What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-06 · 153 added, 148 removed, 640 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except share and per share information)

September 30,

Current Assets

21 unchanged sentences

Series A Convertible Preferred stock, $ 0.001 par value;

17,000 shares designated, 194 shares issued and outstanding as of June 30, 2020 and December 31, 2019 (aggregate liquidation value of $ 194 )

17,000 shares designated, 194 shares issued and outstanding as of September 30, 2020 and December 31, 2019 (aggregate liquidation value of $ 194 )

Series B Convertible Preferred stock, $ 0.001 par value;

11,500,000 shares designated, 3,581,119 shares issued and outstanding as of June 30, 2020 and December 31, 2019 (aggregate liquidation value of $ 17,010 )

11,500,000 shares designated, 3,581,119 shares issued and outstanding as of September 30, 2020 and December 31, 2019 (aggregate liquidation value of $ 17,010 )

Common stock, $ 0.000041666 par value;

300,000,000 shares authorized, 146,434,810 and 126,411,808 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

300,000,000 shares authorized, 146,581,624 and 126,411,808 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Accumulated other comprehensive income

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Costs and expenses

11 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive loss:

Unrealized gain / (loss) on short-term investments

Nine Months Ended

September 30,

Other comprehensive (loss) / gain:

Unrealized (loss) / gain on short-term investments

Comprehensive Loss

2 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

For the Six Months Ended June 30, 2020 and 2019

For the Nine Months Ended September 30, 2020 and 2019

in thousands, except share information)

6 unchanged sentences

Stock-based compensation expense

Vesting of shares issued for services

Vesting of restricted shares issued for services

Tax payments related to shares withheld for vested restricted stock units

Common stock issued upon exercise of stock options

Unrealized gain on short-term investments

Unrealized loss on short-term investments

Common stock sold in public offering, net of offering costs

Balance - June 30, 2020

Balance - September 30, 2020

Balance - December 31, 2018

4 unchanged sentences

Common stock issued upon exercise of stock options

Common stock issued from preferred stock conversion

( 2,273,726 )

Unrealized gain on short-term investments

Cancellation of common stock from settlement of dispute

Balance - June 30, 2019

Balance - September 30, 2019

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

1 unchanged sentence

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended June 30, 2020 and 2019

For the Three Months Ended September 30, 2020 and 2019

in thousands, except share information)

4 unchanged sentences

Stockholders’

Balance - March 31, 2020

Balance - June 30, 2020

Stock-based compensation expense

Vesting of restricted shares issued for services

Tax payments related to shares withheld for vested restricted stock units

Common stock issued upon exercise of stock options

Unrealized loss on short-term investments

Common stock sold in public offering, net of offering costs

Unrealized loss on short-term investments

Balance - September 30, 2020

Balance - June 30, 2019

Balance - March 31, 2019

Stock-based compensation expense

2 unchanged sentences

Common stock issued upon exercise of stock options

Unrealized gain on short-term investments

Balance - June 30, 2019

Common stock issued from preferred stock conversion

( 2,273,726 )

Unrealized loss on short-term investments

Balance - September 30, 2019

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

2 unchanged sentences

in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash Flows from Operating Activities

4 unchanged sentences

Gain on settlement of dispute

Amortization of premiums on investments

Accretion (Amortization) of discounts and premiums on investments

Changes in assets and liabilities:

14 unchanged sentences

Net cash provided by financing activities

Net increase in cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash, Cash Equivalents, and Restricted Cash Beginning of Period

1 unchanged sentence

Supplemental disclosure of non-cash investing and financing activities:

Unrealized gain on short-term investments

Unrealized (loss) / gain on short-term investments

Acquisitions of property and equipment included in accounts payable and accrued expense

Accrued offering costs in accrued expenses

Conversion of convertible preferred stock to common stock

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

7 unchanged sentences

This proprietary and scalable manufacturing method is being further investigated in multiple indications.

The Company’s lead product candidates include lifileucel for metastatic melanoma and LN-145 for metastatic cervical cancer.

The Company’s lead product candidates include lifileucel for metastatic melanoma and metastatic cervical cancer.

Lifileucel for metastatic cervical cancer was formerly known as LN-145.

In addition to metastatic melanoma and metastatic cervical cancer, the Company is investigating the effectiveness and safety of TIL therapy and peripheral blood lymphocyte therapy for the treatment of squamous cell carcinoma of the head and neck, non-small cell lung cancer, and chronic lymphocytic leukemia through its sponsored trials, as well as in other oncology indications through collaborations.

1 unchanged sentence

Basis of Presentation of Unaudited Condensed Consolidated Financial Information

The unaudited condensed consolidated financial statements of the Company for the three and six months ended June 30, 2020 and 2019 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.

The unaudited condensed consolidated financial statements of the Company for the three and nine months ended September 30, 2020 and 2019 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.

6 unchanged sentences

The Company currently does not anticipate that it will generate any significant revenues from the sale or licensing of any of its product candidates during the 12 months from the date these financial statements are issued.

The Company has incurred a net loss of $ 132.6 million for the six months ended June 30, 2020 and used $ 101.9 million of cash in its operating activities during the six months ended June 30, 2020.

In June 2020, the Company received net proceeds of approximately $ 567.0 million from the June 2020 Public Offering (as discussed in Note 5).

As of June 30, 2020, the Company had $ 777.4 million in cash, cash equivalents, short-term investments, and restricted cash ($ 160.6 million of cash and cash equivalents, $ 611.3 million in short-term investments and $ 5.5 million in restricted cash).

The Company expects to continue its research and development activities, increase pre-commercial activities and initiate the construction on the tenant improvements for its new manufacturing facility, which will increase the amount of cash used during 2020 and beyond.

The Company has incurred a net loss of $ 191.2 million for the nine months ended September 30, 2020 and used $ 142.4 million of cash in its operating activities during the nine months ended September 30, 2020.

In June 2020, the Company received net proceeds of $ 567.0 million from the June 2020 Public Offering (as discussed in Note 5).

As of September 30, 2020, the Company had $ 719.7 million in cash, cash equivalents, short-term investments, and restricted cash ($ 68.3 million of cash and cash equivalents, $ 645.8 million in short-term investments and $ 5.5 million in restricted cash).

The Company expects to continue its research and development activities, increase pre-commercial activities and continue the construction of the tenant improvements for its new manufacturing facility, which will increase the amount of cash used during 2020 and beyond.

Specifically, the Company expects continued spending on its current and planned clinical trials, continued expansion of manufacturing activities, including construction of a manufacturing facility, higher payroll expenses as the Company increases its professional and scientific staff and continuation of pre-commercial activities.

23 unchanged sentences

Any impairment losses related to credit losses (if any) are included in an allowance for credit losses with an offsetting entry to net loss.

No impairment losses related to credit losses were recognized for the three and six months ended June 30, 2020 and 2019.

No impairment losses related to credit losses were recognized for the three and nine months ended September 30, 2020 and 2019.

The cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity.

14 unchanged sentences

The $ 74,685 letter of credit will expire on February 25, 2021, however, it will be automatically extended, without written agreement, to the expiration date of December 1, 2022.

As of June 30, 2020, restricted cash consisted of $ 5.5 million and this amount has been classified as a non-current asset on the Company’s condensed consolidated balance sheets.

As of September 30, 2020, restricted cash consisted of $ 5.5 million and this amount has been classified as a non-current asset on the Company’s condensed consolidated balance sheets.

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:

September 30,

Cash and cash equivalents

5 unchanged sentences

The Company’s potentially dilutive common stock equivalent shares, which include incremental shares of common stock issuable upon (i) the exercise of outstanding stock options, (ii) vesting of restricted stock units, and (iii) conversion of preferred stock, are only included in the calculation of diluted net loss per share when their effect is dilutive.

At June 30, 2020 and 2019, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive.

At September 30, 2020 and 2019, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive.

September 30,

Stock options

13 unchanged sentences

Level 2–These are investments where values are based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets

The Company does not have fair valued assets classified under Level 2 as of June 30, 2020 and December 31, 2019.

The Company does not have fair valued assets classified under Level 2 as of September 30, 2020 and December 31, 2019.

Level 3–These are financial instruments where values are derived from techniques in which one or more significant inputs are unobservable.

The Company does not have fair valued assets classified under Level 3 as of June 30, 2020 and December 31, 2019.

The Company does not have fair valued assets classified under Level 3 as of September 30, 2020 and December 31, 2019.

The Company’s financial instruments consist of cash and cash equivalents and short-term investments, all of which are reported at their respective fair value on its condensed consolidated balance sheets.

As of June 30, 2020 and December 31, 2019, financial assets measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of June 30, 2020

As of September 30, 2020 and December 31, 2019, financial assets measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of September 30, 2020

treasury securities

14 unchanged sentences

Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.

Deferred tax assets are reduced by a

valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

5 unchanged sentences

The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act.

The tax relief measures for business include a five-year net operating loss (“NOL”) carrybacks, suspension of annual deduction limitation of 80% taxable income from net operating losses generated in a tax year beginning after December 31, 2017, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and technical correction to allow accelerated deductions for qualified improvement property.

The tax relief measures for business entities include a five-year net operating loss (“NOL”) carrybacks, suspension of annual deduction limitation of 80% taxable income from net operating losses generated in a tax year beginning after December 31, 2017, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and technical correction to allow accelerated deductions for qualified improvement property.

The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic.

The Company evaluated the impact of the CARES Act and determined no material tax provision impact for the quarter ended June 30, 2020.

The Company evaluated the impact of the CARES Act and determined no material tax provision impact for the three and nine months ended September 30, 2020.

The Company determines if an arrangement includes a lease at inception.

Operating leases are included in its condensed consolidated balance sheet as Operating lease right-of-use assets and Operating lease liabilities as of June 30, 2020 and December 31, 2019.

Operating leases are included in its condensed consolidated balance sheet as Operating lease right-of-use assets and Operating lease liabilities as of September 30, 2020 and December 31, 2019.

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.

22 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Research and development

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Stock option expenses

15 unchanged sentences

Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and also issued subsequent amendments to the initial guidance, ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2020-03 (collectively, Topic 326), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (“CECL”).

credit losses (“CECL”).

Under Topic 326, an entity is required to estimate CECL on available-for-sale (“AFS”) debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”.

11 unchanged sentences

The Company adopted this guidance on January 1, 2020.

There was no impact on the Company's condensed consolidated balance sheets and statements of operations as of and for the three and six months ended June 30, 2020.

However, the Company believes it will have a material impact on its condensed consolidated balance sheets and statements of operations in the future by deferring recognition of costs as it prepares to invest in information technology infrastructure for its commercial manufacturing build-out.

Subsequent Events

The Company recorded $ 0.8 million as prepaid expenses and long-term assets on the condensed consolidated balance sheet as of September 30, 2020.

The amortization expense recorded for the three and nine months ended September 30, 2020 was de minimis.

Subsequent Event

The Company’s management evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

See Note 11 Subsequent Event.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents and short-term investments consist of the following (in thousands):

September 30,

Cash equivalents - Money market funds

Cash equivalents - U.S.

treasury securities

Cash equivalents - U.S.

government agency securities

Cash equivalents total

Cash equivalents in the tables above exclude cash demand deposits of $ 9.5 million and $ 3.9 million as of June 30, 2020 and December 31, 2019, respectively (in thousands).

Cash equivalents in the tables above exclude cash demand deposits of $ 17.1 million and $ 3.9 million as of September 30, 2020 and December 31, 2019, respectively (in thousands).

September 30,

Short-term investments

2 unchanged sentences

Short-term investments total

The cost and fair value of cash equivalents and short-term investments at June 30, 2020 and December 31, 2019 were as follows (in thousands):

As of June 30, 2020

The cost and fair value of cash equivalents and short-term investments at September 30, 2020 and December 31, 2019 were as follows (in thousands):

As of September 30, 2020

(Amortization)

6 unchanged sentences

The credit-related losses are required to be recognized through the statements of operations and non-credit related losses are reported in other comprehensive income.

For the three and six months ended June 30, 2020, no CECL was recognized in the condensed consolidated statement of operations and all unrealized gains and losses are included in accumulated other comprehensive income.

All short-term investments held by the Company as of June 30, 2020 and December 31, 2019 have a maturity of less than one year.

For the three and nine months ended September 30, 2020, no CECL was recognized in the condensed consolidated statement of operations and all unrealized gains and losses are included in accumulated other comprehensive income.

All short-term investments held by the Company as of September 30, 2020 and December 31, 2019 have a maturity of less than one year.

BALANCE SHEET COMPONENTS

Accrued liabilities consist of the following (in thousands):

September 30,

Clinical related

Accrued payroll and employee related expenses

Manufacturing related

Commercial manufacturing facility related

Manufacturing related

Legal and related services

6 unchanged sentences

In June 2020, the Company closed an underwritten public offering of 16,935,484 shares of the Company’s common stock at a public offering price of $ 31.00 per share, before underwriting discounts, which included 2,540,322 shares issued upon the exercise in full by the underwriter of its option to purchase additional shares at the public offering price less the underwriting discount (the "June 2020 Public Offering").

The gross proceeds from the offering, before deducting the underwriting discounts and commissions and other offering expenses payable by the Company, were $ 603.7 million, with net proceeds to the Company of approximately $ 567.0 million.

In October 2018, the Company completed an underwritten public offering of 25,300,000 shares of the Company’s common stock at a public offering price of $ 9.97 per share, before underwriting discounts, which included 3,300,000 shares issued upon the exercise in full by the underwriter of its option to purchase additional shares at the public offering price less the underwriting discount.

4 unchanged sentences

The Company’s certificate of incorporation authorizes the issuance of up to 50,000,000 shares of “blank check” preferred stock.

At June 30, 2020, 17,000 shares were designated as Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”) and 11,500,000 shares were designated as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”).

At September 30, 2020, 17,000 shares were designated as Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”) and 11,500,000 shares were designated as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”).

Series A Convertible Preferred Stock

6 unchanged sentences

The Company may not declare, pay or set aside any dividends on shares of capital stock of the Company (other than dividends on shares of common stock payable in shares of common stock) unless the holders of the Series A Convertible Preferred Stock shall first receive an equal dividend on each outstanding share of Series A Convertible Preferred Stock.

No Shares of Series A Convertible Preferred Stock were converted during the six months ended June 30, 2020 or 2019.

At June 30, 2020 and December 31, 2019, 194 shares of Series A Convertible Preferred Stock (that are convertible into 97,000 shares of common stock) remained outstanding.

No Shares of Series A Convertible Preferred Stock were converted during the nine months ended September 30, 2020 or 2019.

At September 30, 2020 and December 31, 2019, 194 shares of Series A Convertible Preferred Stock (that are convertible into 97,000 shares of common stock) remained outstanding.

Series B Convertible Preferred Stock

7 unchanged sentences

So long as any Series B Convertible Preferred Stock remains outstanding, the Company may not redeem, purchase or otherwise acquire any material amount of the Series A Convertible Preferred Stock or any securities junior to the Series B Convertible Preferred Stock.

No shares of Series B Convertible Preferred Stock were converted during the six months ended June 30, 2020 and 2019.

At June 30, 2020 and December 31, 2019, 3,581,119 shares of Series B Preferred Stock (that are convertible into 3,581,119 shares of common stock) remained outstanding.

No shares of Series B Convertible Preferred Stock were converted during the nine months ended September 30, 2020 and 2019.

At September 30, 2020 and December 31, 2019, 3,581,119 shares of Series B Preferred Stock (that are convertible into 3,581,119 shares of common stock) remained outstanding.

Cancellation of Common Stock

2 unchanged sentences

As part of the settlement, the third party returned 32,500 shares of common stock to the Company for cancellation and retained the remaining 17,500 shares.

The Company included a gain of $ 335,000 on cancellation of 32,500 shares in Other income in its condensed consolidated statement of operations.

The Company included a gain of $ 335,000 on cancellation of 32,500 shares in Other income in its condensed consolidated statement of operations for the nine months ended September 30, 2019.

STOCK BASED COMPENSATION

On October 14, 2011, the Company’s Board of Directors (the "Board") adopted the 2011 Equity Incentive Plan (the “2011 Plan”).

On October 14, 2011, the Company’s Board of Directors (the “Board”) adopted the 2011 Equity Incentive Plan (the “2011 Plan”).

Employees, directors, consultants and advisors of the Company are eligible to participate in the 2011 Plan.

4 unchanged sentences

On August 20, 2014, the Board amended the 2011 Plan to increase the number of shares available for issuance upon the exercise of stock options under the 2011 Plan from 1,700,000 to 1,900,000 shares, effective immediately.

At June 30, 2020, 11,240 shares were available for future grant under the 2011 Plan.

At September 30, 2020, 11,240 shares were available for future grant under the 2011 Plan.

On September 19, 2014, the Board adopted the Iovance Biotherapeutics, Inc.

5 unchanged sentences

On August 16, 2016, the Company’s stockholders approved an increase in the total number of shares that can be issued under the 2014 Plan to 9,000,000 shares of the Company’s common stock.

At June 30, 2020, 5,962 shares were available for grant under the Company’s 2014 Plan.

At September 30, 2020, 15,746 shares were available for grant under the Company’s 2014 Plan.

On April 22, 2018, the Board adopted the Iovance Biotherapeutics, Inc.

3 unchanged sentences

On June 8, 2020, the Company's stockholders approved an amendment to the 2018 Plan to increase the number of shares available for issuance upon the exercise of stock options under the 2018 Plan from 6,000,000 to 14,000,000 shares, which became effective immediately.

At June 30, 2020, 7,972,159 shares of common stock were available for grant under the Company’s 2018 Plan.

At September 30, 2020, 7,641,416 shares of common stock were available for grant under the Company’s 2018 Plan.

Restricted Stock Units

7 unchanged sentences

Fardis’ employment, such that the RSUs were fully vested as of June 1, 2020.

At June 30, 2020, the Company had no RSUs outstanding.

At September 30, 2020, the Company had no RSUs outstanding.

Stock-based compensation expense for RSUs are measured based on the closing fair market value of the Company’s common stock on the date of grant.

The stock-based compensation expenses relating to RSUs were $ 0.04 million and $ 0.1 million for the three months ended June 30, 2020 and 2019, respectively, and $ 0.1 million and $ 0.1 million for the six months ended June 30, 2020 and 2019, respectively, recorded as part of general and administrative expenses.

The stock-based compensation expenses relating to RSUs were zero and $ 0.07 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.1 million and $ 0.2 million for the nine months ended September 30, 2020 and 2019, respectively, recorded as part of general and administrative expenses.

Employee Stock Purchase Plan

In June 2020, the Company adopted the 2020 Employee Stock Purchase Plan (the "2020 ESPP") upon its approval by the Company's shareholders at its Annual Stockholders Meeting on June 8, 2020.

The Company reserved 500,000 shares of its common stock for issuance under the 2020 ESPP, and as of June 30, 2020, no shares were issued under the 2020 ESPP and there was no unrecognized compensation cost related to the 2020 ESPP.

The Company reserved 500,000 shares of its common stock for issuance under the 2020 ESPP.

As of September 30, 2020, no shares were issued under the 2020 ESPP and there was no unrecognized compensation cost related to the 2020 ESPP.

Stock Options

A summary of the status of stock options at June 30, 2020, and the changes during the six months then ended, is presented in the following table:

Contract Life

A summary of the status of stock options at September 30, 2020, and the changes during the nine months then ended, is presented in the following table:

(in thousands)

Outstanding at December 31, 2019

Expired/Forfeited

Outstanding at June 30, 2020

Options exercisable at June 30, 2020

The Company recorded stock-based compensation expenses related to stock options of $ 10.5 million and $ 6.4 million for the three months ended June 30, 2020 and 2019 respectively, and $ 19.8 million and $ 12.1 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, there was $ 82.0 million of total unrecognized compensation expense related to the options to be recognized over a weighted average period of 2.09 years.

The weighted average grant date fair value for employee options granted under the Company’s stock option plans during the six months ended June 30, 2020 and 2019 was $ 16.20 and $ 7.98 per option, respectively.

The aggregate intrinsic value in the table above reflects the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the quarter ended June 30, 2020 and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on June 30, 2020.

Outstanding at September 30, 2020

Options exercisable at September 30, 2020

The Company recorded stock-based compensation expenses related to stock options of $ 10.7 million and $ 6.5 million for the three months ended September 30, 2020 and 2019 respectively, and $ 30.5 million and $ 18.7 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, there was $ 78.4 million of total unrecognized compensation expense related to the options to be recognized over a weighted average period of 2.0 years.

The weighted average grant date fair value for employee options granted under the Company’s stock option plans during the nine months ended September 30, 2020 and 2019 was $ 16.37 and $ 8.90 per option, respectively.

The aggregate intrinsic value in the table above reflects the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the quarter ended September 30, 2020 and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on September 30, 2020.

The intrinsic value of the Company’s stock options changes based on the closing price of the Company’s common stock.

The following table summarizes the assumptions relating to options granted pursuant to the Company’s equity incentive plans for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

The following table summarizes the assumptions relating to options granted pursuant to the Company’s equity incentive plans for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

Expected term (years)

1 unchanged sentence

69.99 % - 70.96 %

70.78 % - 71.62 %

Risk-free interest rate

0.29 % - 1.83 %

1.87 % - 2.59 %

Expected dividend yield

19 unchanged sentences

In addition, the Company may be required to supply certain test articles, including TIL, grown and processed under cGMP conditions, suitable for use in clinical trials, where the Company holds the investigational new drug application for such clinical trial.

extended CRADA has a five-year term expiring in August 2021.

The extended CRADA has a five-year term expiring in August 2021.

The Company or the NCI may unilaterally terminate the CRADA for any reason or for no reason at any time by providing written notice at least 60 days before the desired termination date.

The Company recorded costs associated with the CRADA of $ 0.5 million for the three months ended June 30, 2020 and 2019, and $ 1.0 million for the six months ended June 30, 2020 and 2019 as research and development expenses.

The Company recorded costs associated with the CRADA of $ 0.5 million for the three months ended September 30, 2020 and 2019, and $ 1.5 million for the nine months ended September 30, 2020 and 2019 as research and development expenses.

Patent License Agreement Related to the Development and Manufacture of TIL

2 unchanged sentences

The Patent License Agreement requires the Company to pay royalties based on a percentage of net sales (which percentage is in the mid-single digits), a percentage of revenues from sublicensing arrangements, and lump sum benchmark royalty payments on the achievement of certain clinical and regulatory milestones for each of the various indications and other direct costs incurred by the NIH pursuant to the agreement.

The Company anticipates making a milestone payment in conjunction with the submission of Biologics License Application.

The Company anticipates making a milestone payment in conjunction with the submission of a Biologics License Application for any of its product candidates covered by the Patent License Agreement.

Exclusive Patent License Agreement Related to TIL Selection

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Under both clinical grant agreements with Moffit, the Company has non-exclusive rights to clinical data arising from the respective clinical trials.

The Company recorded research and development costs of $ 0.1 and $ 0.2 million for the three months ended June 30, 2020 and 2019, respectively, and $ 0.3 million and $ 0.5 million for the six months ended June 30, 2020 and 2019, respectively, in connection with the research collaboration and clinical grant agreements with Moffitt.

The Company recorded research and development costs of $ 0.1 million and $ 0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.5 million and $ 0.7 million for the nine months ended September 30, 2020 and 2019, respectively, in connection with the research collaboration and clinical grant agreements with Moffitt.

Exclusive License Agreements with Moffitt

The Company entered into a license agreement with Moffitt (the “First Moffitt License”), effective as of June 28, 2014, under which the Company received a world-wide license to Moffitt’s rights to patent-pending technologies related to methods for improving TIL for adoptive cell therapy using toll-like receptor agonists.

Unless earlier terminated, the term of the license extends until the

earlier of the expiration of the last issued patent related to the licensed technology or 20 years after the effective date of the license agreement.

Unless earlier terminated, the term of the license extends until the earlier of the expiration of the last issued patent related to the licensed technology or 20 years after the effective date of the license agreement.

Pursuant to the First Moffitt License, the Company paid an upfront licensing fee in the amount of $ 0.1 million.

3 unchanged sentences

The Company will also be responsible for all costs associated with the preparation, filing, maintenance and prosecution of the patent applications and patents covered by the First Moffitt License related to the treatment of any cancers in the United States, Europe and Japan and in other countries designated by the Company in agreement with Moffitt.

No expenses were recorded for the First Moffitt License for the three and six months ended June 30, 2020 and 2019.

No expenses were recorded for the First Moffitt License for the three and nine months ended September 30, 2020 and 2019.

The Company entered into a license agreement with Moffitt effective as of May 7, 2018 (the “Second Moffitt License”), under which the Company received a license to Moffitt’s rights to patent-pending technologies related to the use of 4- 1BB agonists in conjunction with TIL manufacturing processes and therapies.

1 unchanged sentence

An annual license maintenance fee will be also payable commencing on the first anniversary of the effective date.

In addition, the Company agreed to pay an annual commercial use payment for each indication for which a first sale has occurred, which in the aggregate amounts to up to $ 0.4 million a year.

The Company recorded de minimis amount and $ 0.1 million for the three months ended June 30, 2020 and 2019, respectively, and de minimis amount and $ 0.1 million for the six months ended June 30, 2020 and 2019, respectively, as research and development expenses in connection with the Second Moffit License.

In addition, the Company agreed to pay an annual commercial use payment for each indication for

which a first sale has occurred, which in the aggregate amounts to up to $ 0.4 million a year.

The Company recorded a de minimis amount and $ 0.01 million for the three months ended September 30, 2020 and 2019, respectively, and a de minimis amount and $ 0.02 million for the nine months ended September 30, 2020 and 2019, respectively, as research and development expenses in connection with the Second Moffit License.

Anderson Cancer Center

7 unchanged sentences

In May 2017, the Company made a prepayment of $ 1.4 million under this agreement.

In light of the COVID-19 Pandemic, MDACC has temporarily suspended their research programs and decommissioned their research labs, and as a result, enrollment in the Company’s MDACC-sponsored studies under the SAA is temporarily paused.

The Company recorded $ 0.4 million associated with the MDACC SAA for the three months ended June 30, 2019, and $ 0.2 million and $ 1.6 million for the six months ended June 30, 2020 and 2019, respectively as research and development expenses.

The Company did not record any expenses associated with the MDACC SAA for the three months ended June 30, 2020.

The Company recorded $ 0.3 million and $ 0.7 million associated with the MDACC SAA for the three months ended September 30, 2020 and 2019, respectively, and $ 0.5 million and $ 2.3 million for the nine months ended September 30, 2020 and 2019, respectively as research and development expenses.

WuXi Apptech, Inc.

2 unchanged sentences

Under the agreement, the Company entered into two statements of work for two cGMP manufacturing suites to be established and operated by WuXi for the Company, both of the suites are expected to be capable of being used for the commercial manufacture of its products.

The statements of work for each of the suites were amended in 2019.

The statement of work for the first suite was amended in 2019 and September 2020, and the second suite was amended in 2019.

The statements of work for facility include a fixed component to reserve a dedicated suite and a trained work force, and a variable component, mainly materials and testing used during the manufacturing processes.

1 unchanged sentence

The quarterly fixed fees payable for each of the dedicated manufacturing suites ranges from $ 0.6 million to $ 2.7 million depending on the production capacity level targeted.

The terms of the related statements of work for the first and second dedicated manufacturing suites currently extend to May 2020 and June 2021, respectively.

The Company recorded costs associated with agreements with WuXi of $ 5.7 million and $ 6.8 million for the three months ended June 30, 2020 and 2019 respectively, and $ 12.3 million and $ 10.7 million for the six months ended June 30, 2020 and 2019, respectively, as research and development expenses.

The terms of the related statements of work for the first and second dedicated manufacturing suites currently extend to August 2022 and June 2021, respectively.

The Company recorded costs associated with agreements with WuXi of $ 2.8 million and $ 9.2 million for the three months ended September 30, 2020 and 2019 respectively, and $ 16.2 million and $ 20 million for the nine months ended September 30, 2020 and 2019, respectively, as research and development expenses.

Cellectis S.A.

2 unchanged sentences

Financial terms of the license include development, regulatory and sales milestone payments from the Company to Cellectis, as well as royalty payments based on net sales of TALEN-modified TIL products.

The Company recorded costs associated with the license agreement from Cellectis of $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2020, respectively.

The Company recorded costs associated with the license agreement from Cellectis of $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2020, respectively.

Novartis Pharma AG (Novartis)

1 unchanged sentence

Under the agreement, the Company has paid an upfront payment to Novartis and may pay future milestones related to initiation of patient dosing in various phases of clinical development for IOV-3001 and approval of the product in the U.S, EU and Japan.

Novartis is also entitled to low-to-mid single digit royalties from commercial sales of the product.

Novartis is also entitled to low-to-mid single digit

royalties from commercial sales of the product.

The Company recorded costs associated with the license agreement from Novartis of $ 10.0 million as research and development expenses for the three months ended March 31, 2020.

The Company did not record any expenses for the three months ended June 30, 2020.

The Company did not record any expenses after March 31, 2020 through September 30, 2020.

LEGAL PROCEEDINGS

Class Action Lawsuit .

On April 10, 2017, the SEC announced settlements with the Company and with other public companies and unrelated parties in the In the Matter of Certain Stock Promotion investigation.

The Company’s settlement with the SEC is consistent with its previous disclosures (including in its Annual Report on Form 10-K that the Company filed with the SEC on March 9, 2017).

On April 14, 2017, a purported shareholder filed a complaint seeking class action status in the United States District Court, Northern District of California for violations of the federal securities laws ( Leonard DeSilvio v.

Lion Biotechnologies, Inc., et al., case no.

3:17cv2086) against the Company and three of its former officers and directors.

On April 19, 2017, a second class action complaint (Amra Kuc vs.

Lion Biotechnologies, Inc., et al., case no.

3:17-cv-2188) was filed in the same court.

Both complaints allege, among other things, that the defendants violated the federal securities laws by making materially false and misleading statements, or by failing to make certain disclosures, regarding the actions taken by Manish Singh, the Company’s former CEO, and the Company’s former investor relations firm that were the subject of the In the Matter of Certain Stock Promotions investigation.

On July 20, 2017, the plaintiff in the Kuc case filed a notice to voluntarily dismiss that case.

The court entered an order dismissing the Kuc complaint on July 21, 2017.

On July 26, 2017, the court appointed a movant as lead plaintiff.

On September 8, 2017, the lead plaintiff filed an amended complaint ( Jay Rabkin v.

Lion Biotechnologies, Inc., et al., case no.

3:17-cv-2086) seeking class action status that alleges, among other things, that the defendants violated federal securities laws by making materially false and misleading statements, or by failing to make certain disclosures, regarding the actions taken by Manish Singh and the Company’s former investor relations firm that were the subject of the In the Matter of Certain Stock Promotions SEC investigation.

On February 5, 2018, the court entered an order dismissing two of plaintiff’s six claims.

As a result of mediation, on September 28, 2018, lead plaintiff filed an unopposed motion for settlement.

The court granted preliminary approval to the proposed settlement on November 30, 2018 .

A final hearing was held on April 12, 2019 to determine whether the proposed settlement was fair, reasonable, and adequate, and whether the claims should be dismissed.

On April 17, 2019, the court approved the final settlement, involving a payment of $ 3,250,000 by the Company’s insurance carrier to a settlement fund, awarded attorney’s fees and costs to be paid to plaintiff’s counsel from the settlement fund, approved the plan of allocation for settlement class members, and ordered that the claims against the Company should be dismissed with prejudice.

The Company does not expect to incur any significant costs or expenses in connection with this settlement.

Derivative Lawsuits.

3 unchanged sentences

The complaint alleges breaches of fiduciary duties, unjust enrichment, and violations of Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder arising from the SEC’s investigation in the In the Matter of Certain Stock Promotions investigation and its April 10, 2017 settlement thereof, and seeks unspecified damages on behalf of the Company and injunctive relief.

On March 28, 2018, a purported stockholder

derivative complaint was filed by plaintiff Nazeer Khaleeluddin on behalf of the Company, against the Company, as nominal defendant, and certain of the Company’s current and former officers and directors, and others, as defendants, in the U.S.

On March 28, 2018, a purported stockholder derivative complaint was filed by plaintiff Nazeer Khaleeluddin on behalf of the Company, against the Company, as nominal defendant, and certain of the Company’s current and former officers and directors, and others, as defendants, in the U.S.

District Court for the District of Delaware (case no.

9 unchanged sentences

On July 2, 2020, the court granted final approval for the settlement.

The Company does not expect to incur any significant costs or expenses in connection with this settlement.

The Company has not incurred any significant costs or expenses in connection with this settlement.

Solomon Capital, LLC.

4 unchanged sentences

The Solomon Plaintiffs allege that, between June and November 2012, they provided to the Company $ 0.1 million and that they advanced and paid on behalf of the Company an additional $ 0.2 million.

The Solomon Plaintiffs allege that they should have been able to convert their advances and payments into shares of the Company’s common stock in the restructuring that took effect in May 2013.

The complaint further alleges that the Company agreed to (i) provide them with promissory notes totaling $ 0.2 million, plus interest, (ii) issue a total of 1,110 shares to the Solomon Plaintiffs (after the 1-for-100 reverse split of the Company’s common stock effected in March 2013) (the “Equity Claim”), and (iii) allow the Solomon Plaintiffs to convert the foregoing funds into its securities in the next financing of the Company on the same terms offered to other investors, which Solomon Plaintiffs allege, should have given them the right to convert their advances and payments into shares of the Company’s common stock in the restructuring that took effect in May 2013.

Based on the foregoing, the Solomon Plaintiffs allege causes for breach of contract and unjust enrichment and demand judgment against the Company in an unspecified amount exceeding $ 1.5 million, plus interest.

5 unchanged sentences

On July 2, 2020, the court granted the Company’s motion to dismiss the First Solomon Suit for want of prosecution.

On July 31, 2020, the Solomon Plaintiffs filed a motion seeking leave to reargue the court’s decision to dismiss the First Solomon Suit for want of prosecution.

On July 31, 2020, the Solomon Plaintiffs, through new counsel, filed a motion for reconsideration of the dismissal of the First Solomon Suit for want of prosecution.

On August 11, 2020, the Company filed an opposition brief against the Solomon Plaintiffs’ motion for reconsideration.

On August 17, 2020, the Solomon Plaintiffs filed a reply brief in support of their motion for reconsideration.

On September 2, 2020, the Solomon Plaintiffs filed a notice of appeal of the dismissal for want of prosecution.

On September 27, 2019, the Solomon Plaintiffs filed a new lawsuit (through new legal counsel) (“the Second Solomon Suit”) titled Solomon Capital, LLC, Solomon Capital 401(K) Trust, Solomon Sharbat and Shelhav Raff v.

2 unchanged sentences

655668/2019).

In the Second Solomon Suit, the Solomon Plaintiffs allege that they are third party beneficiaries of a “finder’s fee agreement” that prior management entered into with a third party unlicensed entity in 2012 in connection with seeking financing, that an agreement or understanding existed between the Company and the plaintiffs that the plaintiffs would be paid fees and commissions (in cash and stock) if they obtained financing for the Company, and that they directly and indirectly introduced investors to the Company who invested in the Company, or were willing to invest in the Company.

and indirectly introduced investors to the Company who invested in the Company, or were willing to invest in the Company.

Finally, the Solomon Plaintiffs allege that they were promised a license to use the Company’s technology in Israel.

5 unchanged sentences

On May 22, 2020, the Company moved to dismiss the Second Solomon Suit for lack of personal jurisdiction.

On July 17, 2020, the Solomon Plaintiffs filed an opposition brief against the Company’s motion to dismiss for lack of personal jurisdiction.

On August 7, 2020, the Company filed a reply brief in support of the Company’s motion to dismiss for lack of personal jurisdiction.

The Company intends to vigorously defend these complaints and pursue its counterclaims, as applicable.

22 unchanged sentences

Fischkoff amended his complaint to assert a new claim for defamation arising from SEC filings in which the Company provided the information about this litigation.

On August 4, 2020, the parties agreed in principle to a confidential settlement subject to final negotiation and, accordingly, the court dismissed the litigation without prejudice during such negotiation.

The Company intends to vigorously defend against Dr.

Fischkoff’s lawsuit and pursue the Company’s counterclaims if a settlement is not reached after negotiation.

Based on the current stage of the litigation, it is not possible to estimate the amount or range of (i) a possible loss that might result from an adverse judgment or settlement of this action, or (ii) the potential recovery that might result from a favorable judgment or a settlement of this action.

On September 23, 2020, the parties reached a confidential settlement in this matter, and on October 13, 2020, the court approved a stipulation of dismissal with prejudice filed by the parties.

Other Matters.

41 unchanged sentences

The Company leased office space in New York for a monthly rental of approximately $ 18,000 a month from January 2017 through July 2017.

On June 5, 2017, the Company entered into an agreement whereby the Company will lease office space from August 1, 2017 to July 31, 2018, for approximately $ 9,000 a month.

On June 5, 2017, the Company entered into an agreement whereby the Company will lease office space from

August 1, 2017 to July 31, 2018, for approximately $ 9,000 a month.

On April 20, 2018, the Company entered into an agreement to extend the lease term to January 31, 2019 for approximately $ 7,000 a month.

4 unchanged sentences

On May 24, 2020, the Company entered into an agreement to extend the lease term to October 31, 2020 for approximately $ 4,000 a month.

On September 1, 2020, the Company entered into an agreement to extend the lease term to January 31, 2021, for approximately $ 4,000 a month.

Philadelphia Office Lease

On May 2, 2019, the Company entered into an agreement to lease approximately 1,500 square feet of office space in Philadelphia, Pennsylvania until July 1, 2019 for a rate of $ 2,000 a month, and then approximately 4,500 square feet of office space for the remainder of a three-year term at an initial rate of $ 11,063 per month, subject to annual increases of 2.5 %.

On August 1, 2020, the Company entered into an agreement to lease approximately 2,965 square feet of a training facility space in Philadelphia, Pennsylvania for a twelve month term at a rate of approximately $ 6,500 per month.

Commercial Manufacturing Facility Agreement

4 unchanged sentences

and Phase I-B, the construction of offices and laboratories, with approximately 70,000 rentable square feet of space.

The Commercial Manufacturing Facility Lease is for a term of 242 months , commencing on the earlier of (i) the date on which the Company occupies any portion of the Premises for the normal operation of its business or (ii) the date that is the later of (A) one hundred sixty ( 160 ) days after the Phase I-A substantial completion date, currently anticipated to be July 16, 2020, or (B) the Phase I-B Substantial Completion Date (the “Commencement Date”).

The Commercial Manufacturing Facility Lease is for a term of 242 months , commencing on the earlier of (i) the date on which the Company occupies any portion of the Premises for the normal operation of its business or (ii) the date that is the later of (A) one hundred sixty ( 160 ) days after the Phase I-A substantial completion date, July 16, 2020, or (B) the Phase I-B Substantial Completion Date (the “Commencement Date”).

The Commencement Date shall be extended by one day for each day of landlord delay, net of any tenant delay, as defined in the Lease.

12 unchanged sentences

The terms of the CMO contracts include options to terminate the lease with an advance notice of five to six months.

The termination clauses and extension clauses are included in the calculation of the lease term for each of the CMOs when it is reasonably certain that it will not exercise such options.

The termination clauses and extension

clauses are included in the calculation of the lease term for each of the CMOs when it is reasonably certain that it will not exercise such options.

The guidance requires the Company to first identify a lease deliverable and non-lease deliverable included in the arrangements, and then allocate the fixed contractual consideration to the lease deliverable(s) and the non-lease deliverable(s) on a relative standalone selling price basis to determine the amount of operating lease right-of-use assets and liabilities.

5 unchanged sentences

The balance sheet classification of the Company’s right-of-use asset and lease liabilities was as follows:

June 30, 2020

September 30, 2020

December 31, 2019

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating lease cost

6 unchanged sentences

Right-of-use assets obtained from entering new leases

Increase /(decrease) in right-of-use assets from lease modifications

Increase in right-of-use assets from lease modifications

Weighted-average remaining lease terms (years)

1 unchanged sentence

Variable lease cost is determined based on performance or usage in accordance with the contractual agreements, and not based on an index or rate.

As of June 30, 2020, the maturities of the Company’s operating lease liabilities were as follows (in thousands):

As of September 30, 2020, the maturities of the Company’s operating lease liabilities were as follows (in thousands):

Total lease payments

3 unchanged sentences

In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the date of adoption of Topic 842.

As of June 30, 2020, the weighted average remaining lease term is 1.69 years and the weighted

average discount rate used to determine the operating lease liabilities was 7.5 %.

As of June 30, 2020, the Company has a finance lease for the commercial manufacturing facility that has not yet commenced.

As of September 30, 2020, the weighted average remaining lease term is 1.71 years and the weighted average discount rate used to determine the operating lease liabilities was 7.5 %.

As of September 30, 2020, the Company has a finance lease for the commercial manufacturing facility that has not yet commenced.

This finance lease will commence in December 2020 with a lease term of 20 years.

CLOUD COMPUTING ARRANGEMENTS

The Company defers implementation costs incurred in cloud computing arrangements in accordance with ASC 2018-15 and amortizes it over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the Company or (2) for which exercises, of the renewal option is controlled by the cloud service provider.

Costs incurred during the application development stage that are directly attributable to developing or obtaining software for internal use are defined as implementation costs and capitalized.

Costs incurred during operation and post-implementation stages are charged to expense.

As of September 30, 2020, the Company capitalized $ 0.8 million and included in prepaid expenses and long-term assets in its condensed consolidated balance sheet.

The amortization expense recognized for the three and nine months ended September 30, 2020 was de minimis.

RELATED PARTY TRANSACTIONS

8 unchanged sentences

The vesting of the granted stock options will accelerate, and the entire award will become fully vested upon the closing of a significant licensing transaction, a material product acquisition, a material strategic transaction, or upon a change of control transaction.

The Company recognized $ 0.1 million and $ 0.1 million in stock-based compensation expense related to this consulting agreement during the three months ended June 30, 2020 and 2019, respectively, and $ 0.2 million and $ 0.2 million for the six months ended June 30, 2020 and 2019, respectively.

The Company recognized zero and $ 0.1 million in stock-based compensation expense related to this consulting agreement during the three months ended September 30, 2020 and 2019, respectively, and $ 0.2 million and $ 0.3 million for the nine months ended September 30, 2020 and 2019, respectively.

In addition, in connection with the adoption of ASC 2018-07, the Company recognized $ 0.3 million to retained earnings as of January 1, 2019.

SUBSEQUENT EVENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements