ImmunityBio, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Financial statements are unaudited; dollar figures below are in millions unless stated otherwise. The company completed its merger with NantCell on March 9, 2021. Because the entities were under common control, prior-period statements were recast as if combined from the earliest period presented.
Business context
ImmunityBio is a clinical-stage immunotherapy company focused on oncology and infectious diseases. It reported more than 40 clinical trials across 19 indications and no therapeutic or vaccine products approved for commercial sale. Anktiva (N-803) has FDA Breakthrough Therapy designation for BCG-unresponsive carcinoma in situ non-muscle-invasive bladder cancer; management reported that it had met the primary endpoint in the ongoing registrational Phase II/III trial based on submitted patient readout data.
Key financial metrics
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0.339 | $0.436 | $0.478 | $0.601 |
| Research and development expense | $53.800 | $33.005 | $94.928 | $60.379 |
| Selling, general and administrative expense | $32.445 | $18.347 | $77.720 | $27.840 |
| Operating loss | $(85.906) | $(50.916) | $(172.170) | $(87.618) |
| Net loss | $(89.385) | $(52.017) | $(169.866) | $(89.444) |
| Net loss per share, basic and diluted | $(0.23) | $(0.14) | $(0.44) | $(0.24) |
| Cash used in operating activities | Not separately provided for the quarter | $(130.064) | $(77.129) |
Revenue was minimal and came from activities such as bioreactor sales, non-exclusive licenses and grants; there was no product-sales revenue. Gross margin is not presented as a meaningful standalone metric in the filing.
- Liquidity at June 30: Cash and cash equivalents of $83.958; marketable securities of $20.792; combined cash and marketable securities of approximately $104.8. Current assets were $113.731 and current liabilities $74.428.
- Debt and obligations: Related-party notes payable, including accrued interest, totaled $300.252, up from $254.353 at December 31, 2020. Notes bear 3%–6% interest and generally mature September 30, 2025. Total liabilities were $404.886; stockholders’ deficit was $158.585.
- Cash flow and financing: Six-month investing cash inflow was $42.334, including proceeds from marketable securities, partly offset by $15.128 of property and equipment purchases. Financing cash inflow was $136.834, including $95.026 net ATM proceeds and a $40.000 related-party note advance. Cash, cash equivalents and restricted cash increased $49.043 to $84.137.
- Other items: Property, plant and equipment, net, rose to $89.023 from $72.541, primarily reflecting manufacturing-facility investment. Six-month stock-based compensation was $33.161, versus $0.802 a year earlier.
Changes versus prior comparable periods
- Q2 revenue declined 22%; six-month revenue declined 20% year over year.
- Q2 operating expenses rose 68% and six-month expenses rose 96%. R&D increases reflected higher compensation and stock awards, clinical and regulatory work, manufacturing and laboratory costs, facility expansion, and new license and research agreements.
- Six-month SG&A increased $49.880, including higher stock compensation, merger-related and other professional fees, litigation costs, and insurance. The company recorded $13.0 million of merger-related costs in the first half; total merger costs were $23.3 million.
- Six-month net loss widened to $169.866 from $89.444. The 2021 period included $8.391 of unrealized gains on equity securities, partly offset by higher interest expense.
Outlook, risks and unusual items
- Funding and going concern: The company stated substantial doubt exists about its ability to continue as a going concern without additional funding or financial support. Management nevertheless believed available cash and investments, future equity offerings, and potential affiliate borrowing 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. Such support is not guaranteed. The company expects significant future losses and additional funding needs.
- Equity financing and dilution: The $500 million ATM program had $402.0 million available at June 30 after $94.9 million of net proceeds. Future sales could dilute shareholders; access to financing on acceptable terms is uncertain.
- Clinical and operating risks: Clinical success, regulatory approval, manufacturing scale-up, patient enrollment, and commercialization remain uncertain. Management expected rising R&D costs and noted COVID-19 could slow enrollment and timelines; a Phase II/III hAd5 COVID-19 vaccine trial was on clinical hold pending protocol changes and review of additional information. The pandemic had not materially disadvantaged operations to date, but future effects were uncertain.
- Contingencies: Anktiva-related contingent value rights could require payments of approximately $304 million upon specified BLA approval by December 31, 2022 and approximately $304 million upon specified sales milestones, payable in cash, shares, or both depending on holders’ elections. Litigation includes Altor appraisal and fiduciary-duty claims, Sorrento-related proceedings, and a Beike arbitration; the company said some potential losses could not be estimated. Merger-related complaints were largely dismissed voluntarily, but the company could not predict the outcome of remaining matters.
- Related-party and governance considerations: The Executive Chairman and affiliates controlled approximately 80.3% of shares at June 30 and have substantial business, lease, service, and lending relationships with the company. The company is a Nasdaq controlled company. Related-party balances included $16.711 million due to affiliates and $2.047 million due from affiliates.
- Other unusual item: A $1.9 million write-down of a prepaid balance with the related-party Immuno-Oncology Clinic was recorded in Q2 R&D expense. Management reported disclosure controls were effective at the reasonable-assurance level; no material change in internal control over financial reporting was reported for the quarter.
No formal revenue or earnings guidance was provided. Management expected operating losses and R&D expenses to increase as programs advance.
Investor verification checklist
- Confirm current cash runway, actual subsequent ATM usage, and whether affiliate funding has been provided or remains available.
- Review the terms, interest accrual and repayment provisions of the $300.3 million related-party notes, and assess financing and governance conflicts.
- Verify Anktiva trial progress, regulatory milestones, and the status and potential cash-versus-share impact of the CVRs.
- Check developments in the hAd5 trial hold, COVID-19-related enrollment delays, and manufacturing expansion costs.
- Track litigation and arbitration updates, particularly potential exposure beyond recorded appraisal-related accruals.
- Assess continued expense growth, stock-based compensation, dilution from equity issuance, and the company’s path to product revenue.