Iovance Biotherapeutics(IOVA) - 2022 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements and detailed notes for Iovance Biotherapeutics, Inc Item 1. Condensed Consolidated Financial Statements Provides unaudited condensed consolidated financial statements and explanatory notes for the reporting period Condensed Consolidated Balance Sheets | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $92,360 | $78,229 | | Short-term investments | $389,829 | $426,181 | | Long-term investments | $27,701 | $91,588 | | Total Assets | $701,251 | $777,333 | | Total Liabilities | $149,259 | $155,674 | | Total Stockholders' Equity | $551,992 | $621,659 | | Accumulated deficit | $(1,264,052) | $(1,172,445) | Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Research and development | $68,300 | $55,949 | | General and administrative | $23,413 | $19,621 | | Total costs and expenses | $91,713 | $75,570 | | Loss from operations | $(91,713) | $(75,570) | | Net Loss | $(91,607) | $(75,449) | | Net Loss Per Share (Basic and Diluted) | $(0.58) | $(0.51) | Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Net Loss | $(91,607) | $(75,449) | | Unrealized (loss) gain on investments | $(1,742) | $77 | | Comprehensive Loss | $(93,349) | $(75,372) | Condensed Consolidated Statements of Stockholders' Equity | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Total Stockholders' Equity | $551,992 | $621,659 | | Stock-based compensation expense (Q1) | $22,265 | $16,941 | | Net loss (Q1) | $(91,607) | $(75,449) | | Unrealized loss on investments (Q1) | $(1,742) | — | Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash used in operating activities | $(73,802) | $(62,391) | | Net cash provided by investing activities | $86,516 | $77,211 | | Net cash provided by financing activities | $1,417 | $50,364 | | Net increase in cash, cash equivalents and restricted cash | $14,131 | $65,184 | NOTE 1. GENERAL ORGANIZATION, BUSINESS AND LIQUIDITY - Iovance Biotherapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing Tumor Infiltrating Lymphocyte (TIL) therapy to cure cancer[25] - The company's lead product candidates include lifileucel for metastatic melanoma and metastatic cervical cancer, and LN-145 for metastatic non-small cell lung cancer (NSCLC)[25] Financial Metrics (in millions) | Metric | Value (in millions) | | :--------------------------------------- | :------------------ | | Net loss for Q1 2022 | $(91.6) | | Cash used in operating activities for Q1 2022 | $(73.8) | | Total cash, cash equivalents, investments, and restricted cash (Mar 31, 2022) | $516.0 | - The company believes it has sufficient capital to fund anticipated operating expenses and capital expenditures for at least the next twelve months[28] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Investments are classified as 'available-for-sale' and carried at fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss[30] Restricted Cash (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Restricted cash | $6,084 | $6,084 | - Potentially dilutive common stock equivalents (stock options, ESPP, restricted stock units, and convertible preferred stock) are excluded from diluted net loss per share calculation when their effect would be anti-dilutive[34][35] - Research and development costs are expensed as incurred, with accruals for third-party activities based on estimates of work completed[45] NOTE 3. CASH EQUIVALENTS, INVESTMENTS AND FAIR VALUE MEASUREMENTS Investment Portfolio Fair Value (in thousands) | Investment Type | March 31, 2022 Fair Value (in thousands) | December 31, 2021 Fair Value (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | U.S. treasury securities | $246,484 | $246,767 | | U.S. government agency securities | $5,046 | $5,097 | | Corporate securities | $34,329 | $35,588 | | Commercial paper | $158,095 | $235,316 | | Money market funds | $45,249 | $56,250 | | Total investments | $489,203 | $579,018 | - All available-for-sale securities held as of March 31, 2022, and December 31, 2021, had contractual maturities of less than two years[51] NOTE 4. PROPERTY AND EQUIPMENT, NET Property and Equipment, Net (in thousands) | Asset Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Leasehold improvements | $65,767 | $57,817 | | Construction in progress | $23,732 | $35,782 | | Total Property and equipment, net | $102,757 | $100,938 | | Depreciation expense (Q1) | $1,800 | $400 | NOTE 5. ACCRUED EXPENSES Accrued Expenses (in thousands) | Accrued Expense Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Accrued payroll and employee related expenses | $18,204 | $21,513 | | Clinical related | $17,910 | $18,167 | | Manufacturing related | $6,295 | $6,566 | | Total accrued expenses | $48,911 | $56,766 | NOTE 6. STOCKHOLDERS' EQUITY - As of March 31, 2022, 157,168,321 shares of common stock were issued and outstanding[56] - No sales were made under the 'at the market' offering program during the three months ended March 31, 2022, compared to $42.9 million in net proceeds from sales in the same period of 2021[60] Equity Award Details | Equity Award Type | March 31, 2022 Outstanding | Unrecognized Compensation Expense (in thousands) | | :-------------------------- | :------------------------- | :--------------------------------------- | | Stock options | 14,101,526 | $94,100 | | Restricted stock units (RSUs) and Performance Restricted Stock Units (PRSUs) | 3,095,177 | $37,000 | Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Total stock-based compensation expense | $22,265 | $16,941 | NOTE 7. LICENSES AND AGREEMENTS - The Cooperative Research and Development Agreement (CRADA) with the NCI was extended by three years to August 2024, requiring quarterly payments of $0.5 million for research activities[85][86] - An Amended and Restated Patent License Agreement with NIH grants additional exclusive worldwide patent rights to cytokine-tethered TIL technology and expands the non-exclusive field of use to all cancers[89] - The company has an exclusive patent license agreement with NIH for TIL selection technologies, which includes customary royalties based on a percentage of net sales (mid-single digits)[90][91] Manufacturing and Gene-Editing Agreements (in thousands) | Agreement | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | WuXi Advanced Therapies, Inc. (manufacturing) | $3,900 | $3,400 | | Cellectis S.A. (gene-editing technology) | $100 | $100 | NOTE 8. LEASES Lease Assets and Liabilities (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Operating lease right-of-use assets | $73,475 | $68,983 | | Total operating lease liabilities | $78,894 | $70,531 | Lease Costs (in thousands) | Lease Cost Type | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Operating lease cost | $4,555 | $3,398 | | Variable lease cost | $980 | $710 | | Short-term lease cost | $42 | $36 | | Total lease cost | $5,577 | $4,144 | - The weighted-average remaining lease term as of March 31, 2022, was 14.13 years, with a weighted-average discount rate of 7.2%[111] NOTE 9. LEGAL PROCEEDINGS - A derivative lawsuit was filed on December 11, 2020, alleging breach of fiduciary duty and unjust enrichment related to excessive non-executive director compensation[112] - The company is involved in two lawsuits with Solomon Capital, LLC, concerning alleged unpaid funds and shares, with one suit's damages for the Equity Claim limited to $47,420 by court order[113][115][116] - In the Second Solomon Suit, claims against the former CEO and two claims against the company were dismissed by the Court on January 5, 2022[117] - The company intends to vigorously defend against these complaints and pursue its counterclaims, with the amount or range of possible loss currently not estimable[118] NOTE 10. INCOME TAXES - The company did not record income tax expense for the three months ended March 31, 2022, and 2021, due to expected taxable losses[120] - Net deferred tax assets are fully offset by a valuation allowance, as it is not more likely than not that the benefit will be realized[120] 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, detailing its clinical-stage biopharmaceutical focus, product pipeline, intellectual property, the impact of COVID-19, and a breakdown of operating expenses, liquidity, and capital resources Overview - Iovance Biotherapeutics is a clinical-stage biopharmaceutical company focused on pioneering Tumor Infiltrating Lymphocyte (TIL) therapy to cure cancer[123] - The company has developed a new, shorter proprietary TIL manufacturing process known as Generation 2 (Gen 2), which yields a cryopreserved TIL product[123] - Lead product candidates include lifileucel for metastatic melanoma and metastatic cervical cancer, and LN-145 for metastatic non-small cell lung cancer (NSCLC)[123] - The company is also investigating combinations of TIL therapy with immune checkpoint inhibitors (ICIs), peripheral blood lymphocyte (PBL) therapy, genetically edited TIL products (IOV-4001), and an alternative interleukin-2 (IL-2) co-therapy (IOV-3001)[123] Product Candidate Pipeline and Clinical Development - Lifileucel for metastatic melanoma (C-144-01 trial, Cohort 4) completed patient dosing in January 2020, with a Biologics License Application (BLA) submission expected by August 2022[127][128] - Lifileucel for metastatic cervical cancer (C-145-04 trial, Cohort 2) received Breakthrough Therapy Designation (BTD) and completed enrollment in January 2021[129] - The IOV-LUN-202 clinical trial is enrolling patients with metastatic NSCLC, with Cohort 3 exploring TIL manufacturing from core biopsies using the third-generation (Gen 3) process[130] - The Iovance Cell Therapy Center (iCTC) successfully manufactured and delivered its first clinical batch of LN-145 for the IOV-COM-202 trial in September 2021[136] - The FDA allowed an Investigational New Drug (IND) to proceed for the first genetically modified TIL therapy, IOV-4001, in March 2022, with the first clinical trial expected to initiate in 2022[140] Intellectual Property - The company owns over 40 U.S. patents related to TIL therapy, including compositions and methods of treatment in a broad range of cancers[144] - More than 30 of these patents are related to the Gen 2 TIL manufacturing processes and are anticipated to extend to January 2038[144] - The intellectual property portfolio also includes patent applications for frozen tumor-based TIL technologies, remnant TIL and digest TIL compositions, costimulatory molecules, genetically-modified TIL therapies, and ICI combination methods[144] Impact of COVID-19 on our Business Operations and Liquidity - The COVID-19 pandemic has not had a material impact on the company's liquidity or results of operations for the three months ended March 31, 2022[145] - Clinical trial enrollment has not been significantly affected by the pandemic to date[145] - The company believes its current cash reserves are well-positioned to manage its business through the ongoing crisis[146] - The dynamic nature of the COVID-19 pandemic makes it difficult to forecast future effects on financial condition, results of operations, or cash flows[147][149] Components of Results of Operations - The company has not generated any revenues since its formation and does not anticipate significant revenues from product sales or licensing in the next 12 months[150] - Research and development expenses are expected to increase due to preparations for commercial manufacturing and ongoing clinical trials[153] - General and administrative expenses are anticipated to increase as the company prepares for commercialization and expands its internal team and corporate infrastructure[155] Results of Operations for the Three Months Ended March 31, 2022 and 2021 Operating Results Comparison (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Research and development expense | $68,300 | $55,949 | $12,351 | 22 | | General and administrative expense | $23,413 | $19,621 | $3,792 | 19 | | Interest income, net | $106 | $121 | $(15) | (12) | | Net loss | $(91,607) | $(75,449) | $(16,158) | 21 | - The increase in research and development expense was primarily due to a $6.5 million increase in payroll and related expenses and a $4.4 million increase in stock-based compensation, driven by increased hiring and facility costs, partially offset by a $5.8 million decrease in clinical trial costs[158] - The increase in general and administrative expenses was mainly due to a $1.4 million increase in payroll and related expenses, a $0.9 million increase in stock-based compensation, and a $1.5 million increase in other costs to support business growth and pre-commercialization activities[159] Liquidity and Capital Resources - The company has incurred losses and generated negative cash flows from operations since inception, with an accumulated deficit of $1.3 billion as of March 31, 2022[162] - As of March 31, 2022, the company had $516.0 million in cash, cash equivalents, and investments, which is believed to be sufficient to fund operations for at least the next twelve months[162] - Future funding requirements are expected to increase due to expanded research and development, pre-commercial activities, and completion of the iCTC facility[162] Cash Flow Activities (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash used in operating activities | $(73,802) | $(62,391) | | Net cash provided by investing activities | $86,516 | $77,211 | | Net cash provided by financing activities | $1,417 | $50,364 | - The increase in cash used in operating activities was due to increased net loss and higher non-cash charges, partially offset by changes in operating assets and liabilities[170] - The decrease in net cash provided by financing activities was primarily due to lower proceeds from common stock sales through the 'at the market' offering program in Q1 2022 compared to Q1 2021[172] Off-Balance Sheet Arrangements - As of March 31, 2022, the company had no obligations that would require disclosure as off-balance sheet arrangements[173] Significant Accounting Policies and Recent Accounting Standards - There were no recently issued accounting standards applicable to the company, and no accounting standards were adopted during the three months ended March 31, 2022[174] Inflation - Inflation has not had a material effect on the company's business, financial condition, or results of operations over the two most recent fiscal years[175] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk is primarily limited to interest income sensitivity from its investment portfolio, which consists mainly of short-term U.S. government debt securities - The company's exposure to market risk is primarily limited to interest income sensitivity, affected by changes in U.S. interest rates[176] - The investment policy limits amounts invested in securities by credit rating, maturity, industry group, investment type, and issuer, except for U.S. government securities[176] - As of March 31, 2022, $489.2 million was invested in marketable securities with maturity dates of less than two years[176] - A 1% change in interest rates as of March 31, 2022, would result in an approximate $2.0 million increase or decrease in the fair value of the investment portfolio[176] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report, and there were no material changes in internal control over financial reporting during the quarter ended March 31, 2022 - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of March 31, 2022[177] - There have been no material changes in internal control over financial reporting during the quarter ended March 31, 2022[178] PART II OTHER INFORMATION Presents additional information including legal proceedings, risk factors, sales of securities, and exhibits Item 1. Legal Proceedings This section incorporates by reference the legal proceedings detailed in Note 9 to the Condensed Consolidated Financial Statements, confirming no other material pending legal matters - Information on legal proceedings is incorporated by reference from Note 9 to the Condensed Consolidated Financial Statements[180] - There are no other matters that constitute material pending legal proceedings[180] Item 1A. Risk Factors This section outlines the significant risks and uncertainties facing the company, including those related to its business operations, government regulation, intellectual property, and securities - The company is substantially dependent on the success of its product candidates, which may not complete development, receive regulatory approval, or be commercialized[183] - Significant risks include substantial delays in clinical trials, difficulties in manufacturing and scaling capabilities, and the need for additional financing[183] - The company is subject to extensive and costly regulation, faces significant competition, and its business could be adversely affected by health epidemics like COVID-19[186] Risks Related to Our Business - The company has a history of operating losses, with an accumulated deficit of $1.3 billion as of March 31, 2022, and expects to continue incurring losses[187] - Success is entirely dependent on the development and commercialization of product candidates (lifileucel, LN-145, IOV-2001, IOV-3001), which may never occur[191] - Reliance on third parties (CROs, CMOs, clinical trial sites) for clinical trials and manufacturing exposes the company to risks of delays, failures, and lack of control[197][199][200] - Clinical trials are expensive, time-consuming, and uncertain, with risks of undesirable side effects, failure to demonstrate safety and efficacy, and difficulties in patient enrollment[222][223][231] - Manufacturing of product candidates is complex, highly regulated, and susceptible to product loss, contamination, and scaling difficulties, potentially delaying supply or increasing costs[234][236] - The company needs additional financing to fund future operations, with risks of dilution to stockholders, increased debt, or relinquishing rights to technologies[254][256] - The ongoing military conflict between Russia and Ukraine and resulting geopolitical instability could materially adversely affect the global economy, capital markets, and the company's business[323][325] Risks Related to Government Regulation - The FDA regulatory approval process is lengthy, time-consuming, and uncertain, especially for novel cell therapies, with no prior BLA submission experience[329][330] - Obtaining regulatory approval in one jurisdiction does not guarantee approval in others, and foreign regulatory requirements can vary significantly[333] - Ongoing regulatory obligations post-approval, such as REMS and Phase 4 studies, will result in significant additional expense and potential penalties for non-compliance[335][336][339] - Failure to comply with federal and state healthcare and promotional laws (e.g., fraud and abuse, off-label promotion) could lead to substantial penalties and adverse business impact[341][344][347] - Coverage and reimbursement for product candidates may be limited or unavailable, impacting profitability, particularly for novel therapies in inpatient settings[349][351][357] - New legislation, regulatory proposals, and healthcare payor initiatives (e.g., ACA, drug pricing controls) may increase compliance costs and adversely affect marketability and profitability[358][362] Risks Related to Our Intellectual Property - The company may be involved in lawsuits to protect or enforce its patents or those of its licensors, or lawsuits accusing its products of patent infringement, which could be expensive, time-consuming, and unsuccessful[368] - Issued patents covering product candidates could be found invalid or unenforceable if challenged in court or the USPTO, leading to a loss of patent protection[372] - The patent law relating to biotechnology is still evolving, leading to uncertainty in patent positions and potential for competitors to license similar intellectual properties or duplicate the business model[374][377][378] - The use of the company's technologies could potentially conflict with the rights of others, requiring alterations, licensing fees, or cessation of activities[379] - Changes in U.S. patent law could diminish the value of patents, and limited foreign intellectual property rights may hinder global protection efforts[381][382] Risks Related to Our Securities - Officers, directors, and principal stockholders own a substantial percentage of the company's stock, enabling them to exert significant control over matters subject to stockholder approval[385] - The market price of the common stock is likely to be volatile and could fluctuate widely due to clinical trial results, regulatory developments, competition, and general market conditions[386] - Future sales of common stock in the public market, including from equity offerings or the exercise of common stock equivalents, could cause the stock price to fall and result in substantial dilution to existing stockholders[387][388][389] - The company does not anticipate paying cash dividends for the foreseeable future, so investors should not expect cash dividends[396] - Provisions in corporate charter documents and Delaware law may prevent or frustrate attempts by stockholders to change management or acquire a controlling interest in the company[397][398] Item 2. Unregistered Sales of Securities and Use of Proceeds This section states that there is nothing to report regarding unregistered sales of securities and use of proceeds for the period - Nothing to report[405] Item 3. Defaults Upon Senior Securities This section indicates that there are no defaults upon senior securities to report for the period - Nothing to report[406] Item 4. Mine Safety Disclosure This section states that there is no information to disclose regarding mine safety for the period - Nothing to report[407] Item 5. Other Information This section indicates that there is no other information to report for the period - Nothing to report[408] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, as well as various Inline XBRL documents - Includes Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer and Chief Financial Officer (Exhibits 31.1 and 31.2)[410] - Includes Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer (Exhibits 32.1 and 32.2)[410] - Includes Inline XBRL Instance Document and various Inline XBRL Taxonomy Linkbase Documents[410] SIGNATURES Confirms the due authorization and signing of the Quarterly Report on Form 10-Q by the company's executive officers SIGNATURES This section confirms the due authorization and signing of the Quarterly Report on Form 10-Q on May 5, 2022, by the company's Interim Chief Executive Officer and President, and General Counsel, and its Chief Financial Officer and Treasurer - The report was signed on May 5, 2022[413] - Signed by Frederick G. Vogt, Ph.D., J.D., Interim Chief Executive Officer and President, and General Counsel (Principal Executive Officer)[413] - Signed by Jean-Marc Bellemin, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)[413]