IOVANCE BIOTHERAPEUTICS, INC. — Q3 2019 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2019. Amounts below are in millions of dollars, except per-share data and where noted.
Business context
Iovance is a clinical-stage biotechnology company developing tumor-infiltrating lymphocyte (TIL) cancer therapies. It had no approved commercial products and reported no revenue. Its lead candidates were lifileucel for metastatic melanoma and LN-145 for advanced cervical cancer; it was also conducting or supporting studies in other cancers.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $41.6 | $27.9 | $111.8 | $72.4 |
| General and administrative | $10.0 | $7.1 | $30.0 | $20.9 |
| Net loss | $(49.5) | $(33.8) | $(134.0) | $(91.0) |
| Net loss per share | $(0.40) | $(0.36) | $(1.08) | $(1.01) |
| Operating cash used | Not stated by quarter | Not stated by quarter | $105.1 | $69.7 |
Gross margin and operating margin are not meaningful because the company had no revenue. Net interest income was $2.1 million for Q3 and $7.8 million for the nine-month period, up from $1.2 million and $2.3 million, respectively, in 2018.
At September 30, 2019, cash and cash equivalents were $38.9 million and short-term investments were $323.0 million, totaling $361.9 million; restricted cash was an additional $5.5 million. Working capital was $332.7 million. Total liabilities were $40.7 million, including $14.4 million of operating lease liabilities. The filing reports no off-balance-sheet arrangements and no material borrowings or debt balance.
Changes versus the prior comparable period
- Q3 R&D expense rose 49% and nine-month R&D rose 54%, principally due to manufacturing capacity, clinical-trial activity and staffing; higher drug costs also contributed to the nine-month increase.
- G&A expense increased 41% for Q3 and 43% for the nine months, reflecting higher staffing, intellectual-property legal costs and commercialization market research.
- Net loss increased 46% for Q3 and 47% for the nine months. Operating cash use rose from $69.7 million to $105.1 million for the nine-month period.
- Cash, cash equivalents and short-term investments declined from $468.5 million at December 31, 2018 to $361.9 million at September 30, 2019. Stockholders’ equity declined from $466.2 million to $355.1 million.
Outlook, developments and risks
- Management expected further increases in clinical, R&D, manufacturing, staffing and pre-commercial spending, and anticipated continuing losses. It stated available funds should cover anticipated operating expenses for at least 12 months from the filing date; this is management’s estimate, not a guarantee.
- The company reported encouraging but preliminary clinical results: lifileucel Cohort 2 showed a 38% objective response rate in 66 patients, and LN-145 showed a 44% rate in 27 patients. Follow-up was limited and duration of response had not been reached; results do not establish approval or commercial success.
- Management said FDA discussions indicated the LN-145 study might support a registration filing, with a possible BLA submission in the second half of 2020. That pathway depended on FDA feedback, enrollment, study results and manufacturing requirements. The filing also described a target of 75 patients in the pivotal cohort by the end of Q1 2020.
- A Philadelphia commercial manufacturing facility was under development. Its long-term lease is expected to carry substantial rent and operating costs when commenced; the filing anticipates commencement in 2020, subject to construction and lease terms. Manufacturing scale-up, product comparability, quality control, trial enrollment, regulatory review and reimbursement were significant risks.
- The company terminated its PolyBioCept agreement in June 2019 and its MedImmune collaboration in April 2019; it also closed an NSCLC study and redirected that work to other cohorts. The filing gives no quantified financial impact for these changes.
- The securities class action related to the SEC stock-promotion investigation was settled, with the insurer paying $3.25 million; the company expected no settlement cost. Derivative litigation, two Solomon Capital matters and litigation with a former executive remained unresolved, with potential losses not estimable in the filing. Certain possible securities-law liabilities were also unaccrued because the amounts were uncertain.
- The company disclosed an SEC administrative order arising from the stock-promotion matter that it said could constrain future private and public fundraising and affect investor communications. It also had a $400 million shelf registration statement effective but had not sold securities under it as of the filing.
Important facts for investors to verify
- Whether clinical efficacy, safety and manufacturing results support the anticipated regulatory pathways, and whether FDA feedback changes trial design or timelines.
- Actual cash burn, investment balances and financing needs relative to management’s stated minimum 12-month liquidity outlook; assess potential dilution from future capital raises.
- Construction, lease commencement, total cost and operational readiness of the Philadelphia facility, as well as capacity and performance of contract manufacturers.
- Progress and final outcomes of the pivotal lifileucel and LN-145 trials, including enrollment, response durability, adverse events and consistency across manufacturing sites.
- Developments in unresolved litigation and the SEC order’s practical impact on financing, alongside the company’s increasing operating and lease commitments.