ImmunityBio, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The filing was signed May 11, 2023. ImmunityBio is a clinical-stage biotechnology company with no products approved for commercial sale; revenue remains minimal and is not from product sales.
Key financial results
Amounts below are USD millions, except per-share data. Interim financial statements are unaudited.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0.36 | $0.014 |
| Research and development expense | $79.3 | $55.4 |
| Selling, general and administrative expense | $32.7 | $40.6 |
| Operating loss | $111.6 | $96.0 |
| Net loss | $116.6 | $103.0 |
| Net loss per share, basic and diluted | $0.27 | $0.26 |
| Net cash used in operating activities | $84.3 | $74.9 |
The company reported no meaningful commercial product revenue; the small Q1 2023 increase was primarily grant revenue. Gross margin is not separately presented. Q1 2023 interest expense rose to $29.8 million from $8.5 million, while a $27.6 million noncash gain from the revaluation of warrant liabilities partly offset other expenses.
Financial position and liquidity
- At March 31, 2023, cash and cash equivalents were $88.5 million; marketable securities totaled approximately $3.6 million. Together, cash and marketable securities were $92.1 million, down from $108.0 million at year-end 2022.
- Current assets were $113.5 million versus current liabilities of $564.9 million. Total liabilities were $875.1 million, and stockholders’ deficit was $531.7 million.
- Related-party debt carrying value was approximately $717.1 million, including a $30.0 million convertible note issued March 31; the filing states indebtedness of $769.9 million including accrued interest and before specified accounting adjustments. Variable-rate debt bore 12.89% at quarter-end. Approximately $505.0 million of variable-rate notes were due December 31, 2023; $264.9 million was due September 30, 2025.
- Financing provided $76.9 million of net cash in Q1, including approximately $47.0 million from a registered direct offering and $29.9 million from the related-party note. Operating and investing activities used $84.3 million and $8.5 million, respectively.
- The company reported $225.4 million available under its ATM program and $640.0 million available under its shelf registration at March 31, 2023. These are potential financing capacity, not committed proceeds.
Changes versus prior year and management outlook
- R&D expense increased $23.9 million, mainly from higher external research and development costs, including contract manufacturing, drug materials, regulatory work related to the Anktiva BLA, and clinical trials. Management expects R&D expense to increase significantly as development continues.
- SG&A declined $7.9 million, primarily because Q1 2022 included higher litigation-related legal costs; personnel costs increased in Q1 2023.
- Operating cash use increased $9.4 million year over year. Capital spending on property and equipment was $8.4 million, compared with $27.3 million in Q1 2022. Management expects manufacturing-related capital spending to increase.
- Management states substantial doubt exists about the company’s ability to continue as a going concern without additional funding or financial support. It believes available liquidity, potential equity financing, and the Executive Chairman’s stated intent and ability to provide affiliated-entity support are sufficient for at least 12 months after issuance of the financial statements. Funding is not assured; management says spending may need to be delayed or reduced if additional funds are unavailable.
- No numerical revenue or earnings guidance is provided. Management expects continuing operating losses and substantial funding needs while pursuing clinical development, regulatory approval, and potential commercialization.
Regulatory update, risks, contingencies, and unusual items
- Anktiva: After quarter-end, on May 9, 2023, the FDA issued a complete response letter for Anktiva (N-803) in combination with BCG for BCG-unresponsive NMIBC with CIS, with or without Ta or T1 disease. The letter cited deficiencies related to pre-license inspections of third-party manufacturers and further CMC issues and assays; it also requested updated duration-of-response data and a safety update. The FDA did not request new preclinical studies or Phase 3 trials. Approval timing is uncertain. Management plans to meet with the FDA and address the issues.
- Additional related-party financing: On May 9, 2023, the Executive Chairman agreed to provide a further $30.0 million of non-convertible financing, subject to execution of the underlying agreements. The filing describes a potential Anktiva commercialization partnership discussion targeted for 2023, but there is no assurance a transaction will be completed or on acceptable terms.
- Debt, dilution, and governance: Much of the company’s debt is owed to entities affiliated with its Executive Chairman, who and affiliates held approximately 74.2% of outstanding common stock at March 31. Notes have conversion features, and equity offerings and outstanding warrants may dilute shareholders. The $30.0 million March note has no conversion-price floor, so potential shares cannot be determined from the filing.
- Warrants: Liability-classified warrants had a $17.8 million quarter-end fair value. Their revaluation generated a material, noncash gain in Q1; future fair-value changes could materially affect reported earnings.
- Contingent value rights: The regulatory-approval CVR milestone expired without being met. Up to $164.2 million may remain payable in cash for sales-milestone CVRs held by other former Altor stockholders if the conditions are achieved; the Executive Chairman and related party elected shares for their approximately $139.8 million of CVRs.
- Commitments: The company disclosed $132.4 million of contractual commitments expected within one year, primarily capital expenditures, purchase orders, and near-term milestone payments; up to $775.3 million of further milestone-related commitments are contingent on future events. The Dunkirk facility arrangements include a $1.52 billion operating-expense commitment over the initial 10-year term, plus $1.50 billion if renewed, and hiring commitments. Failure to meet applicable obligations may expose the company to remedies, including potential recoupment of benefits or lease termination.
- Litigation and recoveries: Courts confirmed approximately $176.4 million of judgments against Sorrento, plus 10% post-judgment interest. Sorrento filed for Chapter 11, and ImmunityBio has not recorded a receivable because the amount and timing of any recovery are uncertain. Other disclosed matters include pending Sorrento litigation, a Beike arbitration, and disputes involving former Altor leadership and HCW Biologics; outcomes or potential losses are not clear from the filing.
Most important facts for investors to verify
- Progress and timing of remediation of the FDA’s manufacturing inspection and CMC findings, and any updated regulatory timeline for Anktiva.
- Cash burn, remaining cash runway, actual access to the ATM or shelf, and whether the additional $30.0 million related-party financing was finalized and funded.
- Repayment, refinancing, or conversion plans for the approximately $505.0 million of variable-rate related-party debt due in December 2023, including interest costs and dilution terms.
- Whether proposed commercialization partnering proceeds, and the terms, timing, and economics if a transaction is announced.
- Potential dilution from outstanding warrants, convertible notes, future equity issuance, and any CVR payments; also monitor the warrant revaluation impact on reported results.
- Recoverability of the Sorrento judgments, status and possible exposure from other litigation and arbitration, and the company’s ability to meet facility and other contractual commitments.