Iovance Biotherapeutics(IOVA) - 2023 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Iovance Biotherapeutics, Inc. as of June 30, 2023, and for the three and six-month periods then ended. It includes the balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies and events, such as the recent acquisition of Proleukin® Financial Statements This section provides the unaudited condensed consolidated balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $230,010 | $231,731 | | Total Current Assets | $274,878 | $479,116 | | Intangible assets, net | $235,511 | $0 | | Total Assets | $757,293 | $663,982 | | Liabilities & Equity | | | | Total Current Liabilities | $88,643 | $91,485 | | Total Liabilities | $178,724 | $164,344 | | Total Stockholders' Equity | $578,569 | $499,638 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $238 | $0 | $238 | $0 | | Research and development | $86,347 | $73,406 | $169,081 | $141,706 | | Selling, general and administrative | $21,927 | $26,328 | $50,049 | $49,741 | | Loss from operations | ($110,086) | ($99,734) | ($220,942) | ($191,447) | | Net Loss | ($106,528) | ($99,349) | ($213,898) | ($190,956) | | Net Loss Per Share | ($0.47) | ($0.63) | ($0.98) | ($1.21) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($193,767) | ($151,437) | | Net cash (used in) provided by investing activities | ($3,383) | $182,279 | | Net cash provided by (used in) financing activities | $259,197 | ($650) | | Net increase in cash, cash equivalents and restricted cash | $58,279 | $30,192 | Note 1: General Organization, Business and Liquidity This note details the company's core business, strategic developments, and assessment of its liquidity position - The company is a biopharmaceutical firm focused on developing and delivering tumor-infiltrating lymphocyte (TIL) therapies for solid tumor cancers. Its lead product candidate is lifileucel for advanced melanoma[32] - In May 2023, the company acquired the worldwide rights to Proleukin® (aldesleukin), a commercialized IL-2 product, to secure its supply chain and create a new revenue source[32] - The FDA accepted the Biologics License Application (BLA) for lifileucel in advanced melanoma in May 2023, granted it Priority Review, and set a PDUFA target action date of November 25, 2023[33] - As of June 30, 2023, the company had $317.3 million in cash, cash equivalents, investments, and restricted cash. Management believes it has sufficient capital to fund operations for at least the next twelve months, including proceeds from a July 2023 public offering[37][38] Note 4: Proleukin® Acquisition This note describes the financial details and accounting treatment of the Proleukin® acquisition - On May 18, 2023, the company completed the acquisition of the worldwide rights to Proleukin® from Clinigen for an upfront payment of £166.9 million (approx. $207.2 million) plus inventory costs[81][82] - The transaction was accounted for as an asset acquisition, with the total cost of $222.7 million allocated primarily to developed technology ($232.7 million) and inventory ($9.7 million), offset by a deferred tax liability ($20.4 million)[83][84] - The agreement includes a potential milestone payment of £41.7 million (approx. $50.0 million) upon the first approval of lifileucel in advanced melanoma, as well as future sales-based deferred consideration and earnout payments[84] Note 10: Stockholders' Equity This note outlines changes in stockholders' equity, including capital raises and stock-based compensation - During the six months ended June 30, 2023, the company received approximately $260.1 million in net proceeds from the sale of 36,080,226 shares through its "at the market" (ATM) offering program at a weighted average price of $7.35 per share[103] - In June 2023, stockholders approved an amendment to the 2018 Equity Incentive Plan, increasing the number of shares available for issuance from 20.7 million to 29.7 million[113] - Stock-based compensation expense was $16.7 million for Q2 2023 and $32.4 million for the six months ended June 30, 2023, a decrease from $22.5 million and $44.7 million in the respective prior-year periods[129] Note 13: Legal Proceedings This note provides an overview of the company's ongoing legal disputes and related developments - The company is involved in a stockholder derivative complaint filed in December 2020, alleging excessive compensation for certain non-executive directors. A proposed settlement has been submitted to the court[165] - Two lawsuits filed by Solomon Capital, LLC and related plaintiffs are ongoing, alleging breach of contract and other claims related to financing activities in 2012. The company is vigorously defending these claims and has asserted counterclaims[166][171][172] Note 15: Subsequent Events This note discloses significant events that occurred after the reporting period, impacting the company's financial position - On July 13, 2023, the company closed a public offering of 23,000,000 shares of its common stock at $7.50 per share, generating estimated net proceeds of approximately $161.4 million[179] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations. It details the business strategy, focusing on the development of TIL therapies and the recent acquisition of Proleukin®. The discussion covers the progress of key clinical trials, an analysis of financial results for the three and six months ended June 30, 2023, compared to the prior year, and an assessment of liquidity and capital resources Overview and Clinical Development This section outlines the company's strategic focus, lead product candidates, and progress in key clinical trials - The company's lead product candidate, lifileucel, is under FDA review for advanced melanoma, with a PDUFA target action date of November 25, 2023. A Phase 3 confirmatory trial, TILVANCE-301, is underway in frontline advanced melanoma[183] - Registrational strategies are being pursued for lifileucel in advanced cervical cancer and for TIL therapy LN-145 in metastatic non-small cell lung cancer (NSCLC)[184] - Preliminary analysis of the IOV-LUN-202 trial in 23 NSCLC patients showed an objective response rate of 26.1%. The company plans to enroll a total of approximately 120 patients in this registrational trial[191] - The company is advancing next-generation approaches, including its first genetically modified TIL therapy (IOV-4001), a shorter manufacturing process, and a novel IL-2 analog (IOV-3001)[184][192] Results of Operations This section analyzes the company's revenues, costs, and net loss for the current and prior reporting periods Comparison of Costs and Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $238 | $0 | $238 | $0 | | Cost of sales | $2,050 | $0 | $2,050 | $0 | | Research and development | $86,347 | $73,406 | $169,081 | $141,706 | | Selling, general and administrative | $21,927 | $26,328 | $50,049 | $49,741 | - Revenue & Cost of Sales: The company recorded its first product revenue of $0.2 million and cost of sales of $2.1 million in Q2 2023, following the acquisition of Proleukin® in May 2023[227][229] - R&D Expense Increase: R&D expenses rose by 18% in Q2 2023 YoY, primarily due to increased payroll from hiring, higher clinical trial costs for the Phase 3 TILVANCE-301 trial, and increased manufacturing costs related to commercial readiness activities at the iCTC facility[231] - SG&A Expense Decrease: SG&A expenses decreased by 17% in Q2 2023 YoY, mainly due to a $4.2 million decrease in legal fees (as some costs were capitalized for the Proleukin acquisition) and a $1.2 million decrease in stock-based compensation[233] - Net Loss Increase: Net loss increased to $106.5 million in Q2 2023 from $99.3 million in Q2 2022, driven by the expansion of R&D activities, clinical trials, and pre-commercialization efforts for lifileucel[237] Liquidity and Capital Resources This section assesses the company's cash position, funding sources, and ability to meet its operational and capital needs - The company has historically funded operations through equity offerings. It began generating revenue from Proleukin® sales in Q2 2023 but does not expect material revenue in the next 12 months[238] - Management believes existing capital, including the $161.4 million net proceeds from the July 2023 public offering, is sufficient to fund operations and capital expenditures for at least the next twelve months[238] - Net cash used in operating activities increased to $193.8 million for the six months ended June 30, 2023, up from $151.4 million in the prior-year period, due to higher net loss and increased operational activities[244] - Net cash provided by financing activities was $259.2 million for the first six months of 2023, primarily from $260.1 million in net proceeds from the "at the market" offering program[247] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, primarily interest rate risk and foreign currency exchange risk. Interest rate risk is considered minimal due to the investment portfolio's focus on short-term U.S. government securities. Foreign currency risk has increased following the acquisition of Proleukin®, with exposure mainly to the Great Britain Pound - Interest rate risk is limited as a significant portion of investments are in short-term U.S. government debt securities, with the primary objective being principal preservation[252] - Foreign currency exchange risk has emerged following the Proleukin® acquisition due to foreign subsidiaries and sales denominated in foreign currencies. The most significant exposure is to the Great Britain Pound[255] Item 4. Controls and Procedures This section provides management's conclusion on the effectiveness of the company's disclosure controls and procedures. As of June 30, 2023, these controls were deemed effective. It also notes that internal controls were implemented during the quarter related to the Proleukin® acquisition - Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[257] - During the quarter, the company implemented new internal controls over financial reporting related to revenue and inventory processes resulting from the Proleukin® acquisition[258] PART II OTHER INFORMATION This part covers legal proceedings, comprehensive risk factors, and other required disclosures Item 1. Legal Proceedings This section incorporates by reference the information on legal proceedings from Note 13 of the Condensed Consolidated Financial Statements, which details ongoing litigation, including a stockholder derivative lawsuit and two lawsuits from Solomon Capital, LLC - The company incorporates information on legal proceedings from Note 13 of the financial statements, which details the Shumacher derivative lawsuit and the Solomon Capital lawsuits[260] Item 1A. Risk Factors This section provides a comprehensive discussion of the risks and uncertainties that could materially affect the company's business, financial condition, and results of operations. The risks are categorized into those related to the business, government regulation, intellectual property, and the company's securities Risks Related to Our Business This section details risks inherent to the company's operations, product development, manufacturing, and financial sustainability - The company is substantially dependent on the success of its product candidates, particularly lifileucel, and cannot guarantee they will receive regulatory approval or be successfully commercialized[273] - Manufacturing of TIL therapies is complex and susceptible to product loss, contamination, and scalability issues. Difficulties with the Gen 2 manufacturing process or potency assays could delay or prevent BLA approval[332][334] - The company may need additional financing to fund operations and commercialization. As of June 30, 2023, the company had an accumulated deficit of $1.8 billion[356][269] - The business faces significant competition from other biotechnology companies developing advanced T-cell therapies, immunotherapies, and novel IL-2 treatments[390][392] Risks Related to Government Regulation This section discusses regulatory challenges, approval processes, and compliance requirements affecting the company's products - The FDA regulatory approval process is lengthy, time-consuming, and uncertain. The BLA for lifileucel was accepted with a PDUFA date of November 25, 2023, but approval is not guaranteed[470] - Even if approved, products will be subject to ongoing regulatory obligations, including potential post-marketing studies (like the TILVANCE-301 confirmatory trial) and REMS, which can be costly and limit commercial prospects[414][479] - Coverage and reimbursement from third-party payors (government and private) are critical for commercial success but may be limited or unavailable, making it difficult to sell products profitably[498] Risks Related to Our Intellectual Property This section addresses risks related to protecting and enforcing the company's patents and intellectual property rights - The company may be involved in expensive and time-consuming lawsuits to protect its patents or defend against infringement claims, and an adverse result could invalidate or narrow the scope of its patent protection[523] - Patent law in the biotechnology field is complex and evolving, creating uncertainty about the strength and enforceability of the company's licensed and owned patents[530] - The company has limited foreign intellectual property rights, which may not be sufficient to prevent competitors from practicing its inventions or selling competing products in markets outside the U.S[541] Risks Related to Our Securities This section highlights factors that could impact the market price and liquidity of the company's common stock - The market price of the company's common stock is likely to be volatile due to factors such as clinical trial results, regulatory developments, and market conditions[546] - Future sales of common stock, including under the ATM program or other offerings, could cause the stock price to fall and result in substantial dilution to existing stockholders[547] - Provisions in the company's charter documents and Delaware law could discourage or prevent a change in control, potentially limiting the stock price[561] Other Items (Items 2, 3, 4, 5, 6) This concluding section of the report confirms that there were no unregistered sales of securities, defaults upon senior securities, or mine safety disclosures during the period. It also states that no directors or executive officers adopted or terminated a Rule 10b5-1 trading plan in the second quarter of 2023. The section concludes with an index of exhibits filed with the report - There were no unregistered sales of securities, defaults upon senior securities, or mine safety disclosures to report for the period[569][570][571] - During the second quarter of 2023, no directors or executive officers adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement[572]