ImmunityBio, Inc. — Q1 2021 Form 10-Q
Business context and reporting period
Reports the three months ended March 31, 2021. ImmunityBio is a clinical-stage biotechnology company developing immunotherapies for cancer and infectious diseases; it reported more than 40 clinical trials across 19 indications and had no therapeutic products approved for commercial sale. On March 9, 2021, it completed its merger with NantCell, formerly a private company named ImmunityBio. The transaction was accounted for as a common-control combination, and comparative periods were recast to include NantCell.
Key financial metrics
Amounts below are in millions, except per-share data. Financial statements are unaudited.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $0.139 | $0.165 |
| Research and development expense | $41.1 | $27.4 |
| Selling, general and administrative expense | $45.3 | $9.5 |
| Total operating expenses | $86.4 | $36.9 |
| Loss from operations | $(86.3) | $(36.7) |
| Net loss | $(80.5) | $(37.4) |
| Net loss per share, basic and diluted | $(0.21) | $(0.10) |
| Cash used in operating activities | $(60.5) | $(31.1) |
At March 31, cash and cash equivalents were $44.7 million; marketable securities were $39.6 million, for combined cash and marketable securities of $84.3 million. Total current assets were $99.6 million and current liabilities were $79.9 million. Total liabilities were $394.8 million, including $297.3 million of related-party notes payable; stockholders’ deficit was $185.3 million. No meaningful operating margin is indicated given minimal revenue and substantial development expenses.
Material changes versus the prior comparable period
- Operating expenses rose 134%; R&D increased 50%, and SG&A increased 377%. Management attributed R&D growth to COVID-19 programs, higher clinical and manufacturing activity, staffing, and stock compensation. SG&A growth reflected merger and other professional fees, litigation-related costs, insurance, and stock compensation.
- Net loss increased to $80.5 million from $37.4 million. The 2021 loss included $15.3 million of stock-based compensation, compared with $0.5 million a year earlier, and $12.9 million of merger costs recorded in the quarter.
- Interest and investment income was $8.9 million, versus $0.1 million, primarily reflecting $8.8 million of unrealized gains on equity securities. This noncash investment gain partly offset operating losses.
- Operating cash use increased to $60.5 million. Investing activities provided $31.8 million, primarily from marketable-security maturities and sales, while financing provided $38.5 million, principally from a $40 million related-party loan. Cash, cash equivalents and restricted cash ended at $44.9 million.
- Property, plant and equipment increased to $80.9 million from $72.5 million, including manufacturing-facility expansion spending.
Outlook, risks, contingencies and unusual items
- Funding and going concern: The company reported a $1.7 billion accumulated deficit and substantial doubt about continuing as a going concern without additional funding or support. Management believed available cash and investments, potential equity financing, and the Executive Chairman’s stated intent and ability to provide affiliate funding would support operations for at least 12 months after issuance of the statements. That expectation depends materially on financing and affiliate support and is not assured.
- Potential dilution: A subsequent-event disclosure says the company entered an ATM agreement on April 30, 2021, allowing sales of up to $500 million of common stock. It was not obligated to sell shares; the filing does not report proceeds from the program.
- Debt and related parties: Related-party notes bear interest at 3%–6%; most principal and accrued interest were due September 30, 2025. The Executive Chairman and affiliates controlled approximately 81.8% of the company after the merger, and affiliate transactions include loans, shared services, and leases.
- Clinical and regulatory exposure: Management expected continued significant spending and losses and did not expect product candidates to be commercially available for at least 12–24 months, if ever. It warned that clinical enrollment and timelines could be delayed by COVID-19, manufacturing and supply constraints, and regulatory review. BCG shortages had affected enrollment in Anktiva studies; the FDA would determine how patients receiving reduced-dose BCG affect the relevant trial assessment.
- Milestone obligations: Anktiva-related contingent value rights could require up to approximately $304 million upon the specified regulatory milestone and another $304 million upon the specified sales milestone. The filing says certain holders, including the Executive Chairman and a related party, elected to receive their CVRs in shares; other holders may choose cash or shares. These amounts are contingent, not ordinary scheduled debt payments.
- Legal matters: Disputes include Altor appraisal and fiduciary-duty litigation, Sorrento-related litigation and arbitration, Beike arbitration, Fox Chase license litigation, and lawsuits concerning the merger. The company said it could not estimate losses for certain matters and generally intended to defend them. It recorded $6.9 million for dissenting-share obligations; it could not estimate an upper range of potential loss.
- Other notable items: The Viracta investment became publicly traded shares after a business combination and was carried at $14.5 million at quarter-end, including a $6.6 million unrealized gain. Management said the pandemic had not materially harmed operations to date, but future effects remained uncertain.
Important facts for investors to verify
- Whether the company obtains sufficient financing and affiliate support, and how much of the $500 million ATM capacity is ultimately used.
- Cash burn, available liquidity, related-party debt balances and terms, and potential refinancing or repayment needs.
- Clinical-trial enrollment, FDA feedback and timelines for Anktiva and other programs, including the effect of BCG supply and reduced-dose patients.
- Whether the reported investment gains are sustained or reversed, and the recurring cost trajectory after merger-related expenses and elevated stock compensation.
- Developments and potential exposure in the disclosed litigation and contingent value rights.
- Effects of concentrated voting control and related-party arrangements on governance, financing, and operating decisions.