ImmunityBio, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Amounts are in U.S. dollars; financial statements are unaudited. The March 2021 NantCell merger was accounted for as a common-control transaction, so comparative periods were recast as if the merger had occurred at the earliest period presented.
Business context
ImmunityBio is a clinical-stage biopharmaceutical company developing immunotherapies for cancer and infectious disease. It reported 20 actively recruiting Phase I–III trials, including 13 Phase II or III trials across 12 indications. Anktiva (N-803) had FDA Breakthrough Therapy designation for BCG-unresponsive non-muscle-invasive bladder cancer; the company reported that the ongoing registrational Phase II/III study had achieved its primary endpoint of complete response at any time. No therapeutic or vaccine product was approved for commercial sale, and reported revenue was minimal.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0.066 million | $0.151 million | $0.544 million | $0.752 million |
| Research and development expense | $49.3 million | $35.8 million | $144.2 million | $96.2 million |
| Selling, general and administrative expense | $29.6 million | $19.6 million | $107.3 million | $47.4 million |
| Operating loss | $78.8 million | $65.9 million | $251.0 million | $153.5 million |
| Net loss attributable to ImmunityBio common stockholders | $87.6 million | $65.6 million | $255.5 million | $154.1 million |
| Basic and diluted loss per share | $0.22 | $0.17 | $0.66 | $0.41 |
At September 30, 2021, cash and cash equivalents were $64.5 million and marketable securities were $16.7 million, or $81.2 million combined, compared with $97.0 million at December 31, 2020. Current assets were $94.5 million and current liabilities $65.4 million. Total assets were $214.4 million; total liabilities were $404.4 million; stockholders’ deficit was $189.9 million. Accumulated deficit was $1.9 billion.
For the nine months, operating cash outflow was $202.8 million, compared with $114.1 million in 2020. Investing activities provided $52.9 million, including $20.5 million of net proceeds from the related-party property sale; financing activities provided $179.5 million, mainly from the ATM equity program and related-party borrowing. Cash, cash equivalents and restricted cash ended the period at $64.7 million.
Related-party notes payable, including accrued interest, totaled $303.2 million, up from $254.4 million at year-end 2020. The notes bear interest of 3%–6%; most outstanding amounts are due September 30, 2025. The company raised $136.9 million net through its ATM program during the nine months and had $359.0 million of stated ATM capacity remaining at September 30.
Changes versus the prior comparable period
- Nine-month revenue declined 28%, while R&D expense rose 50% and SG&A expense rose 126%; net loss attributable to common stockholders increased from $154.1 million to $255.5 million.
- Management attributed higher R&D costs mainly to compensation and stock-based compensation, license and research agreements, clinical and regulatory work, facilities, and quality-control and technology costs. SG&A growth reflected compensation and stock-based compensation, merger and other professional fees, and insurance.
- Q3 2021 included a $5.9 million net loss on interest and investments, mainly unrealized losses on marketable equity securities. Q3 2020 included a $10.7 million intangible-asset impairment charge that did not recur in 2021.
- Stock-based compensation rose to $47.0 million for the nine months from $1.5 million in 2020. Merger-related costs totaled $23.3 million overall, of which $13.0 million was recorded in the first nine months of 2021.
Outlook, risks and unusual items
- Funding and going concern: The filing states that operating cash outflows create substantial doubt about the company’s ability to continue as a going concern without additional funding or financial support. Management believed cash, investments, expected equity financing and potential affiliate borrowing would fund operations for at least 12 months after the financial statements’ issuance, relying principally on the Executive Chairman’s stated intent and ability to provide support. Funding is not assured; management said it may need to reduce or delay spending if financing is unavailable.
- Spending outlook: Management expects R&D and SG&A expenses to increase, and capital spending to accelerate as manufacturing capacity is expanded. The filing gives no specific revenue or earnings guidance and says no product is expected to be commercially available in the foreseeable future, if ever.
- Clinical and regulatory: Patient enrollment and trial timelines may be affected by COVID-19. The U.S. Phase II/III trial of the hAd5 COVID-19 vaccine was on clinical hold pending protocol modifications and FDA review of additional information. Product development, approval and commercialization remain uncertain.
- Contingent value rights: Former Altor stockholders may be entitled to approximately $304 million upon Anktiva BLA approval by December 31, 2022 and approximately $304 million upon a qualifying sales milestone. Dr. Soon-Shiong and related holders elected to receive their approximately $279.5 million aggregate CVRs in shares; other holders may elect cash, creating a potential funding exposure.
- Related-party transactions and governance: The company borrowed from affiliates, leases facilities from related parties, and sold and leased back a building from Nant Capital, an entity controlled by Dr. Soon-Shiong. The property sale generated $21.9 million net proceeds; the seven-year lease includes two years without rent. Dr. Soon-Shiong and affiliates held approximately 79.4% of shares at September 30, 2021, and approximately 81.8% immediately after the merger.
- Legal matters: The company reported a $7.0 million accrual for dissenting Altor shares; it could not estimate an upper loss range. It described Sorrento-related arbitration and litigation and Beike arbitration as unresolved, with possible losses not estimable or too early to assess. The company said it believed the claims lacked merit and intended to defend them.
- Other commitments: The amended IDRI RNA license includes maintenance fees of $3.0 million in 2022 and $5.5 million annually from 2023 through 2030, plus potential milestones and royalties. A binding term sheet for a 50:50 COVID-19 vaccine joint venture with Amyris was signed after quarter-end.
Most important facts for investors to verify
- Whether operating cash burn, clinical spending and capital expenditures remain consistent with the company’s stated funding runway and financing assumptions.
- How much ATM capacity is actually used, at what share-price and dilution cost, and whether affiliate funding is available when needed.
- Progress, enrollment, safety and regulatory status of Anktiva registrational studies and the hAd5 COVID-19 trial hold.
- The potential cash or share impact and timing of Altor CVRs, and the outcome or potential exposure from the disclosed litigation and arbitrations.
- The terms, pricing and governance of related-party debt, leases, services and transactions, including the property sale-leaseback.