ImmunityBio, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. ImmunityBio is a clinical-stage biotechnology company with no products approved for commercial sale; revenue to date has been minimal and comes from bioreactors, licenses and grants.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0.082m | $0.118m | $0.483m | $0.167m |
| Research and development | $48.4m | $71.6m | $180.8m | $190.1m |
| Selling, general and administrative | $31.8m | $19.3m | $96.5m | $76.5m |
| Operating loss | $80.1m | $90.8m | $276.9m | $266.4m |
| Net loss attributable to common stockholders | $95.6m | $110.9m | $349.8m | $308.4m |
| Basic and diluted loss per share | $0.19 | $0.28 | $0.77 | $0.77 |
| Cash used in operating activities | — | $251.5m | $246.8m |
Margins: The filing does not provide a meaningful gross margin; revenue is immaterial relative to operating costs and there are no commercial product sales.
Liquidity: At September 30, cash and cash equivalents were $178.0m; marketable securities were $12.7m, for combined cash and securities of $190.6m. Current assets were $215.1m versus current liabilities of $90.3m. Total assets were $432.4m, total liabilities $843.1m, and stockholders’ deficit $410.6m. Accumulated deficit was $2.7bn.
Debt: Related-party debt principal totaled $735m, bearing variable rates of Term SOFR plus 8%; reported rates were approximately 13.3% at quarter-end. The notes are held by entities affiliated with Executive Chairman and Global Chief Scientific and Medical Officer Patrick Soon-Shiong. Approximately $535m of principal was due December 31, 2024; $200m was due September 2026. Nine-month interest expense was $97.1m, compared with $35.0m in 2022.
Changes versus prior comparable periods
- Q3 revenue fell $36,000 year over year; nine-month revenue rose $316,000, mainly from higher grant revenue.
- Q3 R&D declined $23.2m, primarily from lower internal supplies and personnel costs, reduced trial activity and a lease-termination gain. Nine-month R&D fell $9.2m as lower internal costs more than offset $18.2m of higher external costs, including manufacturing, regulatory and clinical-trial spending.
- SG&A rose $12.5m in Q3 and $20.0m for the nine months, principally from higher legal expenses and stock-based compensation. Management cited higher litigation defense costs and legal services.
- Nine-month operating cash use increased $4.7m. Financing provided $357.8m, versus $123.7m in the prior-year period; cash and restricted cash increased $73.3m.
- Common shares outstanding rose to 667.7m from 421.6m at year-end 2022. The increase includes 209.3m shares issued at $1.29 per share to exchange approximately $270m of related-party notes and accrued interest.
Outlook, risks and unusual items
- Anktiva regulatory review: FDA issued a complete response letter on May 9, 2023, citing third-party CMO pre-license inspection deficiencies and other CMC/assay items; it did not request new preclinical or Phase 3 efficacy studies. The company announced BLA resubmission on October 23 and FDA acceptance for review on October 26, after quarter-end. The new PDUFA goal date is April 23, 2024. Approval is not assured.
- Funding and going concern: The company reported substantial doubt about its ability to continue as a going concern without additional funding or support. Management believes available cash and securities, potential equity issuance and potential affiliated-entity loans will fund operations for at least 12 months after issuance of the financial statements, relying in part on Soon-Shiong’s stated intent and ability to provide support. The company expects significant continuing losses and says additional financing will be needed.
- Capital access and dilution: At September 30, the company had $208.8m available under its ATM and $565.6m available under its shelf registration. Future equity, warrants or note conversions could materially dilute shareholders. In October 2023, authorized common shares increased from 900m to 1.35bn.
- Warrants and fair value: Warrant liabilities were $39.4m. Non-cash gains from changes in warrant and convertible-note fair values reduced reported other expense; nine-month warrant fair-value gains were $31.8m. The February 2023 warrants’ exercise price was reduced and expiration extended in July, affecting fair value.
- Contingencies: A possible cash obligation of up to $164.2m remains for certain Altor sales-milestone CVRs if the sales condition is achieved and holders elect cash; Soon-Shiong-affiliated holders agreed to receive shares for their CVRs. The separate regulatory-approval CVR terminated after approval was not obtained by its deadline. The company also disclosed a securities class action tied to the FDA letter, a Beike arbitration with no estimated loss range, and ongoing HCW/Wong arbitration. Management says it cannot estimate a loss for the securities action and considers it without merit.
- Other notable developments: Sorrento did not pay judgments owed to company subsidiaries by the settlement deadline; the judgments and related litigation claims were released, and Sorrento relinquished its interests in NANTibody. Amyris filed for Chapter 11; recovery on joint-venture claims is uncertain. The company continues to explore a commercialization partnership for intravesical N-803, with no assurance a deal will occur.
- Management expects R&D and SG&A costs to remain significant and R&D expenses to increase as development, trials and commercialization preparations advance. The filing gives no quantified revenue or earnings guidance.
Important facts for investors to verify
- Progress toward resolving FDA/CMO and CMC issues, and the status and outcome of the Anktiva review by the April 23, 2024 PDUFA date.
- Cash burn and financing runway, including the availability and terms of future ATM, shelf, affiliated-party or other financing.
- Related-party debt balances, variable interest costs, maturity/refinancing plans and any potential conversion into shares.
- Potential dilution from outstanding warrants, CVRs, equity offerings and the expanded authorized share count.
- Developments and potential financial exposure in the securities action, Beike and HCW/Wong proceedings, and any other material litigation or contingencies.
- Manufacturing build-out spending and obligations at the Dunkirk facility, including the committed operating expenditures and hiring milestones.