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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-05 · 126 added, 121 removed, 124 unchanged (67% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The management’s discussion and analysis of financial condition as of September 30, 2020 and results of operations for the three and nine months ended September 30, 2020, should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2019 which was filed with the Securities and Exchange Commission, or SEC, on February 25, 2020.

The management’s discussion and analysis of our financial condition as of March 31, 2021 and results of operations for the three months ended March 31, 2021, should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2020 which was filed with the Securities and Exchange Commission, or SEC, on February 25, 2021.

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions.

Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Business” section of our Annual Report on Form 10-K and elsewhere in this and other reports we file with the SEC.

We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

We use words such as “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 to identify forward-looking statements, although not all forward-looking statements contain these words.

All forward-looking statements included in this report are based on information available to us on the date hereof and, except as required by law, we assume no obligation to update any such forward-looking statements.

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We are a clinical-stage biopharmaceutical company focused on the development and commercialization of cell therapies as novel cancer immunotherapy products designed to harness the power of a patient’s own immune system to eradicate cancer cells.

Tumor infiltrating lymphocyte, or TIL, therapy is an autologous cell therapy platform technology that was originally developed by the National Cancer Institute, or NCI, which conducted initial clinical trials in diseases such as metastatic melanoma and cervical cancer.

We have developed a new, shorter manufacturing process for TIL known as Generation 2, or Gen 2, which yields a cryopreserved TIL product.

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

TIL therapy is an autologous cell therapy platform technology that was originally developed by the National Cancer Institute, or NCI, which conducted initial clinical trials of this therapy in diseases such as metastatic melanoma and cervical cancer.

We have developed a new, shorter manufacturing process for TIL known as Gen 2, which yields a cryopreserved TIL product.

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

Our 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, we are investigating the effectiveness and safety of TIL for the treatment of squamous cell carcinoma of the head and neck, non-small cell lung cancer, and peripheral blood lymphocyte, or PBL, therapy for chronic lymphocytic leukemia through our sponsored trials, as well as in other oncology indications through collaborations.

In addition to metastatic melanoma and metastatic cervical cancer, we are investigating the effectiveness and safety of TIL for the treatment of squamous cell carcinoma of the head and neck, non-small cell lung cancer, and are investigating peripheral blood lymphocyte, or PBL, therapy for patients with relapsed or refractory chronic lymphocytic leukemia, or CLL, and small lymphocytic lymphoma, or SLL, through our sponsored trials, as well as in other oncology indications through collaborations.

We are conducting a Phase 2 clinical trial, C-144-01, of our lead product candidate, lifileucel, for the treatment of metastatic melanoma.

This multicenter pivotal trial enrolled patients with melanoma whose disease has progressed following treatment with at least one systemic therapy, including a PD-1 inhibitor and if BRAF mutated, a BRAF inhibitor, or a combination of BRAF and MEK inhibitors.

This multicenter pivotal trial enrolled melanoma patients with disease progression following treatment with at least one systemic therapy, including a PD1 inhibitor and, if BRAF mutated, a BRAF inhibitor, or a combination of BRAF and MEK inhibitors.

Cohort 4 of the C-144-01 clinical trial is a single-arm cohort intended to support a Biologics License Application, or BLA, submission for lifileucel.

The C-144-01 trial uses our proprietary Gen 2 manufacturing process.

Cohorts 2 and 4 of the C-144-01 trial use our Gen 2 manufacturing process.

We completed and closed enrollment of patients into Cohort 2 of the C-144-01 trial in 2018.

Results from Cohort 2 of the C-144-01 clinical trial were initially reported at the American Society of Clinical Oncology, or ASCO, annual meeting on June 1, 2019 and subsequently updated at the ASCO annual meeting on May 29, 2020, or ASCO 2020.

In 66 patients with metastatic melanoma, treatment with lifileucel resulted in an objective response rate, or ORR, of 36%, as assessed by investigator, with 2 complete responses and 22 partial responses.

As of the data extract of December 2020, in 66 patients with metastatic melanoma, treatment with lifileucel resulted in an objective response rate, or ORR, of 36%, as assessed by investigator, with 3 complete responses and 21 partial responses.

The disease control rate, or DCR, was 80.3%.

Median duration of response, or DOR, in Cohort 2 had also still not been reached after 28.1 months of median study follow up.

Patients were heavily pretreated and had a mean of 3.3 prior therapies.

The data released at ASCO 2020 disclosed that after a median study follow up of 18.7 months for Cohort 2 patients, the median duration of response, or DOR, has not been reached per investigator assessment.

Furthermore, durable responses have been observed across a wide age range of metastatic melanoma patients, and among those who have received prior anti-CTLA-4 and BRAF targeted treatments, regardless of BRAF mutation status, and equally in patients with PD-L1 high and low status.

We have reported durable responses across a wide age range of metastatic melanoma patients, and among those who have received prior anti-CTLA-4 and BRAF targeted treatments, regardless of BRAF mutation status, and equally in patients with PD-L1 high and low status.

The adverse event profile was generally consistent with the underlying advanced disease and the profile of the lymphodepletion and IL-2 regimens.

Cohort 4 of in the C-144-01 trial was enrolled to evaluate ORR as read out by an Independent Review Committee, or IRC, as the primary endpoint based on our interpretation of discussions with the U.S.

In addition, detailed Cohort 2 data has also been accepted for publication in a forthcoming manuscript in a peer-reviewed high impact oncology journal.

Pivotal Cohort 4 of the C-144-01 trial was enrolled to evaluate ORR as read out by an Independent Review Committee, or IRC, as the primary endpoint based on our interpretation of discussions with the U.S.

Food and Drug Administration, or FDA, as part of an End of Phase 2, or EOP2, meeting held with the FDA in the third quarter of 2018.

In October 2018 and based on the data provided to the FDA during the EOP2 meeting, we announced that lifileucel had received a Regenerative Medicine Advanced Therapy, or RMAT, designation from the FDA.

Enrollment in pivotal Cohort 4 in the C-144-01 trial commenced in March 2019 and patient dosing was completed in January 2020.

A total of 89 patients were dosed in Cohort 4.

Initial results from the pivotal Cohort 4 are available for 68 patients with two radiological assessments, as determined by investigator.

Lifileucel shows a 32.4% ORR, including 1 complete response and 21 partial

responses, 2 of which are yet to be confirmed with follow up visits, and a DCR of 72.1% as of the data cut off of March 16, 2020, corresponding to 5.3 months of median study follow up.

This data is highly consistent with the Cohort 2 data read out at a similar median duration of study follow up.

In October 2018, based on the data provided to the FDA during the EOP2 meeting, we announced that lifileucel had received a Regenerative Medicines Advanced Therapy, or RMAT, designation from the FDA.

Enrollment in Cohort 4 of the C-144-01 trial commenced in March 2019 and patient dosing was completed in January 2020.

A total of 87 patients were dosed with Gen 2 product released for Cohort 4.

Initial results from Cohort 4 are available for 68 patients with two radiological assessments, as determined by investigator.

Lifileucel showed a 32.4% ORR, including one

complete response and 21 partial responses, two of which were yet to be confirmed with follow up visits at the time of the data cut, and a DCR of 72.1% as of the data cut off of March 16, 2020, corresponding to 5.3 months of median study follow up.

This data is consistent with the Cohort 2 data read out at a similar median duration of study follow up.

The ORR of Cohort 2 at a median study follow up of 6 months was 33%.

In October 2020, after a Type B meeting with the FDA, we announced that we had delayed our BLA submission for lifileucel in metastatic melanoma until a date now expected to occur in 2021 as a result of FDA feedback, in order to allow us to simultaneously refine existing and develop new potency assays.

At the same time, we also announced that we had reached agreement with the FDA on the duration of follow up for Cohort 4 to support our BLA submission for lifileucel in the treatment of metastatic melanoma.

In October 2020, after a Type B meeting with the FDA, we announced that we had delayed our BLA submission for lifileucel in metastatic melanoma as a result of FDA feedback, in order to allow us to simultaneously refine existing and develop new potency assays, and we anticipate submitting our BLA in 2021.

We recently submitted additional potency assay data to the FDA, while continuing to evaluate additional assays as backup options in support of the BLA.

At the same time, we also announced that we had reached agreement with the FDA on the minimum duration of follow up for Cohort 4 to support our BLA submission for lifileucel in the treatment of metastatic melanoma.

We are also conducting a Phase 2 clinical trial, C-145-04, which is a multicenter pivotal trial that will assess the safety and efficacy of lifileucel for the treatment of patients with recurrent, metastatic or persistent cervical cancer.

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In March 2019, the protocol for this trial was amended to modify the primary endpoint of ORR to be determined by IRC.

In May 2019, lifileucel received Breakthrough Therapy designation, or BTD, from the FDA for the development in the treatment of cervical cancer.

In May 2019, lifileucel received Breakthrough Therapy Designation, or BTD, from the FDA for development in the treatment of cervical cancer.

Updated results from the C-145-04 clinical trial were reported at the ASCO annual meeting on June 1, 2019.

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Patients were heavily pretreated and had a mean of 2.4 prior therapies.

The DOR had not been reached.

The median DOR had not been reached.

The adverse event profile was generally consistent with the underlying advanced disease and the profile of the lymphodepletion and IL-2 regimens.

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In accordance with the FDA’s recommendations, the protocol was amended to further define the patient population.

In November 2019, in order to position lifileucel for potential future use in broader lines of therapy in cervical cancer, we have further amended the C-145-04 trial to collect additional data on early-line patients as well as late-line patients by adding additional cohorts, in anticipation of a changing landscape in this indication, including Cohort 2 for patients that had previously received anti-PD-1 therapy.

These additional cohorts also allow access to TIL therapy when the pivotal Cohort 1 is completed and we believe may support expanded access to lifileucel.

Cohort 2 of the C-145-04 trial continues and is expected to complete enrollment during the second half of 2020.

We intend to initiate a dialog with the FDA subsequent to such completion to discuss BLA submission plans.

C-145-03 is our ongoing Phase 2, multicenter trial that we are conducting to assess the safety and efficacy of our product candidate LN-145 for the treatment of patients with recurrent metastatic squamous cell carcinoma of the head and neck.

In November 2019, in order to evaluate lifileucel in broader lines of therapy in cervical cancer, we have further amended the C-145-04 trial to collect additional data on early-line patients as well as late-line patients by adding additional cohorts, in anticipation of a changing landscape in this indication, including Cohort 2 for patients that had previously received anti-PD-1 therapy.

These additional cohorts also allow access to TIL therapy after completion of the enrollment in the registrational cohorts.

In January 2021, we announced that Cohort 2 of the C-145-04 trial had completed enrollment and that data from this cohort may be supportive of registration because of the expected changing landscape of care for cervical patients.

We intend to initiate a dialog with the FDA in 2021 to discuss BLA submission plans for lifileucel in cervical cancer.

In November 2020, we announced that we had finalized the protocol for our potential registrational clinical trial in non-small cell lung cancer, or NSCLC, IOV-LUN-202, to investigate LN-145 in patients with recurrent or metastatic NSCLC, without driver mutations, who previously received a single line of approved systemic therapy of combined checkpoint inhibitor and chemotherapy.

The IOV-LUN-202 clinical trial includes three cohorts.

Cohorts 1 and 3 of the IOV-LUN-202 clinical trial will enroll patients with a PD-L1 TPS of less than one percent, and Cohort 2 will enroll patients with a PD-L1 TPS of greater than or equal to one percent.

We intend to enroll patients in the IOV-LUN-202 clinical trial throughout 2021 and 2022.

C-145-03 is our Phase 2, multicenter trial to assess the safety and efficacy of our product candidate LN-145 for the treatment of patients with recurrent metastatic head and neck squamous cell carcinoma, or HNSCC.

In October 2018, we reported that, to date, preliminary data for 13 patients in the C-145-03 clinical trial yielded an ORR of 31% with a DOR ranging from 2.8 to 7.6 months.

The adverse event profile remained consistent with previous reports.

We continue to enroll patients in this study.

We have redesigned our C-145-03 trial to include multiple cohorts, in order to allow for dosing of TIL therapies produced by multiple manufacturing methods, including our Gen 2 manufacturing process, our Generation 3, or Gen 3, manufacturing process, and our PD-1 selected TIL manufacturing process.

Our PD-1 selected TIL manufacturing process is referred to as LN-145-S1.

We are also investigating the potential of our TIL therapies in earlier lines of treatment and in combination with pembrolizumab, and are studying LN-145 as a monotherapy in relapsed refractory non-small cell lung cancer, or NSCLC, patients.

IOV-COM-202 is a Phase 2, multicenter trial that is composed of five cohorts which can enroll up to a total of 75 patients.

We redesigned our C-145-03 trial to include multiple cohorts, in order to allow for dosing of TIL therapies produced by multiple manufacturing methods, including our Gen 2 manufacturing process, our Gen 3 manufacturing process, and our PD-1 selected TIL manufacturing process.

Our PD-1 selected TIL manufacturing process results in a product that we refer to as LN-145-S1.

In January 2021, we announced that we are closing the C-145-03 clinical trial after the trial reached its pre-specified enrollment target.

IOV-COM-202 is a Phase 2, multicenter trial that is composed of seven cohorts that can enroll up to a total of 135 patients.

In May 2019, we reported that the first patient was dosed in the IOV-COM-202 trial.

In Cohort 1A, we are enrolling unresectable or metastatic melanoma patients who have not received prior immunotherapy, including checkpoint inhibitors such as anti-PD-1/anti-PD-L1 therapy.

The patients receive lifileucel in combination with pembrolizumab.

In Cohort 2A, we are enrolling advanced, recurrent, or metastatic head and neck squamous cell carcinoma, or HNSCC, patients who are naïve to prior immunotherapy including anti-PD-1/anti-PD-L1 therapy.

The patients will receive LN-145 in combination with pembrolizumab.

Cohort 3A is enrolling advanced or metastatic NSCLC patients who are naïve to prior immunotherapy including anti-PD-1/anti-PD-L1 therapy.

The patients in Cohort 3A will receive LN-145 in combination with pembrolizumab.

In Cohort 3B, we are enrolling NSCLC patients who have previously received systemic therapy which could include checkpoint inhibitors.

The patients are receiving LN-145.

In February 2020, we announced the addition of Cohort 1B to the IOV-COM-202 trial, for patients with melanoma whose disease has progressed following treatment with at least one systemic therapy, including a PD-1 inhibitor and if BRAF mutated, a BRAF inhibitor, or a combination of BRAF and MEK inhibitors.

The patients will receive LN-145-S1.

In addition to its ongoing enrollment in the U.S., the IOV-COM-202 trial has also received regulatory approval in Canada and in certain European countries.

In October 2020, we disclosed an abstract that was accepted for presentation at the Society for Immunotherapy in Cancer, which included interim results from ongoing Cohort 2A of the IOV-COM-202 trial as follows.

Nine HNSCC patients have received LN-145 plus pembrolizumab with a median duration of follow up of 6.9 months.

In Cohort 2A of the IOV-COM-202 trial, we are enrolling advanced, recurrent, or metastatic HNSCC patients who are naïve to prior immunotherapy including anti-PD-1/anti-PD-L1 therapy.

The patients receive LN-145 in combination with pembrolizumab.

We reported results from ongoing Cohort 2A of the IOV-COM-202 trial at the Society for Immunotherapy in Cancer, or SITC, meeting in

November 2020, as follows.

As of October 16, 2020, nine HNSCC patients have received LN-145 plus pembrolizumab with a median duration of follow up of 8.6 months.

Nine and eight patients were evaluable for safety and efficacy, respectively.

Four patients had a confirmed, objective response with an ORR of 44% including 1 complete response and 3 partial responses.

Four patients had a confirmed, objective response with an ORR of 44% including one complete response and three partial responses.

Median DOR was not reached.

disease control rate at data cutoff was 89% in 9 patients, and 7 of the 8 evaluable patients (87.5%) had a reduction in target lesions.

The mean number of prior therapies was 1.1 with 89% of the patients having received prior chemotherapy.

Four patients were human papilloma virus, or HPV, positive, two patients were HPV negative, and three patients had unknown HPV status.

The DCR at data cutoff was 89% in nine patients, and seven of the eight evaluable patients, or 87.5%, had a reduction in target lesions.

The median number of prior therapies was 1.0 with 89% of the patients having received prior chemotherapy.

Four patients were HPV positive, three patients were HPV negative, and two patients had unknown HPV status.

The treatment emergent adverse event, or TEAE, profile was consistent with the underlying advanced disease and the known adverse event profiles of pembrolizumab, lymphodepletion, and IL-2 regimens.

The most common TEAEs were chills, hypotension, anemia, thrombocytopenia, pyrexia, fatigue and tachycardia.

In November 2019, we announced that our investigational new drug application, or IND, for our PBL therapy, IOV-2001, was authorized by the FDA and our sponsored clinical trial using this therapy, IOV-CLL-01, was cleared to proceed.

The most common TEAEs, occurring in more than 50% of evaluable subjects, were chills, anemia, hypotension, nausea, pyrexia, and thrombocytopenia.

In November 2019, we announced that our investigational new drug, or IND, application for our PBL therapy, IOV-2001, was authorized by the FDA and our sponsored clinical trial using this therapy, IOV-CLL-01, was cleared to proceed.

IOV-2001 is a non-genetically modified, polyclonal T cell product that is manufactured using a nine-day process from 50 mL of patient's blood.

IOV-CLL-01 is Phase 1/2 clinical trial evaluating the safety and efficacy of IOV-2001 in patients with relapsed or refractory chronic lymphocytic leukemia or small lymphocytic leukemia.

IOV-CLL-01 is a Phase 1/2 clinical trial evaluating the safety and efficacy of IOV-2001 in patients with relapsed or refractory CLL or SLL.

The IOV-CLL-01 trial is expected to enroll up to approximately 70 patients.

As part of our collaboration program with the MD Anderson Cancer Center, or MDACC, two Phase 2 trials were initiated in 2018.

As part of our collaboration program with M.D.

Anderson Cancer Center, or MDACC, two Phase 2 trials were initiated in 2018.

Both trials are sponsored by MDACC.

The first trial, NCT03449108, is intended to allow for investigation of LN-145 manufactured by Iovance using our manufacturing processes to treat patients with soft tissue sarcoma, osteosarcoma and platinum resistant ovarian cancer.

The first trial, NCT03449108, is intended to allow for investigation of LN-145 manufactured by us, using our manufacturing processes, to treat patients with soft tissue sarcoma, osteosarcoma, platinum resistant ovarian cancer, and thyroid cancer.

A second trial under the collaboration with MDACC, NCT03610490, is active as well.

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The data obtained using this manufacturing process may not be representative of our data using our Gen 2 manufacturing process.

We are also collaborating with Centre hospitalier de l’Université de Montreal, or CHUM, Yale University, or Yale, and Moffitt on investigator-sponsored clinical trials of TIL therapies in other indications.

We are also collaborating with Centre hospitalier de l’Université de Montreal, or CHUM, Yale University, and Moffitt on investigator-sponsored clinical trials of TIL therapies in other indications.

The clinical trials sponsored by CHUM and Moffitt use, or will use, TIL manufactured by different manufacturing processes, which may not be representative of our data using our Gen 2 manufacturing process.

Our current product candidate pipeline and selected investigator-sponsored proof-of-concept studies are summarized in the graph below:

Our current product candidate pipeline and selected investigator-sponsored proof-of-concept studies are summarized in the figure below:

We have developed a third-generation manufacturing process known as Gen 3.

Gen 3 is a shorter process than Gen 2.

We are using Gen 3 manufacturing in Cohort 1C of the IOV-COM-202 trial in melanoma and in Cohort 3 of the IOV-LUN-202 trial in NSCLC and have previously used it in the C-145-03 trial in HNSCC.

We currently own more than twenty-five granted or allowed U.S.

and international patents for compositions and methods of treatment in a broad range of cancers relating to our Gen 2 manufacturing process, including U.S.

10,130,659, 10,166,257, 10,272,113, 10,363,273, 10,398,734, 10,420,799, 10,463,697, 10,537,595, 10,646,517, 10,653,723, 10,693,330, 10,695,372, 10,894,063, 10,905,718, 10,918,666, 10,925,900, 10,933,094, 10,946,044, 10,946,045, 10,953,046, and 10,953,047.

We anticipate that the terms of these patents related to Gen 2 manufacturing processes will extend to January 2038, not including any patent term extensions or adjustments that may be available.

Our owned and licensed intellectual property portfolio also includes patent applications relating to TIL, marrow infiltrating lymphocyte, or MIL, and PBL therapies;

frozen tumor-based TIL technologies;

remnant TIL and digest TIL compositions, methods and processes;

methods of treatment of a broad range of cancers using TIL therapies;

methods of manufacturing TIL, MIL, and PBL therapies;

the use of costimulatory molecules in TIL therapy and manufacturing;

stable and transient genetically-modified TIL therapies;

methods of using immune checkpoint inhibitors in combination with TIL therapies;

TIL selection technologies;

and methods of treating patient subpopulations.

In January 2020, we obtained a license from Novartis to develop and commercialize an antibody cytokine engrafted protein, which we refer to as IOV-3001.

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

Novartis is also entitled to low-to-mid single digit percentage royalties from commercial sales of IOV-3001.

In addition, in January 2020, we announced a research collaboration and exclusive worldwide licensing agreement with Cellectis, a clinical-stage biopharmaceutical company focused on developing immunotherapies based on gene-edited allogeneic chimeric antigen receptor modified T cells, whereby we licensed certain TALEN technology from Cellectis in order to develop TIL that have been genetically edited to create potentially more potent cancer therapeutics.

The worldwide exclusive license enables us to use TALEN technology addressing multiple gene targets to modify TIL for therapeutic use in several cancer indications.

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

Components of Operating Results

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We expect our research and development expenses to increase over the next couple of years as we prepare for commercial manufacturing of our products and continue to conduct our clinical trials for other indications.

However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates.

However, it is difficult to determine

with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates.

General and Administrative Expenses

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Interest Income

Interest income results from our interest-bearing cash and short term investment balances.

Interest income results from our interest-bearing cash and investment balances.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2020 and 2019

We did not generate any revenues during the three and nine months ended September 30, 2020 or September 30, 2019.

Comparison of the Three Months Ended March 31, 2021 and 2020

We did not generate any revenues during the three months ended March 31, 2021 or March 31, 2020.

Research and Development expenses (in thousands)

Three Months Ended

Nine Months Ended

September 30,

Research and development

Stock-based compensation expense included in research and development expense

Research and development expense for the three months ended September 30, 2020 increased by $1.5 million, or 4%, compared to the same period in 2019.

The increase was primarily attributable to (i) a $5.3 million increase in payroll and related expenses driven by a higher number of full-time research and development employees, and (ii) a $1.9 million increase in stock-based compensation expenses, which were partially offset by a $5.6 million decrease in manufacturing costs due to decreased production runs during the three months ended September 30, 2020.

Research and development expense for the nine months ended September 30, 2020 increased by $37.5 million, or 34%, compared to the same period in 2019.

The increase was primarily attributable to (i) a $15.2 million increase in payroll and related expenses driven by a higher number of full-time research and development employees, (ii) a $11.8 million increase in clinical trial costs due to an increase in enrollment across all the trials, (iii) a $10.0 million increase for the license to further develop IOV-3001 obtained from Novartis, and (iv) a $6.3 million increase in stock-based compensation expenses.

These increases were partially offset by a $4.3 million decrease in manufacturing costs due to decreased production runs in 2020 due to completion of enrollment in the melanoma pivotal program.

Research and development expense for the three months ended March 31, 2021 decreased by $1.0 million, or 2%, compared to the same period in 2020.

The decrease was primarily attributable to (i) a $10.0 million decrease in the license cost to further develop IOV-3001 obtained from Novartis for which we recognized in January 2020 in full and (ii) a $5.0 million decrease in in manufacturing costs due to the reduced manufacturing capacity and production runs during the three months ended March 31, 2021.

These decreases were partially offset by (iii) a $7.0 million increase in payroll and related expenses driven by a higher number of full-time research and development employees, (iv) a $4.9 million increase in stock-based compensation expenses, and (v) a $1.9 million increase in lease cost of our commercial manufacturing facility and other related activities.

General and Administrative expenses (in thousands)

Three Months Ended

Nine Months Ended

September 30,

General and administrative

Stock-based compensation expense included in general and administrative

General and administrative expenses for the three months ended September 30, 2020 increased by $5.9 million, or 59%, compared to the same period in 2019.

The increase was primarily attributable to a $1.9 million increase in payroll and related expenses and a $2.2 million increase in stock-based compensation expenses driven by a higher number of full-time general and administrative employees and a higher average stock price.

General and administrative expenses for the nine months ended September 30, 2020 increased by $14.2 million, or 47%, compared to the same period in 2019.

The increase was primarily attributable to (i) a $5.4 million increase in payroll and related expenses driven by a higher number of full-time general and administrative employees and a higher average stock price, (ii) a $5.5 million increase in stock-based compensation expenses, and (iii) a $1.7 million increase in director’s and officer’s insurance premiums.

General and administrative expenses for the three months ended March 31, 2021 increased by $5.8 million, or 42%, compared to the same period in 2020.

The increase was primarily attributable to (i) a $2.8 million increase in payroll and related expenses, (ii) a $2.6 million increase in stock-based compensation expenses driven by a higher number of full-time general and administrative

employees and a higher average stock price, and (iii) $0.5 million increase in insurance and license fees, which were partially offset by $0.1 million decrease in travel costs.

Interest Income (in thousands)

Three Months Ended

Nine Months Ended

September 30,

Net interest income

Net interest income for the three and nine months ended September 30, 2020 and 2019 decreased by $1.7 million or 81% and $5.6 million or 71% respectively, due primarily to a decrease in interest rates for the three and nine months period ended September 30, 2020 as compared to the same periods in 2019.

Net interest income for the three months ended March 31, 2021 and 2020 decreased by $1.1 million or 90% due primarily to a decrease in interest rates for the three months period ended March 31, 2021 as compared to the same periods in 2020.

Net Loss (in thousands)

Three Months Ended

Nine Months Ended

September 30,

Net loss for the three and nine months ended September 30, 2020 increased by $9.1 million or 18% and $57.2 million or 43% compared to the same periods in 2019.

The increase in our net loss was due to the continued expansion of our research and development activities, increased clinical trials and manufacturing activities, and the overall growth of our corporate infrastructure.

Net loss for the three months ended March 31, 2021 increased by $5.9 million or 8% compared to the same periods in 2020.

The increase in our net loss was due to the continued expansion of our research and development activities and the overall growth of our corporate infrastructure.

We anticipate that we will continue to incur net losses in the future as we further invest in our research and development activities and commercial preparation activities.

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Since 2017, our primary source of funds has been from the public sale of our common stock.

On December 28, 2017, we filed a shelf registration statement, or the 2017 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as Shelf Securities, up to an aggregate amount of $250 million.

Corporate Capitalization

As of March 31, 2021, we had outstanding 149,315,299 shares of our $0.000041666 par value common stock, 194 shares of our $0.001 par value Series A Convertible Preferred Stock, and 2,842,158 shares of our $0.001 par value Series B Convertible Preferred Stock.

The outstanding shares of Series A Convertible Preferred Stock are currently convertible into 97,000 shares of our common stock, and the outstanding shares of Series B Convertible Preferred Stock are currently convertible into 2,842,158 shares of our common stock.

The shares of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock do not have voting rights or accrue dividends.

On December 28, 2017, we filed a shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an aggregate amount of $250 million, which we refer to as the 2017 Shelf Registration Statement.

The 2017 Shelf Registration Statement was declared effective on January 19, 2018.

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The 2017 Shelf Registration Statement was terminated upon effectiveness of the 2018 Shelf Registration Statement (as discussed below).

On September 7, 2018, we filed a shelf registration statement with the SEC for the issuance of up to an aggregate amount of $250 million of Shelf Securities, which we refer to as the 2018 Shelf Registration Statement.

The 2018 Shelf Registration Statement was declared effective on October 3, 2018 and the aggregate amount of securities we could issue thereunder was subsequently increased by $50 million through a post-effective amendment that we filed on October 11, 2018, pursuant to Rule 462(b) under the Securities Act of 1933, as amended.

On September 7, 2018, we filed a shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an aggregate amount of $250 million, which we refer to as the 2018 Shelf Registration Statement.

On October 17, 2018, we sold 25,300,000 shares of our common stock at a public offering price of $9.97 per share pursuant to the 2018 Shelf Registration Statement.

We received gross proceeds of approximately $252.2 million and net proceeds of $236.7 million, after deducting underwriting discounts and offering expenses.

We received gross proceeds of

approximately $252.2 million and net proceeds of $236.7 million, after deducting underwriting discounts and offering expenses.

The 2018 Shelf Registration Statement is no longer available for future offerings.

On September 17, 2019, we filed a shelf registration statement with the SEC for the issuance of up to an aggregate amount of $400 million of Shelf Securities, which we refer to as the 2019 Shelf Registration Statement.

On September 17, 2019, we filed a shelf registration statement with the SEC for the issuance up to an aggregate amount of $400 million, which we refer to as the 2019 Shelf Registration Statement.

The 2019 Shelf Registration Statement was declared effective on September 24, 2019.

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Following the public offering, the 2020 Automatic Shelf Registration Statement remains available for the future issuance of an indeterminate amount of Shelf Securities.

In the future, we may periodically offer one or more of the Shelf Securities in amounts, prices and terms to be announced when and if the securities are offered.

If any of the Shelf Securities covered by the 2020 Automatic Shelf Registration Statement are offered

for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of such offering at that time.

On February 8, 2021, we entered into an Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, with respect to an “at the market” offering program, under which we may, from time to time, in our sole discretion, issue and sell through Jefferies, acting as sales agent, up to $350.0 million of shares of our common stock, par value $0.000041666 per share.

For the three months ended March 31, 2021, we received approximately $42.9 million in net proceeds through the sale of 1,278,243 shares of our common stock.

In the future, we may periodically offer one or more of these securities in amounts, prices and terms to be announced when and if the securities are offered.

If any of the securities covered by the 2020 Automatic Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of such offering at that time.

We are currently engaged in the development of therapeutics to fight cancer.

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We currently do not anticipate that we will generate any significant revenues from the sale or licensing of any products during the 12 months from the date these financial statements are issued.

We have incurred a net loss of $191.2 million for the nine months ended September 30, 2020 and used $142.4 million of cash in our operating activities for the nine months ended September 30, 2020.

As of September 30, 2020, we had $68.3 million of cash and cash equivalents, $645.8 million of short-term investments, $5.5 million of restricted cash, $711.8 million of stockholders’ equity and had working capital of $659.2 million.

We expect to continue our research and development activities, initiate pre-commercial activities and to begin construction on our tenant improvements to our new production facility, which will increase the amount of cash we will use during 2020 and beyond.

Specifically, we expect continued spending on clinical trials, research and development activities, higher payroll expenses as we increase our professional, commercial and scientific staff and continue our expansion of manufacturing activities including building our own facility.

Based on the funds we have available as of the date of filing of this Quarterly Report on Form 10-Q, and after consideration of the possible impacts of the COVID-19 Pandemic, we believe that we have sufficient capital to fund our anticipated operating expenses and capital expenditure for at least the next 12 months from the date of filing this report.

We have incurred a net loss of $75.4 million for the three months ended March 31, 2021 and used $62.4 million of cash in our operating activities for the same period ended March 31, 2021.

As of March 31, 2021, we had $604.2 million of cash, cash equivalents, and investments ($131.9 million of cash and cash equivalents and $462.0 million of short-term investments, and $10.2 million of long-term investments), $647.4 million of stockholders’ equity and had working capital of $550.2 million.

We expect to further increase our research and development activities, especially continuing pre-commercial activities and completing the construction of our tenant improvements to our new commercial manufacturing facility, which will increase the amount of cash we will use during 2021 and beyond.

Specifically, we expect increased spending on clinical trials, research and development activities, higher payroll expenses as we increase our professional and scientific staff and continue our expansion of manufacturing activities including building our own facility.

Based on the funds we have available as of the date of the filing of this Quarterly Report on Form 10-Q, we believe that we have sufficient capital to fund our anticipated operating expenses and capital expenditure for at least 12 months from the date of filing this report.

The following table summarizes our cash flows for the periods presented from Operating, Investing and Financing Activities (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash (used in) provided by:

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Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2020 was $142.4 million compared to $105.1 million for the same period in 2019.

The increase of $37.4 million was primarily due to increased costs in research and development activities.

Included in $37.4 million was the $10.0 million upfront payment we paid for IOV-3001.

Net cash used in operating activities for the three months ended March 31, 2021 was $62.4 million compared to $65.3 million for the same period in 2020.

The decrease of $2.9 million was primarily due to higher noncash share-based compensation cost, lease cost and accretion of discounts on investments.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2020 was $376.6 million compared to net cash provided by investing activities of $63.2 million for the same period in 2019.

The increase in cash used in investing activities of $439.8 million was primarily due to the purchase of short-term investments to invest the net proceeds from our June 2020 public offering.

Net cash provided by investing activities for the three months ended March 31, 2021 was $77.2 million compared to net cash provided by investing activities of $100.1 million for the same period in 2020.

The decrease in cash provided by investing activities of $22.9 million was primarily due to increase in the purchase of property and equipment related to the commercial manufacturing facility and increased purchases of investments.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2020 was $573.5 million compared to $4.0 million for the same period in 2019.

The increase of $569.4 million was primarily due to net proceeds of $567.0 million from our June 2020 public offering.

Impact of the CARES Act

The CARES Act, among other things, permits net operating losses, or NOLs, carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The CARES Act provides other reliefs and stimulus measures.

We are currently evaluating the impact of the CARES Act, however, at present we do not expect that any provision of the CARES Act would result in a material cash benefit to us or have a material impact on our financial statements or internal controls over financial reporting.

Net cash provided by financing activities for the three months ended March 31, 2021 was $50.4 million compared to $3.8 million for the same period in 2020.

The increase of $46.5 million was primarily due to net proceeds of approximately $42.9 million from our sale of 1,278,243 shares of common stock of and a $2.5 million increase in proceeds from the exercise of stock options and $1.0 million proceeds from the issuance of the Job Creation Loan during the three months ended March 31, 2021.

Impact of COVID-19 on our Business

In December 2019, a novel coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally.

On January 30, 2020, the World Health Organization (WHO) declared COVID-19 a pandemic, which we refer to herein as the COVID-19 Pandemic.

The Secretary of Health and Human Services declared a public health emergency on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C.

247d), in response to the COVID-19 Pandemic.

Operations and Liquidity

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We may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees.

To date, the COVID-19 Pandemic has not had significant effects on our clinical trial enrollment.

We do not believe that the COVID-19 pandemic had a material impact on our liquidity or results of operations for the year ended December 31, 2020.

Further, to date, the COVID-19 pandemic has not had significant effects on our clinical trial enrollment.

Given the nature and type of our short-term investments in U.S.

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However, the impacts of the COVID-19 pandemic are broad-reaching and continuing and the financial impacts associated with the COVID-19 pandemic are still uncertain.

The COVID-19 Pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the pandemic, and actions that would be taken by governmental authorities to contain the pandemic or to treat its impact, makes it difficult to forecast any effects on our results for the fiscal year ending December 31, 2020.

The COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the pandemic, and actions that would be taken by governmental authorities to contain the pandemic or to treat its impact, makes it difficult to forecast any effects on our results for the three months ended March 31, 2021.

Despite the economic uncertainty resulting from the COVID-19 pandemic, we intend to continue to focus on the development of our product candidates.

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Off-Balance Sheet Arrangements

At September 30, 2020, we had no obligations that would require disclosure as off-balance sheet arrangements.

As of March 31, 2021, we had no obligations that would require disclosure as off-balance sheet arrangements.

Significant Accounting Policies and Recent Accounting Standards

See Note 2 of the financial statements for a discussion of our significant accounting policies, including the discussion of recently issued and adopted accounting standards.

Inflation and changing prices have had no effect on our continuing operations over our two most recent fiscal years.

Inflation has not had a material effect on our business, financial condition or results of operations over our two most recent fiscal years.

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 2. Management’s Discussion and Analysis