IOVANCE BIOTHERAPEUTICS, INC. — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017. Iovance is a clinical-stage biopharmaceutical company developing tumor-infiltrating lymphocyte (TIL) immunotherapies. It had no commercial products and reported no revenue.
Financial performance and liquidity
- Revenue: $0 for both the three and nine months ended September 30, 2017 and the comparable 2016 periods. The company said it did not expect product-sale or licensing revenue during 2017.
- Q3 2017: R&D expense was $17.8 million, G&A was $4.6 million, operating loss was $22.3 million, and net loss was $22.1 million ($0.35 per share). Q3 2016 net loss was $18.8 million; loss attributable to common stockholders was $68.2 million, including a $49.5 million deemed preferred-stock dividend.
- Nine months 2017: R&D expense was $54.0 million, G&A was $12.8 million, operating loss was $66.8 million, and net loss was $66.2 million ($1.06 per share). In the first nine months of 2016, net loss was $37.2 million; loss attributable to common stockholders was $86.7 million, including the same $49.5 million deemed dividend.
- Expense trends: R&D increased 109% in Q3 and 214% year to date, mainly from manufacturing capacity and costs, outside research services, payroll, and clinical trials. G&A declined 56% in Q3 and 38% year to date, largely because 2016 included substantial stock-based compensation associated with executive departures.
- Cash flow: Operating activities used $57.7 million in the first nine months of 2017, versus $20.5 million in 2016. Investing activities provided $58.6 million, primarily from investment maturities; financing activities provided $55.8 million.
- Liquidity at September 30: Cash and cash equivalents were $163.4 million, with no short-term investments; working capital was $162.8 million. Current liabilities were $8.5 million and stockholders’ equity was $165.4 million. The balance sheet lists no debt.
- Margins: Not meaningful because the company had no revenue. Interest income was $0.2 million for Q3 and $0.6 million year to date.
Material changes and business developments
- The September public offering issued 8.85 million common shares at $6.50 per share, generating approximately $57.5 million gross and $53.8 million net proceeds. Common shares outstanding rose to 71.95 million at quarter-end, from 62.25 million at December 31, 2016.
- The company reported $163.4 million of cash and said available funds were expected to cover anticipated operating expenses for at least 12 months from the filing date. It also warned that R&D, clinical, manufacturing, and staffing spending would rise, and that additional financing would be needed to fund future operations and development.
- Clinical-stage developments included FDA Fast Track designation for LN-144 in advanced melanoma, ongoing Phase 2 melanoma work, and trials in cervical cancer and head and neck cancer. Management cited interim melanoma data from 16 patients: 29% overall response rate, including one ongoing complete response beyond 15 months, and tumor-size reduction in 77% of patients. These are preliminary company-reported results, not approval evidence.
- The company entered a research alliance with MD Anderson, with funding of up to approximately $14.2 million, and a preclinical collaboration with Ohio State. It reported expected delays to planned Karolinska trials in glioblastoma and pancreatic cancer due to personnel changes.
Outlook, risks, contingencies, and unusual items
- Management expected continued losses and increased R&D spending; no specific revenue, earnings, or cash-burn guidance was provided beyond the stated liquidity outlook.
- Key risks include clinical and regulatory uncertainty, manufacturing capacity and cost, dependence on future financing, and the possibility that financing may not be available on acceptable terms. The company also noted that an SEC administrative order could make future fundraising more difficult.
- Pending matters included a securities class action related to stock-promotion allegations, a dispute with Solomon Capital, and litigation involving former executive Steven Fischkoff. The company said it could not estimate potential losses in the early-stage cases; no related loss accrual was reported for certain unestimable matters.
- Other notable items: the company reincorporated in Delaware and changed its name in June 2017. The 2016 comparison included a $49.5 million deemed dividend, materially increasing loss attributable to common stockholders but not net loss.
Important facts for investors to verify
- Whether clinical-trial enrollment, efficacy, safety, and manufacturing progress support management’s development plans.
- Whether cash burn and expanded manufacturing and trial commitments remain consistent with the stated at-least-12-month runway, and when additional capital may be required.
- The potential dilution from outstanding preferred stock, options, and warrants; the filing lists approximately 22.0 million common-stock equivalents excluded from diluted loss per share as anti-dilutive.
- Developments and potential financial or fundraising effects of the SEC order and pending litigation.
- Timing of delayed Karolinska studies and spending under collaboration and license agreements, including MD Anderson’s potential funding commitment.