IOVANCE BIOTHERAPEUTICS, INC. (then Lion Biotechnologies, Inc.) — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2014. Financial statements are unaudited. The company was a development-stage biotechnology business developing tumor-infiltrating lymphocyte (TIL) cell therapies; it had no commercial products or revenue.
Financial performance and condition
| Metric | Three months ended June 30, 2014 | Six months ended June 30, 2014 | Comparable 2013 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $2.11 million, including $1.75 million operating expenses and $0.36 million R&D | $4.37 million, including $3.71 million operating expenses and $0.66 million R&D | $1.03 million and $1.73 million, respectively |
| Net loss | $2.11 million; $0.09 per share | $4.37 million; $0.19 per share | $3.43 million and $4.48 million; $4.19 and $1.54 per share |
| Cash used in operating activities | Six-month outflow of $3.59 million | Six-month outflow of $0.98 million |
- At June 30, cash and cash equivalents were $18.44 million, down from $19.67 million at December 31, 2013. Working capital was $17.36 million; current assets were $18.52 million and current liabilities $1.16 million.
- Total assets were $18.54 million and stockholders’ equity $17.38 million. The company reported no long-term debt or capital leases; accounts payable and accrued expenses were its current liabilities.
- Six-month financing cash inflow was $2.36 million from exercises of 945,392 warrants at $2.50 per share. Investing cash outflow was $5,742. The net cash decrease was $1.23 million.
- Gross margin is not applicable because the company had no revenue. Non-cash stock-based compensation was a significant expense; the filing gives differing amounts in different sections.
Changes versus prior comparable periods
- Quarterly operating expenses increased to $2.11 million from $1.03 million, while quarterly net loss fell from $3.43 million to $2.11 million. The prior-year quarter included a $2.30 million non-cash cost tied to a debt exchange; 2014 had no comparable charge.
- Six-month operating expenses rose to $4.37 million from $1.73 million. Net loss was slightly lower year over year, but the 2013 period included the same $2.30 million exchange cost; excluding it, the filing states 2013 six-month net loss would have been $2.18 million.
- Operating cash use increased to $3.59 million from $0.98 million, partly reflecting lower accrued liabilities and accounts payable. Cash was also raised from warrant exercises, while common shares outstanding increased to 27.23 million from 20.02 million at year-end.
Outlook, risks, commitments and unusual items
- Management expected no revenue in 2014 and anticipated continued losses as research and development expanded. It stated that June 30 cash would fund planned operations for at least 12 months, but additional financing would be needed to complete development and obtain regulatory approvals.
- The filing gives different 2014 budget estimates: approximately $8–$10 million in the notes and $10–$12 million in MD&A. Planned spending includes increased R&D, hiring, Tampa facility setup, laboratory equipment and Lonza manufacturing work.
- The company’s NCI cooperative research agreement requires $250,000 per quarter through August 2016. NIH licensing terms include royalties and development milestones; milestone payments for melanoma could total $6.05 million if all stated benchmarks are achieved. A subsequent Moffitt license adds upfront, milestone, royalty and patent-cost obligations.
- A five-year Tampa research-facility lease was signed in July 2014; first-year base rent is $10,443 per month. The company estimated roughly $500,000 in near-term build-out costs and more than $5 million over two years for construction, furnishing and operation.
- The SEC subpoenaed the company in April 2014 as part of an investigation concerning stock promotions; the filing says the subpoena did not indicate whether the company itself was under investigation, and the company was cooperating. A former sublessor filed a July 2014 lawsuit alleging unpaid rent and expenses of $138,719 and seeking $150,000 related to an alleged loan; the company was evaluating the claims.
- Potential dilution included 11.43 million warrants, 868,750 options and preferred stock convertible into 2.9 million common shares at June 30. Management reported disclosure controls were effective and no material change in internal control during the quarter.
Important facts for investors to verify
- Reconcile the filing’s different 2014 spending estimates ($8–$10 million versus $10–$12 million) and confirm the expected cash runway against planned expansion costs.
- Check the differing stock-based compensation figures reported in the statements, notes and MD&A, and the MD&A description of warrant-exercise proceeds as investing cash flow; the cash flow statement classifies them as financing.
- Monitor progress, clinical and regulatory milestones, Lonza manufacturing setup, NIH/Moffitt license obligations and the need for future financing.
- Follow developments in the SEC subpoena matter and the Theorem Group lawsuit, including any resolution or financial impact.