Iovance Biotherapeutics, Inc. — Q3 2018 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2018. Financial amounts below are in U.S. dollars; statement amounts are in millions unless otherwise noted. The company is a clinical-stage cancer immunotherapy developer with no commercial products or product revenue.
Financial performance and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 in 2018 and 2017 | $0 in 2018 and 2017 |
| Research and development expense | $27.9 in 2018; $16.7 in 2017 | $72.4 in 2018; $50.9 in 2017 |
| General and administrative expense | $7.1 in 2018; $5.7 in 2017 | $20.9 in 2018; $15.9 in 2017 |
| Net loss | $33.8 in 2018; $22.1 in 2017 | $91.0 in 2018; $66.2 in 2017 |
| Net loss per share, basic and diluted | $0.36 in 2018; $0.35 in 2017 | $1.01 in 2018; $1.06 in 2017 |
| Operating cash used | Not separately presented for the quarter | $69.7 in 2018; $57.7 in 2017 |
At September 30, 2018, cash and cash equivalents were $80.7 million and short-term investments were $179.3 million; working capital was $249.2 million. Total assets were $270.8 million, current liabilities $16.7 million, and stockholders’ equity $254.2 million. The balance sheet reports no debt. Cash and cash equivalents plus short-term investments totaled approximately $260.0 million. Management stated it expected available funds to cover anticipated operating expenses for at least 12 months from the filing date, taking account of the subsequent financing.
Cash from financing activities was $185.0 million for the nine-month period, including $162.1 million net proceeds from common-stock issuance and $23.1 million from warrant and option exercises. The January offering generated approximately $162.0 million net. Cash used in investing activities was $179.9 million, primarily for short-term investment purchases. Stock-based compensation was $14.8 million for the first nine months.
Changes versus the prior comparable period
- Third-quarter net loss increased by $11.7 million year over year; nine-month net loss increased by $24.8 million.
- R&D expense rose 68% for the quarter and 42% for the nine months, reflecting higher clinical-trial activity, staffing and related costs, research programs, and manufacturing capacity. Nine-month manufacturing expense was partly offset by lower technical-transfer costs.
- G&A expense increased 26% for the quarter and 32% for the nine months, largely due to payroll and stock-based compensation, with higher professional and legal costs also contributing to the nine-month increase.
- Net interest income increased to $1.2 million for the quarter and $2.3 million for the nine months, primarily due to higher invested cash balances and interest earned.
- Common shares outstanding increased to 97.4 million at September 30, 2018 from 73.2 million at December 31, 2017. A further 25.3 million shares were sold in an October offering.
Outlook, operations, and material risks
- Funding and spending: On October 17, 2018, the company completed a 25.3-million-share public offering at $9.97 per share, with estimated net proceeds of approximately $236.6 million. Management expected R&D, clinical, manufacturing, staffing, and pre-commercial spending to increase; it did not anticipate product or licensing revenue during 2018 or the following 12 months.
- Pipeline and regulatory path: Lifileucel (LN-144) is in Phase 2 development for metastatic melanoma. FDA meeting minutes acknowledged a single-arm C-144-01 cohort may be acceptable for initial registration and a randomized Phase 3 study may not be required. The company planned a new 80–100-patient cohort with a prospectively defined response endpoint, subject to validating a potency assay; it expected to start in early 2019, complete enrollment by late 2019 or early 2020, and submit a BLA in the second half of 2020. Lifileucel had RMAT designation.
- Preliminary clinical data: The filing reports an updated C-144-01 analysis of 47 patients with a 38% investigator-assessed objective response rate and median duration of response of 6.4 months; four partial responses were unconfirmed. It also reports preliminary response rates of 31% among 13 evaluable head-and-neck patients and 27% among 15 cervical-cancer patients. These results are preliminary and may change with additional follow-up or review.
- Safety: Two grade 5 treatment-emergent adverse events had been observed in C-144-01. Common reported events included chills, febrile neutropenia, anemia, decreased platelet counts, fever, and hypophosphatemia.
- Key execution risks: The company depends on third-party manufacturers and clinical partners; patient enrollment, manufacturing scale-up, comparability of Gen 1 and Gen 2 processes, potency-assay validation, regulatory review, and competition could delay development or prevent approval. It expects continued operating losses and may need additional financing, which could dilute shareholders.
- Contingencies and unusual items: A securities class-action settlement was proposed, with a preliminary-approval hearing scheduled for November 9, 2018; the company expected insurance to cover the cost if approved. Derivative suits and other litigation remained pending, and the company said possible losses could not be estimated for certain matters. A $1.6 million refund following termination of a Karolinska clinical-trial agreement resulted in a $0.4 million credit to nine-month R&D expense.
- Controls: Management concluded disclosure controls were effective as of September 30, 2018 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the planned cohort 4 potency assay was validated and the cohort, enrollment, and BLA timelines were met.
- How updated, independently reviewed clinical response and duration data compare with the preliminary investigator-assessed results, including safety outcomes.
- Cash burn and runway after the October financing, alongside the pace and cost of trial expansion and manufacturing investment.
- The final net proceeds and dilution effects of the October offering, and the impact of outstanding options, warrants, preferred shares, and other equity awards.
- Developments in the pending litigation, including settlement approval and any potential uninsured liabilities.