Iovance Biotherapeutics, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Unaudited condensed consolidated financial statements. Iovance is a clinical-stage cancer immunotherapy company developing tumor-infiltrating lymphocyte (TIL) therapies; it had no commercial products or revenue.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $39.3m | $24.6m | $70.2m | $44.5m |
| General and administrative | $10.9m | $6.8m | $19.9m | $13.8m |
| Net loss | $47.6m | $30.7m | $84.5m | $57.2m |
| Net loss per share, basic and diluted | $0.38 | $0.34 | $0.68 | $0.65 |
| Net interest income | $2.6m | $0.7m | $5.7m | $1.1m |
- Cash flow: Six-month operating cash use was $62.9m, versus $41.8m in 2018. Investing activities provided $59.7m, primarily reflecting net short-term investment maturities; financing provided $3.4m. Cash, cash equivalents and restricted cash increased by $0.2m to $82.4m.
- Liquidity: At June 30, cash and cash equivalents were $76.9m and short-term investments were $327.2m, totaling $404.1m. Working capital was $377.1m. Management believed available funds would cover anticipated operating expenses for at least 12 months from filing.
- Balance sheet and debt: Total assets were $435.9m, total liabilities $38.5m and stockholders’ equity $397.4m. The filing reports no borrowings; operating lease liabilities were $12.1m. Current ratio and profit margins are not meaningful indicators for this pre-revenue company.
Changes versus prior comparable period
- Q2 net loss increased 55% year over year; six-month net loss increased 48%. Higher clinical, manufacturing and research activity and growth in corporate infrastructure drove the increase.
- R&D expense rose 60% in Q2 and 58% in the first half, reflecting manufacturing process transfer and capacity, more clinical-trial patients, higher drug costs (including IL-2), and increased R&D headcount.
- G&A expense rose 59% in Q2 and 45% in the first half, primarily due to headcount and stock compensation, intellectual-property legal costs, and commercialization market research.
- Interest income increased with higher average cash and investment balances following 2018 equity offerings. Short-term investments declined from $386.4m at year-end 2018 to $327.2m at June 30, 2019.
Outlook, developments and risks
- Management expects continued increases in R&D, clinical-trial, manufacturing, staffing and pre-commercial spending, and expects ongoing losses. It did not anticipate product or licensing revenue during 2019.
- Lifileucel: the pivotal C-144-01 Cohort 4 began enrolling in March 2019. Reported Cohort 2 results in 66 melanoma patients showed a 38% objective response rate (ORR); median duration of response had not been reached. FDA had acknowledged potential acceptability of single-arm Cohort 4 data for registration, subject to regulatory review.
- LN-145: FDA granted Fast Track and Breakthrough Therapy designations for advanced cervical cancer. Reported results in 27 patients showed a 44% ORR; median duration of response had not been reached. After its June 2019 End-of-Phase-2 meeting, the company planned to expand the trial to at least 75 appropriate patients and said the study might support a BLA submission in the second half of 2020. These plans depend on FDA feedback and trial results.
- The company closed its IOV-LUN-201 NSCLC study in April 2019 amid changes in the treatment landscape and lack of enrollment, and shifted development to a cohort in IOV-COM-202. It terminated its PolyBioCept license in June and reported no expected further payment obligation. The MedImmune collaboration was terminated effective April 1, 2019 after the study closed for changing treatment landscape and lack of enrollment.
- The company entered a build-to-suit Philadelphia manufacturing facility lease for approximately 136,000 square feet, with construction expected in phases and completion anticipated in 2021. It expected to invest about $75m over three years in construction and equipment. Base rent is expected to begin at approximately $320,000 monthly when the lease commences; a related finance lease had not yet commenced and was expected to start in 2020.
- Key risks include clinical efficacy and safety uncertainty, regulatory and BLA timing, patient enrollment, comparability and scale-up of Gen 2 manufacturing, dependence on contract manufacturers and suppliers, future financing needs and possible dilution. The company also disclosed unresolved derivative, Solomon Capital and former-executive litigation for which potential losses could not be estimated. The securities class-action settlement was funded by the insurer, with no company cost expected.
Important facts for investors to verify
- Whether clinical results hold as enrollment expands and follow-up matures, and whether FDA ultimately accepts the proposed registration pathways and timelines.
- Manufacturing transfer, validation, capacity, cost and construction progress for the Philadelphia facility, including the expected capital and lease commitments.
- Cash burn against the stated 12-month runway, future spending plans and the potential need for additional capital or equity issuance.
- Potential outcomes and financial exposure from pending litigation and other unaccrued claims.
- Future share dilution: 15.2m common-stock equivalents were excluded from diluted loss per share as anti-dilutive at June 30, 2019; common shares authorized had increased to 300m.