ImmunityBio, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. ImmunityBio is a clinical-stage biotechnology company developing cancer and infectious-disease therapies and vaccines. It reported no approved products for commercial sale and only minimal non-product revenue.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $14,000 | $139,000; down 90% |
| Research and development expense | $55.4 million | $41.1 million; up 35% |
| Selling, general and administrative expense | $40.6 million | $45.3 million; down 10% |
| Operating loss | $96.0 million | $86.3 million |
| Net loss attributable to ImmunityBio common stockholders | $102.8 million; $0.26 per share | $79.6 million; $0.21 per share |
| Net cash used in operating activities | $74.9 million | $60.5 million |
No meaningful gross margin is presented; revenue was minimal and the company had no commercial product sales. R&D costs rose with higher headcount, facilities and equipment, regulatory and consulting work, and research and manufacturing costs. SG&A fell mainly because 2021 included merger-related professional fees and higher stock compensation, partly offset by legal-settlement accruals and increased personnel costs.
At March 31, 2022, cash and cash equivalents were $36.4 million and marketable securities were approximately $156.8 million, for roughly $193.2 million in cash, cash equivalents and marketable securities. This compared with $317.9 million at December 31, 2021. Total assets were $389.6 million; total liabilities were $727.1 million; and stockholders’ deficit was $337.6 million. Current assets of $212.3 million were below current liabilities of $381.0 million.
Related-party promissory notes totaled approximately $609.0 million, including accrued interest and net of unamortized issuance costs. Approximately $299.6 million was current and due December 17, 2022; the balance was principally due in 2025. Q1 interest expense was $8.5 million, versus $3.2 million a year earlier.
Operating cash use was $74.9 million. Investing activities used $69.3 million, including $27.3 million for property and equipment and $21.2 million for intangible assets related to the Dunkirk acquisition. Cash, cash equivalents and restricted cash declined by $144.7 million during the quarter.
Material changes and significant events
- R&D expense increased $14.3 million year over year, while SG&A decreased $4.7 million. Net loss attributable to common stockholders increased $23.2 million.
- The company acquired a leasehold interest in the 409,000-square-foot Dunkirk manufacturing facility for approximately $40.5 million. It committed to $1.52 billion of operating expenses over the initial 10-year lease term, with an additional $1.50 billion commitment if it renews, and hiring targets of 450 employees within five years.
- The company increased its authorized common shares from 500 million to 900 million in February 2022. No shares were issued under its ATM program during the quarter; $330.8 million remained available for future issuance.
- In late March, the company agreed to settle Altor appraisal claims with 2,229,296 shares and nominal cash for fractional shares; court approval and finalization remained pending. A separate putative class settlement agreed in late April calls for a $5.0 million cash payment, subject to court approval. The company had accrued $12.5 million for the appraisal obligation and $5.0 million for the class settlement at March 31.
Outlook, risks and contingencies
Management stated that it had held a May pre-BLA meeting with the FDA and reached agreement on the content and plan for a BLA submission for N-803 (Anktiva) plus BCG for BCG-unresponsive non-muscle invasive bladder cancer carcinoma in situ. The filing anticipated submission after completion of an internal quality review. The company cautioned that regulatory designations and discussions do not assure approval or a faster review.
The company expects significant operating losses and R&D spending to continue as it advances clinical programs and expands manufacturing. Management disclosed substantial doubt about the company’s ability to continue as a going concern without additional funding or financial support, but said it believed available liquidity, potential equity financing and potential affiliated-entity borrowing would fund operations for at least 12 months after issuance of the financial statements. This assessment relied substantially on the Executive Chairman’s stated intent and ability to provide support. The company warned that external financing may not be available on acceptable terms and that equity financing could dilute shareholders.
- The $300 million related-party note due in December 2022 creates a near-term refinancing or repayment risk. On default, the company may elect to convert principal and accrued interest into common shares at $5.67 per share.
- Altor contingent value rights could require approximately $304 million upon the specified N-803 approval milestone and another approximately $304 million upon the specified sales milestone. Certain holders have elected stock settlement; other holders may elect cash, potentially requiring additional funding.
- Clinical, regulatory, manufacturing-scale-up, supply-chain, reimbursement and commercialization outcomes remain uncertain. The company noted COVID-19-related potential delays to enrollment, trials and regulatory timelines, although it had not seen a material adverse business impact through the filing date.
- Related-party financing, services, leases and the Executive Chairman’s voting control are material governance and conflict-of-interest considerations. The Dunkirk facility’s substantial spending and employment commitments carry potential termination and recoupment consequences if obligations are not met.
- Other contingencies include ongoing Sorrento-related litigation and arbitration and a Beike arbitration; the company stated that possible loss estimates could not be made for certain matters. Merger-related appraisal and class settlements remained subject to court approval.
Important facts for investors to verify
- Whether the planned Anktiva BLA was submitted, accepted for review and ultimately approved, and the associated timing and commercial requirements.
- Repayment or refinancing of the $300 million note due December 2022, the terms and availability of affiliated support, and subsequent liquidity and cash-burn trends.
- Progress toward the Dunkirk facility’s operational and hiring milestones, total build-out costs, and compliance with the long-term spending commitments.
- Final court approval, share issuance and cash payment for the appraisal and class settlements, and any changes in recorded litigation liabilities.
- Potential dilution from the ATM, other equity financing, debt conversion and settlement shares, as well as the cash-versus-stock treatment of contingent value rights.
- Clinical-trial results and timelines, manufacturing capacity and supply, and any material changes in related-party arrangements or litigation exposure.