Iovance Biotherapeutics, Inc. — 2018 First-Quarter Form 10-Q
Reporting period: Three months ended March 31, 2018. Iovance is a clinical-stage biopharmaceutical company developing tumor-infiltrating lymphocyte (TIL) cancer immunotherapies. It had no approved commercial products and reported no revenue.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data and where otherwise stated.
| Metric | Q1 2018 | Q1 2017 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $19.9 | $15.6 | Up 28% |
| General and administrative expense | $7.0 | $5.3 | Up 32% |
| Total costs and expenses | $26.9 | $20.9 | Up $6.0 |
| Operating loss | $(26.9) | $(20.9) | Loss increased |
| Interest income | $0.4 | $0.2 | Up 83% |
| Net loss | $(26.5) | $(20.7) | Loss increased |
| Net loss per share, basic and diluted | $(0.31) | $(0.33) | Loss per share narrowed |
| Net cash used in operating activities | $(17.8) | $(18.8) | Use decreased $1.0 |
Margins are not meaningful because the company had no revenue. Cash and cash equivalents were $297.1 million at March 31, 2018, compared with $145.4 million at December 31, 2017. Current assets were $302.7 million and current liabilities $14.7 million; reported working capital was $288.0 million. Total assets were $307.2 million, stockholders’ equity $292.6 million, and accumulated deficit $275.7 million. The filing reports no debt and no off-balance-sheet arrangements.
Financing activities provided $169.6 million of cash, chiefly reflecting the January public offering: 15.0 million common shares sold at $11.50 per share, generating approximately $162.0 million net proceeds. Investing activities used $0.02 million. Common shares outstanding were 89.6 million at quarter-end.
Material changes versus the prior comparable period
- R&D expense rose $4.3 million, primarily from higher payroll and consulting costs and increased clinical-trial costs; lower manufacturing costs partly offset the increase.
- G&A expense rose $1.7 million, mainly from increased payroll, professional services, and legal expenses.
- Net loss grew by $5.8 million as clinical development, manufacturing activity, and corporate infrastructure expanded. Higher cash balances following the January offering contributed to increased interest income.
- Operating cash use declined year over year despite the larger net loss, with working-capital movements contributing to reported cash flow.
Outlook, management commentary, risks, and unusual items
- Management expected no product-sale or licensing revenue during 2018 and projected increased spending on trials, manufacturing capacity, research, and staffing. It believed available funds would cover anticipated operating expenses for at least 24 months from the filing date.
- Clinical programs included Phase 2 studies of LN-144 for metastatic melanoma and LN-145 for cervical and head-and-neck cancers. The filing described early response observations in small patient groups as preliminary, not conclusive. Management planned further enrollment and use of its Gen 2 manufacturing process in company-sponsored trials.
- Management identified clinical-trial enrollment and outcomes, regulatory approval, manufacturing scale-up and consistency, reliance on contract manufacturers and collaborators, and future financing needs as significant uncertainties. Cell therapy production is patient-specific and operationally complex.
- The company had no commercial products and expected continued losses. It may need additional capital; future equity financing could dilute shareholders, and acceptable financing may not be available.
- Legal matters included securities class and derivative litigation related to the SEC’s stock-promotion investigation, a dispute with Solomon Capital, and litigation involving a former executive. The company said it intended to defend the matters; it could not estimate possible losses for certain cases. It had not accrued a loss for the disclosed resale-registration issue involving up to 128,500 shares.
- After quarter-end, the company terminated its Karolinska University Hospital clinical-trials agreement on April 9, 2018. The filing also reported that two derivative cases were consolidated on May 1, 2018.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether current cash, operating burn, and planned increases in clinical and manufacturing spending support the stated 24-month funding outlook.
- Progress, enrollment, safety, and efficacy in the LN-144 and LN-145 trials, including whether preliminary findings are borne out in larger patient groups.
- Whether Gen 2 manufacturing can be validated, scaled, and operated consistently and economically for later-stage trials and potential commercialization.
- The potential dilution from outstanding options, warrants, convertible preferred shares, and future capital raises; the filing reported 20.9 million potentially dilutive common-share equivalents at March 31, 2018.
- Developments and potential financial exposure in pending litigation, along with obligations under research, license, and manufacturing agreements.