10-Q 1 iova-20220630x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     to    .

Commission File Number 001-36860

IOVANCE BIOTHERAPEUTICS, INC.

(Exact name of issuer as specified in its charter)

Delaware

75-3254381

(State or other jurisdiction of

(I.R.S. employer

incorporation or organization)

identification number)

825 Industrial Road, Suite 400, San Carlos, CA 94070

(Address of principal executive offices and zip code)

(650) 260-7120

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  þ

Accelerated filer

Non-accelerated filer   

Smaller reporting company

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

   

Trading Symbol(s)

   

Name of each exchange on which registered

Common Stock, par value $0.000041666

 

IOVA

 

The Nasdaq Global Market

At July 25, 2022, the issuer had 157,800,581 shares of common stock, par value $0.000041666 per share, outstanding.

Forward-Looking Statements and Market Data

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this report are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “might,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “aim,” “potential,” “continue,” “ongoing,” “goal,” “forecast,” “guidance,” “outlook,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.

These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

the success, cost, enrollment, and timing of our clinical trials;
the success, cost and timing of our product development activities;
the ability of us or our third-party contract manufacturers to continue to manufacture tumor infiltrating lymphocytes, or TIL, in accordance with our selected process;
our ability to design, construct and staff our own manufacturing facility on a timely basis and within the estimated expenses;
the success of competing therapies that are or may become available;
regulatory developments in the United States of America, or U.S., and foreign countries;
the timing of and our ability to obtain and maintain U.S. Food and Drug Administration, or the FDA, or other regulatory authority approval of, or other action with respect to, our product candidates;
our ability to attract and retain key scientific or management personnel;
the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;
the ability and willingness of our third-party research institution collaborators to continue research and development activities relating to our product candidates;
the potential of our other research and development and strategic collaborations;
our expectations regarding our ability to obtain and maintain intellectual property protection for our manufacturing methods and product candidates;
our plans to research, develop and commercialize our product candidates;
the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
fluctuations in the trading price of our common stock; and
our use of cash and other resources.

2

Actual results may differ from those set forth in this Quarterly Report on Form 10-Q due to the risks and uncertainties inherent in our business, including, without limitation: the FDA may not agree with our interpretation of the results of its clinical trials; later developments with the FDA that may be inconsistent with already completed FDA meetings; the preliminary clinical results, including efficacy and safety results, from ongoing Phase 2 may not be reflected in the final analyses of these trials including new cohorts within these trials; the results obtained in our ongoing clinical trials, such as the studies and trials referred to in this Quarterly Report on Form 10-Q, may not be indicative of results obtained in future clinical trials or supportive of product approval; regulatory authorities may potentially delay the timing of FDA or other regulatory authority approval of, or other action with respect to, our product candidates, specifically, our description of FDA interactions are subject to FDA’s interpretation, as well as FDA’s authority to request new or additional information; we may not be able to obtain or maintain FDA or other regulatory authority approval of its product candidates; our ability to address FDA or other regulatory authority requirements relating to our clinical programs and registrational plans, such requirements including, but not limited to, clinical and safety requirements as well as manufacturing and control requirements; risks related to our accelerated FDA review designations; our ability to obtain and maintain intellectual property rights relating to our product pipeline; and the acceptance by the market of our product candidates and their potential reimbursement by payors, if approved.

We caution you that the risks, uncertainties and other factors referenced above may not contain all the risks, uncertainties and other factors that are important to you. In addition, we cannot guarantee future results, level of activity, performance or achievements. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date of this Quarterly Report on Form 10-Q or as of the date on which it is made. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether because of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.

Unless the context requires otherwise, in this report the terms “Iovance,” the “Company,” “we,” “us” and “our” refer to Iovance Biotherapeutics, Inc.

3

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited; in thousands, except share and per share information)

    

June 30, 

December 31, 

    

2022

    

2021

ASSETS

  

 

  

  

 

  

Current Assets

  

 

  

Cash and cash equivalents

$

108,075

$

78,229

Short-term investments

 

316,383

 

426,181

Prepaid expenses and other assets

 

7,135

 

3,546

Total Current Assets

 

431,593

 

507,956

 

  

 

  

Property and equipment, net

101,154

100,938

Operating lease right-of-use assets

70,845

68,983

Long-term investments

 

91,588

Restricted cash

6,430

6,084

Long-term assets

 

856

 

1,784

Total Assets

$

610,878

$

777,333

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

 

  

 

  

Current Liabilities

 

  

 

  

Accounts payable

$

20,009

$

27,377

Accrued expenses

 

37,700

 

56,766

Operating lease liabilities

6,483

5,057

Total Current Liabilities

 

64,192

 

89,200

 

  

 

  

Non-Current Liabilities

 

  

 

  

Operating lease liabilities – noncurrent

 

72,996

 

65,474

Long-term note payable

1,000

1,000

Total Non-Current Liabilities

 

73,996

 

66,474

Total Liabilities

 

138,188

 

155,674

 

  

 

  

Commitments and contingencies

 

  

 

  

 

  

 

  

Stockholders’ Equity

 

  

 

  

Series A Convertible Preferred stock, $0.001 par value; 17,000 shares designated, 194 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

Series B Convertible Preferred stock, $0.001 par value; 11,500,000 shares designated, 2,842,158 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

3

 

3

Common stock, $0.000041666 par value; 300,000,000 shares authorized, 157,800,581 and 157,004,742 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

7

 

7

Accumulated other comprehensive loss

 

(2,697)

 

(601)

Additional paid-in capital

 

1,838,778

 

1,794,695

Accumulated deficit

 

(1,363,401)

 

(1,172,445)

Total Stockholders’ Equity

 

472,690

 

621,659

Total Liabilities and Stockholders’ Equity

$

610,878

$

777,333

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations

(unaudited; in thousands, except per share information)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2022

    

2021

    

2022

    

2021

Costs and expenses

 

 

 

 

Research and development

 

73,406

 

62,119

 

141,706

118,068

General and administrative

 

26,328

 

19,307

 

49,741

38,928

Total costs and expenses

 

99,734

 

81,426

 

191,447

156,996

 

 

 

  

Loss from operations

 

(99,734)

 

(81,426)

 

(191,447)

(156,996)

Other income

 

 

 

  

Interest income, net

 

385

 

75

 

491

196

Net Loss

$

(99,349)

$

(81,351)

$

(190,956)

$

(156,800)

Net Loss Per Share of Common Stock, Basic and Diluted

$

(0.63)

$

(0.53)

$

(1.21)

$

(1.04)

Weighted Average Shares of Common Stock Outstanding, Basic and Diluted

 

157,274

 

153,751

 

157,194

 

150,571

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited; in thousands)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2022

    

2021

    

2022

    

2021

Net Loss

$

(99,349)

$

(81,351)

$

(190,956)

$

(156,800)

Other comprehensive (loss) income:

 

 

 

 

Unrealized (loss) gain on investments

 

(354)

 

(63)

 

(2,096)

 

14

Comprehensive Loss

$

(99,703)

$

(81,414)

$

(193,052)

$

(156,786)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

IOVANCE BIOTHERAPEUTICS, INC

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended June 30, 2022 and 2021

(unaudited; in thousands, except share information)

Series A 

Series B

Convertible

Convertible

Additional

Accumulated other

Total

Preferred Sock

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balance - March 31, 2022

 

194

$

2,842,158

$

3

157,168,321

$

7

$

1,818,377

$

(2,343)

$

(1,264,052)

$

551,992

Stock-based compensation expense

 

22,468

 

22,468

Common stock issued upon purchase of employee stock purchase plan

80,203

582

582

Vesting of restricted shares issued for services

 

898,392

 

 

 

Tax payments related to shares retired for vested restricted stock units

(346,335)

 

(2,649)

 

(2,649)

Unrealized loss on investments

 

(354)

 

(354)

Net loss

 

(99,349)

 

(99,349)

Balance - June 30, 2022

 

194

$

 

2,842,158

$

3

 

157,800,581

$

7

$

1,838,778

$

(2,697)

$

(1,363,401)

$

472,690

Balance - March 31, 2021

 

194

$

 

2,842,158

$

3

 

149,315,299

$

6

$

1,552,968

$

96

$

(905,642)

$

647,431

Stock-based compensation expense

14,414

 

14,414

Common stock issued upon purchase of employee stock purchase plan

55,315

970

 

970

Common stock issued upon exercise of stock options

233,251

2,742

 

2,742

Common stock sold in public offering, net of offering costs

5,195,856

1

160,269

160,270

Unrealized loss on short-term investments

(63)

 

(63)

Net loss

 

(81,351)

 

(81,351)

Balance - June 30, 2021

 

194

$

 

2,842,158

$

3

 

154,799,721

$

7

$

1,731,363

$

33

$

(986,993)

$

744,413

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

IOVANCE BIOTHERAPEUTICS, INC

Condensed Consolidated Statements of Stockholders’ Equity

For the Six Months Ended June 30, 2022 and 2021

(unaudited; in thousands, except share information)

Series A 

Series B

Convertible

Convertible

Additional

Accumulated other

Total

Preferred Sock

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balance - December 31, 2021

 

194

$

 

2,842,158

$

3

 

157,004,742

$

7

$

1,794,695

$

(601)

$

(1,172,445)

$

621,659

Stock-based compensation expense

 

44,733

 

44,733

Common stock issued upon purchase of employee stock purchase plan

80,203

582

582

Vesting of restricted shares issued for services

 

898,392

 

 

 

Tax payments related to shares retired for vested restricted stock units

(346,335)

 

(2,649)

 

(2,649)

Common stock issued upon exercise of stock options

 

163,579

 

 

1,417

 

1,417

Unrealized loss on investments

 

(2,096)

 

(2,096)

Net loss

 

(190,956)

 

(190,956)

Balance - June 30, 2022

 

194

$

 

2,842,158

$

3

 

157,800,581

$

7

$

1,838,778

$

(2,697)

$

(1,363,401)

$

472,690

Balance - December 31, 2020

 

194

$

 

3,581,119

$

4

 

146,874,917

$

6

$

1,486,662

$

19

$

(830,193)

$

656,498

Stock-based compensation expense

 

31,355

 

31,355

Common stock issued upon purchase of employee stock purchase plan

55,315

970

 

970

Common stock issued upon exercise of stock options

 

656,429

 

 

9,221

 

9,221

Common stock sold in public offering, net of offering costs

6,474,099

1

203,154

 

203,155

Common stock issued from preferred stock conversion

(738,961)

(1)

738,961

1

 

Unrealized gain on short-term investments

 

14

14

Net loss

 

(156,800)

(156,800)

Balance - June 30, 2021

 

194

$

 

2,842,158

$

3

 

154,799,721

$

7

$

1,731,363

$

33

$

(986,993)

$

744,413

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited; in thousands)

Six Months Ended

June 30, 

    

2022

    

2021

Cash Flows from Operating Activities

Net loss

$

(190,956)

$

(156,800)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Stock-based compensation expense

44,733

31,355

Amortization of right of use asset

6,184

4,813

Depreciation and amortization

4,042

 

738

Accretion (amortization) of discounts and premiums on investments

995

3,862

Loss on write-off of fixed assets

314

Changes in assets and liabilities:

Prepaid expenses, other assets and long-term assets

(2,661)

 

(3,038)

Operating lease liabilities, net of tenant improvement allowance received

902

 

(2,890)

Accounts payable

65

 

4,950

Accrued expenses and other liabilities

 

(15,055)

 

611

Net cash used in operating activities

 

(151,437)

 

(116,399)

Cash Flows from Investing Activities

Maturities of investments

 

284,136

 

320,151

Purchase of investments

 

(85,841)

 

(381,784)

Purchase of property and equipment

 

(16,016)

 

(20,321)

Net cash provided by / (used in) investing activities

 

182,279

 

(81,954)

Cash Flows from Financing Activities

Tax payments related to shares withheld for vested restricted stock units

 

(2,649)

 

Proceeds from the issuance of common stock upon purchase of employee stock purchase plan

 

582

 

Proceeds from the issuance of common stock upon exercise of options

1,417

10,191

Proceeds from the issuance of common stock, net

203,155

Proceeds from the issuance of debt

1,000

Net cash (used in) / provided by financing activities

 

(650)

 

214,346

Net increase in cash, cash equivalents and restricted cash

 

30,192

 

15,993

Cash, Cash Equivalents and Restricted Cash Beginning of Period

 

84,313

 

72,854

Cash, Cash Equivalents and Restricted Cash End of Period

$

114,505

$

88,847

Supplemental disclosure of non-cash investing and financing activities:

Net unrealized (loss) gain on investments

$

(2,096)

$

14

Acquisition of property and equipment included in accounts payable and accrued expenses

 

967

 

6,472

Conversion of convertible preferred stock to common stock

(1)

Lease liabilities arising from obtaining right-of-use asset from new leases

553

Lease liabilities arising from obtaining right-of-use asset from lease modifications

7,493

555

The accompanying notes are an integral part of these condensed consolidated financial statements.

9

IOVANCE BIOTHERAPEUTICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. GENERAL ORGANIZATION, BUSINESS AND LIQUIDITY

General Organization and Business

Iovance Biotherapeutics, Inc. (the “Company”) is a clinical-stage biopharmaceutical company pioneering a transformational approach to cure cancer by harnessing the human immune system’s ability to recognize and destroy diverse cancer cells in each patient. The Company’s T-cell-based immunotherapy technology platforms are potentially applicable to many tumor types and blood cancers. Tumor infiltrating lymphocyte (“TIL”) therapy is an autologous, polyclonal cell therapy platform technology that was originally developed by the National Cancer Institute (“NCI”), which conducted initial clinical trials of this therapy in diseases such as metastatic melanoma and cervical cancer. The Company’s mission is to be the global leader in innovating, developing and delivering TIL therapies for patients with cancer. The Company has developed a new, shorter TIL manufacturing process known as Generation 2 (“Gen 2”), which yields a cryopreserved TIL product. This centralized, proprietary, and scalable manufacturing method is being investigated in multiple indications. The Company’s lead product candidates include lifileucel for metastatic melanoma and metastatic cervical cancer, as well as LN-145 for metastatic non-small cell lung cancer (“NSCLC”). In addition, the Company is investigating the effectiveness and safety of combinations of TIL therapy with immune checkpoint inhibitors (“ICI”), in metastatic melanoma, cervical cancer, NSCLC, and head and neck squamous cell carcinoma (“HNSCC”). The Company also initiated a clinical trial with its first genetically modified TIL therapy, designated IOV-4001, in patients with previously treated metastatic melanoma and NSCLC. The Company is also developing genetically edited TIL products based on the inactivation of genes that encode immune checkpoint proteins and the insertion of genes that encode immunomodulatory proteins. The Company’s lead peripheral blood lymphocyte (“PBL”) therapy, IOV-2001, is being investigated in a clinical study for patients with relapsed or refractory chronic lymphocytic leukemia (“CLL”) and small lymphocytic lymphoma (“SLL”) through its sponsored trials. On June 1, 2017, the Company reincorporated from a Nevada corporation to a Delaware corporation.

Basis of Presentation of Unaudited Condensed Consolidated Financial Information

The accompanying unaudited condensed consolidated financial statements of the Company for the three and six months ended June 30, 2022 and 2021 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for audited financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company's financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2022 or for any other period. The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2022. These interim financial statements should be read in conjunction with that report. Certain prior period amounts reported in our condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period presentation.

Liquidity

The Company is currently engaged in the development of therapeutics to fight cancer, specifically solid tumors. The Company currently does not have any commercial products and has not yet generated any revenues from its business, nor does the Company currently anticipate that it will generate significant revenues from the sale or licensing of any of its product candidates during the twelve months from the date these consolidated financial statements are issued. The Company has incurred a net loss of $191.0 million for the six months ended June 30, 2022 and used $151.4 million of cash in its operating activities during the six months ended June 30, 2022. As of June 30, 2022, the Company had $430.9 million in cash, cash equivalents, investments, and restricted cash ($108.1 million of cash and cash equivalents, $316.4 million in short-term investments and $6.4 million in restricted cash).

10

The Company expects to continue its research and development activities, increase pre-commercial activities and complete construction of the remaining tenant improvements for the Iovance Cell Therapy Center (the “iCTC”), which are expected to increase the amount of cash used during the remainder of 2022 and beyond. Specifically, the Company expects continued spending on its current and planned clinical trials, continued expansion of manufacturing activities, higher payroll expenses as the Company increases its professional and scientific staff and continuation of pre-commercial activities. Based on the funds the Company has available as of the date these consolidated financial statements are issued, the Company believes that it has sufficient capital to fund its anticipated operating expenses and capital expenditures as planned for at least the next twelve months from the date these financial statements are issued.

Concentrations of Risk

The Company is subject to credit risk from its portfolio of cash, cash equivalents and investments. Under its investment policy, the Company limits amounts invested in securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. The Company does not believe it is exposed to any significant concentrations of credit risk from these financial instruments. The goals of its investment policy are safety and preservation of principal, diversification of risk, and liquidity of investments sufficient to meet cash flow requirements.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents, and Investments

The Company’s cash and cash equivalents include short-term investments with original maturities of three months or less when purchased. The Company's investments are classified as “available-for-sale.” The Company includes these investments in current assets or non-current assets in the Condensed Consolidated Balance Sheets based on the length of maturity from the reporting date and carries them at fair value. Unrealized gains and losses on available-for-sale securities are recorded in accumulated other comprehensive loss. Impairment losses related to credit losses (if any) are recorded as an allowance for credit losses with an offsetting entry to Interest income, net. No impairment losses related to credit losses were recognized for the three and six months ended June 30, 2022 and 2021. The cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in Interest income, net in the Condensed Consolidated Statements of Operations. Gains and losses on securities sold are recorded based on the specific identification method and are included in Interest income, net in the Condensed Consolidated Statements of Operations. The Company has not incurred any realized gains or losses from sales of securities to date. The Company’s investment policy limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S. government and U.S. government agencies as well as corporate debt securities and commercial paper, and places restrictions on maturities and concentration by type and issuer, except for securities issued by the U.S. government.

Restricted Cash

The Company maintains a required minimum balance in a segregated bank account in connection with its letters of credit for which amounts are restricted as to their use by the Company. Currently, the Company’s letters of credit are primarily comprised of one for the benefit of the landlord for the iCTC used as a security deposit for the lease in the amount $5.45 million (See Note 8 - Leases) and one for $0.6 million for the benefit of the landlord for the Company’s current headquarters’ lease. The total amount of the Company’s letters of credit is classified as Restricted Cash in the Condensed Consolidated Balance Sheets. The letter of credit for $5.45 million originally expired on May 28, 2020, however, it automatically extends for additional one-year periods, without written agreement, to May 28 in each succeeding calendar year, through at least 60 days after the lease expiration date. Further, on the expiration of the seventh year of the lease, and each anniversary date thereafter, the letter of credit may be decreased by $1.0 million with a minimum security deposit of $1.5 million maintained through the end of the lease term. The letter of credit with the landlord for the Company’s current headquarters’ lease expires on February 1, 2032, however, it will be automatically extended, without written agreement, for one-year periods to February in each succeeding calendar year. As of June 30, 2022 and December 31, 2021, restricted cash consisted of $6.4 million and $6.1 million, respectively. This amount has been classified as a non-current asset in the Company’s Condensed Consolidated Balance Sheets.

11

The following table provides a reconciliation of cash, cash equivalents, and restricted cash, reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):

    

June 30, 

2022

2021

Cash and cash equivalents

$

108,075

$

82,763

Restricted cash

 

6,430

 

6,084

Total cash, cash equivalents and restricted cash

$

114,505

$

88,847

Net Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of shares of common stock outstanding and the dilutive common stock equivalents outstanding during the period. The Company’s potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options, (ii) purchases though the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), (iii) vesting of restricted stock units, and (iv) conversion of preferred stock, are only included in the calculation of diluted net loss per share when their effect is dilutive.

As of June 30, 2022 and 2021, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive:

June 30, 

    

2022

    

2021

Stock options

14,519,506

 

14,537,031

Employee Stock Purchase Plan

193,194

39,766

Restricted stock units

2,499,178

1,253,540

Series A Convertible Preferred Stock*

97,000

97,000

Series B Convertible Preferred Stock*

2,842,158

 

2,842,158

20,151,036

 

18,769,495

* on an as-converted basis

The dilutive effect of potentially dilutive securities would be reflected in diluted earnings per common share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company's common stock could result in a greater dilutive effect from potentially dilutive securities.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include assumptions made in the fair value of equity awards and related stock-based compensation, assumptions used in measuring operating right-of-use assets and operating lease liabilities, accounting for potential liabilities, including estimates inherent in accruals related to clinical trials, and the realizability of the Company’s deferred tax assets.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Iovance Biotherapeutics, Inc. and its wholly-owned subsidiaries, Iovance Biotherapeutics Manufacturing LLC, Iovance Biotherapeutics GmbH, and Iovance Biotherapeutics B.V. All intercompany accounts and transactions have been eliminated. The U.S. dollar is the functional currency for all the Company's consolidated operations.

12

Leases

The Company determines if an arrangement includes a lease at inception and thereafter, if modified. Operating leases are included in its Condensed Consolidated Balance Sheets as Operating lease right-of-use assets and Operating lease liabilities as of June 30, 2022 and December 31, 2021. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date or modification date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses an estimated incremental borrowing rate that is applicable to the Company based on the information available at the later of the lease commencement or modification date.

The operating lease right-of-use assets also include any lease payments made less lease incentives. The Company’s leases may include options to extend or terminate the lease, which is considered in the lease term when it is reasonably certain that the Company will exercise any such options. Lease expense is recognized on a straight-line basis over the expected lease term and recorded in costs and expenses in the Condensed Consolidated Statements of Operations. The Company has elected not to apply the recognition requirements of Accounting Standards Update (“ASU”) No. 2016-02 and No. 2018-10 (together “Topic 842”) for short-term leases.

For lease agreements entered into by the Company that include lease and non-lease components, such components are generally accounted for separately.

Stock-Based Compensation

The Company periodically grants stock options to employees and non-employees as compensation for services rendered. The Company accounts for all stock-based payment awards made to employees, including the employee stock purchase plans, and non-employees in accordance with the authoritative guidance provided by the Financial Accounting Standards Board (“FASB”) where the value of the award is measured on the date of grant and recognized over the vesting period. Forfeitures are recognized in the period in which they occur. The Company accounts for stock option grants to non-employees in a similar manner as stock option grants to employees except for the term used in the grant date fair value, therefore no longer requiring a re-measurement at the then-current fair values at each reporting date until the shares underlying the options have vested. The non-employee awards that contain a performance condition that affects the quantity or other terms of the award are measured based on the outcome that is probable.

The fair value of the Company's common stock option grants is estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected term of the common stock options, and future dividends. The stock-based compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model could affect compensation expense recorded in future periods.

The Company issues restricted stock units (“RSUs”) from time to time as part of its equity incentive plans. The Company measures the compensation cost with respect to RSUs issued to employees based upon the estimated fair value of the equity instruments at the date of the grant, which is recognized as an expense over the period during which an employee is required to provide services in exchange for the awards. The fair value of RSUs is based on the closing price of the Company’s common stock on the grant date.

Accrued Research and Development Costs

Research and development costs are expensed as incurred. Clinical development costs compose a significant component of research and development costs. The Company has a history of contracting with third parties, including contract research organizations (“CROs”), independent clinical investigators, and contract manufacturing organizations (“CMOs”) that perform various clinical trial activities on the Company’s behalf in connection with the ongoing development of the Company’s product candidates. The financial terms of these contracts are subject to negotiations and may vary from contract to contract and may result in uneven payment flow. The Company accrues and expenses costs for clinical trial activities performed by third parties based upon estimates of work completed to date for each clinical trial in accordance with agreements established with CROs, hospitals, and clinical investigators. Accruals for CROs and CMOs are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs and other outside service providers. The Company determines its estimates through discussions with internal clinical stakeholders and outside service providers as to the progress or stage of completion of clinical trials or services and the contracted fee to be paid for such services.

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Included in the Company’s clinical development costs are investigator costs, which are costs associated with treatments administered at clinical sites as required under each clinical study protocol. The Company’s estimates for clinical investigator costs and timing of expense recognition will depend on a number of factors that include, but are not limited to, (i) the overall number of patients that enroll in the trial at each individual site, (ii) the length of study enrollment period, (iii) discontinuation and completion rates of patients, (iv) duration of patient safety follow-ups, (v) the number of sites included in the clinical trial, and (vi) the contracted fee of each participating site for patient treatment while on study, which can vary greatly for several reasons including, but not limited to, geographic region, medical center or physician costs, and overhead costs. In addition, the Company’s estimates for per patient trial costs will vary based on a number of factors that include, but are not limited to, the extent of additional treatments that may be administered by investigators as a result of patient health status, recoverability of patient costs through insurance carriers of patients, and unanticipated cost of injuries incurred as a result of the study treatment. The Company accrues for estimated expenses resulting from obligations under investigator site agreements as the timing of payments does not always timely align with the periods over which the treatments are administered by the clinical investigators. These estimates are typically based on contracted amounts, patient visit data, discussions with internal clinical stakeholders and outside service providers, and historical look-back analysis of actual payments made to date.

The Company makes judgements and estimates in determining the accrual balance in each reporting period.

In the event advance payments are made to a CRO, CMO or other outside service provider, the payments are recorded within prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets and subsequently recognized as research and development expense in the Condensed Consolidated Statements of Operations when the associated services have been performed. As actual costs become known, the Company adjusts its estimates, liabilities and assets. Inputs used in the determination of estimates discussed above may vary from actual, which will result in adjustments to research and development expense in future periods. Changes in these estimates that result in material changes to the Company’s accruals could materially affect its results of operations. The Company’s historical estimates have not been materially different from actual amounts recorded.

Segment Reporting

The Company operates in one segment, focused on innovating, developing and commercializing therapies using autologous TIL for the treatment of metastatic melanoma and other solid tumor cancers.

NOTE 3. CASH EQUIVALENTS, INVESTMENTS AND FAIR VALUE MEASUREMENTS

The amortized cost, fair value measurements, and fair value of cash equivalents and investments as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

Gross

Gross

Amortized

Unrealized

Unrealized

As of June 30, 2022

    

Cost

    

Gains

    

Losses

    

Fair Value

U.S. treasury securities

$

245,177

$

$

(2,526)

$

242,651

U.S. government agency securities

 

5,029

 

 

(17)

 

5,012

Corporate securities

6,002

(12)

5,990

Commercial paper

87,942

(140)

87,802

Money market funds

68,102

68,102

Total investments

$

412,252

$

$

(