Iovance Biotherapeutics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Unaudited results; amounts below are in U.S. dollars unless otherwise noted.
Business context
Iovance is a clinical-stage biotechnology company developing tumor-infiltrating lymphocyte (TIL) cancer therapies. Its lead candidate, lifileucel, is being studied in metastatic melanoma; LN-145 is being developed for cervical and other cancers. The company had no commercial products and generated no revenue.
- The pivotal Cohort 4 of the Phase 2 innovaTIL-01 lifileucel trial began dosing its first patient in March 2019.
- LN-145 received FDA Fast Track designation for cervical cancer in February 2019. The company amended the trial protocol and planned to discuss a potential registration pathway with the FDA.
- IOV-COM-202, studying TIL with pembrolizumab in melanoma, head and neck cancer, and lung cancer, was open for enrollment.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $30.9 million | $19.9 million; up 55% |
| General and administrative expense | $9.1 million | $7.0 million; up 30% |
| Total costs and expenses | $40.0 million | $26.9 million |
| Net loss | $37.0 million | $26.5 million; loss increased 39% |
| Basic and diluted loss per share | $0.30 | $0.31 |
| Net cash used in operating activities | $29.1 million | $17.8 million |
| Net interest income | $3.0 million | $0.4 million |
Margins are not meaningful because the company had no revenue. Higher R&D spending reflected more clinical-trial patients, manufacturing-capacity technology transfer, and increased R&D headcount. G&A growth reflected increased staffing and stock-based compensation. Net interest income rose with higher average cash and investment balances.
At March 31, 2019, cash and cash equivalents were $54.1 million and short-term investments were $385.9 million, or $440.0 million combined. Working capital was $422.6 million; total current assets were $444.8 million and current liabilities were $22.1 million. Stockholders’ equity was $434.9 million. No debt was reported; operating lease liabilities totaled $10.4 million, including $6.1 million current and $4.4 million noncurrent. Cash and cash equivalents declined $28.1 million from year-end 2018. There was no material financing cash inflow in Q1 2019.
Material changes, outlook, and risks
- Management expected R&D and G&A spending to rise as trials, manufacturing expansion, staffing, and pre-commercial activities grow. It expected continued losses and no product or licensing revenue during 2019.
- Management believed available funds were sufficient for at least 12 months from the filing date. It also stated that completing development and executing its plans, including establishing its own manufacturing facility, would require more than current funds; future financing may be needed.
- Key execution risks include clinical-trial enrollment and results, FDA agreement on regulatory pathways, safety, manufacturing scale-up and consistency, third-party manufacturer dependence, and competition. The filing notes two Grade 5 treatment-emergent adverse events in an October 2018 update of the lifileucel trial.
- In April 2019, Iovance closed its NSCLC study IOV-LUN-201 and planned to add an arm to IOV-COM-202 in response to changes in the treatment landscape. The MedImmune collaboration was terminated effective April 1 after the study was closed because of changing treatment options and lack of enrollment.
- A shareholder class-action settlement was approved April 17, 2019; the insurer was to pay $3.25 million, and the company said it did not expect settlement costs. Derivative suits and other employment and commercial disputes remained pending; potential losses were not estimable for certain matters.
- Effective January 1, 2019, adoption of the new lease standard added operating lease assets and liabilities to the balance sheet. The company recorded a $0.3 million cumulative transition adjustment to retained earnings upon adoption of updated nonemployee stock-compensation guidance.
Important facts for investors to verify
- Progress, enrollment, safety, and data quality in the lifileucel Cohort 4 and LN-145 trials, including FDA feedback on potential registration pathways.
- Cash burn relative to the $440.0 million cash-and-investment balance, the stated 12-month runway, and the timing and terms of any additional financing.
- Manufacturing capacity, Gen 2 process comparability and validation, and the cost and timetable for any company-owned facility.
- Developments in pending litigation and confirmation that the class-action settlement creates no company-funded obligation.
- Potential dilution: 123.4 million common shares were outstanding at quarter-end, with additional options and convertible preferred shares outstanding.