Iovance Biotherapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted.
Business context
Iovance is a clinical-stage biopharmaceutical company developing autologous tumor-infiltrating lymphocyte (TIL) and peripheral blood lymphocyte therapies for cancer. Its lead candidate is lifileucel, being studied for metastatic melanoma and cervical cancer. The company had no approved commercial products and generated no revenue.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $55.9 | $57.0; down 2% |
| General and administrative expense | $19.6 | $13.9; up 42% |
| Total operating expenses | $75.6 | $70.8 |
| Net loss | $75.4 | $69.6; loss increased 8% |
| Basic and diluted loss per share | $0.51 | $0.55 |
| Net cash used in operating activities | $62.4 | $65.3 |
| Cash provided by investing activities | $77.2 | $100.1 |
| Cash provided by financing activities | $50.4 | $3.8 |
There was no meaningful operating margin because the company had no revenue. Net interest income fell to $0.1 million from $1.2 million, primarily due to lower interest rates. Stock-based compensation was $16.9 million, up from $9.4 million, and was a significant noncash expense.
At March 31, 2021, cash and cash equivalents were $132.0 million, short- and long-term investments totaled $472.2 million, and restricted cash was $6.1 million. Together these were approximately $610.2 million; excluding restricted cash, cash, cash equivalents and investments were approximately $604.2 million. Working capital was $550.2 million. Total assets were $750.6 million and stockholders’ equity was $647.4 million.
Liabilities included $1.0 million of long-term note payable and $53.0 million of operating lease liabilities. The note is unsecured, non-interest-bearing, and potentially forgivable subject to employee-related conditions; the company said it was not reasonably assured of forgiveness and accounted for it as debt. No other material conventional debt was reported.
Changes versus the prior comparable period
- Net loss increased by $5.9 million, despite a $1.0 million decrease in R&D expense. Management attributed the R&D decrease mainly to the absence of the $10.0 million Novartis license cost recognized in Q1 2020 and lower manufacturing costs, partly offset by higher payroll, stock compensation, and facility costs.
- G&A expense rose $5.8 million, mainly due to increased payroll and stock-based compensation, as the company expanded its organization and pre-commercial preparation.
- Operating cash use declined $2.9 million year over year. Financing cash flow rose primarily because of $42.9 million in net ATM proceeds, alongside option exercises and the $1.0 million loan.
- Property and equipment increased to $72.8 million from $59.2 million, largely reflecting construction in progress for the Philadelphia manufacturing facility.
Outlook, commentary and key risks
- Management expected no significant product or licensing revenue in the 12 months following issuance and anticipated continuing losses and negative operating cash flows. It believed available funds would cover planned operating expenses and capital expenditures for at least 12 months from the filing date, while also noting that additional financing may be needed to complete development and commercialization plans.
- Spending was expected to increase for clinical trials, manufacturing expansion and facility construction, staffing, and pre-commercial activities. The company entered a $350 million at-the-market equity program in February 2021 and sold 1.28 million shares for $42.9 million net during Q1.
- Management anticipated submitting a lifileucel melanoma BLA in 2021 after FDA feedback required further work on potency assays. Additional assay data had been submitted, but FDA agreement and timing remained uncertain. The company also intended to discuss cervical-cancer BLA plans with FDA in 2021.
- Reported lifileucel melanoma results included a 36% investigator-assessed objective response rate (ORR) in 66 Cohort 2 patients at a December 2020 data extract; median duration of response had not been reached at 28.1 months’ median follow-up. Preliminary Cohort 4 results showed a 32.4% investigator-assessed ORR among 68 patients with two assessments, at a March 16, 2020 cutoff and 5.3 months’ median follow-up. The filing notes these Cohort 4 results had not been reviewed by an independent review committee.
- Key risks include clinical or regulatory delays or failure, uncertainty over potency assays and manufacturing scale-up, reliance on contract manufacturers and specialized suppliers, competition, commercialization and reimbursement challenges, and possible effects of COVID-19 on operations and trials. Management said COVID-19 had not significantly affected trial enrollment to date but that future effects were uncertain.
- Legal matters included a derivative suit and two Solomon lawsuits; the company said possible losses could not be estimated. It also disclosed uncertainty about potential liability relating to 200,000 shares issued after a delayed Form S-8 amendment; no accrual was recorded.
- The company reported no material off-balance-sheet arrangements. Disclosure controls were deemed effective, with no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether FDA accepts the potency assays and supporting data, and whether the anticipated melanoma BLA filing and cervical-cancer regulatory discussions proceed on schedule.
- Updated, independently reviewed clinical efficacy and safety results, including follow-up durability and the relevance of preliminary or investigator-assessed response data.
- Cash burn, construction and manufacturing costs, and whether management’s stated runway remains adequate as development and pre-commercial spending increases.
- Further ATM sales or other financing, resulting dilution, and the share count: 149.3 million common shares were outstanding at March 31, versus 152.8 million at April 26, 2021.
- Manufacturing readiness, supplier capacity, trial enrollment, and the status or potential financial effects of disclosed litigation and contingencies.