IOVANCE BIOTHERAPEUTICS, INC. annual report, FY2020

Iovance Biotherapeutics, Inc. — FY2020 Form 10-K

Reporting period: Fiscal year ended December 31, 2020. The filing was signed February 25, 2021. Iovance is a clinical-stage biopharmaceutical company developing personalized tumor-infiltrating lymphocyte (TIL) cell therapies; it had no approved products and generated no revenue.

Financial performance and liquidity

Metric	FY2020	FY2019
Revenue	$0	$0
Research and development expense	$201.7 million	$166.0 million
General and administrative expense	$60.2 million	$40.8 million
Operating loss	$261.9 million	$206.9 million
Net loss	$259.6 million	$197.6 million
Basic and diluted net loss per share	$1.88	$1.59
Cash used in operating activities	$205.1 million	$158.9 million

Fourth-quarter 2020 revenue was $0; net loss was $68.4 million and loss per share was $0.47, compared with a $63.6 million loss and $0.50 loss per share in Q4 2019. Profit margins are not meaningful because the company had no revenue.

• At year-end, cash and cash equivalents were $67.3 million, short-term investments $562.1 million, and restricted cash $5.5 million. Management reported $629.4 million in cash, cash equivalents and short-term investments, and working capital of $581.2 million.
• Total assets were $768.5 million; total liabilities were $112.0 million; stockholders’ equity was $656.5 million. The filing reports no borrowings; liabilities include $51.7 million of operating lease liabilities.
• Investing activities used $317.9 million, including $46.8 million of property and equipment purchases. Financing provided $576.4 million, principally from the June 2020 equity offering, which generated $567.0 million net proceeds.
• Outstanding common shares increased to 146.9 million at December 31, 2020, from 126.4 million a year earlier. No dividends or share repurchases were reported.

Material changes and business developments

• Net loss increased 31% year over year. R&D expense rose 22%, reflecting expanded staffing and clinical activity and a $10.0 million Novartis license payment for IOV-3001; lower manufacturing costs partly offset the increase. G&A expense rose 47%, including higher compensation, insurance, legal and commercialization-preparation costs.
• Cash used in operations increased by $46.2 million. The company raised substantial equity capital in June 2020 and invested much of the proceeds in short-term U.S. government securities.
• Property and equipment increased to $59.2 million, largely due to construction of the Philadelphia manufacturing facility. At the start of 2021, most construction and commissioning was complete; clinical manufacturing was expected to begin during 2021.
• The company reported 241 employees at year-end, including 176 in research and development.

Pipeline, outlook and key risks

• Melanoma: Lifileucel Cohort 2 reported a 36% investigator-assessed objective response rate (ORR) in 66 patients; median duration of response had not been reached after 28.1 months’ median follow-up, per a January 2021 update. In Cohort 4, 87 patients were dosed; preliminary data for 68 patients with two radiological assessments showed a 32.4% investigator-assessed ORR and 72.1% disease control rate at the March 16, 2020 cutoff. Two partial responses were not yet confirmed. The company delayed its anticipated BLA to refine existing and develop new potency assays after FDA feedback, and expected to submit in 2021.
• Cervical cancer: In a reported 27-patient dataset, lifileucel had a 44% ORR and 85% disease control rate; median duration of response had not been reached. The company planned FDA discussions in 2021 on BLA plans. FDA had granted Fast Track and Breakthrough Therapy designations; these do not ensure approval.
• Other programs: In a small HNSCC combination cohort, LN-145 plus pembrolizumab produced a reported 44% ORR in eight efficacy-evaluable patients. A potential registrational NSCLC trial was planned to enroll during 2021. IOV-2001, a PBL therapy for CLL/SLL, was in Phase 1/2 development.
• Financial outlook: Management expected continued losses and increased R&D, commercialization-readiness and manufacturing spending. It believed available funds would cover planned operating expenses and capital expenditures for at least 12 months from the filing date; no revenue or earnings guidance was provided. The company also expected about $40 million in facility equipment and construction spending over the following year, excluded from its contractual-obligations table.
• Principal risks: FDA agreement on potency assays and acceptance of clinical data; whether preliminary, small-cohort results hold up in final or independent review; trial execution and enrollment; personalized-cell manufacturing, scale-up, quality and cost; reliance on CMOs and suppliers; competition; reimbursement and market adoption; and COVID-19-related disruption. The filing says COVID-19 had not materially affected 2020 liquidity or results, while future effects remained uncertain.
• Contingencies and subsequent events: The company disclosed a stockholder derivative suit alleging excessive director compensation and continuing Solomon-related litigation; potential losses were not estimable. It reported no other material pending proceedings, and management did not expect pending matters to materially harm financial position, results or cash flows. After year-end, it entered into a $350 million at-the-market equity sales agreement and a $1.0 million interest-free, potentially forgivable Philadelphia job-creation loan.

Important facts for investors to verify

• Whether the FDA’s potency-assay requirements are resolved and whether the melanoma BLA timeline and proposed supporting data remain viable.
• Final Cohort 4 melanoma results, including independent-review ORR, response confirmation, follow-up duration and safety; do not treat preliminary investigator-assessed results as final.
• Whether cervical-cancer results support a registrational filing under the evolving treatment landscape and FDA feedback.
• Actual cash burn, facility completion and manufacturing readiness relative to management’s stated runway; also consider future equity issuance and dilution.
• Whether TIL manufacturing can be scaled consistently and economically, and whether clinical outcomes from different manufacturing processes are comparable.
• Developments in the disclosed litigation, lease and facility commitments, reimbursement prospects, and the company’s post-year-end financing activity.

The financial statements received an unqualified audit opinion, and the auditor reported effective internal control over financial reporting as of December 31, 2020.