Business context and reporting period
This unaudited Form 10-Q is for Lion Biotechnologies, Inc. for the quarter and nine months ended September 30, 2015. The request identifies Iovance Biotherapeutics, but the filing itself names Lion Biotechnologies. Lion was a clinical-stage cancer immunotherapy developer with no product revenue; its lead program was LN-144, an autologous tumor-infiltrating lymphocyte (TIL) therapy for metastatic melanoma.
During the quarter, the company initiated a Phase 2 study of LN-144, expected to enroll about 20 evaluable patients with refractory metastatic melanoma. The filing describes safety and manufacturing feasibility as primary endpoints, with response rate among secondary measures.
Financial results and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $2.7 million | $2.4 million | $7.3 million | $6.2 million |
| Research and development | $5.0 million | $0.4 million | $12.1 million | $1.0 million |
| Total costs and expenses | $7.6 million | $2.8 million | $19.4 million | $7.2 million |
| Net loss | $7.6 million | $2.8 million | $19.3 million | $7.2 million |
| Basic and diluted loss per share | $0.16 | $0.11 | $0.44 | $0.30 |
| Operating cash used | Not provided by quarter | Not provided by quarter | $11.8 million | $5.3 million |
No operating margin is meaningful because the company reported no revenue. At September 30, 2015, cash and cash equivalents were $10.2 million, money market funds were $20.6 million, and short-term investments were $79.4 million, totaling $110.1 million. Working capital was $107.5 million; stockholders’ equity was $109.4 million. Current liabilities were $2.9 million. The company reported no long-term debt or bank credit lines.
For the first nine months, investing cash outflow was $100.9 million, principally reflecting purchases of short-term investments; financing cash inflow was $78.0 million, including $68.3 million net proceeds from a March public offering and $9.6 million from warrant exercises. Cash and cash equivalents alone declined $34.7 million to $10.2 million; this does not include the separately reported money market funds and investments.
Changes, outlook, and risks
- Year-to-date net loss rose to $19.3 million from $7.2 million, mainly as R&D activity expanded. R&D expense increased $11.1 million year over year; management cited the expanded NCI collaboration, the Tampa research facility, and broader development work.
- Management expected operating and R&D spending to continue increasing, with no near-term revenue anticipated. It believed September 30 resources would fund planned operations for at least 24 months, but said additional funding would ultimately be needed to complete development and regulatory approval plans.
- The company expanded its NCI CRADA to include bladder, lung, triple-negative breast, and HPV-associated cancers. An NIH license amendment effective October 2, 2015 added exclusive rights for breast, lung, bladder, and HPV-associated cancers and removed rights for ovarian and colorectal cancers described in the earlier arrangement.
- License and CRADA commitments included $3.1 million for the remainder of 2015 and $2.9 million for 2016. The filing also describes potential future royalties and milestone payments.
- MBA Holdings sought $7.746 million in a breach-of-contract suit. Lion disputed the allegations and said it intended to defend itself; the filing does not state a clear estimate of any probable loss or an accrued amount.
- Management reported disclosure controls and procedures were not effective as of quarter-end. It reported no material change in internal control over financial reporting during the quarter.
- Cash exposure included balances above insured limits at one bank and investment concentration: 56% of short-term investments were in notes of five companies. The portfolio had an average maturity of 66 days. Management said interest-rate changes were not expected to materially affect cash equivalents.
Important facts for investors to verify
- Confirm the issuer identity: this filing is for Lion Biotechnologies, Inc., despite the request naming Iovance Biotherapeutics.
- Track LN-144 Phase 2 enrollment, safety, response, and manufacturing feasibility, along with the timing and cost of subsequent trials.
- Assess the assumptions behind the stated 24-month operating runway, planned spending increases, and expected need for future capital.
- Review the status and potential financial consequences of the MBA Holdings lawsuit and the license, royalty, and milestone obligations.
- Follow remediation of ineffective disclosure controls and the company’s continuing dilution: common shares outstanding increased to 47.8 million from 33.8 million at December 31, 2014.