IOVANCE BIOTHERAPEUTICS, INC. quarterly report, Q1 FY2015

Business context and reporting period

This is Lion Biotechnologies, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2015. The filing describes a clinical-stage cancer immunotherapy company developing tumor-infiltrating lymphocyte (TIL) therapies, with metastatic melanoma as its lead program. The filing does not identify the registrant as Iovance Biotherapeutics, Inc.

Financial results and liquidity

Gross margin and operating margin are not meaningful because the company reported no revenue. Total assets were $113.54 million and total current liabilities were $1.91 million at quarter-end. The company reported no long-term debt and no bank credit lines. Financing cash inflows of $70.61 million included $68.31 million net proceeds from a March public offering and $2.30 million from warrant exercises. Investing cash outflow was $0.78 million, mainly for Tampa laboratory equipment and furniture.

Material changes and developments

• Operating expenses rose amid increased corporate, compliance, listing, insurance, investor-relations, and share-based compensation costs.
• R&D spending increased with the Tampa facility, new hires, manufacturing work, and expanded NCI collaboration and licensing activity.
• The March 3 offering sold 9.2 million shares at $8.00 per share. Common shares outstanding increased to 44.87 million at March 31; the filing reports 45.03 million outstanding at May 8.
• The NCI CRADA was expanded to include bladder, lung, triple-negative breast, and HPV-associated cancers, with annual payments increasing from $1 million to $2 million.
• The company obtained an exclusive NIH license for TIL treatment of metastatic melanoma and an exclusive license to two patent-pending TIL technologies. These agreements include potential milestone, royalty, and sublicensing payments.

Outlook, risks, and unusual items

Management does not anticipate product-sale or licensing revenue in 2015 and expects losses and operating cash use to continue as R&D activity expands. Planned spending includes a Phase 2 multicenter study expected to treat about 20 patients with refractory metastatic melanoma, higher staffing and Tampa facility costs, and CRADA payments. Management estimated that cash on hand at March 31 would fund its anticipated operating expenses for at least 24 months, while noting that additional funding will eventually be needed to complete development and obtain regulatory approvals.

The company disclosed an SEC subpoena related to an investigation into certain stock promotions. It said it had completed document production in November 2014 and that the SEC had not requested further action as of the filing. Management concluded disclosure controls and procedures were not effective at quarter-end; it reported no material change in internal control over financial reporting during the quarter. The filing says there were no material changes to previously disclosed risk factors.

Cash balances exceeded insured limits at one bank. Other significant exposures include clinical-development and regulatory uncertainty, potential future financing needs and dilution, and contractual license and research obligations. A May 2015 secondary offering by stockholders generated no proceeds for the company.

Important facts for investors to verify

• Confirm the registrant’s identity and corporate-name history: this filing is for Lion Biotechnologies, Inc.
• Review the basis for management’s 24-month cash runway estimate against planned clinical, manufacturing, staffing, and facility spending.
• Track clinical-trial timing and results, regulatory progress, and the costs and milestones under NIH, NCI, Moffitt, and Lonza arrangements.
• Assess the SEC subpoena’s status and the company’s remediation of ineffective disclosure controls.
• Evaluate potential dilution from outstanding warrants, options, restricted shares, and any future financing.