IOVANCE BIOTHERAPEUTICS, INC. quarterly report, Q1 FY2023

Business context and reporting period

Iovance Biotherapeutics, Inc. is a clinical-stage biotechnology company developing personalized tumor-infiltrating lymphocyte (TIL) therapies for solid tumors. This unaudited Form 10-Q covers the three months ended March 31, 2023. The company had no commercial products and had not generated product revenue. It completed its rolling FDA biologics license application (BLA) submission for lifileucel for advanced melanoma in March 2023.

Financial performance and liquidity

Unless noted otherwise, amounts are in U.S. dollars.

Margins are not meaningful because the company reported no revenue. Operating expenses rose principally with hiring, clinical-trial activity—including Phase 3 TILVANCE-301—and manufacturing and commercial-readiness spending. Higher interest income partly offset the larger operating loss.

At March 31, 2023, cash and cash equivalents were $543.5 million, short-term investments were $82.8 million, and restricted cash was $6.4 million, totaling $632.7 million. Current assets were $637.8 million and current liabilities were $87.3 million. Total liabilities were $157.9 million, including a $1.0 million long-term note payable and $82.2 million of operating lease liabilities. The company reported no off-balance-sheet arrangements.

Cash, cash equivalents and restricted cash increased $311.8 million during the quarter. Financing provided $258.2 million, principally from $260.1 million in net proceeds from an at-the-market stock offering; investing activities provided $153.4 million, primarily reflecting investment maturities; operating activities used $99.8 million. The offering sold 36.1 million shares at a weighted-average $7.35 per share, increasing common shares outstanding to 224.4 million at quarter-end.

Material changes versus the prior comparable period

• Net loss increased $15.8 million, while operating cash use increased $26.0 million.
• R&D expense increased $14.4 million, mainly due to payroll, clinical-trial costs, manufacturing readiness and facility expansion; lower stock-based compensation partly offset the increase.
• G&A expense increased $4.7 million, including higher staffing and legal and professional costs related to the planned Proleukin acquisition.
• Interest income increased $3.4 million, reflecting higher rates and larger interest-bearing balances.
• The company raised $260.1 million net through its ATM program, compared with no ATM sales in Q1 2022, materially increasing the share count.

Outlook, management commentary and risks

Management expected significant ongoing R&D, clinical, manufacturing, commercial-readiness and i CTC facility spending. Based on available funds, it believed capital was sufficient for planned operating expenses, capital expenditures and the Proleukin acquisition for at least the next 12 months from issuance of the financial statements. The company expected product revenue within that period following the lifileucel BLA submission and anticipated Proleukin transaction, but cautioned that revenue might not be material. No specific revenue, earnings or cash-flow guidance was provided.

The proposed acquisition of worldwide Proleukin rights was expected to close in Q2 2023, subject to regulatory approvals and other closing conditions. Consideration includes an upfront payment of approximately $200 million, a $50 million milestone upon first approval of lifileucel for advanced melanoma, and deferred payments based on double-digit percentages of global net sales. Certain termination events could trigger a reverse termination fee.

Principal risks include FDA review and approval uncertainty, possible additional clinical or safety requirements, trial timing and outcomes, manufacturing scale-up and inspection readiness, reliance on contract manufacturers and suppliers, commercialization and reimbursement challenges, and the need for future financing. Additional equity financing could dilute shareholders. The filing describes pending derivative and Solomon-related litigation; the company said the possible loss in the Solomon matters could not be estimated and management did not believe pending matters would materially adversely affect its financial position, results or cash flows. Management reported effective disclosure controls and procedures and no material change in internal control over financial reporting during the quarter.

Important facts for investors to verify

• FDA review status, timing and any additional requirements for the lifileucel BLA, including manufacturing and pre-approval inspection outcomes.
• Progress, enrollment, safety and results for TILVANCE-301 and other registrational studies, including whether timelines or costs change.
• Proleukin transaction closing, regulatory clearances, cash payment, milestone terms and resulting sales-based obligations.
• Quarterly operating cash burn, facility and manufacturing spending, and whether management’s stated cash runway remains adequate.
• Further share issuance, dilution and remaining capacity under the ATM program.
• Resolution or material developments in disclosed litigation and other contingencies.