL) therapies. It had no approved commercial products and generated no revenue.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $49.3m | $39.3m | $106.2m | $70.2m |
| General and administrative expense | $14.4m | $10.9m | $28.2m | $19.9m |
| Operating loss | $63.6m | $50.2m | $134.4m | $90.2m |
| Net loss | $63.0m | $47.6m | $132.6m | $84.5m |
| Basic and diluted loss per share | $0.47 | $0.38 | $1.02 | $0.68 |
| Net interest income | $0.6m | $2.6m | $1.8m | $5.7m |
Margins are not meaningful because the company reported no revenue. Q2 net loss increased 33% year over year; six-month net loss increased 57%. Management attributed the increases mainly to expanded clinical, research, manufacturing and corporate activities. Six-month R&D expense included a $10.0m Novartis license payment for IOV-3001.
For the six months, operating cash use was $101.9m, versus $62.9m a year earlier. Investing activities used $323.7m, primarily reflecting purchases of short-term investments; financing provided $572.3m, principally from the June stock offering. Cash, cash equivalents and restricted cash increased $146.7m to $166.1m.
At June 30, cash and cash equivalents were $160.6m, short-term investments $611.3m and restricted cash $5.5m, totaling $777.4m. Working capital was $727.7m; stockholders’ equity was $758.3m. Total liabilities were $59.3m, including $7.9m of operating lease liabilities. The filing reports no conventional borrowings. A 20-year finance lease for the Philadelphia manufacturing facility was expected to commence in December 2020; its future payment amount is not clearly provided here.
Material changes versus comparable periods
- Q2 R&D expense rose 25%; six-month R&D rose 51%. The company cited clinical-trial costs, increased staffing and stock compensation; Q2 manufacturing costs were lower due to fewer production runs.
- Q2 G&A expense rose 32%; six-month G&A rose 41%, reflecting staffing, stock compensation and higher directors’ and officers’ insurance costs.
- Interest income declined as interest rates and the cash balance were lower for much of the periods; the June offering proceeds were invested late in Q2.
- In June, Iovance sold 19.5m common shares at $31 per share, receiving approximately $567.0m net. Shares outstanding increased to 146.4m at quarter-end.
Outlook, operating developments and risks
- Management expected continued higher spending on clinical trials, manufacturing expansion, facility construction, staffing and pre-commercial activities. It stated that available funds were sufficient for planned operating expenses and capital spending for at least 12 months from the filing date, but also said additional capital may be needed to complete development and commercialization plans.
- Iovance targeted a lifileucel BLA submission by the end of 2020 and discussed a potential 2021 launch if approved. For LN-145, the filing describes further FDA discussions and possible BLA plans; timing and the registration pathway remained uncertain.
- For lifileucel melanoma trial C-144-01 Cohort 4, 89 patients had been dosed. Initial data for 68 patients showed a 32.4% investigator-assessed response rate and 72.1% disease-control rate at a median 5.3 months’ follow-up. Cohort 2 had shown a 36% response rate among 66 patients; median duration of response had not been reached at 18.7 months’ median follow-up.
- For LN-145 cervical cancer, the company cited earlier trial results of a 44% response rate in 27 patients, but noted that study changes, FDA feedback and future results could affect any filing plan. The company also continued studies in head and neck cancer, lung cancer and other indications.
- COVID-19 effects remained uncertain. Management reported no significant effect on trial enrollment to date, but MD Anderson temporarily suspended research programs and enrollment in Iovance-sponsored studies there was paused. The filing warns of possible trial, manufacturing, regulatory-review and launch delays.
- Key execution risks include clinical efficacy and safety, FDA acceptance of trial data and manufacturing validation, dependence on contract manufacturers and trial sites, scaling the cell-therapy process, commercialization and reimbursement, competition, and ongoing cash burn. The company cautioned that preliminary clinical results may change.
- Legal matters include Solomon Capital suits with possible losses not estimable; the First Solomon Suit was dismissed for want of prosecution in July 2020, with further motions and an appeal noted. The parties in the Fischkoff litigation agreed in principle to a confidential settlement on August 4, 2020, subject to final negotiation. Management did not expect pending matters to materially affect the company’s financial position, results or cash flows.
Important facts for investors to verify
- Whether lifileucel meets FDA requirements for a BLA, including Cohort 4 data, independent review, manufacturing controls and validation, and whether the targeted filing and launch timing remain feasible.
- Updated LN-145 trial results, enrollment progress, the FDA’s registration feedback and any confirmed BLA timetable.
- Clinical-trial, manufacturing and facility spending against the stated cash runway, including the Philadelphia facility’s construction costs and future lease obligations.
- Effects of COVID-19 on trial sites, enrollment, manufacturing capacity, regulatory review and commercialization preparations.
- Potential dilution from equity compensation and future financing; also monitor remaining shelf-registration capacity and shares issuable under outstanding options and preferred stock.
- Developments in the Solomon and Fischkoff matters and any other unaccrued contingencies; the filing states that certain possible losses cannot be estimated.