TIL THERAPY
FROM BENCH TO COMMERCIAL
IOVANCE BIOTHERAPEUTICS 2019 ANNUAL REPORT & 1O-K INFORMATION
WE HAVE COME
FAR IN DEVELOPING
OUR TIL FROM AN
ACADEMIC PROCESS
TO A POTENTIALLY
COMMERCIAL
PRODUCT IN JUST
FOUR YEARS.”
LETTER FROM THE PRESIDENT & CEO
DEAR IOVANCE BIOTHERAPEUTICS
STOCKHOLDERS,
2019 WAS A SIGNIFICANT YEAR FOR IOVANCE
in building our leadership in developing Tumor
Infiltrating Lymphocyte (TIL) therapy toward
commercialization. We continued to advance Iovance
TIL in pivotal programs in melanoma and cervical
cancers. We also expanded the use of TIL in the clinic
in new indications and earlier lines of therapy while
introducing new TIL products and manufacturing
processes.
We have come far in developing our TIL from
an academic process to a potentially commercial
product in just four years. In 2016 when I joined, we
had only initiated patient dosing in melanoma with
a Generation 1 product, and the company had a
market capitalization of approximately $286 million.
We have since created a new Generation 2 (Gen 2)
manufacturing method, dosed well over 300 patients
in clinic in multiple indications, and defined our
registration strategy in consultation with the U.S. Food
and Drug Administration (FDA). We have received a
Breakthrough Therapy Designation (BTD) for cervical
cancer and a Regenerative Medicine Advanced
Therapy (RMAT) designation for melanoma, started
and completed enrollment into the pivotal cohort for
melanoma, and expect to complete enrollment into the
pivotal program for cervical cancer. We have initiated
new studies to evaluate the effect of Iovance TIL in
non-small cell lung cancer (NSCLC) as well as head and
neck squamous cell carcinoma (HNSCC). We believe
we have a therapy which can advance patient care,
particularly in unmet medical need patient populations.
We have funded the company through several rounds
of financing to support our drug development activities,
and our current market capitalization is now well over
15 times compared to that in 2016.
In 2019, we focused on the registration programs
subsequent to consultation with FDA in melanoma
and cervical cancers. In melanoma, we held our End
of Phase 2 (EOP2) meeting with the FDA in late 2018,
and the agency agreed that a single cohort within
our ongoing study, C-144-01, can be supportive of
registration. We initiated patient dosing in March 2019,
closed enrollment in the fourth quarter of 2019, and
dosed our last patient in January 2020. The patients
are in follow up, and we intend to file a Biologics
License Application (BLA) with FDA in this indication
in late 2020. In addition to RMAT designation, we have
received a Fast Track designation for lifileucel from the
U.S. FDA.
We presented data updates for Cohort 2 in the
C-144-01 clinical study in melanoma throughout the
year, including at the American Society of Clinical
Oncology (ASCO) annual meeting in June 2019 and the
Society for Immunotherapy of Cancer (SITC) Annual
Meeting in November 2019. We reported a 36.4%
overall response rate (ORR) in 66 patients, as assessed
by investigators. The median duration of response, or
DOR, for Cohort 2 had not been reached at the time of
the SITC presentation. In an Iovance corporate update
provided in January 2020, the median DOR was still
not reached at 15.5 months of median study follow
up. Published data shows median overall survival in
late-stage melanoma patients may reach seven to
eight months. Therefore, these results with lifileucel are
highly encouraging.
For our second pivotal program, LN-145 for
metastatic cervical cancer, we reported clinical
data, received Fast Track and BTD designations, and
successfully completed an EOP2 meeting with the
FDA in 2019. These designations were supported by
compelling data demonstrating a 44% ORR from 27
patients in the ongoing C-145-04 study, which was
presented at ASCO in June 2019. We continue enrolling
in the C-145-04 study, with the potential to submit a
BLA later this year following a dialog with the FDA.
In parallel with the pivotal trials for melanoma
and cervical cancers, we are building our internal
manufacturing capability. We broke ground in June
2019 to build a state-of-the-art, 136,000 square foot
commercial-scale production facility in Philadelphia.
Our new facility is expected to be operational in 2021
to support commercial supply in 2022. As we build
our internal Iovance manufacturing capability, our
initial commercial supply will come from our contract
manufacturing partner, WuXi AppTec’s Philadelphia
facility.
payors. Under a patient-centric model, we intend
to support the patient at every step in the process,
from initial resection to infusion and release from the
hospital.
Our Gen 2 manufacturing process is robust with
over 90 percent success rate in over 300 patients
dosed to date. We believe we have established a solid
track record in manufacturing TIL for patients in need
of treatment as we prepare to launch lifileucel and
LN-145 using this Gen 2 process.
We invest in our research and development, and
our research activities remain focused on developing
new products to introduce into clinic. During 2019,
we developed multiple new products and have now
introduced them into clinic. A few include a shorter 16-
day manufacturing product, Gen 3, an expectedly more
potent selected TIL product, LN-145-S1, and our PBL
product, IOV-2001, toward hematologic malignancies.
We continue to invest in building a strong team.
While we are small for a late-stage development
company, we have nearly doubled our employee
pool to approximately 180 team members in 2020,
to include a diverse group of world-class leaders in
multiple functions.
Overall, I am very pleased with the progress we
have made during 2019 and into 2020. Indeed, in just
four years, we have brought TIL therapy from bench
to bedside, and we expect commercialization in 2021.
We believe we have the potential to impact the lives
of thousands of patients across multiple cancer types.
We are focused on commercializing Iovance TIL in
melanoma and cervical cancers who have exhausted
current treatment options.
We started investigating the therapeutic potential
To conclude, I acknowledge the valuable
contribution of many individuals, including committed
shareholders, hard-working employees, clinical
investigators, collaboration partners, and patients and
patient families who motivate us. We look forward to
realizing the shared vision of these individuals.
Maria Fardis, Ph.D., M.B.A.
PRESIDENT & CHIEF EXECUTIVE OFFICER
of Iovance TIL in new indications, such as NSCLC and
in earlier lines of therapy. Our IOV-COM-202 study
was initiated in May 2019 to evaluate TIL alone or in
combination with pembrolizumab in patients with
metastatic melanoma, head and neck, and NSCLC.
In 2020 we expanded this study to include a cohort
to investigate a new Iovance product, LN-145-S1, in
melanoma patients who have received prior anti-PD-1
and BRAF or BRAF/MEK, if indicated.
We also entered the clinic with our very first
Iovance cell therapy for blood cancers (designated
IOV-2001), our peripheral blood lymphocyte (PBL)
therapy, in the Phase 1/2 IOV-CLL-01 study in patients
with relapsed or refractory CLL or small lymphocytic
lymphoma (SLL).
In anticipation of the launch of lifileucel and LN-
145, our main area of focus remains ensuring a positive
patient experience with Iovance TIL products. Toward
that, we are working on the following items: clinical
site engagement, close collaboration with healthcare
professionals, operational excellence by Iovance in
provision of the product, and communication with
IOVANCE IS COmmITTEd TO dEVElOpING COmmERCIAllY
available cell therapies for patients with solid tumors
and hematologic malignancies utilizing autologous
Tumor Infiltrating Lymphocytes (TIL) that amplify
and rejuvenate the body’s own immune response to
eradicate cancer.
Our unique TIL technology platform, has enabled us
to generate scalable, personalized, cell therapies that
are currently in clinical studies for multiple cancers
including metastatic melanoma, cervical cancer, head
and neck cancer, non-small cell lung cancer, and CLL.
TIL THERAPY PLATFORM FOR
SOLID TUMORS
Activated
TIL
Tumor
cell lysis
Tumor
microenvironment
WORLD-CLASS
RESEARCH & DEVELOPMENT
TIL therapy is an investigational therapy and has
not been approved for any indication by the United
States Food and Drug Administration (USFDA) or
any other regulatory agency. The safety and efficacy
of this therapy has not been determined.
First Potential Cell Therapy in Solid Tumors
BLA Submission in Late 2020
Two Pivotal Programs
Metastatic Melanoma & Cervical Cancer
LN-145 Clinical Development
Metastatic Cervical Cancer & Multiple Solid Tumors
Cell Therapy Manufacturing
~136,000 SQ FT
Commercial-scale production facility
in Philadelphia, PA expected to be
operational in 2022
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from __________ to __________
Commission file number: 001-36860
IOVANCE BIOTHERAPEUTICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
999 Skyway Road, Suite 150, San Carlos, California
(Address of Principal Executive Offices)
75-3254381
(I.R.S. Employer
Identification No.)
94070
(Zip Code)
(650) 260-7120
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $ 0.000041666 Par Value per Share
Trading Symbol(s)
IOVA
Name Of Each Exchange
On Which Registered
The Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer ☑
Non-accelerated filer ☐
Accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates on June 30, 2019, the last business day of the registrant’s most recently completed second
fiscal quarter, was approximately $2.9 billion. Shares of common stock held by directors and executive officers and any ten percent or greater stockholders and their
respective affiliates have been excluded from this calculation, because such stockholders may be deemed to be "affiliates" of the Registrant. This is not necessarily
determinative of affiliate status of other purposes. As of February 17, 2020, there were 126,498,470 shares of the registrant’s common stock outstanding.
Portions of registrant’s proxy statement relating to registrant’s 2020 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the registrant’s fiscal year, are incorporated by reference in Part III of this
Annual Report on Form 10-K. Except with respect to information specifically incorporated by reference in this Annual Report on Form 10-K, the Proxy Statement is not
deemed to be filed as part of this Annual Report on Form 10-K.
Documents Incorporated By Reference
Table of Contents
TABLE OF CONTENTS
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings.
Mine Safety Disclosures.
Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence.
Principal Accounting Fees and Services.
Exhibits, Financial Statements Schedules.
10-K Summary.
2
4
4
35
78
79
79
82
82
82
84
84
92
92
92
92
93
93
93
93
93
93
93
93
93
96
Table of Contents
Forward-Looking Statements and Market Data
This Annual Report on Form 10-K contains forward-looking statements that are based on management’s beliefs and assumptions and on
information currently available to management. All statements other than statements of historical facts contained in this report are forward-
looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,”
“should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “aim,” “potential,” “continue,” “ongoing,”
“goal,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.
These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements
to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we
have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a
combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-
looking statements in this Annual Report on Form 10-K include, but are not limited to, statements about:
● the success, cost, enrollment, and timing of our clinical trials;
● the success, cost and timing of our product development activities;
● the ability of our third-party contract manufactures to continue to manufacture tumor infiltrating lymphocytes, or TIL, in
accordance with our selected process;
● our ability to design, construct and staff our own manufacturing facility on a timely basis and within the estimated expenses;
● the success of competing therapies that are or may become available;
● the timing of and our ability to obtain and maintain U.S. Food and Drug Administration, or FDA, or other regulatory authority
approval of, or other action with respect to, our product candidates;
● our ability to attract and retain key scientific or management personnel;
● the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
● our ability to obtain funding for our operations, including funding necessary to complete further development and
commercialization of our product candidates;
● the ability and willingness of our third-party research institution collaborators to continue research and development activities
relating to our product candidates;
● the potential of our other research and development and strategic collaborations;
● our expectations regarding our ability to obtain and maintain intellectual property protection for our manufacturing methods and
product candidates;
● our plans to research, develop and commercialize our product candidates;
● the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
● our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
● regulatory developments in the United States and foreign countries;
● fluctuations in the trading price of our common stock; and
● our use of cash and other resources.
Actual results may differ from those set forth in this Annual Report on Form 10-K due to the risks and uncertainties inherent in our
business, including, without limitation: the FDA may not agree with our interpretation of the results of its clinical trials; later developments
with the FDA that may be inconsistent with already completed FDA meetings; the preliminary clinical results, including efficacy and
safety results, from ongoing Phase 2 may not be reflected in the final analyses of these trials including new cohorts within these trials; the
results obtained in our ongoing clinical trials, such as the studies and trials referred to in this 10-K, may not be indicative of results
obtained in future clinical trials or supportive of product approval; regulatory authorities may potentially delay the timing of FDA or other
regulatory authority approval of, or other action with respect to, our product candidates, specifically, our description of FDA interactions
are subject to FDA’s interpretation, as well as FDA’s authority to request new or additional information;we may not be able to obtain or
maintain FDA or other regulatory authority approval of its product candidates;our ability to address FDA or other regulatory authority
requirements relating to our clinical programs and registrational plans, such requirements including, but not limited to, clinical and safety
requirements as well as manufacturing and control requirements; risks related to our accelerated FDA review designations; our ability to
obtain and maintain intellectual property rights relating to our product pipeline; and the acceptance by the market of our product candidates
and their potential reimbursement by payors, if approved.
3
Table of Contents
We caution you that the risks, uncertainties and other factors referenced above may not contain all the risks, uncertainties and other factors
that are important to you. In addition, we cannot guarantee future results, level of activity, performance or achievements. Any forward-
looking statement made by us in this Annual Report on Form 10-K speaks only as of the date of this Annual Report on Form 10-K or as of
the date on which it is made. Except as required by law, we undertake no obligation to publicly update any forward-looking statements,
whether because of new information, future events or otherwise, after the date of this Annual Report on Form 10-K.
Unless the context requires otherwise, in this report the terms “Iovance,” the “Company,” “we,” “us” and “our” refer to Iovance
Biotherapeutics, Inc.
Item 1. Business
Overview
PART I
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. Our lead product candidates include
lifileucel for metastatic melanoma and LN-145 for metastatic cervical cancer. In addition to metastatic melanoma and metastatic cervical
cancer, we are investigating the effectiveness and safety of TIL therapy 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 treatment of chronic lymphocytic leukemia 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.
The C-144-01 trial has National Clinical Trial identification number NCT02360579. Cohort 4 of the C-144-01 clinical trial is a single-arm
cohort intended to be used for the registration of lifileucel. The C-144-01 trial uses our proprietary Gen 2 manufacturing process. We
completed and closed enrollment of patients into Cohort 2 of the C-144-01 trial in 2018. We announced that the last patient was dosed in
Cohort 4 of this trial in January 2020. Cohort 4 was enrolled with a prospective definition of objective response rate, or ORR, 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. FDA also acknowledged the potential acceptability of single-arm data from Cohort 4 for registration. In
October 2018, we announced that lifileucel had received a Regenerative Medicine Advanced Therapy, or RMAT, designation from the
FDA. Updated 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 Society for Immunotherapy of Cancer, or SITC, annual meeting in
November 2019. In 66 patients with metastatic melanoma, treatment with lifileucel resulted in an ORR of 36%, as assessed by investigator,
with 2 complete responses and 22 partial responses. The disease control rate, or DCR, was 80%. Patients were heavily pretreated and had a
mean of 3.3 prior therapies. For both the ASCO and SITC updates, the median duration of response, or DOR, had not been reached. In
January 2020, with a median follow up of 15.5 months for Cohort 2 patients,the median DOR has not been reached per investigator
assessment. The adverse event profile was generally consistent with the underlying advanced disease and the profile of the
lymphodepletion and IL-2 regimens.
In addition to our ongoing trial in metastatic melanoma, we are conducting clinical trials with LN-145 TIL therapy, in cervical, head
and neck , lung and other cancers. C-145-04 , or NCT03108495, is an ongoing Phase 2, multicenter pivotal trial that will assess the safety
and efficacy of LN-145 for the treatment of patients with recurrent, metastatic or persistent cervical cancer. In February 2019, LN-145
received Fast Track designation from the FDA for development in the treatment of cervical cancer with disease progression on or after
chemotherapy. 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, LN-145 received Breakthrough Therapy designation, or BTD, from the FDA for the 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. In 27 patients with
metastatic cervical cancer, treatment with LN-145 resulted in an ORR of 44%. At the time of study data cut,there were 3 complete
responses and 9 partial responses. The DCR was 85%. Patients were heavily pretreated and had a mean of 2.4 prior therapies. The DOR
had not been reached. The median follow-up was 7.4 months. The adverse event
4
Table of Contents
profile was generally consistent with the underlying advanced disease and the profile of the lymphodepletion and IL-2 regimens. Based on
an End of Phase 2 meeting held with the FDA in June 2019, the FDA has acknowledged that results from the C-145-04 clinical trial may be
sufficient to support registration in the treatment of patients with metastatic cervical cancer. In accordance with the FDA’s
recommendations, the protocol was amended to further define the patient population. In November 2019, in order to position LN-145 for
potential future use in broader lines of therapy in cervical cancer, we have amended the C-145-04 trial to collect additional data on early-
line patients as well as later-line patients. Enrollment in these additional cohorts is not expected to impact the timing of the completion of
Cohort 1.As a result of this amendment, the C-145-04 trial now consists of the following cohorts of cervical cancer patients with recurrent,
persistent, or metastatic disease:
● Cohort 1 is the expected pivotal cohort for LN-145 and is anticipated to enroll 75 patients who have progressed during or after
chemotherapy;
● Cohort 2 will enroll patients for treatment with LN-145 who have progressed during or after treatment with anti-PD-1/anti-PD-L1
checkpoint inhibitor;
● Cohort 3 will enroll patients who have not received prior systemic therapy for recurrent, metastatic, or persistent disease. This
Cohort will explore safety and efficacy of the combination of the LN-145 regimen with pembrolizumab;
● Cohort 4 is intended for patients who have been previously enrolled but are not considered within the registrational population,
including patients dosed with product produced by our first generation, or Gen 1, TIL manufacturing process; and
● Cohort 5 will enroll patients for retreatment with LN-145 for patients who have progressed after initial treatment with LN-145.
As a result of these changes, we have also expanded the sample size of the C-145-04 clinical trial to include 138 patients from the
appropriate patient populations across these five cohorts. We plan on completing enrollment into Cohort 1 of C-145-04 at approximately
mid-year 2020. We currently plan to submit a BLA for this indication by the end of 2020 subsequent to consultation with the FDA.
C-145-03 , or NCT03083873, is an ongoing Phase 2, multicenter trial that we are conducting to assess the safety and efficacy of LN-
145 for the treatment of patients with recurrent metastatic squamous cell carcinoma of the head and neck . 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.
We are also investigating the potential of our TIL therapies in earlier lines of treatment and in combination with pembrolizumab. We
are also studying LN-145 as a monotherapy in relapsed refractory non-small cell lung cancer, or NSCLC, patients. IOV-COM-202 , or
NCT03645928, is a Phase 2, multicenter trial that is composed of four cohorts to enroll up to a total of 48 patients. In Cohort 1A, we are
enrolling advanced 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 head and neck squamous cell carcinoma 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 non-small cell lung cancer
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 non-small cell lung cancer patients who have previously received
systemic therapy which could include checkpoint inhibitors. The patients are receiving LN-145. In May 2019, we reported that the first
patient was dosed in the IOV-COM-202 trial. 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 November 2019, we announced that our investigational new drug application, or IND, for our PBL therapy, IOV-2001, was
approved 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 ,
or NCT04155710, 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. The IOV-CLL-01 trial is expected to enroll up to approximately 70 patients.
5
Table of Contents
In April 2019, we closed the IOV-LUN-201 clinical trial, investigating TIL therapy in NSCLC, in combination with anti-PD-L1
therapy, and instead opened Cohorts 3A and 3B of the IOV-COM-202 trial as described above, to adapt our clinical development plans to
reflect advances in the treatment landscape for non-small cell lung cancer.
As part of our collaboration program with the MD Anderson Cancer Center, or MDACC, two Phase 2 trials were initiated in 2018.
Both trials are sponsored by MDACC. The first trial, 2017-0672 or NCT03449108, is intended to allow for investigation of LN-145
manufactured by us using our manufacturing process to treat patients with soft tissue sarcoma, osteosarcoma and platinum resistant ovarian
cancer. A second trial under the collaboration with MDACC , NCT03610490, is active as well. This trial is treating patients with platinum
resistant ovarian cancer, pancreatic and colorectal cancer. This trial uses TIL manufactured by MDACC using urelumab, a 4-1BB agonistic
antibody, as part of the manufacturing process. The data obtained using this manufacturing process 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:
We have also entered into a collaboration with a Canadian institution, Centre hospitalier de l’Université de Montreal, or CHUM, under
which CHUM agreed to conduct a clinical study using a PD-1 selected TIL product manufactured by a CHUM collaborator using a process
developed by CHUM. We are also developing a PD-1 selected TIL product to be manufactured by Iovance. This product, known as LN-
145-S1, will initially be tested in the C-145-03 trial in head and neck cancer patients.
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 in the C-145-03 trial in head and neck cancers.
We currently own ten granted or allowed U.S. patents for compositions and methods of treatment in a broad range of cancers relating
to our Gen 2 manufacturing process, including U.S. Patent Nos. 10,130,659, 10,166,257, 10,272,113, 10,363,273, 10,398,734, 10,420,799,
10,463,697, and 10,537,595. Our owned and licensed intellectual property portfolio also includes patent applications relating to TIL,
marrow infiltrating, and peripheral blood lymphocyte therapies, methods of manufacturing, the use of costimulatory molecules in TIL
therapy and manufacturing, stable and transient genetically-modified TIL therapies, and methods of treating patient subpopulations.
We previously collaborated with Roswell Park Cancer Institute, or RPCI, on a clinical trial using our LN-145 product for the treatment
of patients with bladder cancer in combination with the anti-PD-1 antibody pembrolizumab. This trial was closed in 2019 because of a lack
of enrollment.
6
Table of Contents
We are also collaborating with Yale University on a clinical trial using our LN-145 product for the treatment of patients with metastatic
triple negative breast, or TNBC, cancer (NCT04111510).
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 low single digit 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 royalties from commercial sales of IOV-3001. In addition, in January 2020, we
announced a research collaboration and exclusive worldwide licensing agreement with Cellectis S.A., or 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 transcription activator-like effector nuclease, or 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.
Corporate Strategy
Our goal is to be a leader in the development and commercialization of TIL-based immunotherapies to treat solid tumors. We are
developing a portfolio of TIL-based product candidates with the potential to meaningfully improve survival and quality of life for cancer
patients. Key elements of our strategy include:
Expedite clinical development, regulatory approval, and commercialization of our lead product candidate lifileucel for the
treatment of metastatic melanoma.
Based on results of TIL therapy from trials sponsored by the NCI and our own clinical trials in metastatic melanoma, we are focused
on expediting the development, regulatory approval and commercialization of our lead product candidate, lifileucel, for the treatment of
patients with metastatic melanoma. We filed an investigational new drug application, or IND, with the FDA in December 2014 to initiate a
company-sponsored Phase 2 single-arm, multicenter clinical trial of lifileucel in patients with metastatic melanoma. We began enrollment
of this trial in the second half of 2015 and expanded it into three cohorts in 2017. In 2019 we expanded into an additional cohort, Cohort 4,
which serves as the basis for registration. Cohort 1 evaluated our first-generation TIL manufacturing process, Cohort 2 evaluated our
second-generation, Gen 2, TIL manufacturing process and Cohort 3 evaluated retreatment of certain patients with a second dose of TIL. We
presented updated data from Cohort 2 in November 2018 at the SITC annual meeting, in June 2019 at the ASCO annual meeting, and in
November 2019 at the SITC annual meeting.
We held an end of Phase 2 meeting with the FDA in September 2018. In addition, we received an RMAT designation for lifileucel.
Based on the meeting and subsequent dialog with the FDA, we amended the protocol for the C-144-01 trial to include 75 patients in Cohort
4. The primary endpoint is ORR as determined by IRC. We have completed dosing of patients in Cohort 4.
Continue to improve our TIL manufacturing process and develop new TIL manufacturing technology to become the preferred
provider of TIL therapy in the U.S. and the rest of the world.
We believe that we are the only company in the United States to have a centralized and commercially-viable TIL manufacturing
process. In 2018, we utilized our second generation TIL manufacturing process, known as Gen 2, which reduced TIL manufacturing time
from 5-6 weeks to 22 days, allowing for a more commercially-viable product candidate. Gen 2 also produces a cryopreserved product for
ease of administration and handling. The Gen 2 manufacturing process was utilized in Cohort 2 and Cohort 4 of our C-144-01 trial and has
also been selected for use in most of our other ongoing TIL clinical development. We have included Gen 2 as the manufacturing process
for registration for our discussions with the FDA and eventually the anticipated Biologics License Application, or BLA, filing for lifileucel.
Our strategy is to establish our Gen 2 process as a commercial manufacturing process for TIL therapies, including lifileucel.
Collaborate with governmental, academic and corporate partners to improve and develop TIL and PBL therapies for new
indications or for use in combination with other therapies, and to evaluate new manufacturing methods.
In addition to our own research and process development efforts, we seek to collaborate with government, academic research
institutions, and corporate partners to improve TIL manufacturing and to develop TIL therapies for new indications. For example, we
7
Table of Contents
have announced licensing agreements and collaborations with Yale University, Cellectis, and Novartis, as described above or in the
following sections, and continued our collaborations with Moffitt, MDACC, and the Ohio State University, to evaluate several new solid
tumor and hematologic indications for TIL and PBL therapy in clinical and preclinical studies as well as, in some cases, new TIL
manufacturing approaches. In August 2016, we expanded our Cooperative Research and Development Agreement, or CRADA, with the
NCI for another 5-year term. This collaboration with the NCI is directed at research on unmodified TIL therapy and also addresses human
papilloma virus, or HPV-associated cancers (cervical and head and neck), lung, bladder, and breast cancer. A description of certain of these
collaborations and related agreements is provided in the following sections of this Annual Report on Form 10-K.
Continue to establish manufacturing capacity for TIL products.
We continue to invest in improving the process and efficiency of manufacturing our product candidates in the United States and
Europe for TIL manufacturing. Currently we use several contract manufacturing organizations, or CMOs, to supply our TIL-based products
for our clinical trials under various MSAs. CMOs limit the amount of upfront capital investment as they have existing manufacturing
facilities that we can utilize in TIL production.
We began construction of our own manufacturing facility in 2019, in order to provide for better margins and rapid implementation of
innovative changes for TIL therapies that we may develop or commercialize. We intend to carefully manage our cost structure, and reduce
the long-term cost of manufacturing our products, although there can be no assurance that we will be able to reduce our manufacturing
costs to commercially attractive levels.
In October 2018, we entered into a three-year MSA and related statement of work with MaSTherCell S.A., or MaSTherCell, a cell
therapy CMO that is a subsidiary of Orgenesis Inc . that was recently acquired by Catalent, Inc. Pursuant to the MSA, MaSTherCell agreed
to provide manufacturing and other services for use in our European clinical trials. In December 2019, we provided MaSTherCell with a
notice of termination for the statement of work for cell therapy manufacturing. We intend to cease manufacturing at MaSTherCell in 2020.
In 2017, we entered into a three-year MSA and related statements of work with PharmaCell B.V., or PharmaCell, a contract
manufacturing services company based in the Netherlands, to manufacture our autologous cell therapy products for use in our European
clinical trials. PharmaCell was subsequently acquired by Lonza Group Ltd., or Lonza. Lonza continues to manufacture TIL products for
our European clinical trials in its clinical and commercial facility in Geleen, the Netherlands.
Also in 2017, we entered into a two-year MSA and related statements of work with Moffitt, to manufacture our autologous cell therapy
products for use in clinical trials, which has since been extended until March 2025. Moffitt continues to manufacture TIL products for our
clinical trials in the U.S.
In 2016, we entered into a three-year MSA and related statements of work with WuXi AppTec, Inc., or WuXi, in order to increase our
TIL manufacturing capacity in facilities with both clinical and commercial capability for two suites. 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. We intend to use
WuXi as the initial manufacturer for commercial production of lifileucel and potentially LN-145 for cervical cancer.
Iovance-Sponsored Clinical Trials
We currently have five ongoing Phase 2 clinical studies. The ongoing studies include C-144-01, of our lead product candidate,
lifileucel, for the treatment of metastatic melanoma; C-145-04, of our product candidate LN-145 for recurrent, metastatic or persistent
cervical cancer; and C-145-03, of our product candidate LN-145, for recurrent and/or metastatic squamous cell carcinoma of the head and
neck. During 2018, we initiated a Phase 2 clinical trial, IOV-COM-202, a basket trial that will treat checkpoint naïve patients with TIL in
combination with pembro for metastatic melanoma, head and neck cancer and non-small cell lung cancer. The trial also includes a cohort
that will treat relapsed and refractory NSCLC patients with TIL alone. In 2019, we announced that the FDA had cleared our Phase 1/2
clinical trial, IOV-CLL-01, using our PBL therapy, IOV-2001, to proceed. Additional information about our clinical trials is presented as
follows:
Lifileucel for Metastatic Melanoma
We are developing lifileucel to treat metastatic melanoma. Melanoma is a common type of skin cancer, accounting for approximately
96,000 patients diagnosed and 7,230 deaths each year in the United States according to the NCI’s Surveillance,
8
Table of Contents
Epidemiology and End Results program, or SEER program, as of 2019. Our Phase 2 trial, C-144-01, is a prospective, registrational, four-
cohort interventional study evaluating lifileucel in metastatic melanoma patients who have progressed after prior anti-PD-1 therapy and if
BRAF mutant, after BRAF or BRAF/MEK inhibitor therapy. Patients enrolled in this trial to date have failed several prior treatment
regimens.
Patients with metastatic melanoma who have failed at least one treatment under the current standards of care have an unfavorable
prognosis with very few curative treatment options. The National Comprehensive Cancer Network, or NCCN,has recommendations for the
treatment of patients with unresectable or metastatic melanoma. Initial therapy can include checkpoint inhibitors either alone or in
combination (ipilimumab, nivolumab, pembrolizumab), targeted therapies for patients with BRAF mutations (dabrafenib/trametinib,
vemurafenib/cobimetinib combinations or single agents) or participating in a clinical trial. For patients not responding or progressing and
who have an adequate clinical status, agents selected from the previous list or of a different therapeutic class can be used as well as high
dose IL-2. NCCN experts also recommend participating in a clinical trial at any stage of disease. Patients who do not respond to the current
second-line therapies have very few treatment options and typically have a very poor prognosis, with limited median survival measured
in months. According to estimates from SEER in the United States in 2019, approximately there were 7,230 deaths due to melanoma. If
approved, we believe lifileucel may be able to treat a portion of the patients that have received all other approved treatment options.
We are using our Gen 2 manufacturing process for most of our ongoing Phase 2 trials, and as a result, Cohort 1 of C-144-01, using our
Gen 1 manufacturing process, was closed to enrollment in 2017 and subsequent patients were enrolled in Cohort 2. The planned enrollment
in C-144-01 was reached in late 2018 and Cohort 2 is closed to enrollment. Cohort 3 is a retreatment cohort. Cohort 4, a pivotal cohort, was
added in 2019. We have completed dosing in Cohort 4.
Updated results from Cohort 2 of the C-144-01 clinical trial were initially reported at the ASCO annual meeting in June 2019 and
subsequently updated at the SITC annual meeting in November 2019. In 66 patients with metastatic melanoma, treatment with lifileucel
resulted in an ORR of 36%, with 2 complete responses and 22 partial responses. The disease control rate, or DCR, was 80%. Patients were
heavily pretreated and had a mean of 3.3 prior therapies. For both the ASCO and SITC updates, the median duration of response, or DOR,
had not been reached. In January 2020, with a median follow up of 15.5 months for Cohort 2 patients, we have reported that median DOR
has not been reached as assessed by investigator. The adverse event profile was generally consistent with the underlying advanced disease
and the profile of the lymphodepletion and IL-2 regimens. We have not reported any results from Cohort 4. A BLA submission to the FDA
including Cohort 4 results is expected in late 2020. Lifileucel had received a Regenerative Medicine Advanced Therapy, or RMAT,
designation from the FDA.
We held an End of Phase 2 meeting with the FDA in September 2018 to discuss the C-144-01 study. In its written minutes to the
meeting, the FDA acknowledged that conduct of a randomized Phase 3 study may not be feasible in its intended population of advanced
melanoma patients, who have been treated with at least one systemic therapy including an anti-PD-1 antibody and if BRAF mutation
positive, a BRAF inhibitor or BRAF inhibitor with MEK inhibitor, and that a randomized study is not required for the registration of
lifileucel. The FDA further acknowledged that a single-arm cohort of the C-144-01 trial may be acceptable for registration in this
indication. A new cohort, Cohort 4, of 75 patients was enrolled in C-144-01 with a prospective definition of the primary endpoint of ORR
to be determined by IRC, to support registration of lifileucel. The FDA recommended that we validate a potency assay prior to starting
Cohort 4, which we have done. We initiated Cohort 4 in early 2019 in the United States and in Europe and completed dosing in January
2020.
LN-145 for Cervical Cancer
We are developing LN-145 to treat cervical cancer. According to estimates from the SEER program, approximately 13,000 women
were diagnosed with cervical cancer, and approximately 4,300 cervical cancer-related deaths occurred in the United States in 2019.
C-145-04 is an ongoing Phase 2, multicenter pivotal trial that will assess the safety and efficacy of LN-145 for the treatment of patients
with recurrent, metastatic or persistent cervical cancer. In February 2019, LN-145 received Fast Track designation from the FDA for
development in the treatment of cervical cancer with disease progression on or after chemotherapy. 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, LN-145 received Breakthrough Therapy
designation, or BTD, from the FDA for the 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. In 27 patients with metastatic cervical cancer, treatment with LN-145
resulted in an ORR of 44%. In the study there were 3 complete responses and 9 partial responses. The
9
Table of Contents
DCR was 85%. Patients were heavily pretreated and had a mean of 2.4 prior therapies. The DOR had not been reached. The median
follow-up was 7.4 months. The adverse event profile was generally consistent with the underlying advanced disease and the profile of the
lymphodepletion and IL-2 regimens.
Based on an End of Phase 2 meeting held with the FDA in June 2019, the FDA has acknowledged that results from the C-145-04
clinical trial may be sufficient to support registration in the treatment of patients with metastatic cervical cancer. In accordance with the
FDA’s recommendations, the protocol was amended, to further define the patient population. We plan to include in the BLA, patients who
have progressed following initial systemic therapy for recurrent or metastatic disease. In November 2019, in order to position LN-145 for
potential future use in broader lines of therapy in cervical cancer, we have amended the C-145-04 trial to collect additional data on early-
line patients as well as late-line patients. These additional cohorts also allow access to TIL therapy when the pivotal Cohort 1 is completed
and also may support a request from FDA to provide expanded access to LN-145. Enrollment in these additional cohorts will not impact
the timing of the completion of the pivotal cohort nor the size of the registrational program. As a result of this amendment, the C-145-04
trial now consists of the following cohorts of cervical cancer patients with recurrent, persistent, or metastatic disease:
● Cohort 1 is the expected pivotal cohort for LN-145 and is anticipated to enroll 75 patients who have progressed during or after
chemotherapy;
● Cohort 2 will enroll patients for treatment with LN-145 who have progressed during or after treatment with anti-PD-1/anti-PD-L1
checkpoint inhibitor;
● Cohort 3 will enroll patients who have not received prior systemic therapy for recurrent, metastatic, or persistent disease. This
Cohort will explore safety and efficacy of the combination of the LN-145 regimen with pembrolizumab;
● Cohort 4 is intended for patients who have been previously enrolled but are not considered within the registrational population,
including patients dosed with product produced by first generation, or our Gen 1, TIL manufacturing process; and
● Cohort 5 will enroll patients for retreatment with LN-145 for patients who have progressed after initial treatment with LN-145.
As a result of these changes, we have also expanded the sample size of the C-145-04 clinical trial to include 138 patients from the
appropriate patient populations across these five cohorts.
LN-145 for Head and Neck Cancer
According to estimates from the SEER program, approximately 53,000 people were diagnosed with head and neck-related cancers,
and approximately 11,000 head and neck- related cancer deaths occurred in the United States in 2019.
We are developing LN-145 to treat head and neck cancers. In June 2017, we enrolled our first patient in our ongoing Phase 2 trial, C-
145-03, for the treatment of patients with recurrent and/or metastatic squamous cell carcinoma of the head and neck, who have failed one
prior therapy. In 2018, preliminary data for 13 patients who were administered a mix of Gen 1 and Gen 2 products, was released showing
an ORR of 31%, with 4 partial responses, with the DOR ranging from 2.8 to 7.6 months. Patients in the study had a median of three prior
therapies. The safety findings from this study were also consistent with previous reports. The most common treatment emergent adverse
events observed at the time of that data cut included chills, hypotension, pyrexia, hyponatremia, and anemia. As additional patients are
enrolled in the C-145-03 study, the safety profile of LN-145 may change. We continue to enroll patients to the full target sample size of 55
patients. The trial is enrolling patients in the United States. We have since changed the design of our C-145-03 trial so that enrolled patients
will be treated using either LN-145 produced from the Gen 3 manufacturing process or PD-1 selected TIL, or LN-145-S1, from the PD-1
selected TIL manufacturing process in two separate cohorts.
Lifileucel and LN-145 in combination with pembrolizumab
In addition to the monotherapy trials for lifileucel and LN-145 mentioned above, we are developing these products in combination
with pembrolizumab for melanoma, head and neck and NSCLC. We also have a monotherapy arm for LN-145 in NSCLC. According to
estimates from the SEER program, approximately 228,000 people were diagnosed with lung and bronchus cancers, and approximately
143,000 deaths occurred related to these cancers in the United States in 2019.
IOV-COM-202 is a Phase 2, multicenter trial that is composed of four cohorts to enroll up to a total of 48 patients. In Cohort 1A, we
are enrolling advanced 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
10
Table of Contents
Cohort 2A, we are enrolling advanced head and neck squamous cell carcinoma patients who are also 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
non-small cell lung cancer 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 non-small cell lung cancer patients who have
previously received systemic therapy which could include checkpoint inhibitors. The patients are receiving LN-145. In May 2019, we
reported that the first patient was dosed in the -IOV-COM-202 trial. In addition to the U.S., the IOV-COM-202 trial has also received
regulatory approval in Canada and in certain European countries.
IOV-2001 PBL for CLL/SLL
In November 2019, we announced that our investigational new drug application, or IND, for IOV-2001 was approved 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 CLL, or small lymphocytic
leukemia, or SLL. The IOV-CLL-01 trial is expected to enroll up to approximately 70 patients.
Investigator-Sponsored Clinical Trials
TIL in Other Solid Tumor Indications
We are collaborating with MDACC on clinical trials to evaluate TIL therapy in sarcomas, ovarian, colorectal and pancreatic cancers.
These trials, NCT03610490 and NCT03449108, began enrolling patients in 2018. Patients in these trials will be treated with LN-145 or
TIL manufactured by MDACC.
We are collaborating with Yale University on a clinical trial to evaluate TIL therapy in TNBC cancer. This trial is expected to begin
enrolling patients in 2020. Patients in this trial will be treated with LN-145.
TIL in Combination with Other Immunotherapy Drugs
Checkpoint inhibitors are a class of immunotherapy drugs that seek to overcome one of cancer’s main defenses against an immune
system attack. PD-1 is a checkpoint protein found on immune cells called T cells. It normally acts as a type of “off switch” that helps
prevent T cells from attacking other cells in the body. It does this by attaching to PD-L1, a protein found on both normal and cancerous
cells, which may then shut down an attack by a T cell. Some cancer cells have large amounts of PD-L1 expressed on their surfaces, which
helps them evade T cell attack.
We provide funding for a clinical trial, NCT03215810, conducted by Moffitt, which seeks to evaluate TIL therapy in combination with
the checkpoint inhibitor nivolumab in NSCLC. An additional clinical trial, NCT03374839, is being conducted by Moffitt to evaluate TIL
therapy in combination with nivolumab in metastatic melanoma. We have also previously collaborated with Moffitt on a clinical trial,
NCT01701674, to evaluate TIL therapy in combination with the CTLA-4 checkpoint inhibitor ipilimumab.
In 2019 we entered into a collaboration with Moffitt to fund a phase 1 trial of lymphodepletion plus TIL therapy with high-dose IL-2
in adolescent and young adult patients with soft tissue sarcoma in clinical trial NCT04052334.
Under our CRADA, we are collaborating with the NCI on the clinical trial NCT02621021 to evaluate TIL therapy in combination with
the checkpoint inhibitor pembrolizumab in a 170-patient clinical trial in patients with advanced melanoma. This study is currently
enrolling.
TIL Therapy Background
Immune system
The immune system recognizes danger signals and responds to threats at a cellular level. The most significant components of the
cellular aspect of the adaptive immune response are T cells, or T lymphocytes, so called because they mature in the thymus and are
distinguished from B cells which mature in the bone marrow. T cells can be distinguished from other white blood cells by T cell receptors
present on their cell surface. These receptors contribute to tumor surveillance by helping T cells recognize infected cells as
11
Table of Contents
well as cancerous cells. T cells are involved in both sensing and killing infected or cancerous cells, as well as coordinating the activation of
other cells in an immune response.
Cancer immunotherapy
Despite the progress that has been made over the past several decades, effective treatment of cancer, especially solid tumors, continues
to be challenging. Some reasons solid tumors are so difficult to treat are: (i) in many solid tumors, multiple genes (as many as hundreds or
thousands of genes) are mutated, and solid tumors are heterogeneous, (ii) it is not always clear which particular mutations are critical, and
(iii) tumors can adapt and find a way to evade treatments that target a single mutation. In addition, the tumor can suppress the patient’s
natural immune response. When T cells with cancer-specific receptors are absent, present in low numbers, of poor quality, or rendered
inactive by suppressive mechanisms employed by tumor tissue, the cancer can grow and spread to various organs. In addition, standard of
care treatments for cancer can be deleterious to T cells’ ability to kill cancer.
We believe that adoptive cell therapy, with the use of human cells as therapeutic entities to reengage the immune system, may be a
significant advancement in the treatment of cancer. These one-time cellular therapies may avoid the long-term side effects associated with
current treatments and have the potential to be effective. We believe TIL therapy, in particular, has the potential to treat solid tumors by
increasing the effectiveness and number of a patient’s cancer-specific T cells. TIL therapy is polyclonal, and we believe that it is capable of
targeting multiple tumor antigens on cancer cells. Furthermore, the non-myeloablative lymphodepleting chemotherapy administered prior
to TIL infusion is capable of suppressing the hostile tumor microenvironment, which we believe will enhance the efficacy of TIL therapy.
Tumor-infiltrating lymphocytes
Adoptive cell therapy with TIL involves the following steps:
1. Excision: After a surgical resection of a lesion, a patient’s TIL are removed from the tumor
2. Extraction: Tumor is fragmented and placed in media for TIL to leave the tumor
3. Expansion: TIL expanded exponentially ex vivo to yield 109 – 1011 TIL
4. Preparation and Infusion: Patient receives non-myeloablative lymphodepletion to eliminate potentially suppressive tumor
microenvironment and maximize engraftment and potential potency of TIL therapy; patient is infused with their expanded TIL
and up to 6 doses of IL-2 to promote activation, proliferation and anti-tumor cytolytic activity of TIL
12
Table of Contents
Currently, our Gen 2 manufacturing process takes 22 days from receipt of the patient’s tumor at the manufacturing facility until
shipping of the final TIL product to the institution for infusion of the TIL back into the patient. We currently treat patients with a single
infusion of TIL, although our protocols allow for evaluation of more than one administration of TIL. After infusion, TIL can potentially
infiltrate the tumor microenvironment to eliminate large numbers of cancer cells. TIL can also further proliferate in the body. TIL therapy
can potentially overcome several mechanisms of tumor escape to which endogenous T cells may be susceptible due to the hostile tumor
microenvironment.
Historical clinical results with TIL in metastatic melanoma
To date, hundreds of metastatic melanoma patients have already been treated with TIL therapy produced locally using different
manufacturing methods at different academic institutions and hospitals in the United States, Europe, Canada, and Israel. At NCI, clinical
responses have been relatively consistent in several trials: over 50% of the melanoma patients treated with TIL have an objective response
(i.e. tumor regression of 30% or more, as defined by RECIST criteria) and approximately 22-24% of patients have a complete response
(tumor regression of 100%) with no evidence of disease remaining after only one administration. Most patients who have had a complete
response remained in response in 3-7 years of follow up. Furthermore, patients can respond to TIL therapy regardless of their prior
therapies.
In September 2015, Dr. Rosenberg, a recognized pioneer in immuno-oncology and adoptive cell therapy using TIL, presented updated
findings from a Phase 2 clinical trial of TIL therapy in metastatic melanoma at the American Association for Cancer Research Inaugural
International Cancer Immunotherapy Conference. Data was presented from a 101 patient, Phase 2 clinical trial conducted at the NCI. In the
trial, patients with advanced metastatic melanoma were equally divided in two groups. Both groups were treated according to a standard
TIL protocol using nonmyeloablative, or NMA, chemotherapy, with the second group also receiving total body irradiation. 54% of the
patients treated with TIL therapy achieved an objective response. An objective response occurs when there is a complete remission or a
partial remission of the tumor. Out of the 101 patients, 24, or 24%, had experienced a complete remission and 23 of the 24, or 96%, showed
ongoing durability of this response at 30 to 47 months following treatment, at the time of publication. Median follow-up time was
approximately 40.9 months. Overall survival, or OS, was approximately 80% at 12 months, and median OS had not yet been
achieved. Median progression-free survival was approximately 8-10 months. This observation was
13
Table of Contents
also presented by Dr. Stephanie Goff at the 2016 ASCO meeting and published in the Journal of Clinical Oncology in June 2016. At the
ASCO 2018 meeting, Dr. Goff presented updated findings from the study. Patients that had prior anti PD-1 treatment had an ORR of 20-
25%.
Overall Survival of patients in TIL ± TBI study
Source: Goff, S.L. et al. Randomized, Prospective Evaluation Comparing Intensity of Lymphodepletion Before Adoptive Transfer of
Tumor-Infiltrating Lymphocytes for Patients With Metastatic Melanoma. Journal of Clinical Oncology, 34(20), 2389-2397.
Clinical results with TIL in other solid tumor indications
Under our CRADA with the NCI, we are providing research, development and clinical funding for the development of unmodified TIL
therapy for a variety of solid tumor indications, including HPV-associated cancers (cervical, head and neck), bladder, breast, and lung
cancers. The NCI has an ongoing clinical trial involving TIL therapy to treat advanced HPV-positive cervical cancer. Data from this trial
was published in the Journal of Clinical Oncology in April 2015 and in Science in April 2017 and was updated at the ASCO meeting in
2018. Out of 18 cervical cancer patients treated with HPV-TIL, two experienced complete remissions reported as ongoing at 53 and
67 months. Another three patients experienced a three-month partial response. Additionally, the NCI has ongoing trials to treat patients
using TIL with colorectal cancer, gastric cancer, pancreatic cancer, hepatocellular carcinoma and cholangiocarcinoma and lung cancer.
Depending on results from the research and development and clinical trials conducted at the NCI under our CRADA, we may pursue the
development and regulatory approval of TIL therapy for additional indications.
Safety
We continue to enroll patients in our ongoing TIL programs and we closely monitor our studies to learn about all safety events
occurring, as described elsewhere in this Annual Report on Form 10-K. Some of these events may be associated with TIL therapy.
Historically, the largest set of data for TIL therapy was generated by the NCI as part of their multiple clinical studies. Per publications from
the NCI, toxicities or adverse events during TIL therapy have been mostly associated with either the lymphodepletion regimen or the high-
dose IL-2 therapy given after TIL infusion as described by Goff et al. in the Journal of Clinical Oncology in June 2016. The standard
approach to the administration of high-dose IL-2 is to continue dosing until patients can no longer tolerate treatment. Our trials, however,
have limited administration of IL-2 to up to 6 doses.
14
Table of Contents
Next Generation TIL Product Strategies
We are developing next generation TIL products using owned and licensed intellectual property rights, in some cases in combination
with collaborators such as Cellectis and the University of Montreal, as described elsewhere in this Annual Report on Form 10-K. These
products include both genetically-modified TIL and PD-1 selected TIL therapies. We are also developing PBL therapy for chronic
lymphocytic leukemia.
Process Development, Manufacturing, and Manufacturing Agreements
Our first generation TIL manufacturing process was based on the NCI’s original manufacturing and processing of TIL, which we
modified so that it could be reproduced in a cGMP environment. This first-generation process expanded the number of TIL over a 5 to 6
week period and produced a non-cryopreserved product for administration to the patient. Our Gen 2 TIL manufacturing process, which was
developed by our internal research and process development team, shortens the manufacturing process to 22 days while allowing for a
cryopreserved product. The Gen 2 process is currently in use in almost all of our trials in which we manufacture TIL products, including
lifileucel and LN-145. We have selected Gen 2 for product registration and ongoing and future TIL clinical development, although we
continue to develop new TIL manufacturing processes. We have developed a third-generation manufacturing process, known as Gen 3
which has a shorter manufacturing process than Gen 2. We are testing Gen 3 in the C-145-03 head and neck study. We have also developed
a manufacturing process that specifically selects for TIL that are PD-1 positive. This product is known as LN-145-S1 and is currently being
studied in the C-145-03 head and neck study.
The Gen 2 manufacturing process begins with the collection of the patient’s tumor, which is then sent to a central manufacturing
facility, where the T cells are isolated. These cells are stimulated to proliferate, then propagated in cell culture flasks until sufficient cells
are available for infusion back into the patient. The TIL is then washed and put in media suitable for cryopreservation and infusion. The
final product is shipped back to the clinical center where it can be administered to the patient. The following diagram illustrates our Gen 2
TIL manufacturing process.
We have entered into MSAs with WuXi, Moffitt, and PharmaCell, which was acquired by Lonza, pursuant to which they have agreed
to manufacture, package, ship and handle quality assurance and quality control of certain clinical trials for our TIL products working
closely with our employees. We have two suites for clinical manufacturing at WuXi, and one of two suites is also available to manufacture
TIL for commercial use. Cell processing activities will be conducted at all companies under cGMP, using qualified equipment and
materials. We believe that all materials and components utilized in the production of the final TIL product are readily available from
qualified suppliers. We expect to rely on these CMOs, to meet anticipated clinical trial and if approved, commercial demands. In the future,
we may rely on them or other third parties, or our own manufacturing capabilities for the manufacturing and processing of TIL-based
product candidates for our clinical trials.
15
Table of Contents
To meet projected needs for commercial sale quantities, we are building our own commercial manufacturing facility to supply and
process products. Developing our own manufacturing capabilities may be costlier than we anticipate or result in significant delays. If we
are unable to develop our own manufacturing capabilities, we may need to rely on CMOs, including both current and alternate suppliers, to
ensure sufficient capacity is available for commercial purposes.
WuXi
In November 2016, we entered into a three-year manufacturing and services agreement, or MSA, with WuXi, pursuant to which WuXi
agreed to provide manufacturing and other services. Under the agreement, we entered into two statements of work for two cGMP
manufacturing suites to be established and operated by WuXi for our product manufacturing. The statements of work for each of the suites
were amended in 2019 and 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 process. Both statements of work provide for adjustments to the targeted
production capacity levels and corresponding fixed quarterly fees upon written notice from us of 30 and 90 days for the first and second
dedicated suites, respectively. The quarterly fixed fees payable for each of the dedicated manufacturing suites range from $1.2 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.
Personalized Patient Product
In September 2017, we entered into an agreement with TrakCel Ltd., or TrakCel, to build a scheduling and logistics software tool that
automates the supply chain for our TIL therapy products. The TrakCel software will electronically link us with our clinical sites, CMOs
and couriers to schedule and track TIL therapies for each patient. The TrakCel software is also intended to help manage capacity utilization
and throughput and will provide efficiencies in the delivery of TIL treatment.
The TrakCel software is also designed to ensure chain of identity for each patient’s product. Because our product candidates are
specifically manufactured for each individual patient, we will be required to maintain a chain of identity with respect to the patient’s tumor
as it moves from the patient to the manufacturing facility, through the manufacturing process, and back to the patient.
We continue to explore optimized scheduling and logistics software tools useful in the commercialization of our TIL therapies,
including tools from vendors other than TrakCel.
Orphan Drug Designation
During 2015, we received an orphan-drug designation for lifileucel in the United States to treat malignant melanoma stages IIB-IV. If
approved, this designation provides seven years of market exclusivity in the United States, subject to certain limited exceptions. However,
the orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.
During 2018, we received an orphan drug designation from the FDA for LN-145 for the treatment of cervical cancer with a tumor size
of greater than 2 cm in diameter.
Fast Track Designation
In August 2017, we announced that the FDA had granted Fast Track designation for lifileucel for the treatment of advanced melanoma.
The FDA’s Fast Track process is designed to facilitate the development and expedite the review of drugs that treat serious conditions and
fill an unmet medical need. Fast Track designation allows more frequent meetings and communications with the FDA to discuss the drug’s
development plans and review process. The Fast Track designation also allows for the possibility for rolling review of a BLA by FDA, and
also potential eligibility (if criteria are met) for accelerated approval.
Regenerative Medicine Advanced Therapy Designation
In October 2018, we announced that the FDA had granted RMAT designation for lifileucel for the treatment of patients with metastatic
melanoma. The RMAT designation is based on data provided to the FDA from our C-144-01 study. RMAT designation is granted for
regenerative medicine drugs and allows for increased access to FDA during development. Under this designation,
16
Table of Contents
surrogate endpoints can be used to receive approval for a product, accelerated approval may be granted, and a rolling review of a BLA may
be permitted by FDA.
Commercialization Plan
We currently have limited sales, marketing or commercial product distribution capabilities and as a company we have no experience in
commercializing a cell therapy products. We are in the process of building our U.S. commercial and medical affairs infrastructure and
intend to build our own global commercialization capabilities over time in certain geographies for our TIL product candidates including
lifileucel for metastatic melanoma and LN-145 for metastatic cervical cancer. Melanoma is a common type of skin cancer, accounting for
approximately 96,000 patients diagnosed and 7,230 deaths each year in the United States according to SEER as of 2019. In cervical cancer
approximately 13,000 women were diagnosed and approximately 4,300 cervical cancer-related deaths occurred in the United States in
2019. If any of our TIL product candidates are approved, we expect to commercialize those products in the United States with an
experienced sales, marketing, payer access and distribution organization including a national specialty oncology sales force. We have
started and continue to build a dedicated team of Medical Affairs professionals to help educate health professionals about our TIL therapy
and to assist in any training necessary for individual centers to administer our therapy. Outside the United States, we are in the process of
defining our regulatory and commercial strategy. As additional product candidates advance through our pipeline, our commercial plans will
evolve as we consider elements such as the market potential.
The five primary areas of our pre-launch efforts include:
● center engagement for commercial launch;
● development of a close collaboration with healthcare professionals, or HCPs, who will be handling or administering our product;
● operational excellence by us in provision of our product;
● communication with payors; and
● building a patient-centric organization
To date, in the United States lifileucel has been administered in 23 centers and LN-145 for cervical cancer has been administered in 19
centers. We anticipate that centers with prior TIL experience will be the initial targets for launch upon approval.
Intellectual Property
Intellectual property is of importance in our field and in biotechnology generally. We seek to protect and enhance proprietary
technology, inventions, and improvements that are commercially important to the development of our business by seeking, maintaining,
and defending patent rights, whether developed internally or licensed from third parties. We also plan to rely on regulatory protection
afforded through orphan drug designations, available regulatory exclusivities and patent term extensions where available. To achieve this
objective, a strategic focus for us has been to develop our own intellectual property, while also identifying and licensing patents that
provide protection and serve as an optimal platform to enhance our intellectual property and technology base.
We have engaged in the development of our own patent portfolio based on internal research and development activities in 2018. As a
result, we now own a number of pending patent applications and granted patents in the fields of TIL therapy, marrow infiltrating
lymphocyte or MIL therapy, PBL therapy, TIL, MIL, and PBL manufacturing processes, and TIL, MIL, and PBL expansion methods. Our
patent portfolio includes nine recently-granted U.S. patents related to our Gen 2 TIL manufacturing process. We expect to further develop
our own patent portfolio as a strategic focus in 2020.
Research, Development and License Agreements
Currently, preclinical research and development is conducted primarily at our own internal research and development laboratory in
Tampa, Florida, and additionally with the NCI, Moffitt, and MDACC, as described below. We also have preclinical collaborations with
MDACC and Ohio State University. We sponsor our own clinical trials and also collaborate on investigator-sponsored clinical trials with
the NCI, Moffitt, and MDACC.
17
Table of Contents
In addition, we hold exclusive, co-exclusive, and non-exclusive licenses to certain patent and other intellectual property rights with the
National Institutes of Health, or NIH, an agency of the United States Public Health Service within the Department of Health and Human
Services, Moffitt, MDACC, Novartis, and Cellectis as described in this Annual Report on Form 10-K.
National Institutes of Health and the National Cancer Institute
Cooperative Research and Development Agreement
In August 2011, we signed a five-year CRADA with the NCI to work with Dr. Steven Rosenberg on developing adoptive cell
immunotherapies that are designed to destroy metastatic melanoma cells using a patient’s tumor infiltrating lymphocytes.
In January 2015, we executed an amendment to the CRADA to include four new indications. As amended, in addition to metastatic
melanoma, the CRADA included the development of TIL therapy for the treatment of patients with bladder, lung, triple-negative breast,
and HPV-associated cancers.
In August 2016, we entered into a second amendment to the CRADA. The principal changes effected by the second amendment
included (i) extending the term of the CRADA by another five years to August 2021, and (ii) modifying the focus on the development of
unmodified TIL as a stand-alone therapy or in combination with FDA-licensed products and commercially available reagents routinely
used for adoptive cell therapy. The parties will continue the development of improved methods for the generation and selection of TIL with
anti-tumor reactivity in metastatic melanoma, bladder, lung, breast, and HPV-associated cancers.
Pursuant to the terms of the CRADA, as amended, we are required to make quarterly payments of $0.5 million to the NCI for support
of research activities. To the extent we license patent rights relating to a TIL-based product candidate, we will be responsible for all patent-
related expenses and fees, past and future, relating to the TIL-based product candidate. In addition, we may be required to supply certain
test articles, including TIL, grown and processed under cGMP conditions, suitable for use in clinical trials, where we hold the
investigational new drug application for such clinical trial. The extended CRADA has a five-year term expiring in August 2021. We 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.
Patent License Agreement Related to the Development and Manufacture of TIL
Effective October 5, 2011, we entered into an Exclusive Patent License Agreement, or the Patent License Agreement, with the NIH, an
agency of the United States Public Health Service within the Department of Health and Human Services, which was subsequently amended
on February 9, 2015 and October 2, 2015. Pursuant to the Patent License Agreement as amended, the NIH granted us licenses, including
exclusive, co-exclusive, and non-exclusive licenses, to certain technologies relating to autologous tumor infiltrating lymphocyte adoptive
cell therapy products for the treatment of metastatic melanoma, lung, breast, bladder and HPV-positive cancers. 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.
Exclusive Patent License Agreement Related to TIL Selection
On February 10, 2015, we entered into an exclusive patent license Agreement, or the Exclusive Patent License Agreement, with the
NIH under which we received an exclusive license to the NIH’s rights to patent-pending technologies related to methods for improving
adoptive cell therapy through more potent and efficient production of TIL from melanoma tumors by selecting for T cell populations that
express various inhibitory receptors. Unless terminated sooner, the license shall remain in effect until the last licensed patent right expires.
Under the Exclusive Patent License Agreement, the Company agreed to pay customary royalties based on a percentage of net sales of a
licensed product (which percentage is in the mid-single digits), a percentage of revenues from sublicensing arrangements, and lump sum
benchmark payments upon the successful completion of clinical studies involving licensed technologies, the receipt of the first FDA
approval or foreign equivalent for a licensed product or process resulting from the licensed technologies, the first commercial sale of a
licensed product or process in the United States, and the first commercial sale of a licensed product or process in any foreign country.
18
Table of Contents
H. Lee Moffitt Cancer Center
Research Collaboration and Clinical Grant Agreements with Moffitt
In December 2016, we entered into a new three-year Sponsored Research Agreement with H. Lee Moffitt Cancer Center, or Moffitt. At
the same time, we have entered into a clinical grant agreement with Moffitt under which we provide support for an ongoing clinical trial at
Moffitt that combines TIL therapy with nivolumab for the treatment of patients with metastatic melanoma. In June 2017, we entered into a
second clinical grant agreement with Moffitt to support a new clinical trial at Moffitt that combines TIL therapy with nivolumab for the
treatment of patients with non-small cell lung cancer, under which we obtained a non-exclusive, royalty-free license to any new Moffitt
inventions made in the performance of the agreement. Under both clinical grant agreements with Moffit, we have non-exclusive rights to
clinical data arising from the respective clinical trials.
Exclusive License Agreements with Moffitt
We entered into a license agreement with Moffitt, or the First Moffitt License, effective as of June 28, 2014, under which we 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.
Pursuant to the First Moffitt License, we paid an upfront licensing fee in the amount of $0.1 million. A patent issuance fee will also be
payable under the First Moffitt License, upon the issuance of the first U.S. patent covering the subject technology. In addition, we agreed to
pay milestone license fees upon completion of specified milestones, customary royalties based on a specified percentage of net sales
(which percentage is in the low single digits) and sublicensing payments, as applicable, and annual minimum royalties beginning with the
first sale of products based on the licensed technologies, which minimum royalties will be credited against the percentage royalty payments
otherwise payable in that year. We 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 us in agreement with Moffitt.
We entered into a license agreement with Moffitt effective as of May 7, 2018, or the Second Moffitt License, under which we 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. We continue to develop TIL therapies using a 4-1BB agonist in manufacturing in conjunction with M.D. Anderson
Cancer Center.
Pursuant to the Second Moffitt License, we paid an upfront licensing fee in the amount of $0.1 million in 2018. An annual license
maintenance fee will be also payable commencing on the first anniversary of the effective date. In addition, we 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.
PolyBioCept
PolyBioCept Exclusive and Co-Exclusive License Agreement
On September 14, 2016, we entered into an exclusive and co-exclusive license Agreement, or the PolyBioCept Agreement, with
PolyBioCept, AB, or PolyBioCept, a corporation organized under the laws of Sweden. Under the PolyBioCept Agreement, we received the
exclusive right and license to PolyBioCept’s intellectual property to develop, manufacture, market and genetically engineer TIL produced
by expansion, selection and enrichment using a proprietary cytokine cocktail. We also received a co-exclusive license (with PolyBioCept)
to develop, manufacture and market genetically engineered TIL under the same intellectual property. The licenses were for use in all
cancers and were worldwide in scope, with the exception that the uses in melanoma are not included for certain countries of the former
Soviet Union. On June 13, 2019, we terminated the PolyBioCept Agreement.
19
Table of Contents
M.D. Anderson Cancer Center
Strategic Alliance Agreement
On April 2017, we entered into a Strategic Alliance Agreement, or the SAA, with MDACC under which we and MDACC agreed to
conduct clinical and preclinical research studies. We agreed in the SAA to provide total funding not to exceed approximately $14.2 million
for the performance of the multi-year studies under the SAA. In return, we acquired all rights to inventions resulting from the studies and
have been granted a non-exclusive, sub-licensable, royalty-free, and perpetual license to specified background intellectual property of
MDACC reasonably necessary to exploit, including the commercialization thereof. We have also been granted certain rights in clinical data
generated by MDACC outside of the clinical trials to be performed under the SAA. The SAA’s term shall continue in effect until the later
of the fourth anniversary of the SAA or the completion or termination of the research and receipt by us of all deliverables due from
MDACC thereunder. In May 2017, the Company made a prepayment of $1.4 million under this agreement.
MedImmune
In December 2015, we entered into a collaboration agreement, the MedImmune Agreement, with MedImmune, the global biologics
research and development arm of AstraZeneca, to conduct clinical and preclinical research immuno-oncology. Under the MedImmune
Agreement, we funded and sought to conduct at least one clinical trial combining MedImmune's PD-L1 inhibitor, durvalumab with TIL for
treatment of patients. MedImmune supplied durvalumab for the clinical trials. On April 3, 2019, the Company and MedImmune announced
that the study was closed because of a changing treatment landscape and a lack of enrollment, and the collaboration agreement was
terminated as of April 1, 2019.
WuXi
In November 2016, the Company entered into a three-year manufacturing and services agreement, or MSA, with WuXi pursuant to
which WuXi agreed to provide manufacturing and other services. 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. The statements of work for each of the
suites were amended in 2019 and 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. Both statements of work provide for adjustments to the
targeted production capacity levels and corresponding fixed quarterly fees upon written notice from the Company of 30 and 90 days for the
first and second dedicated suites, respectively. 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.
Cellectis
In June 2018, we entered into a preclinical research collaboration with Cellectis to investigate TALEN for genetic editing in
conjunction with TIL therapy. In January 2020, we entered into a license agreement with Cellectis to use the TALEN technology to
genetically edit TIL (see Subsequent Events).
Competition
The biotechnology and pharmaceutical industries put significant resources in developing novel and proprietary therapies for the
treatment of cancer. We compete with multiple entities who have developed and are developing immuno-oncology therapies, including
large and specialty pharmaceutical and biotechnology companies, academic research institutions and governmental agencies and public and
private research institutions, as well as companies developing novel targeted therapies for cancer. Universities and public and private
research institutions in the U.S. and Europe are also potential competitors. For example, a Phase 3 study comparing TIL to standard
ipilimumab in patients with metastatic melanoma is currently being conducted in Europe by the Netherlands Cancer Institute, the
Copenhagen University Hospital at Herlev, and the University of Manchester. While these universities and public and private research
institutions primarily have educational objectives, they may develop proprietary technologies that lead to other FDA-approved therapies or
that secure patent protection. We anticipate that we will face possibly increasing competition as new drugs and therapies enter the market
and advanced technologies become available.
Due to the promising clinical therapeutic effect of their therapies in clinical exploratory trials, we anticipate substantial direct
competition from other organizations developing advanced T cell therapies targeting patients who have received prior anti-PD-1/PD-
20
Table of Contents
L1 therapies. In particular, we expect to compete with other new therapies for our lead indications developed by companies such as Bristol-
Myers Squibb, Merck, Nektar Therapeutics, Idera Pharmaceuticals, Checkmate Pharmaceuticals, Oncosec Medical, Immetacyte, WindMIL
Therapeutics, Seattle Genetics, and others. We also may compete with therapies based on genetically engineered T cells rendered reactive
against tumor-associated antigens prior to their administration to patients. Genetically engineered T cells are being pursued by several
companies, including Adaptimmune, Bristol-Myers Squibb’s through its acquisition of Celgene, Gilead Sciences, Novartis and others. To
date, these technologies have been primarily applicable to hematologic malignancies, but their application in solid tumor indications may
create competition with us.
Competition for late stage melanoma patients may come, if approved, from several compounds currently under development. In 2019,
Idera Pharmaceuticals reported results from an ongoing Phase 3 clinical trial of the TLR9 agonist IMO-2125 in combination with
ipilimumab indicating an ORR of 18% in 49 melanoma patients who had previously received anti-PD-1 therapy. Checkmate
Pharmaceuticals reported preliminary results from an ongoing Phase 1b clinical trial of the TLR9 agonist CMP-001 in combination with
pembrolizumab indicating an ORR of 25% in 82 patients who had received prior anti-PD-1 therapy.
While other types of cancer immunotherapies may potentially be used in combination with TIL, such as checkpoint inhibitors, to
enhance efficacy, we also expect substantial direct competition from other types of immunotherapies. We face competition from
immunotherapy treatments offered by companies such as Amgen, AstraZeneca, Bristol-Myers Squibb, Merck, and Roche. Immunotherapy
is also being pursued by several biotechnology companies as well as by large-cap pharmaceutical companies. We cannot predict whether
other types of immunotherapies may be enhanced and show greater efficacy. As a result, we may have direct and substantial competition
from such immunotherapies in the future.
Many potential competitors, either alone or with their strategic partners, have substantially greater financial, technical and human
resources than we do. Accordingly, our competitors may be more successful than us in obtaining approval for treatments and achieving
widespread market acceptance and may render our treatments obsolete or non-competitive. Mergers and acquisitions in the biotechnology
and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study
sites and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs.
Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large
and established companies.
Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for
commercially important technology, inventions and know-how related to our business; defend and enforce our patents; preserve the
confidentiality of our trade secrets; and operate without infringing the valid enforceable patents and proprietary rights of third parties. Our
ability to stop third parties from making, using, selling, offering to sell or importing our products may depend on the extent to which we
have rights under valid and enforceable patents or trade secrets that cover these activities. With respect to both licensed and company-
owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with
respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be
granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same. We
may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect.
We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees,
consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by
maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have
confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have
adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by
competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us,
disputes may arise as to the rights in related or resulting know-how and inventions.
Government Regulations
The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among
other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging,
storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting
of biologics such as those we are developing. We, along with our third-party contractors, will be required to
21
Table of Contents
navigate the various preclinical, clinical and commercial approval and post-approval requirements of the governing regulatory agencies of
the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. The process of obtaining
regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the
expenditure of substantial time and financial resources.
Biologic products are regulated by the FDA under a combination of the federal Food, Drug, and Cosmetic Act, or FDCA, and Public
Health Services Act, or PHSA, and the FDA’s implementing regulations. Failure to comply with regulatory requirements may result in
significant regulatory actions. Such actions may include refusal to approve pending applications, license suspension or revocation,
withdrawal of an approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters,
modification of promotional materials or labeling, provision of corrective information, imposition of post-market requirements including
the need for additional testing, imposition of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy, or REMS,
product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial suspension of production or distribution,
FDA debarment, injunctions, fines, consent decrees, corporate integrity agreements, debarment from receiving government contracts and
new orders under existing contracts, exclusion from participation in federal and state healthcare programs, restitution, disgorgement, or
civil or criminal penalties, including fines and imprisonment, and adverse publicity, among other adverse consequences.
The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the
following:
● completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory
Practices, or GLP, regulation, as well as manufacturing development and formulation studies;
● submission to the FDA of an investigational new drug application, or IND, which must become effective before clinical trials
may begin and must be updated annually or when significant changes are made;
● approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site or centrally, before the
trial is begun;
● performance of adequate and well-controlled human clinical trials to establish the safety, and efficacy of the proposed biologic
product candidate for its intended purpose;
● preparation of and submission to the FDA of a BLA, after completion of pivotal clinical trial(s);
● satisfactory completion of an FDA Advisory Committee review, if applicable;
● a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;
● satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed
product is produced to assess compliance with cGMP, and to assure that the facilities, methods and controls are adequate to
preserve the biological product’s continued safety, purity and potency, and of selected clinical sites to assess compliance with
current Good Clinical Practices, or cGCPs; and
● FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the
United States, which must be updated periodically when changes are made.
The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals
for our product candidates will be granted on a timely basis, if at all. Prior to beginning the first clinical trial with a new product candidate,
we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product
to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND
also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic
characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the
use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes
effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the proposed
clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding
concerns or questions before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during trials
due to safety concerns or non-compliance. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical
trial.
Human immunotherapy products are a new category of therapeutics. Because this is a relatively new and expanding area of novel
therapeutic interventions, there can be no assurance as to the length of the trial period, the number of patients the FDA will require to be
enrolled in the trials in order to establish the safety, efficacy, purity and potency of immunotherapy products, or that the data generated in
these trials will be acceptable to the FDA to support marketing approval.
22
Table of Contents
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified
investigators in accordance with cGCPs, which include the requirement that all research subjects provide their informed consent for their
participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study,
the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated, and a statistical analysis plan. A separate
submission to the existing IND must be made for each successive clinical trial conducted during product development and for any
subsequent protocol amendments. Investigators must also provide certain information to the clinical trial sponsors to allow the sponsors to
make certain financial disclosures to the FDA.
Furthermore, an independent IRB for each site proposing to conduct the clinical trial or centrally must review and approve the plan for
any clinical trial, its informed consent form and any subject communications, before the clinical trial begins at that site, and upon
amendment of the trial, and must monitor the study until completed. An IRB considers, among other things, whether the risks to
individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits and whether the planned human
subject protections are adequate. Informed consent must be received from each study subject prior to participation in a clinical study.
Progress reports detailing the results of the clinical trials must also be submitted at least annually to the FDA and the IRB and more
frequently if serious adverse events or other significant safety information is found.
Regulatory authorities, the IRB, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the
subjects are being exposed to an unacceptable health risk, that the trial is not being conducted in accordance with regulatory or IRB
requirements, or that the trial is unlikely to meet its stated objectives. Sponsors may also discontinue studies or development programs for
many reasons, including changing business objectives. Some studies also include oversight by an independent group of qualified experts
organized by the clinical study sponsor, known as a data safety monitoring board, or DSMB, which provides recommendations and
assessments for whether or not a study should move forward at designated check points based on access to certain data from the study.
Following a review by a DSMB, the study may be halted if there is an unacceptable safety risk for subjects or on other grounds, such as
failure to demonstrate efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to
public registries. For instance, we are required to register certain clinical trials and post the results of certain completed clinical trials on a
government-sponsored database, ClinicalTrials.gov, within specified timeframes, and also to certify to FDA our compliance with these
requirements when we make FDA submissions. Failure to make required ClinicalTrials.gov submissions, submitting false or misleading
information to ClinicalTrials.gov, or making false certifications to FDA could result in enforcement actions, including civil money
penalties and adverse publicity.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap. Although
these are the typical phases for progression, and characteristics of the phases of a clinical development program, certain expedited
programs allow for variations that could support a marketing application based on surrogate endpoints, intermediate clinical endpoints, or
single-arm as opposed to comparative or placebo-controlled studies.
● Phase 1 - The investigational product is initially introduced into healthy human subjects or patients with the target disease or
condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the
investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on
effectiveness.
● Phase 2 - The investigational product is administered to a limited patient population with a specified disease or condition to
evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety
risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase
3 clinical trials.
● Phase 3 - The investigational product is administered to an expanded patient population in adequate and well-controlled studies to
further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at
multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit
relationship of the investigational product and to provide an adequate basis for product approval. Typically, two Phase 3 studies
are required by the FDA for product approval.
● Phase 4 - In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is
approved to gain more information about the product. These so-called Phase 4 studies may be made a condition to approval of the
BLA.
Additional types of data may also help to support a BLA, such as real-world evidence and patient experience data. Phase 1, Phase 2
and Phase 3, and Phase 4 testing, if applicable, may not be completed successfully within a specified period, if at all, and there can be no
assurance that the data collected will support FDA approval or licensure of the product. Concurrent with clinical trials,
23
Table of Contents
companies may complete additional animal studies and develop additional information about the biological characteristics of the product
candidate and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must
develop methods for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product
candidate does not undergo unacceptable deterioration over its shelf life and manufacturing processes must be validated.
The manufacture of investigational biologics for the conduct of human clinical trials is subject to cGMP requirements. Investigational
biologics and active ingredients imported into the United States are also subject to regulation by the FDA relating to their labeling and
distribution. Further, the export of investigational products outside of the United States is subject to regulatory requirements of the
importing country as well as U.S. export requirements under the FDCA. Additional United States and foreign laws and regulations may
also be applicable to the handling, import, export, and transportation of biological materials, including tissue samples.
During the development of a new therapeutic, a sponsor may be able to request a Special Protocol Assessment, or SPA, the purpose of
which is to reach an agreement with the FDA on the Phase 3 clinical trial protocol design and analysis that will form the primary basis of
product approval and an efficacy claim, as well as preclinical carcinogenicity trials and stability studies. An SPA may only be modified
with the agreement of the FDA and the trial sponsor, or if the director of the FDA reviewing division determines that a substantial scientific
issue essential to determining the safety or efficacy of the product was identified after the testing began. An SPA is intended to provide
assurance that, in the case of clinical trials, if the agreed upon clinical trial protocol is followed, the clinical trial endpoints are achieved,
and there is a favorable risk-benefit profile, the data may serve as the primary basis for an efficacy claim in support of a BLA. However,
SPA agreements are not a guarantee of approval of a product candidate or any permissible claims about the product candidate. In particular,
SPAs are not binding on the FDA if, among other reasons, previously unrecognized public health concerns arise during the performance of
the clinical trial, other new scientific concerns regarding the product candidate’s safety or efficacy arise, or if the sponsoring company fails
to comply with the agreed upon clinical trial protocol.
In addition, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA for a new active ingredient, indication,
dosage form, dosage regimen, or route of administration, must contain data that are adequate to assess the safety and effectiveness of the
product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric
subpopulation for which the product is safe and effective. Also, under the FDA Reauthorization Act of 2017, beginning in 2020, sponsors
submitting applications for product candidates intended for the treatment of adult cancer which are directed at molecular targets that the
FDA determines to be substantially relevant to the growth or progression of pediatric cancer must submit, with the application, reports
from molecularly targeted pediatric cancer investigations designed to yield clinically meaningful pediatric study data, using appropriate
formulations, to inform potential pediatric labeling. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for
submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data
requirements. Orphan products are also exempt from PREA requirements.
The FDA also may require submission of REMS, to ensure that the benefits of the biologic outweigh the risks. The REMS plan could
include medication guides, physician communication plans, and elements to assure safe use, such as restricted distribution methods, patient
registries, or other risk minimization tools. An assessment of the REMS must also be conducted at set intervals. Following product
approval, a REMS may also be required by the FDA if new safety information is discovered and the FDA determines that a REMS is
necessary to ensure that the benefits of the biologic outweigh the risks.
BLA Submission and Review by the FDA
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of
product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the
product for one or more indications. The BLA must include all relevant data available from pertinent preclinical and clinical studies,
including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry,
manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to
test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators.
The submission of a BLA requires payment of a substantial user fee to the FDA, under the
24
Table of Contents
Prescription Drug User Fee Act, and the sponsor of an approved BLA is also subject to annual program fees. These fees are typically
increased annually. A waiver of user fees may be obtained under certain limited circumstances.
Once a BLA has been submitted, the FDA has sixty days to determine whether it will accept the application for filing. The FDA
accepts applications for filing if it determines that the application is substantially complete to permit a substantive review. The FDA may
request additional information rather than accept a BLA for filing. In this event, the application must be resubmitted with the additional
information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for
filing, the FDA begins an in-depth substantive review.
The FDA’s goal is to review the application within ten months after it accepts the application for filing, or, if the application relates to a
serious or life-threatening indication and, if approved, the product would provide a significant improvement in safety and efficacy, six
months after the FDA accepts the application for filing, which is referred to as Priority Review. The review process is often significantly
extended if the FDA requests additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a
product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure
the product’s continued safety, purity and potency. There are numerous FDA personnel assigned to review different aspects of a BLA, and
uncertainties can be presented by their ability to exercise judgment and discretion during the review process. The development and
provision of additional data and information requested by FDA during review of a BLA may be time consuming and expensive.
The FDA may convene an advisory committee to provide clinical insight on application review questions. Before approving a novel
biologic, the FDA must either refer that biologic to an external advisory committee or provide in an action letter, a summary of the reasons
why the FDA did not refer the product candidate to an advisory committee. An advisory committee is typically a panel that includes
clinicians and other experts, which review, evaluate, and make a recommendation as to whether the application should be approved and
under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations
carefully when making decisions.
Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not
approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and
adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will
typically inspect one or more clinical sites to assure compliance with cGCP.
If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the
deficiencies in the submission and often will request additional testing, clinical studies, application modifications, or information in a
complete response letter, or CRL. A CRL indicates that the review cycle for the application is complete and that the application is not ready
for approval. If a CRL is issued, the applicant may either: resubmit the BLA, addressing all the deficiencies identified in the letter;
withdraw the application; or request an opportunity for a hearing. Notwithstanding the submission of any requested additional information,
the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. Data obtained from clinical trials
are not always conclusive and the FDA may interpret data differently than an applicant interprets the same data.
If the FDA finds that a BLA is approvable, the FDA may issue an approval letter. An approval letter authorizes commercial marketing
of the product with specific prescribing information for specific indications. However, even if the FDA approves a product, it may limit the
approved indications for use of the product, require that contraindications, warnings, or precautions be included in the product labeling,
including a boxed warning, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a product’s
safety and efficacy after approval, require testing and surveillance programs to monitor the product after commercialization, or impose
other conditions, including distribution restrictions or other risk management mechanisms under a REMS which can materially affect the
potential market and profitability of the product. The FDA may also not approve label statements that are necessary for successful
commercialization and marketing.
If compliance with the pre-and post-marketing regulatory standards are not maintained or if problems occur after the product reaches
the marketplace, the FDA may also withdraw the product approval. Further, should new safety information arise, additional testing, product
labeling, or FDA notification may be required.
A sponsor may seek approval of its product candidate under programs designed to accelerate the FDA’s review and approval of new
drugs and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for Fast Track
designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical
25
Table of Contents
needs for the condition. For a Fast Track designation, the FDA may consider sections of the BLA for review on a rolling basis before the
complete application is submitted if relevant criteria are met. Fast Track-designated products are also eligible for more frequent FDA
interactions. A Fast Track-designated product candidate may also qualify for Priority Review, under which the FDA sets the target date for
FDA action on the BLA at six months after the FDA accepts the application for filing. Priority Review is granted when there is evidence
that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a
serious condition. If criteria are not met for Priority Review, the application is subject to the standard FDA review period of 10 months
after the FDA accepts the application for filing. Priority Review designation does not change the scientific/medical standard for approval or
the quality of evidence necessary to support approval.
Under the Accelerated Approval Program, the FDA may approve a BLA on the basis of either a surrogate endpoint that is reasonably
likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is
reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity,
or prevalence of the condition and the availability or lack of alternative treatments. To qualify for Accelerated Approval, the product must
be intended to treat a serious condition and must generally provide a meaningful advantage over available therapies. Post-marketing studies
or completion of ongoing studies after marketing approval are required to verify the biologic’s clinical benefit in relationship to the
surrogate endpoint or ultimate outcome in relationship to the clinical benefit. If this trial is not conducted, if it fails to verify the benefit, if
other evidence demonstrates that the product is not safe, pure or potent, or if the applicant disseminates false or misleading promotional
material, the FDA may withdraw approval of the application on an expedited basis. Sponsors of products under the Accelerated Approval
Pathway must further submit promotional materials to the FDA before dissemination.
In addition, the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted and signed into law in
2012, established the new Breakthrough Therapy Designation. A sponsor may seek FDA designation of its product candidate as a
Breakthrough Therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a
serious or life-threatening disease or condition and preliminary clinical evidence indicates that the therapy may demonstrate substantial
improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in
clinical development. Sponsors may request the FDA to designate a Breakthrough Therapy at the time of or any time after the submission
of an IND, but ideally before an end-of-Phase 2 meeting with the FDA. If the FDA designates a Breakthrough Therapy, it may take actions
appropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the
review team throughout the development of the therapy; providing timely advice to, and interactive communication with, the sponsor
regarding the development of the drug to ensure that the development program to gather the nonclinical and clinical data necessary for
approval is as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-
disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development
program and to serve as a scientific liaison between the review team and the sponsor; and considering alternative clinical trial designs when
scientifically appropriate, which may result in smaller trials or more efficient trials that require less time to complete and may minimize the
number of patients exposed to a potentially less efficacious treatment. Breakthrough Therapy designation also allows the sponsor to file
sections of the BLA for review on a rolling basis.
Through the 21st Century Cures Act, or Cures Act, Congress also established another expedited program, called a Regenerative
Medicine Advanced Therapy, or RMAT, designation. The Cures Act directs the FDA to facilitate an efficient development program for and
expedite review of RMATs. To qualify for this program, the product must be a cell therapy, therapeutic tissue engineering product, human
cell and tissue product, or a combination of such products, and not a product solely regulated as a human cell and tissue product. The
product must be intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition, and preliminary clinical
evidence must indicate that the product has the potential to address an unmet need for such disease or condition. Advantages of the RMAT
designation include all the benefits of the Fast Track and breakthrough therapy designation programs, including early interactions with the
FDA. These early interactions may be used to discuss potential surrogate or intermediate endpoints to support accelerated approval.
In August 2017, we announced that the FDA had granted Fast Track designation for lifileucel, for advanced metastatic melanoma. The
Fast Track designation does not change the standards for approval but may expedite the development or approval process. In October 2018,
we announced that lifileucel had received the RMAT designation for metastatic melanoma. In 2019 the FDA granted Fast Track
designation and Breakthrough Therapy Designation for LN-145 for metastatic cervical cancer.
26
Table of Contents
Orphan Drugs
During 2015, we received an orphan drug designation for lifileucel in the United States to treat malignant melanoma stages IIB-IV. We
plan to seek orphan drug designation for some or all our other product candidates in specific orphan indications in which there is a
medically plausible basis for the use of such products.
During 2018, we received an orphan-drug designation from the FDA for LN-145 for the treatment of cervical cancer with a tumor size
of greater than 2cm in diameter.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or
condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient
population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing
and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic.
Additionally, sponsors must present a plausible hypothesis for clinical superiority to obtain orphan drug designation if there is a product
already approved by the FDA that is intended for the same indication and that is considered by the FDA to be the same product as the
already approved product. This hypothesis for clinical superiority must be demonstrated to obtain orphan exclusivity. Orphan drug
designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the
therapeutic agent and its potential orphan use are disclosed publicly by the FDA.
If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the
disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve
any other applications, including a full BLA, to market the same biologic, as sameness is defined in the FDA’s regulations, for the same
indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug
exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient
quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug
exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or
biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research,
opportunities for certain research grant funding, and a waiver of the BLA application fees. The tax credit, however, was recently limited
through Congress’s tax reform efforts. Despite these benefits, the orphan drug designation does not convey any advantage in, or shorten the
duration of, the regulatory review or approval process.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for
which it received orphan designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later
determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the
product to meet the needs of patients with the rare disease or condition. The FDA may also approve a product deemed to be the same as an
approved orphan product for the same orphan indication, despite periods of exclusivity, if the new product is demonstrated to be clinically
superior to the former product.
Market and Data Exclusivity and Biosimilars
While the FDA may eventually license products, as further described below, that are biosimilar to any of our product candidates that
are approved, our products may receive periods of regulatory exclusivity, in addition to orphan drug exclusivity for those products with
orphan drug designations, providing additional protection from certain forms of competition. For instance, our products may receive 12
years of reference product exclusivity that begins running at the time of first licensure. During this time, the FDA may not make an
approval of a biosimilar product effective and may not accept a biosimilar application for four years from the date of licensure. However,
certain changes and supplements to an approved BLA, and subsequent applications filed by the same sponsor, manufacturer, licensor,
predecessor in interest, or other related entity do not qualify for the exclusivity period. The PHSA also includes provisions to protect
reference products that have patent protection. The biosimilar product sponsor and reference product sponsor may, but are not required to,
exchange certain patent and product information for the purpose of determining whether there should be a legal patent challenge. Based on
the outcome of negotiations surrounding the exchanged information, the reference product sponsor may bring a patent infringement suit
and injunction proceedings against the biosimilar product sponsor. The biosimilar applicant may also be able to bring an action for
declaratory judgment concerning the patent.
The Biologics Price Competition and Innovation Act, or BPCIA, created an abbreviated approval pathway for biological products
shown to be highly similar to or interchangeable with an FDA-licensed reference biological product. Accordingly, if we receive FDA
27
Table of Contents
licensure, we may face competition from biosimilar products. Biosimilarity sufficient to reference a prior FDA-approved product requires a
high similarity to the reference product notwithstanding minor differences in clinically inactive components, and no clinically meaningful
differences between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity must be shown
through analytical studies, animal studies, and at least one clinical trial, absent a waiver by the FDA. There must be no difference between
the reference product and a biosimilar in conditions of use, route of administration, dosage form, and strength. A biosimilar product may be
deemed interchangeable with a prior approved product if it meets the higher hurdle of demonstrating that it can be expected to produce the
same clinical results as the reference product and, for products administered multiple times, the biologic and the reference biologic may be
switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use
of the reference biologic.
Pediatric Exclusivity and Patent Term Extension
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the
attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity. This six-month
exclusivity may be granted if a sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data
do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to
the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA,
whatever regulatory periods of exclusivity that already cover the product are extended by six months.
If approved, biologics may also be eligible for periods of U.S. patent term restoration. If granted, patent term restoration extends the
patent life of a single unexpired patent that has not previously been extended, for a maximum of five years. The total patent life of the
product with the extension also cannot exceed fourteen years from the product’s approval date. Subject to the prior limitations, the period
of the extension is calculated by adding half of the time from the effective date of an IND to the initial submission of a marketing
application, and all the time between the submission of the marketing application and its approval. This period may also be reduced by any
time that the applicant did not act with due diligence. Whether any of our product candidates will be eligible for patent term restoration is
currently unknown. Even if any of our product candidates are found to be eligible for patent term protection, the applicable authorities may
subsequently determine that we are not eligible for such restoration periods.
Post-Approval Requirements
Any products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things,
record-keeping requirements, reporting of adverse experiences with the product and deviations, annual reporting and monitoring and
providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, certain electronic records
and signature requirements, fulfilling post-marketing study and REMS commitments, and complying with FDA promotion and advertising
requirements, which include, among other things, standards for direct-to-consumer advertising, restrictions on promoting products for uses
or in patient populations that are not described in the product’s approved uses or otherwise consistent with the FDA-approved product
labeling (known as “off-label use”), limitations on industry-sponsored scientific and educational activities, rules regarding communication
of health care economic information regarding biopharmaceutical products to payors and formularies, and requirements for promotional
activities involving the internet. Although physicians may prescribe legally available products for off-label use, if they deem such use to be
appropriate in their professional medical judgment, manufacturers may not market or promote such off-label uses. Recent court decisions
have impacted FDA’s enforcement activity regarding off-label promotion in light of First Amendment considerations; however, there are
still significant risks in this area, in part due to the potential for False Claims Act exposure.
In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after
approval to ensure the long-term stability of the product. cGMP regulations require among other things, quality control and quality
assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any
deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are required to
register their establishments with the FDA and certain state agencies that list their products, and are subject to periodic unannounced
inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to
expend time, money, and effort in the areas of production and quality control to maintain cGMP compliance. Discovery of problems with a
product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things,
withdrawal of approval, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly
regulated, and depending on the significance of the change, may require
28
Table of Contents
prior FDA approval or notification before being implemented. Other types of changes to the approved product, such as adding new
indications and claims, are also subject to further FDA review and approval.
The Drug Supply Chain Security Act, or DSCSA, imposes obligations on manufacturers of prescription biopharmaceutical products
for commercial distribution, regulating the distribution of the products at the federal level, and sets certain standards for federal or state
registration and compliance of entities in the supply chain, including manufacturers and repackagers, wholesale distributors, third-party
logistics providers, and dispensers. The DSCSA preempts previously enacted state laws and the pedigree requirements of the Prescription
Drug Marketing Act, or PDMA. Trading partners within the drug supply chain must now ensure certain product tracing requirements are
met that they are doing business with other authorized trading partners; and they are required to exchange transaction information,
transaction history, and transaction statements. Further, the DSCSA limits the distribution of prescription pharmaceutical products and
imposes requirements to ensure overall accountability and security in the drug supply chain. As of November 27, 2018, product identifier
information, an aspect of the product tracing scheme, is required.
As previously mentioned, the FDA may also require Phase 4 testing and surveillance to monitor the effects of an approved product.
Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative
consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective
advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or
effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and
may require the implementation of other risk management measures. Also, new government requirements, including those resulting from
new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products
under development.
Additional Biologic Requirements
To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing
controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend
licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical
public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable
diseases in the United States and between states.
After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the
manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution.
If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA, together with a
release protocol showing the results of all the manufacturer's tests performed on the lot. The FDA may also perform certain confirmatory
tests on lots of some products before releasing the lots for distribution by the manufacturer.
In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of
biological products. After approval of biologics, manufacturers must address any safety issues that arise, are subject to recalls or a halt in
manufacturing, and are subject to periodic inspection after approval.
Other Healthcare Laws and Compliance Requirements
Our sales, promotion, medical education and other activities following product approval will be subject to regulation by numerous
regulatory and law enforcement authorities in the United States, and in addition to the FDA, these entities may include the Federal Trade
Commission, the Department of Justice, the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and
Human Services and state and local governments. Our promotional and scientific/educational programs must comply with the federal Anti-
Kickback Statute, or AKS, the Foreign Corrupt Practices Act, or FCPA, the False Claims Act, or FCA, the Veterans Health Care Act,
physician payment transparency laws, privacy laws, security laws, and additional state laws similar to the foregoing.
The federal AKS prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or
receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing,
ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal
healthcare programs, in whole or in part. The term remuneration has been interpreted broadly to include anything of value. The federal
AKS has been interpreted broadly to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers,
purchasers, and formulary managers on the other. The term "remuneration" includes kickbacks, bribes or rebates and also has been
29
Table of Contents
broadly interpreted to include anything of value, including, for example, gifts, discounts, waivers of payment, ownership interest and
providing anything at less than its fair market value. There are a number of statutory exceptions and regulatory safe harbors protecting
some common activities from prosecution or other regulatory sanctions. The exceptions and safe harbors are drawn narrowly and practices
that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to
scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all the requirements of a particular applicable statutory
exception or regulatory safe harbor does not make the conduct per se illegal under the AKS. Instead, the legality of the arrangement will be
evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Our practices may not in all cases meet
all the criteria for protection under a statutory exception or regulatory safe harbor.
Additionally, the intent standard under the federal AKS was amended by the Patient Protection Affordable Care Act of 2010, as
amended by the Health Care and Education Reconciliation Act of 2010, which is collectively referred to as the Affordable Care Act, or
ACA, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate
it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a
violation of the federal AKS constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.
The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have
presented or caused to be presented a claim for payment, or approval to a federal healthcare program that the person knows or should know
is for an item or service that was not provided as claimed or is false or fraudulent.
The FCA imposes liability on persons who, among other things, knowingly present or cause to be presented false or fraudulent claims
for payment to, or approval by the federal government knowingly making or using, or causing to be made or used a false statement or
record material to a claim to the federal government, or avoiding, decreasing or concealing an obligation to pay money to the federal
government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or
demand" for money or property presented to the federal government. The civil FCA has been or can be used to assert liability on the basis
of kickbacks and other improper referrals, improperly reported government pricing metrics such as Best Price and Average Manufacturer
Price, improper promotion of uses not expressly approved by the FDA in a drug’s label, false statements associated with government
grants, and allegations of misrepresentations with respect to services rendered, as well as claims for payment that are inaccurate or
fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. FCA claims may be based on
noncompliance with regulatory requirements under an implied certification theory if material to the government’s decision to buy or pay
for a drug. Intent to deceive is not required to establish liability under the civil FCA. Civil FCA liability may also be imposed for Medicare
or Medicaid overpayments caused by understated rebate amounts that are not refunded within 60 days of discovering the overpayment,
even if the overpayment was not caused by a false or fraudulent act. Actions under the FCA may be brought by the government or as a qui
tam action by a private individual in the name of the government. If the government intervenes in a qui tam action, and prevails, the qui
tam plaintiff will share in the proceeds from damages and fines or settlement funds. If the government declines to intervene, the qui tam
plaintiff may pursue the case alone. Violations of the FCA can result in significant monetary penalties and treble damages. The government
may further prosecute conduct under the criminal FCA, which prohibits the making or presenting of a claim to the government knowing the
claim to be false, fictitious or fraudulent. Unlike the civil FCA, conviction requires proof of intent to submit a false claim. In addition,
federal AKS violations (which may be alleged based on certain marketing practices, including allegations of off-label promotion) implicate
the FCA.
Additionally, the FCPA, and similar worldwide anti-bribery laws, generally prohibit companies and their intermediaries from making,
offering or authorizing improper payments or other items of value, directly or indirectly, to foreign officials, political parties, or candidates
for the purpose of obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to
comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the
corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for
international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and
civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts. We cannot assure you that our internal
control policies and procedures will protect us from reckless or negligent acts committed by our employees, future distributors, partners,
collaborators or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a
negative impact on our business, results of operations and reputation.
Payment or reimbursement of prescription drugs by Medicaid or Medicare requires manufacturers of the drugs to submit pricing
information to the Centers for Medicare & Medicaid Services, or CMS. The Medicaid Drug Rebate statute requires manufacturers to
calculate and report price points, which are used to determine Medicaid rebate payments shared between the states and the federal
government and Medicaid payment rates for the drug. For drugs paid under Medicare Part B, manufacturers must also calculate and
30
Table of Contents
report their Average Sales Price or ASP, which is used to determine the Medicare Part B payment rate for the drug. Drugs that are approved
under a Biologic License Application, or BLA, or a New Drug Application, or NDA, including 505(b)(2) drugs, are subject to an additional
inflation penalty which can substantially increase rebate payments. In addition, for BLA and NDA drugs, the Veterans Health Care Act, or
VHCA, requires manufacturers to calculate and report to the Veterans Administration, or VA, a different price called the Non‑Federal
Average Manufacturing Price, which is used to determine the maximum price that can be charged to certain federal agencies, referred to as
the Federal Ceiling Price, or FCP. Like the Medicaid rebate amount, the FCP includes an inflation penalty. A Department of Defense
regulation requires manufacturers to provide this discount on drugs dispensed by retail pharmacies when paid by the TRICARE Program.
All these price reporting requirements create risk of submitting false information to the government, and potential FCA liability.
The VHCA also requires manufacturers of covered drugs participating in the Medicaid program to enter into Federal Supply Schedule
contracts with the VA through which their covered drugs must be sold to certain federal agencies at FCP and to report pricing information.
This necessitates compliance with applicable federal procurement laws and regulations and subjects us to contractual remedies as well as
administrative, civil, and criminal sanctions. In addition, the VHCA requires manufacturers participating in Medicaid to agree to provide
different mandatory discounts to certain Public Health Service grantees and other safety net hospitals and clinics.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil prohibits,
among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or
fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any
healthcare benefit program, regardless of whether the payor is public or private third-party, knowingly and willfully embezzling or stealing
from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, and knowingly and willfully
falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with
the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters. The ACA amended the intent
requirement of certain of these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge of the
statute, or the specific intent to violate it, to have committed a violation.
We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our
business. HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and their respective
implementing regulations, including the final omnibus rule published on January 25, 2013, imposes specific requirements relating to the
privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy
and security standards directly applicable to “business associates,” defined as a person or entity that performs certain functions or activities
that involve the use or disclosure of protected health information in connection with providing a service for or on behalf of, or provide
services to, a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business
associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in
federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In
addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in
significant ways and may not have the same effect. The Department of Health and Human Services Office of Civil Rights, or the OCR, has
increased its focus on compliance and continues to train state attorneys general for enforcement purposes. The OCR has increased both its
efforts to audit HIPAA compliance and its level of enforcement, with one recent penalty exceeding $5 million.
Even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal
Trade Commission, or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or
practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a). The
FTC expects a company's data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer
information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
Medical data is considered sensitive data that merits stronger safeguards. The FTC's guidance for appropriately securing consumers'
personal information is similar to what is required by the HIPAA Security Rule.
Payments made to physicians and other healthcare providers, and other financial interests, have been the subject of a range of federal
and state laws. The federal physician payment transparency requirements, sometimes referred to as the Physician Payments Sunshine Act,
or the Sunshine Act, was created under the ACA. The Sunshine Act, among other things, imposes reporting requirements on drug
manufacturers for payments or other transfers of value made by them to physicians and teaching hospitals, as well as ownership and
investment interests held by physicians, other healthcare providers, and their immediate family members.
31
Table of Contents
Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an
additional aggregate of $1 million per year for “knowing failures,” for all payments, transfers of value or ownership or investment interests
that are not timely, accurately and completely reported in an annual submission. In the future, the reporting and transparency requirements
for payments and transfers of value will be extend (based on 2018 legislation) beyond physicians to physician assistants, nurse
practitioners, and other mid-level HCPs, (with reporting requirements going into effect in 2022 for payments made in 2021). Additionally,
certain states also mandate implementation of commercial compliance programs, impose restrictions on drug manufacturer marketing
practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and other HCPs.
Analogous state laws and regulations, such as state anti-kickback and false claims laws, and other state laws addressing the
pharmaceutical and healthcare industries, which may apply to items or services reimbursed by any third-party payor, including commercial
insurers, and in some cases may apply regardless of payor, i.e. even if reimbursement is not available. Some state laws require
pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines (the PhRMA Code) and the
relevant compliance program guidance promulgated by the federal government (HHS-OIG) in addition to requiring drug manufacturers to
report pricing and marketing information, including, among other things, information related to gifts, payments, or other remuneration to
physicians and other healthcare providers or marketing expenditures, state and local laws that require the registration of pharmaceutical
sales representatives, and state laws governing the privacy and security of health information and the use of prescriber-identifiable data in
certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating
compliance efforts. For example, California enacted legislation – the California Consumer Privacy Act, or CCPA, – which went into effect
on January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy
rights to California residents, including the right to opt out of certain disclosures of their information.
To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which
may include, for instance, applicable post-marketing requirements, including safety surveillance, anti‑fraud and abuse laws, and
implementation of corporate compliance programs and reporting of payments or transfers of value to HCPs.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under such laws, it is
possible that certain business activities could be subject to challenge under one or more of such laws. The scope and enforcement of each
of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of
applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between
healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in
the healthcare industry. Ensuring that business arrangements with third parties comply with applicable healthcare laws, as well as
responding to possible investigations by government authorities, can be time- and resource-consuming and can divert management's
attention from the business.
If our operations are found to be in violation of any of such health regulatory laws described above or any other governmental laws
and regulations that apply to us, we may be subject to penalties, including, without limitation, civil, administrative, and criminal penalties,
damages, fines, disgorgement, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare
programs and individual imprisonment, injunctions, private qui tam actions brought by individual whistleblowers in the name of the
government, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other
agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business
and our financial results.
Coverage and Reimbursement
Sales of pharmaceutical products depend significantly on the availability of third-party coverage and reimbursement. Third-party
payors include Medicare, Medicaid, and other government programs at the federal and state level, managed care providers, private health
insurers and other organizations. Third party payors decide which drugs they will pay for on behalf of their beneficiaries and establish
reimbursement levels for health care. Although we currently believe that third-party payors will provide coverage and reimbursement for
our product candidates, if approved, these third-party payors are increasingly challenging the price and examining the cost-effectiveness of
medical products and services, with a recent focus on prioritization of “equivalent,” less expensive alternatives when available. In addition,
significant uncertainty exists as to the reimbursement status of newly approved healthcare products. We may need to conduct expensive
clinical studies to demonstrate the comparative cost-effectiveness of our products. The product candidates that we develop may not be
considered cost-effective. It is time consuming and expensive for us to seek coverage
32
Table of Contents
and reimbursement from third-party payors. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an
adequate reimbursement rate will be approved, especially for product candidates such as ours, which are used in the inpatient setting,
usually resulting in no separate reimbursement for pharmaceuticals. There are additional pressures on pricing as a result of other, peripheral
policies impacting reimbursement across both government and private payors. Non-health specific policies may impart downstream
impacts on private insurance reimbursement decision-making. In consideration of these numerous factors, reimbursement may not be
available or sufficient to allow us to sell our products on a competitive and profitable basis.
Medicare is a federally-funded program managed by CMS through local contractors that administer coverage and reimbursement for
certain healthcare items and services furnished to the elderly and disabled. Medicare Part A covers inpatient hospitalization and Medicare
Part B covers outpatient medical services. Medicare coverage of drugs and biological products and payment rates to providers are
established by federal law and regulations. Medicaid is an insurance program for certain categories of low income patients who are
otherwise uninsured and is both federally and state funded and managed by each state. The federal government sets general guidelines for
Medicaid and requires rebates on outpatient drugs and biological products, including those administered by physicians if the cost is billed
separately. Each state creates specific regulations that govern its individual program, including supplemental rebate programs that prioritize
coverage for drugs on the state Preferred Drug List. Government laws and regulations also establish price controls on prescription drugs
purchased by government agencies that provide health care and certain federally funded hospital outpatient departments and clinics. In the
United States, private health insurers and other third-party payors often provide reimbursement for products and services based on the level
at which the government provides reimbursement through the Medicare or Medicaid programs for such products and services. These
restrictions and limitations influence the purchase of healthcare services and products. In addition, government programs like Medicaid
include substantial penalties for increasing commercial prices over the rate of inflation which can affect realization and return on
investment. Further, some stakeholders have recently questioned whether the market price of prescription drugs may be inflated by virtue
of the built-in cost imparted by the government rebate model, often negotiated indirectly in exchange for a coverage determination or
formulary placement where relevant.
In the United States, the European Union, and other potentially significant markets for our product candidates, government authorities
and private third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for
new and innovative products and therapies, which often has resulted in average selling prices lower than they would otherwise be.
Manufacturers frequently must rebate a portion of the prescription price to the third‑party payors as a condition of coverage, which can
greatly reduce realization on the sale. Third-party payors are increasingly challenging the price and examining the medical necessity and
cost-effectiveness of medical products and services, in addition to their safety and efficacy, and are developing increasingly sophisticated
methods of controlling healthcare costs. They may limit coverage to specific drug products on an approved list, or formulary, which might
not include all the FDA-approved drug products for a particular indication, or they may control costs, particularly for new expensive
therapies, by requiring prior authorization or imposing other restrictions before covering certain products, or they may condition payment
based on achieving performance metrics. Legislative proposals to reform healthcare or reduce costs under government programs may result
in lower reimbursement for our product candidates or exclusion of our product candidates from coverage.
Achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new
product, because Medicare and Medicaid can represent a sizeable share of the market and because private payors often rely on the lead of
the governmental payors in rendering coverage and reimbursement determinations. Further, the increased emphasis on managed healthcare
in the United States and on country and regional pricing and reimbursement controls in the European Union will likely put additional
pressure on product pricing, reimbursement, and utilization, which may adversely affect our future product sales and results of operations.
These pressures can arise from rules and practices of managed care groups, competition within therapeutic classes, availability of generic
equivalents, judicial decisions and governmental laws and regulations related to Medicare, Medicaid, and healthcare reform,
pharmaceutical coverage and reimbursement policies, and pricing in general. Patients who are prescribed treatments for their conditions
and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare
costs. Sales of our product candidates will therefore depend substantially, both domestically and abroad, on the extent to which the costs of
our products will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or
reimbursed by government health administration authorities, such as Medicare and Medicaid, private health insurers, and other third-party
payors.
As a result of the above, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity
and cost-effectiveness of our products, in addition to the costs required to obtain FDA approvals. Our product candidates may not be
considered medically necessary or cost-effective. A payor’s decision to provide coverage for a drug product does not imply that an
adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to ensure
33
Table of Contents
acceptance and use of our products and product candidates or enable us to maintain price levels sufficient to realize an appropriate return
on our investment in drug development. Legislative and regulatory proposals to reform healthcare or reduce costs under government
insurance programs may result in lower reimbursement for our products and product candidates or exclusion of our products and product
candidates from coverage. The cost containment measures that healthcare payors and providers are instituting and any healthcare reform
could significantly reduce our revenues from the sale of any approved product candidates. We cannot provide any assurances that we will
be able to obtain and maintain third-party coverage or adequate reimbursement for our product candidates in whole or in part.
Healthcare Reform
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to
change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the
United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing
healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus
of these efforts and has been significantly affected by major federal and state legislative initiatives.
In addition, other legislative and regulatory changes have been proposed and adopted since the ACA was enacted. These changes
include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013, which will remain in effect
through 2025 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, which, among
other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, increased the
statute of limitations period for the government to recover overpayments to providers from three to five years. In 2017, CMS promulgated
a rule reducing Medicare Part B reimbursement to hospitals for drugs purchased under the 340B program by 30%. Although hospital trade
associations filed a lawsuit challenging the regulation, the final rule is now in effect. These new laws may result in additional reductions in
Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved,
and, accordingly, our financial operations.
Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments
from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to
generate revenue, attain profitability or commercialize our drugs.
The cost of pharmaceuticals continues to generate substantial governmental and third-party payor interest and states have begun to
take action to increase transparency in drug pricing through mandatory reporting requirements. We expect that the pharmaceutical industry
will experience pricing pressures due to the trend toward managed healthcare, the increasing influence of managed care organizations, and
additional legislative proposals. Our results of operations could be adversely affected by current and future healthcare reforms. While we
cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented in the future, the announcement
or adoption of these proposals could have a material adverse effect on our ability to obtain adequate prices for our product candidates and
operate profitably.
Foreign Regulation
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and
commercial sales and distribution of our products to the extent we choose to develop or sell any products outside of the United States. The
approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The
requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
In the EU, member states require both regulatory clearances by the national competent authority and a favorable ethics committee
opinion prior to the commencement of a clinical trial. Under the EU regulatory systems, marketing authorization applications may be
submitted under either a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing
authorization that is valid for all EU member states. It is compulsory for medicines produced by certain biotechnological processes.
Because our products are produced in that way, we would be subject to the centralized process. Under the centralized procedure,
pharmaceutical companies submit a single marketing authorization application to the European Medicines Agency. Once granted by the
European Commission, a centralized marketing authorization is valid in all EU member states, as well as the European Economic Area
countries. By law, a company can only start to market a medicine once it has received a marketing authorization.
34
Table of Contents
Employees
As of December 31, 2019, we had 148 employees, 112 of whom were engaged in research and development activities and 36 of whom
were engaged in general and administrative support activities. None of our employees are subject to a collective bargaining agreement. We
consider our relationship with our employees to be good. Our future performance depends significantly upon the continued service of our
key scientific, technical and senior management personnel.
Available Information
We maintain a website at www.iovance.com and make available there, free of charge, our periodic reports filed with the Securities and
Exchange Commission, or SEC, as soon as is reasonably practicable after filing. The SEC maintains a website at http:/www.sec.gov that
contains reports, proxy and information statements, and other information regarding issuers such as us that file electronically with the SEC.
Item 1A. Risk Factors
The risks described below may not be the only ones relating to our company. Additional risks that we currently believe are immaterial
may also impair our business operations. Our business, financial conditions and future prospects and the trading price of our common
stock could be harmed as a result of any of these risks. Investors should also refer to the other information contained or incorporated by
reference in this Annual Report on Form 10-K, including our financial statements and related notes, and our other filings from time to time
with the Securities and Exchange Commission.
Risks Related to Our Business
We have a history of operating losses; we expect to continue to incur losses and we may never be profitable.
We are a clinical-stage biotechnology company focused on the development and commercialization of novel cancer immunotherapy
products designed to harness the power of a patient's own immune system to eradicate cancer. We do not have products approved for
commercial sale and have not generated revenue from operations. As of December 31, 2019, we had an accumulated deficit of $570.6
million. In addition, during the year ended December 31, 2019, we incurred a net loss of $197.6 million. Since our inception we have not
generated any revenues from operations. We are preparing for the commercial launch of our products, if approved, in 2021. We do not
expect to generate any meaningful product sales or royalty revenues until we have a product approved. We expect to incur significant
additional operating losses in the future as we expand our development and clinical trial activities in support of demonstrating the
effectiveness of our products.
Our ability to achieve long-term profitability is dependent upon obtaining regulatory approvals for our products and successfully
commercializing our products alone or with third parties. However, our operations may not be profitable even if any of our products under
development are successfully developed and produced and thereafter commercialized.
Our current line of business, and the biotechnology industry in which we operate, makes it difficult to evaluate our business plan
and our prospects.
We have only a limited operating history in our current line of business on which a decision to invest in our company can be based.
The future of our company currently is dependent upon our ability to implement our business plan, as that business plan may be modified
from time to time by our management and Board of Directors. While we believe that we have a reasonable business plan and research and
development strategy, we have only a limited operating history against which we can test our plans and assumptions, and investors
therefore cannot evaluate the likelihood of our success.
We face the problems, expenses, difficulties, complications and delays normally associated with a pre-commercial biotechnology
company, many of which are beyond our control. Accordingly, our prospects should be considered in light of the risks, expenses and
difficulties frequently encountered in the establishment of a new business developing technologies in an industry that is characterized by a
number of market entrants and intense competition. Because of our size and limited resources, we may not possess the ability to
successfully overcome many of the risks and uncertainties frequently encountered by pre-commercial companies involved in the rapidly
evolving field of immunotherapy. If our research and development efforts are successful, we may also face the risks associated
35
Table of Contents
with the shift from development to commercialization of new products based on innovative technologies. There can be no assurance that
we will be successful in developing our business.
We are substantially dependent on the success of our product candidates and cannot guarantee that these product candidates will
successfully complete development, receive regulatory approval, or be successfully commercialized.
We currently have no products approved for commercial sale. We have invested a significant portion of our efforts and financial
resources in the development of our current product candidates, lifileucel and LN-145 and expect that we will continue to invest heavily in
our current product candidates, as well as in any future product candidates we may develop. Our business depends entirely on the
successful development and commercialization of our product candidates, which may never occur. Our ability to generate revenues in the
future is substantially dependent on our ability to develop, obtain regulatory approval for, and then successfully commercialize our product
candidates. We currently generate no revenue from the sale of any products, and we may never be able to develop or commercialize a
marketable product.
Our product candidates will require additional clinical and non-clinical development, regulatory approval, commercial manufacturing
arrangements, establishment of a commercial organization, significant marketing efforts, and further investment before we generate any
revenue from product sales. We cannot assure you that we will meet our timelines for our current or future clinical trials, which may be
delayed or not completed for a number of reasons.
We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or
comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates or
regulatory approval that will allow us to successfully commercialize our product candidates. If we do not receive FDA approval with the
necessary conditions to allow successful commercialization, and then successfully commercialize our product candidates, we will not be
able to generate revenue from those product candidates in the United States in the foreseeable future, or at all. Any significant delays in
obtaining approval for and commercializing our product candidates will have a material adverse impact on our business and financial
condition.
We have not previously submitted a BLA to the FDA, or similar marketing application to comparable foreign authorities, for any
product candidate, and we cannot be certain that our current or any future product candidates will be successful in clinical trials or receive
regulatory approval. Furthermore, although we do not expect to submit our BLA with comparisons to existing or more established
therapies and likewise do not expect FDA to base its determination with respect to product approval on such comparisons, FDA may factor
these comparisons into its decision whether to approve our TIL therapies, including lifileucel and LN-145 for metastatic cervical cancer.
FDA may also consider its approvals of competing products, which may alter the treatment landscape concurrently with their review of our
BLA filings, and which may lead to changes in FDA’s review requirements that have been previously communicated to us and our
interpretation thereof, including changes to requirements for clinical data or clinical study design. Such changes could delay approval or
necessitate withdrawal of our BLA filings.
Our product candidates are susceptible to the risks of failure inherent at any stage of product development, including the appearance of
unexpected adverse events or failure to achieve primary endpoints in clinical trials. Further, our product candidates may not receive
regulatory approval even if they are successful in clinical trials.
If approved for marketing by applicable regulatory authorities, our ability to generate revenues from our product candidates will
depend on our ability to:
● price our product candidates competitively such that third-party and government reimbursement leads to broad product adoption;
● prepare a broad network of clinical sites for administration of our product;
● create market demand for our product candidates through our own marketing and sales activities, and any other arrangements to
promote these product candidates that we may otherwise establish;
● receive regulatory approval for the targeted patient population(s) and claims that are necessary or desirable for successful
marketing;
● hire, train, and deploy a commercial team including a sales force to commercialize product candidates in the United States and
abroad;
● manufacture product candidates through CMOs or in our own manufacturing facility in sufficient quantities and at acceptable
quality and manufacturing cost to meet commercial demand at launch and thereafter;
36
Table of Contents
● establish and maintain agreements with wholesalers, distributors, pharmacies, and group purchasing organizations on
commercially reasonable terms;
● maintain patent and trade secret protection and regulatory exclusivity for our product candidates;
● launch commercial sales of our product candidates;
● maintain compliance with applicable laws, regulations, and guidance specific to commercialization including interactions with
HCPs, patient advocacy groups, and communication of health care economic information to payors and formularies;
● achieve market acceptance of our product candidates by patients, the medical community, and third-party payors;
● achieve appropriate reimbursement for our product candidates;
● maintain a distribution and logistics network capable of product storage within our specifications and regulatory guidelines, and
further capable of timely product delivery to commercial clinical sites;
● effectively compete with other therapies or competitors; and
● maintain a continued acceptable safety profile of our product candidates following launch.
We have a brief history as a company conducting clinical trials and face risks due to the need to rely on third parties.
We initiated our clinical development efforts in 2015 and expanded those efforts in 2017. As such, we have a brief history of
conducting clinical trials and have no experience as a company in filing and supporting the applications necessary to gain marketing
approvals. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to
regulatory authorities for each therapeutic indication to establish the product candidate’s safety, purity, and potency for that indication.
Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of
manufacturing facilities and clinical trial sites by, applicable regulatory authorities. Clinical testing is expensive and can take many years to
complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. We have limited
experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval.
We have recruited a team that has experience with clinical trials and in the development of preclinical assets for translation into
clinical trials; however, we as a company have limited experience completing pivotal clinical trials for cell therapy products or developing
preclinical immunotherapy products. In part because of this lack of experience, we cannot be certain that our ongoing pivotal clinical trials
will be completed on time, if at all, will progress according to our plans or expectations, or that our planned clinical trials will be initiated
or initiated in a timely manner, progress according to our plans or expectations, or be completed on time, if they are completed at all.
Large-scale clinical trials require significant financial and management resources, and reliance on third-party clinical investigators,
contract research organizations or CROs, contract manufacturing organizations or CMOs, or consultants. Relying on third-party clinical
investigators, CROs or CMOs may force us to encounter delays and challenges that are outside of our control. We rely on CMOs in the
United States and Europe to manufacture TIL for use in our trials. We may not be able to demonstrate sufficient comparability between
products manufactured at different facilities to allow for inclusion of the clinical results from patients treated with products from these
different facilities, in our product registrations. Further, our CMOs may not be able to manufacture TIL or otherwise fulfill their obligations
to us because of interruptions to their business, including the loss of their key staff or interruptions to their raw material supply.
We rely on third party CROs and clinical trial sites to conduct, supervise, and monitor our clinical trials for our product candidates. We
expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions, independent review
organizations and clinical investigators, to conduct our clinical trials. While we have agreements governing their activities, we have limited
influence over their actual performance and control only certain aspects of their activities. The failure of these third parties to successfully
carry out their contractual duties or meet expected deadlines could substantially harm our business because we may be delayed in
completing or unable to complete the clinical trials required to support future approval of our product candidates, or we may not obtain
marketing approval for or commercialize our product candidates in a timely manner or at all. Moreover, these agreements might terminate
for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, that could
delay our product development activities and adversely affect our business.
Our reliance on these third parties for development activities will reduce our control over these activities. Nevertheless, we are
responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific
standards and our reliance on the CROs, clinical trial sites, and other third parties does not relieve us of our regulatory responsibilities. For
example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with
37
Table of Contents
the general investigational plan and protocols for the trial and for ensuring that our preclinical trials are conducted in accordance with Good
Laboratory Practices, or GLPs, as appropriate. Moreover, the FDA and comparable foreign regulatory authorities require us to comply with
GCPs for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate
and that the rights, integrity, and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements
through periodic inspections (including pre-approval inspections once a BLA is filed with the FDA) of trial sponsors, clinical investigators,
trial sites and certain third parties including CMOs. If we, our CROs, clinical trial sites, or other third parties fail to comply with applicable
GCPs or other regulatory requirements, we or they may be subject to enforcement or other legal actions, the clinical data generated in our
clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional
clinical trials. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any
of our clinical trials comply with GCP regulations.
In addition, we will be required to report certain financial interests of our third-party investigators if these relationships exceed certain
financial thresholds or meet other criteria. The FDA or comparable foreign regulatory authorities may question the integrity of the data
from those clinical trials conducted by investigators that are determined to have conflicts of interest.
In addition, our clinical trials must be conducted with product candidates that were produced under cGMP regulations. Our failure to
comply or our CMOs’ failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory
approval process. We also are required to register certain clinical trials and post the results of certain completed clinical trials on a
government sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so could result in enforcement actions and
adverse publicity.
Our CROs, clinical trial sites, and other third parties may also have relationships with other entities, some of which may be our
competitors, for whom they may also be conducting clinical trials or other therapeutic development activities that could harm our
competitive position. In addition, these third parties are not our employees, and except for remedies available to us under our agreements
with them, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical, non-clinical, and preclinical
programs. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials
in accordance with regulatory requirements or our stated protocols, if they need to be replaced or if the quality or accuracy of the data they
obtain is compromised due to the failure to adhere to our protocols, regulatory requirements or for other reasons, our trials may be
repeated, extended, delayed, or terminated and we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our
product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates, or we or
they may be subject to regulatory enforcement actions. As a result, our results of operations and the commercial prospects for our product
candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. To the extent we are unable to
successfully identify and manage the performance of third party service providers in the future, our business may be materially and
adversely affected.
If any of our relationships with these third parties terminate, we may not be able to enter into arrangements or do so on commercially
reasonable terms. Switching or adding additional contractors involves additional cost and requires management time and focus. In addition,
there is a natural transition period when a new third party commences work. As a result, delays could occur, which could compromise our
ability to meet our desired development timelines. Though we carefully manage our relationships with our third-party service providers,
there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not
have a material adverse impact on our business, financial condition and prospects or results of operations.
We also rely on other third parties to manufacture and ship our products for the clinical trials that we conduct. Any performance failure
on the part of these third parties could delay clinical development or marketing approval of our product candidates or any additional
product candidates or commercialization of our product candidates, if approved, producing additional losses and depriving us of potential
product revenue.
We may encounter substantial delays in our clinical trials or may not be able to conduct our trials on the timelines we expect and
we may be required to conduct additional clinical trials or modify current or future clinical trials based on feedback we receive from the
FDA.
Clinical testing is expensive, time consuming, and subject to uncertainty. We cannot guarantee that any current or future clinical
studies will be conducted as planned or completed on schedule, if at all, or that any of our product candidates will receive regulatory
approval. We initiated clinical trials in patients with metastatic melanoma, cervical, head and neck and non-small cell lung cancers,
38
Table of Contents
and in other indications in collaboration with third parties. We plan to initiate trials in new indications, and new cohorts in existing trials.
Even as these trials progress, issues may arise that could require us to suspend or terminate such clinical trials or could cause the results of
one cohort to differ from a prior cohort. For example, we may experience slower than anticipated enrollment in our pivotal clinical trials,
which may consequently delay our BLA filing timelines or permit competitors to obtain approvals that may alter our BLA filing strategy. A
failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful. Events that
may prevent successful or timely initiation or completion of clinical development, or product approval include:
● inability to generate sufficient preclinical data to support the initiation of clinical studies;
● regulators or Institutional Review Boards, or IRBs may not authorize us or our investigators to commence a clinical trial, conduct
a clinical trial at a prospective trial site, or amend trial protocols, or regulators or IRBs may require that we modify or amend our
clinical trial protocols;
● delays in reaching a consensus or inability to obtain agreement with regulatory agencies on study design;
● the FDA or comparable foreign regulatory authorities may disagree with our intended indications, study design or our
interpretation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh its
safety risks;
● the FDA or comparable foreign regulatory authorities may not accept data from studies with clinical trial sites in foreign
countries;
● the FDA may not allow us to use the clinical trial data from a research institution to support an IND if we cannot demonstrate the
comparability of our product candidates with the product candidate used by the relevant research institution in its clinical studies;
● delays in or failure to reach an agreement on acceptable terms with prospective CROs and clinical study sites, the terms of which
can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites;
● delays in obtaining required IRB approval at each clinical study site;
● imposition of a temporary or permanent clinical hold, suspensions or terminations by regulatory agencies, IRBs, or us for various
reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to
unacceptable health risks, undesirable side effects, or other unexpected characteristics of the product candidate, or due to findings
of undesirable effects caused by a biologically or mechanistically similar therapeutic or therapeutic candidate;
● delays in recruiting suitable patients to participate in our clinical studies;
● delay in adding new investigators or clinical trial sites, or withdrawal of clinical trial sites from a study;
● delay or change in strategic direction for an indication resulting from differences in results between cohorts in a clinical trial, such
as Cohort 2 and Cohort 4 of the C-144-01 clinical trial or the previously disclosed preliminary results for the C-145-04 trial and
the final patient population and results, including differences in patient population, or from different interpretations of investigator
results by IRC;
● failure by our CROs, clinical trial sites, patients, or other third parties, or us to adhere to clinical study requirements, including
regulatory, contractual or protocol requirements;
● failure to perform in accordance with the FDA’s cGCP requirements, or applicable regulatory guidelines in other countries;
● the number of patients required for clinical trials of our product candidates may be larger than we anticipate or enrollment in these
clinical trials may be slower than we anticipate, potentially affecting our timelines for approval of our product candidates;
● patients that enroll in our studies may misrepresent their eligibility or may otherwise not comply with the clinical trial protocol,
resulting in the need to drop such patients from the study or clinical trial, increase the needed enrollment size for the study or
clinical trial or extend the study’s or clinical trial’s duration;
● patients dropping out of a study;
● occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;
● changes in regulatory requirements and guidance that require amending or submitting new clinical protocols to regulatory
authorities and IRBs, and which may cause delays in our development programs, or changes to regulatory review times;
● there may be regulatory questions or disagreements regarding interpretations of data and results, or new information may emerge
regarding our product candidates;
● changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;
● the cost of clinical studies of our product candidates being greater than we anticipate, or we may have insufficient funds for a
clinical trial or to pay the substantial user fees required by the FDA upon the filing of a BLA;
● clinical studies of our product candidates producing negative or inconclusive results may fail to provide sufficient data and
information to support product approval, or our studies may fail to reach the necessary level of statistical or clinical
39
Table of Contents
significance, which may result in our deciding, or regulators requiring us, to conduct additional clinical studies, or preclinical
studies, or abandon product development programs;
● early results from our clinical studies of our product candidates may be negatively affected by changes in efficacy measures such
as overall response rate and duration of response as more patients are enrolled in our clinical trials or as new cohorts of our
clinical trials are tested, and overall response rate and duration of response may be negatively affected by the inclusion of
unconfirmed responses in preliminary results that we report if such responses are not later confirmed;
● we may not be able to demonstrate that a product candidate provides an advantage over current standards of care or current or
future competitive therapies in development;
● there may be changes to the therapeutics or their regulatory status which we are administering in combination with our product
candidates;
● the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing
processes or our manufacturing facilities for clinical and future commercial supplies;
● the FDA or comparable regulatory authorities may take longer than we anticipate making a decision on our product candidates;
● transfer of our manufacturing processes to our CMOs or other larger-scale facilities operated by a CMO or by us and delays or
failure by our CMOs or us to make any necessary changes to such manufacturing process;
● our use of different manufacturing processes within our clinical trials, including our Gen 1 and Gen 2 manufacturing processes,
and any effects that may result from the use of different processes on the clinical data that we have reported and will report in the
future; and
● delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates
for use in clinical studies or the inability to do any of the foregoing, including as a result of any quality issues associated with the
contract manufacturer.
We also may conduct clinical and preclinical research in collaboration with other academic, pharmaceutical, biotechnology and
biologics entities in which we combine our technologies with those of our collaborators. Such collaborations may be subject to additional
delays because of the management of the trials, contract negotiations, the need to obtain agreement from multiple parties, and the necessity
of obtaining additional approvals for therapeutics used in the combination trials. These combination therapies will require additional testing
and clinical trials will require additional FDA regulatory approval and will increase our future cost of expenses.
Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability
to generate revenue. In addition, if we make manufacturing changes to our product candidates, we may be required to, or we may elect to,
conduct additional studies to bridge our modified product candidates to earlier versions. These changes may require the FDA approval or
notification, may not have their desired effect and the FDA may not accept data from prior versions of the product to support an
application, delaying our clinical trials or programs or necessitating additional clinical or preclinical studies. For example, we changed our
manufacturing process from our first generation, or Gen 1 to our second generation, or Gen 2 to decrease the production time and allow for
the cryopreservation of the product. We may find that this update has unintended consequences that necessitates additional development
and manufacturing work, additional clinical and preclinical studies, or that results in refusal to file or non-approval of a BLA.
Clinical study delays could shorten any periods during which our products have patent protection and may allow our competitors to
bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm
our business and results of operations.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that
our data are insufficient for approval and require additional preclinical, clinical or other studies. The number and types of preclinical
studies and clinical trials that will be required for regulatory approval also varies depending on the product candidate, the disease or
condition that the product candidate is designed to address, and the regulations applicable to any particular product candidate. Approval
policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product
candidate’s clinical development and may vary among jurisdictions. It is possible that any product candidates we may seek to develop in
the future will ever obtain the appropriate regulatory approvals necessary for us or any future collaborators to commence product sales.
Any delay in completing development, obtaining or failure to obtain required approvals could also materially adversely affect our ability or
that of any of our collaborators to generate revenue from any such product candidate, which likely would result in significant harm to our
financial position and adversely impact our stock price.
40
Table of Contents
It may take longer and cost more to complete our clinical trials than we project, or we may not be able to complete them at all.
For budgeting and planning purposes, we have projected the date for the commencement of future trials, and continuation and
completion of our ongoing clinical trials. However, a number of factors, including scheduling conflicts with participating clinicians and
clinical institutions, and difficulties in identifying and enrolling patients who meet trial eligibility criteria, may cause significant delays. We
may not commence or complete clinical trials involving any of our products as projected or may not conduct them successfully.
We are currently enrolling our company-sponsored, Phase 2 clinical trials to establish the feasibility of our product, and to assess its
overall safety and efficacy in patients with cervical, head and neck and lung cancers. However, we may experience difficulties in patient
enrollment in our clinical trials for a variety of reasons. Our ability to enroll or treat patients in our other studies, or the duration or costs of
those studies, could be affected by multiple factors, including, preliminary clinical results, which may include efficacy and safety results
from our ongoing Phase 2 studies, but may not be reflected in the final analyses of these trials. For example, our studies of TIL therapy
LN-145 in patients with recurrent, metastatic or persistent cervical cancers and TIL therapy lifileucel in advanced melanoma utilize an
“open-label” trial design. An open-label trial is one where both the patient and investigator know whether the patient is receiving the test
article or either an existing approved drug or placebo, which has the potential to create selection bias in the investigators. In our Phase 2
open-label studies of TIL therapy LN-145 in patients with recurrent, metastatic or persistent cervical cancers and TIL therapy lifileucel in
advanced melanoma, the investigators have significant discretion over the selection of patient participants. Although preliminary data from
these trials was generally positive, that data may not necessarily be representative of interim or final results, as new patients are cycled
through the applicable treatment regimes. As the trials continue, the investigators may prioritize patients with more progressed forms of
cancer than the initial patient population, based on the success or perceived success of that initial population. Patients with more progressed
forms of cancer may be less responsive to treatment, and accordingly, interim efficacy data may show a decline in patient response rate or
other assessment metrics. As the trials continue, investigators may shift their approach to the patient population, which may ultimately
result in a decline in both interim and final efficacy data from the preliminary data, or conversely, an increase in final efficacy data
following a decline in the interim efficacy data, as patients with more progressed forms of cancer are cycled out of the trials and replaced
by patients with less advanced forms of cancer. This opportunity for investigator selection bias in our trials as a result of open-label design
may not be adequately handled and may cause a decline in or distortion of clinical trial data from our preliminary results. Depending on the
outcome of our open-label studies, we may need to conduct one or more follow-up or supporting studies in order to successfully develop
our products for FDA approval. Many companies in the biotechnology, pharmaceutical and medical device industries have suffered
significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we cannot be certain that we will
not face such setbacks.
Furthermore, the timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to
enroll a sufficient number of patients who remain in the study until its conclusion. In addition, our clinical trials will compete with other
clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the
number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in
a trial being conducted by one of our competitors. Accordingly, we cannot guarantee that the trial will progress as planned or as scheduled.
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our ongoing clinical trial and planned
clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product
candidates.
We expect to rely on medical institutions, academic institutions or CROs to conduct, supervise or monitor some or all aspects of
clinical trials involving our products. We will have less control over the timing and other aspects of these clinical trials than if we
conducted them entirely on our own. If we fail to commence or complete, or experience delays in, any of our planned clinical trials, our
stock price and our ability to conduct our business as currently planned could be harmed.
We currently anticipate that we will have to rely on our CMOs to manufacture our adoptive cell therapy and biologic products for
clinical trials. If they fail to commence or complete, or experiences delays in, manufacturing our adoptive cell therapy and other biologic
products, our planned clinical trials will be delayed, which will adversely affect our stock price and our ability to conduct our business as
currently planned.
41
Table of Contents
Clinical trials are expensive, time-consuming and difficult to design and implement, and our clinical trial costs may be higher than
for more conventional therapeutic technologies or drug products.
Clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements.
Because our product candidates include candidates based on new cell therapy technologies and manufactured on a patient-by-patient basis,
we expect that they will require extensive research and development and have substantial manufacturing costs. In addition, costs to treat
patients with relapsed/refractory cancer and to treat potential side effects that may result from our product candidates can be significant.
Some clinical trial sites may not bill, or obtain coverage from Medicare, Medicaid, or other third-party payors for some or all of these costs
for patients enrolled in our clinical trials, and we may be required by those trial sites to pay such costs. Accordingly, our clinical trial costs
are likely to be significantly higher per patient than those of more conventional therapeutic technologies or drug products. In addition, our
proposed personalized product candidates involve several complex and costly manufacturing and processing steps, the costs of which will
be borne by us. We are also responsible for the manufacturing costs of products for patients that may have a tumor resection but ultimately
do not receive an infusion. Depending on the number of patients that we ultimately screen and enroll in our trials, and the number of trials
that we may need to conduct, our overall clinical trial costs may be higher than for more conventional treatments.
Our clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which would prevent or
delay regulatory approval and commercialization.
The clinical trials of our product candidates are, and the manufacturing and marketing of our products will be, subject to extensive and
rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and
market our product candidates. Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must
demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and
effective for use in each target indication. Because our product candidates are subject to regulation as biological drug products, we will
need to demonstrate that they are safe, pure, and potent for use in their target indications. Each product candidate must demonstrate an
adequate risk versus benefit profile in its intended patient population and for its intended use. The risk/benefit profile required for product
licensure will vary depending on these factors and may include not only the ability to show tumor shrinkage, but also adequate duration of
response, a delay in the progression of the disease, and/or an improvement in survival. For example, response rates from the use of our
product candidates may not be sufficient to obtain regulatory approval unless we can also show an adequate duration of response.
Regulatory authorities may ultimately disagree with our chosen endpoints or may find that our studies or study results do not support
product approval. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can
occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates with
small patient populations may not be predictive of the results of later-stage clinical trials or the results once the applicable clinical trials are
completed. Preliminary, single cohort, or top-line results from clinical studies may not be representative of the final study results. The
results of studies in one set of patients or line of treatment may not be predictive of those obtained in another and the results in various
human clinical trials reported in scientific and medical literature may not be indicative of results we obtain in our clinical trials. Product
candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through
preclinical studies and initial clinical trials. Preclinical studies may also reveal unfavorable product candidate characteristics, including
safety concerns.
We expect there may be greater variability in results for products processed and administered on a patient-by-patient basis, as
anticipated for our product candidates, than for “off-the-shelf” products, like many other drugs. There is typically an extremely high rate of
attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may
fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. Many
companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or
unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that begin clinical trials are never
approved by regulatory authorities for commercialization.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product
candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the
patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. Our
current and future clinical trial results may not be successful. Moreover, should there be a flaw in a clinical trial, it may not become
apparent until the clinical trial is well advanced. Further, because we currently plan to test our product candidates for use with other
oncology products, the design, implementation, and interpretation of the clinical trials necessary for marketing approval may be more
complex than if we were developing our product candidates alone.
42
Table of Contents
In addition, even if such trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will
interpret the results as we do, and more trials could be required before we submit our product candidates for approval. To the extent that the
results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be
required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of
our product candidates.
We have reported preliminary results for clinical trials of our product candidates, including TIL for the treatment of metastatic
melanoma, cervical cancer, and head and neck cancers. These preliminary results, which include assessments of efficacy such as ORR, are
subject to substantial risk of change due to small sample sizes, and may change as patients are evaluated or as additional patients are
enrolled in these clinical trials. These outcomes may be unfavorable, deviate from our earlier reports, and/or delay or prevent regulatory
approval or commercialization of our product candidates, including candidates for which we have reported preliminary efficacy results. In
clinical studies where a staged expansion is expected, such as studies using a Simon’s two stage design, these outcomes may result in the
failure to meet an initial efficacy threshold for the first stage. Furthermore, other measures of efficacy for these clinical trials and product
candidates may not be as favorable.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise
adversely affected.
The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a
sufficient number of patients, or similar patients in the pivotal program to the Phase 2, who remain in the trial until its conclusion. We may
experience difficulties or delays in patient enrollment in our clinical trials for a variety of reasons, including:
● the size and nature of the patient population;
● the severity of the disease under investigation;
● the patient eligibility criteria defined in the protocol;
● the size of the study population required for analysis of the trial’s primary endpoints;
● the proximity of patients to trial sites;
● the design of the trial;
● our ability to recruit clinical trial investigators with the appropriate competencies and experience;
● the efforts to facilitate timely enrollment in clinical trials and the effectiveness of recruiting publicity;
● the patient referral practices of physicians;
● competing clinical trials for similar therapies or other new therapeutics not involving cell-based immunotherapy;
● clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in
relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are
investigating;
● clinical investigators enrolling patients who do not meet the enrollment criteria, requiring the inclusion of additional patients in
the clinical trial;
● approval of new indications for existing therapies or approval of new therapies in general;
● our ability to obtain and maintain patient consents; and
● the risk that patients enrolled in clinical trials will not complete a clinical trial, return for post-treatment follow-up, or follow the
required study procedures. For instance, patients, including patients in any control groups, may withdraw from the clinical trial if
they are not experiencing improvement in their underlying disease or condition. Withdrawal of patients from our clinical trials
may compromise the quality of our data.
In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our
product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might
have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of
qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our
competitor’s use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Moreover,
because our product candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their
doctors may be inclined to use conventional therapies, such as chemotherapy and approved immunotherapies, rather than enroll patients in
any future clinical trial. In addition, potential enrollees may opt to participate in other clinical trials because of the length of time between
the time that their tumor is excised and the TIL is infused back into the patient. Amendments to our clinical protocols may affect
enrollment in, or results of, our trials, including amendments we have made to further define the patient population to be studied.
43
Table of Contents
Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment or small population size
may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these
trials and adversely affect our ability to advance the development of our product candidates.
Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development,
prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.
Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.
Undesirable side effects caused by our product candidates could cause us, IRBs, Drug Safety Monitoring Boards or DSMBs, or regulatory
authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval
by the FDA or other comparable foreign regulatory authorities. Even if we were to receive product approval, such approval could be
contingent on inclusion of unfavorable information in our product labeling, such as limitations on the indicated uses for which the products
may be marketed or distributed, a label with significant safety warnings, including boxed warnings, contraindications, and precautions, a
label without statements necessary or desirable for successful commercialization, or requirements for costly post marketing testing and
surveillance, or other requirements, including REMS, to monitor the safety or efficacy of the products, and in turn prevent us from
commercializing and generating revenues from the sale of our current or future product candidates.
If unacceptable toxicities or side effects arise in the development of our product candidates, we, an IRB, DSMB or the FDA or
comparable foreign regulatory authorities could order us to cease clinical trials, order our clinical trials to be placed on clinical hold, or
deny approval of our product candidates for any or all targeted indications. The FDA or comparable foreign regulatory authorities may also
require additional data, clinical, or pre-clinical studies should unacceptable toxicities arise. We may need to abandon development or limit
development of that product candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are
less prevalent, less severe or more acceptable from a risk/benefit perspective. Toxicities associated with our trials and products may also
negatively impact our ability to conduct clinical trials using TIL therapy in larger patient populations, such as in patients that have not yet
been treated with other therapies or have not yet progressed on other therapies.
Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete our trials or result in
potential product liability claims. Such toxicities, which may arise from TIL therapy in general, including co-therapies, may include, for
example, thrombocytopenia, chills, anemia, pyrexia, febrile neutropenia, diarrhea, neutropenia, vomiting, hypotension, and dyspnea. For
example, the update in October 2018 from the C-144-01 trial included two grade 5 treatment emergent adverse events. In addition, these
side effects and deaths may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from
personalized cell therapy are not normally encountered in the general patient population and by medical personnel. Any of these
occurrences may harm our business, financial condition and prospects significantly.
The manufacture of our product candidates is complex, and we may encounter difficulties in production, particularly with respect
to process development, quality control, or scaling-up of our manufacturing capabilities. If we, or any of our third-party manufacturers
encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients, if
approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.
Our product candidates are biologics and the process of manufacturing our products is complex, highly-regulated and subject to
multiple risks. The manufacture of our product candidates involves complex processes, including harvesting tumor fragments from
patients, isolating the T cells from the tumor fragments, multiplying the T cells to obtain the desired dose, and ultimately infusing the T
cells back into a patient. As a result of the complexities, the cost to manufacture biologics is generally higher than traditional small
molecule chemical compounds, and the manufacturing process is less reliable and is more difficult to reproduce. Our manufacturing
process will be susceptible to product loss or failure due to logistical issues associated with the collection of tumor fragments, or starting
material, from the patient, shipping such material to the manufacturing site, shipping the final product back to the patient, and infusing the
patient with the product, manufacturing issues associated with the differences in patient starting material, interruptions in the
manufacturing process, contamination, equipment failure, assay failures, improper installation or operation of equipment, vendor or
operator error, inconsistency in cell growth, meeting pre-specified release criteria, and variability in product characteristics. Even minor
deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If
for any reason we lose a patient’s starting material, or later-developed product at any point in the process, or if any product does not meet
the applicable specifications, the manufacturing process for that patient will need to be restarted, including resection of the proper amount
of tumor fragment and the resulting delay may adversely affect that patient’s outcome. If microbial, viral, environmental or other
contaminations are discovered in our product candidates or in the manufacturing facilities in which our
44
Table of Contents
product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy
the contamination.
Because our product candidates are manufactured specifically for each individual patient, we will be required to maintain a chain of
identity with respect to the patient’s tumor as it moves from the patient to the manufacturing facility, through the manufacturing process,
and back to the patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse patient
outcomes, loss of product, or regulatory action including withdrawal of our products from the market. Further, as product candidates are
developed through preclinical to late stage clinical trials towards approval and commercialization, it is common that various aspects of the
development program, such as manufacturing methods, are altered along the way to optimize processes and results. Such changes carry the
risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently
and affect the results of planned clinical trials or other future clinical trials or otherwise necessitate the conduct of additional studies.
Currently, our product candidates are manufactured using processes developed or modified by us or by our third-party research
institution collaborators that we may not intend to use for more advanced clinical trials or commercialization. We have selected Gen 2 as
the manufacturing process for product registration, and all ongoing and future company-sponsored clinical trials. Although we believe Gen
2 is a commercially viable process, there are risks associated with scaling to the level required for advanced clinical trials or
commercialization, including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability
issues, lot consistency, and timely availability of raw materials. This includes potential risks associated with FDA not agreeing with all of
the details of our validation data or our potency assay for Cohort 4 of our C-144-01 clinical trial. Furthermore, some of our CMOs may not
be able to establish comparability of their products with TIL product used in Cohort 2 or may not be fully validated prior to starting Cohort
4. As a result of these challenges, we may experience delays in our clinical development and/or commercialization plans. We may
ultimately be unable to reduce the cost of goods for our product candidates to levels that will allow for an attractive return on investment if
and when those product candidates are commercialized.
Our current manufacturing strategy involves the use of CMOs. Currently our product candidates are manufactured by WuXi, Lonza
Netherlands, MasTHerCell, and Moffitt. Should we continue to use CMOs, we may not succeed in maintaining our relationships with our
current CMOs or establishing relationships with additional or alternative CMOs. Our product candidates may compete with other products
and product candidates for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP
regulations and that are both capable of manufacturing for us and willing to do so. If our CMOs should cease manufacturing for us, we
would experience delays in obtaining sufficient quantities of our product candidates for clinical trials and, if approved, commercial supply.
Further, our CMOs may breach, terminate, or not renew these agreements. If we were to need to find alternative manufacturing facilities it
would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. The
commercial terms of any new arrangement could be less favorable than our existing arrangements and the expenses relating to the transfer
of necessary technology and processes could be significant.
Reliance on third-party manufacturers entails exposure to risks to which we would not be subject if we manufactured the product
candidate ourselves, including:
● inability to negotiate manufacturing and quality agreements with third parties under commercially reasonable terms;
● reduced day-to-day control over the manufacturing process for our product candidates as a result of using third-party
manufacturers for all aspects of manufacturing activities;
● reduced control over the protection of our trade secrets and know-how from misappropriation or inadvertent disclosure;
● termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that may be costly or damaging
to us or result in delays in the development or commercialization of our product candidates; and
● disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or
operations, including the bankruptcy of the manufacturer or supplier.
In May 2019 we entered into a lease agreement to build a commercial-scale manufacturing facility in Philadelphia, Pennsylvania for
commercial and clinical production of autologous TIL products, including our product candidates lifileucel and LN-145. We would expect
that development of our own manufacturing facility would provide us with enhanced control of material supply for both clinical trials and
the commercial market, enable the more rapid implementation of process changes, and allow for better long-term margins. However, we
have no experience as a company in developing a manufacturing facility and we may not be successful in finalizing the development of our
own manufacturing facility or capability. We may establish multiple manufacturing facilities as we expand our commercial footprint to
multiple geographies, which may lead to regulatory delays or prove costly. Even if we are
45
Table of Contents
successful, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages,
natural disasters, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our
manufacturing strategy and have a material adverse effect on our business.
The manufacture of cell therapy products requires significant expertise and capital investment, including the development of advanced
manufacturing techniques and process controls. Manufacturers of cell therapy products often encounter difficulties in production,
particularly in scaling up initial production. These problems include difficulties with production costs and yields, quality control, including
stability of the product candidate and quality assurance testing, shortages of qualified personnel, and compliance with strictly enforced
federal, state, local and foreign regulations.
Moreover, any problems or delays we or our CMOs experience in preparing for commercial scale manufacturing of a product
candidate or component may result in a delay in the FDA approval of the product candidate or may impair our ability to manufacture
commercial quantities or such quantities at an acceptable cost, which could result in the delay, prevention, or impairment of clinical
development and commercialization of our product candidates and could adversely affect our business. Furthermore, if we or our
commercial manufacturers fail to deliver the required commercial quantities of our product candidates on a timely basis and at reasonable
costs, we would likely be unable to meet demand for our products and we would lose potential revenues.
In addition, the manufacturing process and facilities for any products that we may develop is subject to FDA and foreign regulatory
authority approval processes, and we or our CMOs will need to meet all applicable FDA and foreign regulatory authority requirements,
including cGMPs, on an ongoing basis. The cGMP requirements include quality control, quality assurance, and the maintenance of records
and documentation. The FDA and other regulatory authorities enforce these requirements through facility inspections. Manufacturing
facilities must submit to pre-approval inspections by the FDA that will be conducted after we submit our marketing applications to the
agency. Manufacturers are also subject to continuing FDA and other regulatory authority inspections following marketing approval.
Further, we, in cooperation with our CMOs, must supply all necessary chemistry, manufacturing, and control documentation in support of a
BLA on a timely basis.
Our, or our CMOs’ manufacturing facilities may be unable to comply with our specifications, cGMPs, and with other FDA, state, and
foreign regulatory requirements. Poor control of production processes can lead to the introduction of adventitious agents or other
contaminants, or to inadvertent changes in the properties or stability of product candidate that may not be detectable in final product
testing. If we or our CMOs are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities,
or in accordance with the strict regulatory requirements, we may not obtain or maintain the approvals we need to commercialize such
products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs will be
able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient
quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Deviations from
manufacturing requirements may further require remedial measures that may be costly and/or time-consuming for us or a third party to
implement and may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent
closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our
business.
Even to the extent we use and continue to use CMOs, we are ultimately responsible for the manufacture of our products and product
candidates. A failure to comply with these requirements may result in regulatory enforcement actions against our manufacturers or us,
including fines and civil and criminal penalties, which could result in imprisonment, suspension or restrictions of production, injunctions,
delay or denial of product approval or supplements to approved products, clinical holds or termination of clinical studies, warning or
untitled letters, regulatory authority communications warning the public about safety issues with the biologic, refusal to permit the import
or export of the products, product seizure, detention, or recall, operating restrictions, suits under the civil False Claims Act, corporate
integrity agreements, consent decrees, or withdrawal of product approval.
Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more
clinical trials, increase clinical trial costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of
goods, and have an adverse effect on our business, financial condition, results of operations and growth prospects.
46
Table of Contents
Cell-based therapies and biologics rely on the availability of reagents, specialized equipment, and other specialty materials, which
may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials, we rely or may rely on
sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products.
Manufacturing our product candidates requires many reagents, which are substances used in our manufacturing processes to bring
about chemical or biological reactions, and other specialty materials and equipment, some of which are manufactured or supplied by small
companies with limited resources and experience to support commercial biologics production. We currently depend on a limited number of
vendors for certain materials and equipment used in the manufacture of our product candidates. Some of these suppliers may not have the
capacity to support clinical trials and commercial products manufactured under cGMP by biopharmaceutical firms or may otherwise be ill-
equipped to support our needs. We also do not have supply contracts with many of these suppliers and may not be able to obtain supply
contracts with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key materials and equipment to
support clinical or commercial manufacturing.
For some of these reagents, equipment, and materials, we rely and may in the future rely on sole source vendors or a limited number of
vendors. An inability to continue to source product from any of these suppliers, which could be due to a number of issues, including
regulatory actions or requirements affecting the supplier, adverse financial or other strategic developments experienced by a supplier, labor
disputes or shortages, unexpected demands, or quality issues, could adversely affect our ability to satisfy demand for our product
candidates, which could adversely and materially affect our product sales and operating results or our ability to conduct clinical trials,
either of which could significantly harm our business.
As we continue to develop and scale our manufacturing process, we expect that we will need to obtain rights to and supplies of certain
materials and equipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially
reasonable terms, or at all, and if we are unable to alter our process in a commercially viable manner to avoid the use of such materials or
find a suitable substitute, it would have a material adverse effect on our business. Even if we are able to alter our process so as to use other
materials or equipment, such a change may lead to a delay in our clinical development and/or commercialization plans. If such a change
occurs for product candidate that is already in clinical testing, the change may require us to perform both ex vivo comparability studies and
to collect additional data from patients prior to undertaking more advanced clinical trials.
We will be unable to commercialize our products if our trials are not successful.
With the exception of lifileucel and LN-145 for metastatic cervical cancer, our research and development programs are at an early
stage. We must demonstrate our products’ safety and efficacy in humans through extensive clinical testing. We may experience numerous
unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of our products, including but
not limited to the following:
● safety and efficacy results in various human clinical trials reported in scientific and medical literature may not be indicative of
results we obtain in our clinical trials;
● after reviewing test results, we or our collaborators may abandon projects that we might previously have believed to be promising;
● we, our collaborators or regulators, may suspend or terminate clinical trials if the participating subjects or patients are being
exposed to unacceptable health risks;
● the effects our potential products have may not be the desired effects or may include undesirable side effects or other
characteristics that preclude regulatory approval or limit their commercial use if approved;
● manufacturers may not meet the necessary standards for the production of the product candidates or may not be able to supply the
product candidates in a sufficient quantity; and
● regulatory authorities may find that our clinical trial design or conduct does not meet the applicable approval requirements.
Clinical testing is very expensive, can take many years, and the outcome is uncertain. It could take as much as 12 months or more
before we learn the results from any clinical trial using our adoptive cell therapy with TIL. The data collected from our clinical trials may
not be sufficient to support approval by the FDA of our TIL-based product candidates for the treatment of solid tumors. The clinical trials
for our products under development may not be completed on schedule and the FDA may not ultimately approve any of our product
candidates for commercial sale. If we fail to adequately demonstrate the safety and efficacy of any product candidate
47
Table of Contents
under development, we may not receive regulatory approval for those products, which would prevent us from generating revenues or
achieving profitability.
Even if our lead products, lifileucel and LN-145, are approved and commercialized, we may not become profitable.
Our lead products, lifileucel and LN-145, are initially targeting a small population of refractory patients that suffer from metastatic
melanoma and metastatic cervical cancer. Even if the FDA approves these new therapies, and even if we obtain significant market share for
each product candidate, because the potential target population for lifileucel and LN-145 in refractory patients may be small, we may never
achieve profitability without obtaining regulatory approval for additional indications. The FDA often approves new therapies initially only
for use in patients with relapsed or refractory metastatic disease. We expect to initially seek approval of our product candidates in this
setting and are currently studying these patient populations.
We collaborate with governmental, academic and corporate partners to improve and develop TIL therapies for new indications for
use in combination with other therapies and to evaluate new TIL manufacturing methods, the results of which, because the
manufacturing processes are not within our control, may be incorrect or unreliable.
In addition to our own research and process development efforts, we seek to collaborate with government, academic research
institutions and corporate partners to improve TIL manufacturing and to develop TIL therapies for new indications. In 2017-2019, we
announced collaborations with Moffitt, MDACC, Ohio State University, and CHUM to evaluate several new solid tumor and hematologic
indications for TIL therapy in clinical and preclinical studies as well as, in some cases, new TIL manufacturing approaches. The results of
these collaborations may be used to support our filing with the FDA of INDs to conduct more advanced clinical trials of our product
candidates, or to otherwise analyze or make predictions or decisions with respect to our current or future product candidates. However,
because the majority of our collaborations are conducted at outside laboratories and we do not have complete control over how the studies
are conducted or reported or over the manufacturing methods used to manufacture TIL product, the results of such studies, which we may
use as the basis for our conclusions, projections or decisions with respect to our current or future product candidates, may be incorrect or
unreliable, or may have a negative impact on us if the results of such studies are imputed to our products or proposed indications, even if
such imputation is improper. For example, we have entered into collaborations with Moffitt, MDACC and CHUM to perform clinical trials
using TIL products that differ from our products, but the results of these clinical trials, if negative, may adversely impact our stock price
and our development plans for our products. Additionally, we may use third party data to analyze, reach conclusions or make predictions or
decisions with respect to our product candidates that may be incomplete, inaccurate or otherwise unreliable.
We will need additional financing to fund our operations and complete the development and commercialization of our various
product candidates, and if we are unable to obtain such financing, we may be unable to complete the development and
commercialization of our product candidates. Raising additional capital may cause dilution to our existing stockholders, restrict our
operations or require us to relinquish rights to our technologies or product candidates.
Our operations have consumed substantial amounts of cash since inception. From our inception to December 31, 2019, we have an
accumulated deficit of $570.6 million. In addition, our research and development and our operating costs have also been substantial and are
expected to increase. In January 2018, we closed an underwritten public offering of our common stock. The net proceeds from the offering,
after deducting the underwriting discounts and commissions and other offering expenses payable by us, were $162.0 million. In October
2018, we closed an underwritten public offering of our common stock. The net proceeds from the offering, after deducting the underwriting
discounts and commissions and other estimated offering expenses payable by us, were $236.7 million. In September 2019, 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 $400 million. In addition to our continued spending for our product candidates, we expect to spend approximately $75
million to $85 million over the next three years for equipment and construction costs for our commercial-scale production facility under
construction in Philadelphia, Pennsylvania, for which we have latitude as to the timing and amount of expenditures. As of December 31,
2019, we had $307.1 million in cash, cash equivalents and short-term investments ($14.0 million of cash and cash equivalents and $293.1
million in short-term investments) and $5.5 million in restricted cash.
Accordingly, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operations
for at least the next twelve months from the date this Annual Report on Form 10-K is issued. However, in order to complete the
development of our current product candidates, and in order to affect our business plan, including establishing our own manufacturing
facility, we anticipate that we will have to spend more than the funds currently available to us. Furthermore, changing
48
Table of Contents
circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may require additional capital
for the further development and commercialization of our product candidates and may need to raise additional funds sooner if we choose to
expand more rapidly than we presently anticipate. Moreover, our fixed expenses such as rent, minimum payments to our contract
manufacturers, and other contractual commitments, including those for our research collaborations, are substantial and are expected to
increase in the future.
We will need to obtain additional financing to fund our future operations, including completing the development and
commercialization of our product candidates. Our future funding requirements will depend on many factors, including, but not limited to:
● progress, timing, scope and costs of our clinical trials, including the ability to timely initiate clinical sites, enroll subjects and
manufacture TIL for treatment for patients in our ongoing, planned and potential future clinical trials;
● time and cost necessary to obtain regulatory approvals that may be required by regulatory authorities to execute clinical trials or
commercialize our product;
● our ability to successfully commercialize our product candidates, if approved;
● our ability to have clinical and commercial product successfully manufactured consistent with FDA and European Medicines
Agency, or EMA, regulations;
● amount of sales and other revenues from product candidates that we may commercialize, if any, including the selling prices for
such potential products and the availability of adequate third-party coverage and reimbursement for patients;
● sales and marketing costs associated with commercializing our products, if approved, including the cost and timing of building
our marketing and sales capabilities;
● cost of building, staffing and validating our own manufacturing facility in the United States;
● terms and timing of our current and any potential future collaborations, licensing or other arrangements that we have established
or may establish;
● cash requirements of any future acquisitions or the development of other product candidates;
● costs of operating as a public company;
● time and cost necessary to respond to technological, regulatory, political and market developments;
● costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
● costs associated with any potential business or product acquisitions, strategic collaborations, licensing agreements or other
arrangements that we may establish.
Unless and until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity
offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements. Additional
funds may not be available when we need them on terms that are acceptable to us, or at all. We have no committed source of additional
capital and if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to delay or
reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts. Our current
license and collaboration agreements may also be terminated if we are unable to meet the payment obligations under those agreements. As
a result, we may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an
immediate need for additional capital at that time.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be
diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of
indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our
ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions
that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and
licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant
licenses on terms unfavorable to us.
Subject to various spending levels approved by our Board of Directors, our management will have broad discretion in the use of the
net proceeds from our capital raises, including our October 2018 and January 2018 public offerings, and may not use them effectively.
Our management will have discretion in the application of the net proceeds from our capital raises, and our stockholders will not have
the opportunity as part of their investment decision to assess whether the net proceeds from our capital raises are being used appropriately.
You may not agree with our decisions, and our use of the proceeds from our capital raises may not yield any return to
49
Table of Contents
stockholders. Because of the number and variability of factors that will determine our use of the net proceeds from our capital raises, their
ultimate use may vary substantially from their currently intended use. Our failure to apply the net proceeds of our capital raises effectively
could compromise our ability to pursue our growth strategy and we might not be able to yield a significant return, if any, on our investment
of those net proceeds. Stockholders will not have the opportunity to influence our decisions on how to use our net proceeds from our
capital raises. Pending their use, we may invest the net proceeds from our capital raises in interest and non-interest bearing cash accounts,
short-term, investment-grade, interest-bearing instruments and U.S. government securities. These temporary investments are not likely to
yield a significant return.
The use of our net operating loss carryforwards and research tax credits may be limited.
Our net operating loss carryforwards and any future research and development tax credits may expire and not be used. As of December
31, 2019, we had U.S. federal net operating loss carryforwards of approximately $426.7 million. Our net operating loss carryforwards
arising in taxable years ending on or prior to December 31, 2017 will begin expiring in 2027 if we have not used them prior to that time.
Net operating loss carryforwards arising in taxable years ending after December 31, 2017 are no longer subject to expiration under the
Internal Revenue Code of 1986, as amended, or the Code. Additionally, our ability to use any net operating loss and credit carryforwards to
offset taxable income or tax, respectively, in the future will be limited under Sections 382 and 383 of the Code, respectively, if we have a
cumulative change in ownership of more than 50% within a three-year period.
We have performed an IRC Section 382 analysis as of December 31, 2018. Per the analysis, the May 2013 recapitalization, private
placements in 2014 and 2016 may have already triggered such an ownership change. As a result, the federal and state carryforwards
associated with the net operating loss and credit deferred tax assets were reduced by the amount of tax attributes estimated to expire during
their respective carryforward periods. In addition, since we will need to raise substantial additional funding to finance our operations, we
may undergo further ownership changes in the future. Any such annual limitation may significantly reduce the utilization of the net
operating loss carryforwards and research tax credits before they expire. Depending on our future tax position, limitation of our ability to
use net operating loss carryforwards in states in which we are subject to income tax could have an adverse impact on our results of
operations and financial condition.
Recently enacted tax reform legislation in the U.S., changes to existing tax laws, or challenges to our tax positions could adversely
affect our business and financial condition.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the Tax Act, was signed into law, making significant changes to the
Internal Revenue Code. Changes under the Tax Act include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective
for tax years beginning after December 31, 2017, a one-time transition tax on the mandatory deemed repatriation of cumulative foreign
earnings, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of
the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time
taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject
to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over
time, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical
testing expenses incurred in the testing of orphan drugs). The overall impact of the new federal tax law is uncertain, and our business and
financial condition could be adversely affected. For example, because of the tax rate decrease, our deferred tax assets and our
corresponding valuation allowance against these deferred tax assets have been reduced and may continue to be adversely impacted. In
addition, it is uncertain if and to what extent various states will conform to Tax Act and what effect that legal challenges will have on the
Tax Act, including litigation in the U.S. and international challenges brought at organizations such as the World Trade Organization. The
impact of the Tax Act on holders of our common stock is also uncertain and could be adverse. Investors should consult with their legal and
tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.
In addition, U.S. federal, state and local tax laws are extremely complex and subject to various interpretations. Although we believe
that our tax estimates and positions are reasonable, including our decision to build our commercial manufacturing facility at the Navy Yard
in Philadelphia in order to take advantage of the site’s designation as a Keystone Opportunity Zone, Keystone Opportunity Expansion
Zone, or Keystone Opportunity Improvement Zone, or collectively KOZ, which allows incentives for business development, as well as
certain other financial incentives provided by the Commonwealth of Pennsylvania, the City of Philadelphia and the Philadelphia Industrial
Development Corporation, there can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we
would be successful in any such challenge. Further, challenges to the site’s designation as a KOZ or broader challenges to Pennsylvania’s
KOZ program could result in the revocation of the site’s designation as a KOZ and the attendant
50
Table of Contents
tax advantages associated with such designation. If we are unsuccessful in such a challenge, or if the site’s status as a KOZ is revoked, the
relevant tax authorities may assess additional taxes, which could result in adjustments to, or impact the timing or amount of, taxable
income, deductions or other tax allocations, which may adversely affect our results of operations and financial position.
We are subject to extensive regulation, which can be costly, time consuming and can subject us to unanticipated delays; even if we
obtain regulatory approval for some of our products, those products may still face regulatory difficulties.
Our potential products, cell processing and manufacturing activities, are subject to comprehensive regulation by the FDA in the United
States and by comparable authorities in other countries. The process of obtaining FDA and other required regulatory approvals, including
foreign approvals, is expensive and often takes many years and can vary substantially based upon the type, complexity and novelty of the
products involved. In addition, regulatory agencies may lack experience with our technologies and products, which may lengthen the
regulatory review process, increase our development costs and delay or prevent their commercialization.
No adoptive cell therapy using TIL has been approved for marketing in the FDA. Consequently, there is no precedent for the
successful commercialization of products based on our technologies. In addition, we have had only limited experience in filing and
pursuing applications necessary to gain regulatory approvals, which may impede our ability to obtain timely FDA approvals, if at all. We
have not yet sought FDA approval for any adoptive cell therapy product. We will not be able to commercialize any of our potential
products until we obtain FDA approval, and so any delay in obtaining, or inability to obtain, FDA approval would harm our business.
If we violate regulatory requirements at any stage, whether before or after marketing approval is obtained, we may face a number of
regulatory consequences, including refusal to approve pending applications, license suspension or revocation, withdrawal of an approval,
imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, modification of promotional materials or
labeling, provision of corrective information, imposition of post-market requirements including the need for additional testing, imposition
of distribution or other restrictions under a REMS, product recalls, product seizures or detentions, refusal to allow imports or exports, total
or partial suspension of production or distribution, FDA debarment, injunctions, fines, consent decrees, corporate integrity agreements,
debarment from receiving government contracts, and new orders under existing contracts, exclusion from participation in federal and state
healthcare programs, restitution, disgorgement, or civil or criminal penalties, including fines and imprisonment, and adverse publicity,
among other adverse consequences. Additionally, we may not be able to obtain the labeling claims necessary or desirable for the promotion
of our products. We may also be required to undertake post-marketing trials. In addition, if we or others identify side effects after any of
our adoptive cell therapies are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn, and
reformulation of our products may be required.
We may not be able to license new technology from third parties.
An element of our intellectual property portfolio is to license additional rights and technologies from third parties, including the NIH
and others. Our inability to license the rights and technologies that we have identified, or that we may in the future identify, could have a
material adverse impact on our ability to complete the development of our products or to develop additional products. No assurance can be
given that we will be successful in licensing any additional rights or technologies from third parties, including the NIH and others. Failure
to obtain additional rights and licenses may detrimentally affect our planned development of additional product candidates and could
increase the cost, and extend the timelines associated with our development of such other products.
Our projections regarding the market opportunities for our product candidates may not be accurate, and the actual market for our
products may be smaller than we estimate.
Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers
who are in a position to receive second- or third-line therapy, and who have the potential to benefit from treatment with our product
candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific
literature, surveys of clinics, patient foundations, or market research by third parties, and may prove to be incorrect. Further, new studies or
approvals of new therapeutics may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to
be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not
be amenable to treatment with our product candidates and may also be limited by the cost of our treatments and the reimbursement of those
treatment costs by third-party payors. For instance, we expect lifileucel to initially target a small patient population that suffers from
metastatic melanoma. Even if we obtain significant market share for our product candidates,
51
Table of Contents
because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional
indications.
We are required to pay substantial royalties and lump sum benchmark payments under our license agreements with the NIH,
Moffitt, Novartis, and Cellectis, and we must meet certain milestones to maintain our license rights.
Under our license agreements with the NIH, Novartis, and Cellectis for our adoptive cell therapy and immunotherapy technologies, we
are currently required to pay both substantial benchmark payments and royalties to that institution based on our revenues from sales of our
products utilizing the licensed technologies. These payments could adversely affect the overall profitability for us of any products that we
may seek to commercialize under these license agreements. In order to maintain our license rights under the NIH, Moffitt, Novartis, and
Cellectis license agreements, we will need to meet certain specified milestones, subject to certain cure provisions, in the development of
our product candidates. There is no assurance that we will be successful in meeting these milestones on a timely basis, or at all.
Because our current products represent, and our other potential product candidates will represent novel approaches to the
treatment of disease, there are many uncertainties regarding the development, the market acceptance, third-party reimbursement
coverage and the commercial potential of our product candidates.
Human immunotherapy products are a new category of therapeutics. Because this is a relatively new and expanding area of novel
therapeutic interventions, there are many uncertainties related to development, marketing, reimbursement, and the commercial potential for
our product candidates. There can be no assurance as to the length of the trial period, the number of patients the FDA will require to be
enrolled in the trials in order to establish the safety, efficacy, purity and potency of immunotherapy products, or that the data generated in
these trials will be acceptable to the FDA to support marketing approval. The FDA may take longer than usual to come to a decision on any
BLA that we submit and may ultimately determine that there is not enough data, information, or experience with our product candidates to
support an approval decision. The FDA may also require that we conduct additional post-marketing studies or implement risk management
programs, such as REMS until more experience with our product candidates is obtained. Finally, after increased usage, we may find that
our product candidates do not have the intended effect or have unanticipated side effects, potentially jeopardizing initial or continuing
regulatory approval and commercial prospects.
We may also find that the manufacture of our product candidates is more difficult than anticipated, resulting in an inability to produce
a sufficient amount of our product candidates for our clinical trials or, if approved, commercial supply. Moreover, because of the
complexity and novelty of our manufacturing process, there are only a limited number of manufacturers who have the capability of
producing our product candidates. Should any of our contract manufacturers no longer produce our product candidates, it may take us
significant time to find a replacement, if we are able to find a replacement at all.
There is no assurance that the approaches offered by our products will gain broad acceptance among doctors or patients or that
governmental agencies or third-party medical insurers will be willing to provide reimbursement coverage for proposed product candidates.
Moreover, we do not have verifiable internal marketing data regarding the potential size of the commercial market for our product
candidates, nor have we obtained current independent marketing surveys to verify the potential size of the commercial markets for our
current product candidates or any future product candidates. Since our current product candidates and any future product candidates will
represent novel approaches to treating various conditions, it may be difficult, in any event, to accurately estimate the potential revenues
from these product candidates. Accordingly, we may spend significant capital trying to obtain approval for product candidates that have an
uncertain commercial market. The market for any products that we successfully develop will also depend on the cost of the product. We do
not yet have sufficient information to reliably estimate what it will cost to commercially manufacture our current product candidates, and
the actual cost to manufacture these products could materially and adversely affect the commercial viability of these products. Our goal is
to reduce the cost of manufacturing and providing our therapies. However, unless we can reduce those costs to an acceptable amount, we
may never be able to develop a commercially viable product. If we do not successfully develop and commercialize products based upon
our approach or find suitable and economical sources for materials used in the production of our products, we will not become profitable,
which would materially and adversely affect the value of our common stock.
Our TIL therapies and our other therapies may be provided to patients in combination with other agents provided by third parties. The
cost of such combination therapy may increase the overall cost of therapy and may result in issues regarding the allocation of
reimbursements between our therapy and the other agents, all of which may affect our ability to obtain reimbursement coverage for the
combination therapy from governmental or private third party medical insurers.
52
Table of Contents
No assurance can be given that the Gen 2 manufacturing process we have selected will be FDA-compliant, more efficient and
lower the cost to manufacture TIL products.
Pursuant to the CRADA, and in cooperation with our contract manufacturers and potentially other manufacturers, we have developed
and are developing improved methods for the generating and selecting autologous TILs, and methods for large-scale production of
autologous TILs that are in accord with current cGMP procedures. We have developed a new and more efficient TIL manufacturing
process that we believe can be more efficient and cost effective, and in a more automated manner than previous processes. The production
and control of the physical and/or chemical attributes of our products in a cGMP facility is subject to many uncertainties and difficulties.
We have never manufactured our adoptive cell therapy product candidate on a commercial scale, nor have our partners. As a result, we
cannot give any assurance that the Gen 2 process or any future process that we select will be a manufacturing process that can produce our
products in compliance with the applicable regulatory requirements, at a cost or in quantities necessary to make them commercially viable.
Moreover, our third-party manufacturers will have to continually adhere to current cGMP regulations enforced by the FDA through its
facilities inspection program. If our facilities or any of the facilities of these manufacturers cannot pass a pre-approval plant inspection, the
FDA pre-market approval of our products will not be granted. In complying with cGMP and foreign regulatory requirements, we and any
of our third-party manufacturers will be obligated to expend time, money and effort in production, record-keeping and quality control to
assure that our products meet applicable specifications and other requirements. If we or any of our third-party manufacturers fail to comply
with these requirements, we may be subject to regulatory action. No assurance can be given that we will be able to develop such a
manufacturing process, or that our partners will thereafter be able to establish and operate such a production facility.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit
commercialization of our product candidates.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater
risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are
found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include
allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or
a breach of warranties. Claims could also be asserted under state consumer protection acts. Large judgements have also been awarded in
class action lawsuits based on therapeutics that had unanticipated side effects. If we cannot successfully defend ourselves against product
liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful
defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may
result in:
● decreased demand for our product candidates;
● injury to our reputation;
● withdrawal of clinical trial participants or sites and potential termination of clinical trial sites or entire clinical programs;
● initiation of investigations by regulators, refusal to approve marketing applications or supplements, and withdrawal or limitation
of product approvals;
● costs to defend the related litigation;
● a diversion of management’s time and our resources;
● substantial monetary awards to trial participants or patients;
● product recalls, withdrawals or labeling, marketing or promotional restrictions;
● loss of revenue;
● significant negative media attention;
● decrease in the price of our stock and overall value of our company;
● exhaustion of our available insurance coverage and our capital resources; or
● the inability to commercialize our product candidates.
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims
could prevent or inhibit the commercialization of products we develop, alone or with corporate collaborators. Our insurance policies may
also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. While we have obtained
clinical trial insurance for our Phase 2 clinical trials, we may have to pay amounts awarded by a court or negotiated in a settlement that
exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to
pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such
indemnification may not be available or adequate should any claim arise.
53
Table of Contents
We face significant competition from other biotechnology and pharmaceutical companies and from non-profit institutions.
Competition in the field of cancer therapy is intense and is accentuated by the rapid pace of technological development. Research and
discoveries by others may result in breakthroughs which may render our products obsolete even before they generate any revenue. There
are products that are approved and currently under development by others that could compete with the products that we are developing.
Many of our potential competitors have substantially greater research and development capabilities and approval, manufacturing,
marketing, financial and managerial resources and experience than we do. Our competitors may:
● develop safer, more convenient or more effective immunotherapies and other therapeutic products;
● develop therapies that are less expensive or have better reimbursement from private or public payors;
● reach the market more rapidly, reducing the potential sales of our products; or
● establish superior proprietary positions.
Due to the promising clinical therapeutic effect of competitor therapies in clinical exploratory trials, we anticipate substantial direct
competition from other organizations developing advanced T cell therapies targeting patients who have received prior anti-PD-1/PD-L1
therapies. In particular, we expect to compete with other new therapies for our lead indications developed by companies such as Bristol-
Myers Squibb, Merck, Nektar Therapeutics, Idera Pharmaceuticals, Checkmate Pharmaceuticals, Immetacyte, WindMIL Therapeutics,
Seattle Genetics, and others. We also may compete with therapies based on genetically engineered T cells rendered reactive against tumor-
associated antigens prior to their administration to patients. Genetically engineered T cells are being pursued by several companies,
including Adaptimmune, Bristol-Myers Squibb through their acquisition of Celgene, Gilead Sciences, Novartis and others. To date, these
technologies have been primarily applicable to hematologic malignancies, but their application in solid tumor indications may create
competition with us. Many of these companies and our other current and potential competitors have substantially greater research and
development capabilities and financial, scientific, regulatory, manufacturing, marketing, sales, human resources, and experience than we
do. Many of our competitors have several therapeutic products that have already been developed, approved and successfully
commercialized, or are in the process of obtaining regulatory approval for their therapeutic products in the United States and
internationally. Our competitors may obtain regulatory approval for their products more rapidly than we may obtain approval for ours,
which could result in competitors establishing a strong market position before we are able to enter the market.
Universities and public and private research institutions in the U.S. and Europe are also potential competitors. For example, a Phase 3
trial comparing TIL to standard ipilimumab in patients with metastatic melanoma is currently being conducted in Europe by the
Netherlands Cancer Institute, the Copenhagen County Herlev University Hospital, and the University of Manchester. While these
universities and public and private research institutions primarily have educational objectives, they may develop proprietary technologies
that lead to other FDA approved therapies or that secure patent protection that we may need for the development of our technologies and
products.
Our lead product candidates, lifileucel and LN-145, are therapies for the treatment of metastatic melanoma and metastatic cervical
cancer. Currently, there are numerous companies that are developing various alternate treatments for melanoma and cervical cancer,
including patients that have progressed after prior treatment with checkpoint inhibitors and chemotherapy. Accordingly, lifileucel and LN-
145 face significant competition in the melanoma and cervical cancer treatment space from multiple companies. Even if we obtain
regulatory approval for lifileucel, the availability and price of our competitors’ products could limit the demand and the price we are able to
charge for our therapies. We may not be able to implement our business plan if the acceptance of our products is inhibited by price
competition or the reluctance of physicians to switch from other methods of treatment to our product, or if physicians switch to other new
therapies, drugs or biologic products or choose to reserve our product for use in limited circumstances.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated
among a smaller number of our competitors. Early stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified
scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring
technologies complementary to, or necessary for, our programs.
54
Table of Contents
We are dependent on third parties to support our research, development and manufacturing activities and, therefore, are subject to
the efforts of these parties and our ability to successfully collaborate with these third parties.
As a result of our current strategy to outsource most of our manufacturing, we rely very heavily on third parties to perform for us the
manufacturing of our products for our clinical trials. We also license a portion of our technology from others. We intend to rely upon our
contract manufacturers to produce large quantities of materials needed for clinical trials and potentially product commercialization. Third
party manufacturers may not be able to meet our needs with respect to timing, quantity or quality. If we are unable to contract for a
sufficient supply of needed materials on acceptable terms, or if we should encounter delays or difficulties in our relationships with
manufacturers, our clinical testing may be delayed, thereby delaying the submission of products for regulatory approval or the market
introduction and subsequent sales of our products. Any such delay may lower our revenues and potential profitability.
In addition, in order to supplement our own efforts to improve TIL manufacturing and develop TIL therapies in new indications in
clinical trials, we currently work and collaborate with government and academic research institutions, medical institutions and corporate
partners such as the NCI, Moffitt, Ohio State University, Cellectis, Yale University, Novartis, and CHUM. We also intend to continue to
enter into additional third-party collaborative agreements in the future. However, we may not be able to successfully negotiate any
additional collaborative arrangements. If established, these relationships may not be scientifically or commercially successful, or may be
unable to enroll patients, such as our collaboration with RPCI. The success of these and future collaborations and joint development
arrangements may be subject to numerous risks and uncertainties, including the inability or unwillingness of our partners to perform in the
manner, or to the extent anticipated, and may also be subject to disagreements regarding the rights, interests, and performance of the
counterparties under our licenses and development agreements. Disagreements between parties to a collaboration arrangement regarding
clinical development and commercialization matters can lead to delays in the development process or commercialization of the applicable
product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if
neither of the parties has final decision-making authority under the collaboration agreement.
With regard to future collaboration efforts, we face significant competition in seeking appropriate collaborators. Our ability to reach a
definitive agreement for collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise,
the terms and conditions of the proposed collaboration and, an evaluation by the proposed collaborator of a number of similar or unique
factors.
Collaborations with biopharmaceutical companies and other third parties often are terminated or allowed to expire by the other party.
Any such termination or expiration would adversely affect us financially and could harm our business reputation. Any collaboration may
pose a number of risks, including the following:
● collaborators may not perform their obligations as expected;
● collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or
may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the
collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create
competing priorities;
● collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a
product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
● collaborators could fail to make timely regulatory submissions for a product candidate;
● collaborators may not comply with all applicable regulatory requirements or may fail to report safety data in accordance with all
applicable regulatory requirements;
● collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our
products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed
or can be commercialized under terms that are more economically attractive than ours;
● product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product
candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product
candidates;
● a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval
may not commit sufficient resources to the marketing and distribution of such product candidate or product;
55
Table of Contents
● disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course
of development, might cause delays or termination of the research, development or commercialization of product candidates,
might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of
which would be time consuming and expensive;
● collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a
way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to
potential litigation;
● collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
● collaborators may be involved in a business combination, resulting in the decreased emphasis or termination of development or
commercialization of any product candidate subject to the collaboration agreement; and
● termination of a collaboration agreement may make it more difficult to attract new collaborators and our and our products’ or
product candidates’ reputation in the medical, business, and financial communities could be adversely affected.
If any third-party collaborator breaches or terminates its agreement with us or fails to conduct its activities in a timely manner, the
commercialization of our products under development could be delayed or blocked completely. It is possible that our collaborators will
change their strategic focus, pursue alternative technologies or develop alternative products, either on their own or in collaboration with
others, as a means for developing treatments for the diseases targeted by our collaborative programs. The effectiveness of our collaborators
in marketing our products will also affect our revenues and earnings.
Our collaborators will also be required to comply with the applicable regulatory requirements, and, as such, are subject to the same
risks as we are. If they do not or are not able to comply with these requirements, we may not be able to use the data generated through their
studies to support our future investigational or marketing applications. Collaborator noncompliance may also expose them and us to
regulatory enforcement actions.
No assurance can be given that we will be able to successfully collaborate with our partners as anticipated and that our current or
future collaborations and clinical trials will be completed as contemplated, support the regulatory approval of our current product
candidates, or result in any viable additional product candidates. For instance, to the extent that these collaborators conduct their studies
with manufacturing processes that are different than ours or product that is different than ours, the results generated from their studies may
not be seen in our current or future studies that employ our manufacturing processes and the results generated from their studies may not
support approval of our product candidates.
If we are unable to obtain or maintain suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the
development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its
potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake
development or commercialization activities at our own expense.
Development of a product candidate intended for use in combination with an already approved product may present more or
different challenges than development of a product candidate for use as a single agent.
We are currently developing lifileucel and LN-145 for use along with IL-2. We and our collaborators are also studying TIL therapy
along with other products, such as pembrolizumab, ipilimumab and nivolumab. The development of product candidates for use in
combination with another product may present challenges. For example, the FDA may require us to use more complex clinical trial
designs, in order to evaluate the contribution of each product and product candidate to any observed effects. It is possible that the results of
these trials could show that any positive results are attributable to the already approved product. Moreover, following product approval, the
FDA may require that products used in conjunction with each other be cross labeled for combined use. To the extent that we do not have
rights to already approved products, this may require us to work with another company to satisfy such a requirement. Moreover,
developments related to the already approved products may impact our clinical trials for the combination as well as our commercial
prospects should we receive marketing approval. Such developments may include changes to the approved product's safety or efficacy
profile, changes to the availability of the approved product, and changes to the standard of care.
56
Table of Contents
A Fast Track product designation, Breakthrough Therapy designation or other designation to facilitate product candidate
development may not lead to faster development or a faster regulatory review or approval process, and it does not increase the
likelihood that our product candidates will receive marketing approval.
We were granted Fast Track designation by the FDA for lifileucel in advanced melanoma and LN-145 for metastatic cervical cancer.
We were granted Breakthrough Therapy designation, or BTD, for LN-145 for metastatic cervical cancer and Regenerative Medicine
Advanced Therapy, or RMAT, designation for lifileucel in advanced melanoma. We may seek Fast Track or Breakthrough designation for
other of our current or future product candidates. Receipt of a designation to facilitate product candidate development is within the
discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for a designation, the FDA may
disagree. In any event, the receipt of such a designation for a product candidate may not result in a faster development process, review, or
approval compared to product candidates considered for approval under conventional the FDA procedures and does not assure ultimate
marketing approval by the FDA. In addition, the FDA may later decide that the products no longer meet the designation conditions.
While lifileucel has received orphan drug designation for melanoma stages IIB-IV and LN-145 has received orphan drug
designation for cervical cancer patients with tumors greater than 2 cm, there is no guarantee that we will be able to maintain this
designation, receive these designations for any of our other product candidates, or receive or maintain any corresponding benefits,
including periods of exclusivity.
We received orphan drug designation in the United States for lifileucel to treat malignant melanoma stages IIB-IV and LN-145 for
cervical cancer patients with tumors greater than 2 cm. We may also seek orphan drug designation for our other product candidates, as
appropriate. Orphan designation, however, may be lost if the indication for which we develop our designated product candidates do not
meet the orphan criteria. Moreover, following product approval, orphan exclusivity may be lost if the FDA determines, among other
reasons, that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product
to meet the needs of patients with the rare disease or condition. Even if we obtain orphan exclusivity, that exclusivity may not effectively
protect the product from competition because different products can be approved for the same condition and the same product can be
approved for different conditions. Even after an orphan product is approved, the FDA can subsequently approve a product containing the
same principal molecular features for the same condition if the FDA concludes that the later product is clinically superior in that it is shown
to be safer or more effective or makes a major contribution to patient care.
Moreover, the FDA may grant orphan drug designations to multiple of the same products for the same indication. If another sponsor
receives FDA approval for an orphan drug designated product that is the same as our product candidates and intended for the same
indication before we do, we would be prevented from launching our product in the United States for this indication for a period of at least
7 years.
In response to a court decision regarding the plain meaning of the exclusivity provision of the Orphan Drug Act, the FDA may
undertake a reevaluation of aspects of its orphan drug regulations and policies. We do not know if, when, or how the FDA may change the
orphan drug regulations and policies, and it is uncertain how any changes might affect our business. Depending on what changes the FDA
may make to its orphan drug regulations and policies, our business, financial condition, results of operations, and prospects could be
harmed.
As a condition of approval, the FDA may require that we implement various post-marketing requirements and conduct post-
marketing studies, any of which would require a substantial investment of time, effort, and money, and which may limit our commercial
prospects.
As a condition of biologic licensing, the FDA is authorized to require that sponsors of approved BLAs implement various post-market
requirements, including REMS and Phase 4 studies. For example, when the FDA approved Novartis’ Kymriah in August 2017, a CAR-T
cell therapy for the treatment of patients up to 25 years of age with B-cell precursor acute lymphoblastic leukemia, or ALL, that is
refractory or in second or later relapse, the FDA required significant post-marketing commitments, including a Phase 4 trial, revalidation of
a test method, and a substantial REMS program that included, among other requirements, the certification of hospitals and their associated
clinics that dispense Kymriah, which certification includes a number of requirements, the implementation of a Kymriah training program,
and limited distribution only to certified hospitals and their associated clinics. If we receive approval of our product candidates, the FDA
may determine that similar or additional post-approval requirements are necessary to ensure that our product candidates are safe, pure, and
potent. To the extent that we are required to establish and implement any post-approval
57
Table of Contents
requirements, we will likely need to invest a significant amount of time, effort, and money. Such post-approval requirements may also limit
the commercial prospects of our product candidates.
We may be unable to establish effective marketing and sales capabilities or enter into agreements with third parties to market and
sell our product candidates, if they are approved, and as a result, we may be unable to generate product revenues.
We currently have a small commercial team focused on our commercial strategy, but we do not have a commercial infrastructure for
the marketing, sale, and distribution of biopharmaceutical products. If approved, in order to commercialize our products, we must build our
marketing, sales, and distribution capabilities or make arrangements with third parties to perform these services, which will take time and
require significant financial expenditures and we may not be successful in doing so. Even if we are able to effectively establish a sales
force and develop a marketing and sales infrastructure, our sales force and marketing teams may not be successful in commercializing our
current or future product candidates. To the extent we rely on third parties to commercialize any products for which we obtain regulatory
approval, we would have less control over their sales efforts, and could be held liable if they failed to comply with applicable legal or
regulatory requirements.
We have no prior experience in the marketing, sale, and distribution of biopharmaceutical products, and there are significant risks
involved in the building and managing of a commercial infrastructure. The establishment and development of commercial capabilities,
including a comprehensive healthcare compliance program, to market any products we may develop will be expensive and time consuming
and could delay any product launch, and we may not be able to successfully develop this capability. We, or our collaborators, will have to
compete with other pharmaceutical and biotechnology companies to recruit, hire, train, manage, and retain marketing, sales and
commercial support personnel. In the event we are unable to develop a commercial infrastructure, we may not be able to commercialize our
current or future product candidates, which would limit our ability to generate product revenues. Factors that may inhibit our efforts to
commercialize our current or future product candidates and generate product revenues include:
● the inability to recruit, train, manage, and retain adequate numbers of effective sales, marketing and commercial support
personnel;
● the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe our current
or future product candidates;
● our inability to effectively oversee a geographically dispersed sales and marketing team;
● the costs and time associated with the initial and ongoing training of sales and marketing personnel on legal and regulatory
compliance matters and monitoring their actions;
● an inability to secure adequate coverage and reimbursement by government and private health plans;
● the clinical indications for which the products are approved and the claims that we may make for the products;
● limitations or warnings, including distribution or use restrictions, contained in the products’ approved labeling;
● any distribution and use restrictions imposed by the FDA or to which we agree as part of a mandatory REMS or voluntary risk
management plan;
● liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory requirements;
● the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to
companies with more extensive product lines; and
● unforeseen costs and expenses associated with creating an independent sales and marketing organization or engaging a contract
sales organization.
If our product candidates do not achieve broad market acceptance, the revenues that we generate from their sales will be limited.
We have never commercialized a product candidate for any indication. Even if our product candidates are approved by the appropriate
regulatory authorities for marketing and sale, they may not gain acceptance among physicians, patients, third-party payors, and others in
the medical community. If any product candidate for which we obtain regulatory approval does not gain an adequate level of market
acceptance, we may not generate significant product revenues or become profitable. Market acceptance of our product candidates by the
medical community, patients, and third-party payors will depend on a number of factors, some of which are beyond our control. For
example, physicians are often reluctant to switch their patients and patients may be reluctant to switch from existing therapies even when
new and potentially more effective or safer treatments enter the market.
58
Table of Contents
Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant
resources and may not be successful. If any of our product candidates is approved but does not achieve an adequate level of market
acceptance, we may not generate significant revenues and we may not become profitable. The degree of market acceptance of any of our
product candidates will depend on a number of factors, including:
● the efficacy of our product candidates;
● the prevalence and severity of adverse events associated with such product candidates;
● the clinical indications for which the products are approved and the approved claims that we may make for the products;
● limitations or warnings contained in the Product’s FDA-approved labeling, including potential limitations or warnings for such
products that may be more restrictive than other competitive products;
● changes in the standard of care for the targeted indications for such product candidates;
● the relative difficulty of administration of such product candidates;
● cost of treatment versus economic and clinical benefit in relation to alternative treatments or therapies;
● the availability of adequate coverage or reimbursement by third parties, such as insurance companies and other healthcare payors,
and by government healthcare programs, including Medicare and Medicaid;
● the extent and strength of our marketing and distribution of such product candidates;
● the safety, efficacy, and other potential advantages over, and availability of, alternative treatments already used or that may later
be approved for any of our intended indications;
● distribution and use restrictions imposed by the FDA with respect to such product candidates or to which we agree as part of a
mandatory risk evaluation and mitigation strategy or voluntary risk management plan;
● the timing of market introduction of such product candidates, as well as competitive products;
● our ability to offer such product candidates for sale at competitive prices;
● the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
● the extent and strength of our third-party manufacturer and supplier support;
● the approval of other new products for the same indications;
● adverse publicity about the product or favorable publicity about competitive products; and
● potential product liability claims.
Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant
resources and may never be successful. Even if the medical community accepts that our product candidates are safe and effective for their
approved indications, physicians and patients may not immediately be receptive to such product candidates and may be slow to adopt them
as an accepted treatment of the approved indications. If our current or future product candidates are approved but do not achieve an
adequate level of acceptance among physicians, patients, and third-party payors, we may not generate meaningful revenues from our
product candidates, and we may not become profitable.
Our product candidates may face competition sooner than anticipated.
The enactment of the Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated pathway for the
approval of biosimilar and interchangeable biological products. The abbreviated regulatory pathway establishes legal authority for the FDA
to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity
to an existing brand product. Under the BPCIA, the FDA cannot make an approval of an application for a biosimilar product effective until
12 years after the original branded product was approved under a BLA. Certain changes, however, and supplements to an approved BLA,
and subsequent applications filed by the same sponsor, manufacturer, licensor, predecessor in interest, or other related entity do not qualify
for the 12-year exclusivity period.
Our product candidates may qualify for the BPCIA’s 12-year period of exclusivity. However, there is a risk that the FDA will not
consider our product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar
competition sooner than anticipated. Additionally, this period of regulatory exclusivity does not block companies pursuing regulatory
approval via their own traditional BLA, rather than via the abbreviated pathway. Changes may also be made to this exclusivity period as a
result of future legislation as there has been ongoing efforts to reduce the period of exclusivity. Even if we receive a period of BPCIA
exclusivity for our first licensed product, if subsequent products do not include a modification to the structure of the product that impacts
safety, purity, or potency, we may not receive additional periods of exclusivity for those products. Moreover, the extent to which a
biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional
59
Table of Contents
generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are
still developing. Medicare Part B encourages use of biosimilars by paying the provider the same percentage of the reference product,
average sale price, or ASP as a mark-up, regardless of which product is reimbursed. It is also possible that payors will give reimbursement
preference to biosimilars even over reference biologics absent a determination of interchangeability.
We will need to obtain FDA approval of any proposed branded product names, and any failure or delay associated with such
approval may adversely affect our business.
Any name we intend to use for our product candidates will require approval from the FDA regardless of whether we have secured a
formal trademark registration from the U.S. Patent and Trademark Office, or USPTO. The FDA typically conducts a review of proposed
product names, including an evaluation of the potential for confusion with other product names. The FDA may also object to a product
name if it believes the name inappropriately implies medical claims or contributes to an overstatement of efficacy. If the FDA objects to
any of our proposed product names, we may be required to adopt alternative names for our product candidates. If we adopt alternative
names, we would lose the benefit of any existing trademark applications for such product candidate and may be required to expend
significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not
infringe the existing rights of third parties, and be acceptable to the FDA. We may be unable to build a successful brand identity for a new
trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.
Our internal computer systems, or those used by our contract research organizations or other contractors or consultants, may fail
or suffer security breaches.
Despite the implementation of security measures, our internal computer systems and those of our contract research organizations and
other contractors and consultants are vulnerable to damage from computer viruses, unauthorized and authorized access, natural disasters,
terrorism, war and telecommunication and electrical failures. If such an event was to occur and cause interruptions in our operations, it
could result in a disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing
clinical trials for a product candidate could result in delays in our regulatory approval efforts and significantly increase our costs to recover
or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications,
or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of any product
candidates could be delayed.
We are dependent on information technology, systems, infrastructure and data.
We are dependent upon information technology systems, infrastructure and data. The multitude and complexity of our computer
systems make them inherently vulnerable to service interruption or destruction, malicious intrusion and random attack. Likewise, data
privacy or security breaches by third parties, employees, contractors or others may pose a risk that sensitive data, including our intellectual
property, trade secrets or personal information of our employees, patients, or other business partners may be exposed to unauthorized
persons or to the public. Cyberattacks are increasing in their frequency, sophistication and intensity. Cyberattacks could include the
deployment of harmful malware, denial-of-service, social engineering and other means to affect service reliability and threaten data
confidentiality, integrity and availability. Our business and technology partners face similar risks and any security breach of their systems
could adversely affect our security posture. While we have invested, and continue to invest, in the protection of our data and information
technology infrastructure, there can be no assurance that our efforts, or the efforts of our partners and vendors, will prevent service
interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical
or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may
not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.
Our failure to comply with international data protection laws and regulations could lead to government enforcement actions and
significant penalties against us, and adversely impact our operating results.
European Union, or EU, member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and
regulations which impose significant compliance obligations on us. Moreover, the collection and use of personal health data in the EU,
which was formerly governed by the provisions of the EU Data Protection Directive, was replaced with the EU General Data Protection
Regulation, or the GDPR, in May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent
of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the
personal data, data breach notification and the use of third-party processors in connection with the processing of
60
Table of Contents
personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S., provides an enforcement
authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global
revenues of the noncompliant company, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also
to transfers of information between us and our subsidiaries, including employee information. The recent implementation of the GDPR has
increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be
required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and
increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with
applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new
proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the EU and other
jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.
Our failure to comply with state and/or national data protection laws and regulations could lead to government enforcement
actions and significant penalties against us, and adversely impact our operating results.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security
concerns, and some state privacy laws apply more broadly than the Health Insurance Portability and Accountability Act, or HIPAA, and
associated regulations. For example, California recently enacted legislation - the California Consumer Privacy Act, or CCPA - which went
into effect January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new
privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a
private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach.
The California Attorney General will issue final regulations. Although the law includes limited exceptions, including for certain
information collected as part of clinical trials as specified in the law, it may regulate or impact our processing of personal information
depending on the context. It remains unclear what language the final Attorney General regulations will contain, or how the statute and
regulations will be interpreted.
We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.
Our operations are dependent upon the services of our executives and our employees who are engaged in research and development.
The loss of the services of our executive officers or senior research personnel could delay our product development programs and our
research and development efforts. In order to develop our business in accordance with our business plan, we will have to hire additional
qualified personnel, including in the areas of research, manufacturing, clinical trials management, regulatory affairs, and sales and
marketing. We are continuing our efforts to recruit and hire the necessary employees to support our planned operations in the near term.
However, competition for qualified employees among companies in the biotechnology and biopharmaceutical industry is intense, and no
assurance can be given that we will be able attract, hire, retain and motivate the highly skilled employees that we need. Future growth will
impose significant added responsibilities on members of management, including:
● identifying, recruiting, integrating, maintaining, and motivating additional employees;
● managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates,
while complying with our contractual obligations to contractors and other third parties; and
● improving our operational, financial and management controls, reporting systems, and procedures.
Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to
effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from
day-to-day activities in order to devote a substantial amount of time to managing these growth activities.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors
and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and
consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we
are unable to effectively manage our outsourced activities or if the quality, compliance or accuracy of the services provided by consultants
is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory
approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our
existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.
61
Table of Contents
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and
contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates
and, accordingly, may not achieve our research, development, and commercialization goals on a timely basis, or at all.
If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders,
cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual
property rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:
● increased operating expenses and cash requirements;
● the assumption of additional indebtedness or contingent liabilities;
● the issuance of our equity securities;
● assimilation of operations, intellectual property and products of an acquired company or product, including difficulties associated
with integrating new personnel;
● the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic
merger or acquisition;
● retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
● risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing
products or product candidates and regulatory approvals; and
● our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the
acquisition or even to offset the associated acquisition and maintenance costs.
Depending on the size and nature of future strategic acquisitions, we may acquire assets or businesses that require us to raise additional
capital or to operate or manage businesses in which we have limited experience. Making larger acquisitions that require us to raise
additional capital to fund the acquisition will expose us to the risks associated with capital raising activities. Acquiring and thereafter
operating larger new businesses will also increase our management, operating and reporting costs and burdens. In addition, if we undertake
acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets
that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and
this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our
business.
We may rely on third parties to perform many essential services for any products that we commercialize, including services related
to distribution, government price reporting, customer service, accounts receivable management, cash collection, and adverse event
reporting. If these third parties fail to perform as expected or to comply with legal and regulatory requirements, our ability to
commercialize our current or future product candidates will be significantly impacted and we may be subject to regulatory sanctions.
We may retain third-party service providers to perform a variety of functions related to the sale and distribution of our current or future
product candidates, key aspects of which will be out of our direct control. These service providers may provide key services related to
distribution, customer service, accounts receivable management, and cash collection. If we retain a service provider, we would substantially
rely on it as well as other third-party providers that perform services for us, including entrusting our inventories of products to their care
and handling. If these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or
otherwise do not carry out their contractual duties to us, or encounter physical or natural damage at their facilities, our ability to deliver
product to meet commercial demand would be significantly impaired and we may be subject to regulatory enforcement action.
In addition, we may engage third parties to perform various other services for us relating to adverse event reporting, safety database
management, fulfillment of requests for medical information regarding our product candidates and related services. If the quality or
accuracy of the data maintained by these service providers is insufficient, or these third parties otherwise fail to comply with regulatory
requirements related to adverse event reporting, we could be subject to regulatory sanctions.
62
Table of Contents
Additionally, we may contract with a third-party to calculate and report pricing information mandated by various government
programs. If a third party fails to timely report or adjust prices as required or errs in calculating government pricing information from
transactional data in our financial records, it could impact our discount and rebate liability, and potentially subject us to regulatory
sanctions or False Claims Act lawsuits.
The SEC has issued an administrative order against us that may make it more difficult for us to raise capital in the future.
On April 10, 2017, the SEC issued an administrative order that requires us to cease and desist from committing or causing any
violations and any future violations of Sections 5(b), 17(a), and 17(b) of the Securities Act of 1933, as amended, or the Securities Act, and
of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The order was entered into as part of our settlement
with the SEC in the investigation titled In the Matter of Certain Stock Promotions. The SEC’s investigation, in part, involved the conduct
of our former Chief Executive Officer and director, Manish Singh, during the period between September 2013 and April 2014, and the
failure by authors of certain articles about our company to disclose that they were compensated by one of our former investor relations
firms. The foregoing order may negatively impact our reputation with current and future investors, will disqualify us from effecting private
placement transactions in reliance upon any of the exemptions from Securities Act registration afforded by Regulation D, and will limit our
ability to make certain communications in future public offerings. As a result, the SEC’s order will make it more difficult for us to raise
capital in future private and public offerings. We currently anticipate that we will have to raise additional capital in the future to fund our
future research, development and commercialization efforts. Some of the limitations placed on us as a result of the SEC administrative
order relating to ineligibility for statutory safe harbors, including under the Private Securities Litigation Reform Act, and limitations on our
communications and status as an ineligible issuer under Rule 405 of the Securities Act, are expected to end in April 2020.
We are, and in the future may be, subject to Federal or state securities or related legal actions that could adversely affect our
results of operations and our business.
Shortly after the SEC announced settlements with us, with other public companies, and with unrelated parties in the In the Matter of
Certain Stock Promotions investigation, two securities class action complaints were filed in the U.S. District Court for the Northern District
of California against our company, Manish Singh, and two of our other former officers. On July 20, 2017, the plaintiff in one of the cases
filed a notice to voluntarily dismiss that case, and the court entered an order dismissing the complaint on July 21, 2017. On July 26, 2017,
the court appointed a movant as lead plaintiff. On September 8, 2017, the lead plaintiff, individually and on behalf of all others similarly
situated, filed an amended complaint seeking class action status in the United States District Court for the Northern District of California
(Jay Rabkin v. Lion Biotechnologies, Inc., et al., case no. 3:17-cv-0286) against us, two of our former officers, and the managing member
of our former investor relations firm. The amended complaint alleges, among other things, that the defendants violated various provisions
of the Securities Exchange Act of 1934 by making materially false and misleading statements, or by failing to make certain disclosures,
regarding the actions taken by Manish Singh, our former Chief Executive Officer and a former director, and our 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 the result of mediation, on September 28, 2018, lead plaintiff filed an unopposed motion
for settlement, the cost of which, was expected to be borne by our insurance carrier and would result in no loss to us. The court gave
preliminary approval to the proposed settlement on November 30, 2018. A 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 our 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 us should be dismissed with prejudice. The court retains jurisdiction over the parties and class members in the case for the
purposes of administration, interpretation, implementation, and enforcement of the settlement, and related matters.
On December 15, 2017, a purported stockholder derivative complaint was filed by plaintiff Kevin Fong against us, as nominal
defendant, and certain of our current and former officers and directors, and others, as defendants, in the U.S. District Court for the District
of Delaware (case no. 1:17-cv-1806). 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 matter and our April 10, 2017 settlement thereof, and seeks unspecified damages on behalf of our
company and injunctive relief. On March 28, 2018, a purported stockholder derivative complaint was filed by plaintiff Nazeer
Khaleeluddin on behalf of our company, against us, as nominal defendant, and certain of our current and former officers and directors, and
others, as defendants, in the U.S. District Court for the District of Delaware (case no. 1:18-cv-00469). The complaint alleges, among other
things, violations of securities law, breach of fiduciary duty, aiding and abetting, waste of corporate assets, and
63
Table of Contents
unjust enrichment. The complaint is based on claims arising from the SEC’s investigation in the In the Matter of Certain Stock Promotions
investigation and our April 10, 2017 settlement thereof, and seeks unspecified damages on behalf of our company and injunctive relief.
On May 1, 2018, the court consolidated this case with the aforementioned purported stockholder derivative case filed by plaintiff
Kevin Fong. The consolidated cases are titled In re Iovance Biotherapeutics, Inc. Stockholder Derivative Litigation (lead case no. 17-cv-
1806). While we have reached a preliminary settlement in this matter on January 28, 2020, the settlement is currently awaiting preliminary
approval by the court. If the proposed settlement is given final approval by the court, we do not expect to incur any significant costs or
expenses in connection with this settlement. However, the settlement may not be approved, in which case we intend to vigorously defend
against these complaints, which may incur additional costs. Based on the current stage of the litigation matters, it is not possible to estimate
the amount or range of possible loss that might result from an adverse judgment or a settlement of these matters. Furthermore, litigation is
inherently uncertain, and there is no assurance as to the outcome of these, or other future cases. We could incur substantial unreimbursed
legal fees, settlements, judgments and other expenses in connection with these, or other legal and regulatory proceedings that may not
qualify for coverage under, or may exceed the limits of, our applicable directors’ and officers’ liability insurance policies and could have a
material adverse effect on our financial condition, liquidity and results of operations. The currently pending cases also may distract the time
and attention of our officers and directors or divert our other resources away from our ongoing commercial and development programs. An
unfavorable outcome in these matters could damage our business and reputation or result in additional claims or proceedings against us.
Risks Related to Government Regulation
The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical
development and regulatory approval of our product candidates.
We have not previously submitted a BLA to the FDA, or similar approval filings to comparable foreign authorities. A BLA must
include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety and effectiveness for
each desired indication. For example, following our End of Phase 2 meeting with the FDA, we increased enrollment in Cohort 1 of our
ongoing C-145-04 clinical trial of TIL therapy LN-145 to at least 75 patients of the appropriate population to address the expected sample
size in anticipation of a BLA submission in late 2020. Additionally, the patient population is defined per the discussion with FDA as
patients who have progressed following initial systemic therapy for recurrent or metastatic disease which include many of the more
advanced patients enrolled to date. Based on feedback we received from the FDA following our End of Phase 2 meeting, we are planning
for a BLA submission in late 2020 subsequent to discussions with the FDA. However, our current beliefs regarding the registration
pathway for the LN-145 product candidate are based on our interpretation of communications with the FDA to date and our efforts to
address such communications, which may be incorrect. Our statements that the study may support a BLA submission also assume that our
as-adjusted study has addressed the additional requests by the FDA that were raised at our End of Phase 2 meeting. Further, enrollment in
this study may need to be further adjusted based on future feedback from the FDA or other regulatory agency input. The revised protocol
which further defines the patient population to include more advanced patients in the study, may have an adverse effect on the results
reported to date, changes to implement an independent review committee and assay validation and implementation, and the data within this
study may not ultimately be supportive of product approval, all of which could result in significant delays to our currently anticipated
timeline for development and approval of our product candidate or prevent its approval entirely. Similarly, our current beliefs for our
lifileucel product candidate for the treatment of melanoma are based on our interpretation of communications received from the FDA to
date regarding this product candidate and our ongoing C-144-01 clinical trial, and may also be incorrect.
A BLA must also include significant information regarding the chemistry, manufacturing and controls for the product. Additionally,
we expect the novel nature of our product candidates to create further challenges in obtaining regulatory approval. For example, the FDA
has limited experience with commercial development of cell therapies for cancer. We may also not be able to successfully utilize the BTD
or RMAT designations we have received for metastatic cervical cancer and advanced melanoma, respectively, to successfully complete the
development and commercialization of lifileucel. We may not be able to reach agreement with FDA on an interpretation of outcomes from
our meetings, including meetings we have held with FDA in relation to our C-145-04
64
Table of Contents
and C-144-01 clinical trials and future meetings. Accordingly, the regulatory approval pathway for our product candidates may be
uncertain, complex, expensive and lengthy, and approval may not be obtained.
We may also experience delays, including delays arising from the need to increase enrollment, in completing planned clinical trials for
a variety of reasons, including delays related to:
● the availability of financial resources to commence and complete the planned trials;
● reaching agreement on acceptable contract terms with prospective CROs and clinical trial sites, the terms of which can be subject
to extensive negotiation and may vary significantly among different CROs and trial sites;
● obtaining approval at each clinical trial site by an independent institutional review board, or IRB, or central IRB;
● recruiting suitable patients to participate in a trial;
● having patients complete a trial or return for post-treatment follow-up;
● clinical trial sites deviating from trial protocol or dropping out of a trial;
● adding new clinical trial sites;
● manufacturing sufficient quantities of qualified materials under cGMPs and applying them on a subject by subject basis for use in
clinical trials; or
● timely implementing or validating changes to our manufacturing or quality control processes and methods needed to address FDA
feedback.
We could also encounter delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of
our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial
may be suspended or terminated by us, the IRBs for the institutions in which such trials are being conducted by the FDA or other
regulatory authorities, or recommended for suspension or termination by DSMBs due to a number of factors, including failure to conduct
the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site
by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects,
failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of
adequate funding to continue the clinical trial. If we experience termination of, or delays in the completion of, any clinical trial of our
product candidates, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenue will
be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product development and
approval process and jeopardize our ability to commence product sales and generate revenue.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be
successful in obtaining regulatory approval of our product candidates in other jurisdictions.
In order to market and sell our products outside the United States, we or our third-party collaborators may be required to obtain
separate marketing approvals and comply with numerous and varying regulatory requirements. Obtaining and maintaining regulatory
approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in
any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the
regulatory approval process in others. Approval policies and requirements may vary among jurisdictions. For example, even if the FDA
grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the
manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and
can involve requirements and administrative review periods different from, and greater than, those in the United States, including
additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities
in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it
can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
We or our collaborators may not be able to file for regulatory approval of our product candidates in international jurisdictions or obtain
approvals from regulatory authorities outside the United States on a timely basis, if at all.
We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the United States have
requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign
regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us
and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in
international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full
market potential of our product candidates will be harmed.
65
Table of Contents
We are, and if we receive regulatory approval of our product candidates, will continue to be subject to ongoing regulatory
obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if
we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.
Any regulatory approvals that we receive for our product candidates will require surveillance to monitor the safety and efficacy of the
product candidate. The FDA may also require a REMS to approve our product candidates, which could entail requirements for a
medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient
registries and other risk minimization tools. The FDA may also require post-approval Phase 4 studies. Moreover, the FDA and comparable
foreign regulatory authorities will continue to closely monitor the safety profile of any product even after approval. If the FDA or
comparable foreign regulatory authorities become aware of new safety information after approval of any of our product candidates, they
may withdraw approval, require labeling changes or establishment of a REMS or similar strategy, impose significant restrictions on a
product’s indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market
surveillance. Any such restrictions could limit sales of the product.
In addition, we, our contractors, and our collaborators are and will remain responsible for FDA compliance, including requirements
related to product design, testing, clinical and pre-clinical trials approval, manufacturing processes and quality, labeling, packaging,
distribution, adverse event and deviation reporting, storage, advertising, marketing, promotion, sale, import, export, submissions of safety
and other post-marketing information and reports such as deviation reports, registration, product listing, annual user fees, and
recordkeeping for our product candidates. We and any of our collaborators, including our contract manufacturers, could be subject to
periodic unannounced inspections by the FDA to monitor and ensure compliance with regulatory requirements. Application holders must
further notify the FDA, and depending on the nature of the change, obtain FDA pre-approval for product and manufacturing changes. The
cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.
Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or
frequency, that the product is less effective than previously thought, problems with our third-party manufacturers or manufacturing
processes, or failure to comply with regulatory requirements, may result in, among other things:
● restrictions on the marketing, distribution, or manufacturing of our product candidates, withdrawal of the product from the
market, or voluntary or mandatory product recalls;
● restrictions on the labeling of our product candidates, including required additional warnings, such as black box warnings,
contraindications, precautions, and restrictions on the approved indication or use;
● modifications to promotional pieces;
● changes to product labeling or the way the product is administered;
● liability for harm caused to patients or subjects;
● fines, restitution, disgorgement, warning letters, untitled letters, or holds on or termination of clinical trials;
● refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or
revocation of license approvals;
● product seizure or detention, or refusal to permit the import or export of our product candidates;
● injunctions or the imposition of civil or criminal penalties, including imprisonment;
● FDA debarment, debarment from government contracts, and refusal of future orders under existing contracts, exclusion from
federal healthcare programs, consent decrees, or corporate integrity agreements;
● regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing
warnings or other safety information about the biologic;
● reputational harm; or
● the product becoming less competitive.
Any of these events could further have other material and adverse effects on our operations and business and could adversely impact
our stock price and could significantly harm our business, financial condition, results of operations, and prospects.
The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are
66
Table of Contents
slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to
maintain regulatory compliance, we may lose any marketing approval that we may have obtained, be subject to other regulatory
enforcement action, and we may not achieve or sustain profitability.
If we fail to comply with federal and state healthcare and promotional laws, including fraud and abuse and information privacy
and security laws, we could face substantial penalties and our business, financial condition, results of operations, and prospects could
be adversely affected.
As a biopharmaceutical company, we are subject to many federal and state healthcare laws, including the federal AKS, the federal civil
and criminal FCA, the civil monetary penalties statute, the Medicaid Drug Rebate statute and other price reporting requirements, the
Veterans Health Care Act of 1992, the federal Health Insurance Portability and Accountability Act of 1996 (as amended by the Health
Information Technology for Economics and Clinical Health Act), the Foreign Corrupt Practices Act of 1977, the Patient Protection and
Affordable Care Act of 2010, and similar state laws. Even though we do not and will not control referrals of healthcare services or bill
directly to Medicare, Medicaid, or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and
abuse and patients’ rights are and will be applicable to our business. If we do not comply with all applicable fraud and abuse laws, we may
be subject to healthcare fraud and abuse enforcement by both the federal government and the states in which we conduct our business.
Laws and regulations require calculation and reporting of complex pricing information for prescription drugs, and compliance will
require us to invest in significant resources and develop a price reporting infrastructure, or depend on third parties to compute and report
our drug pricing. Pricing reported to CMS must be certified. Non-compliant activities expose us to FCA risk if they result in overcharging
agencies, underpaying rebates to agencies, or causing agencies to overpay providers.
If we or our operations are found to be in violation of any federal or state healthcare law, or any other governmental regulations that
apply to us, we may be subject to penalties, including civil, criminal, and administrative penalties, damages, fines, disgorgement,
debarment from government contracts, refusal of orders under existing contracts, exclusion from participation in U.S. federal or state health
care programs, corporate integrity agreements, and the curtailment or restructuring of our operations, any of which could materially
adversely affect our ability to operate our business and our financial results. If any of the physicians or other healthcare providers or entities
with whom we expect to do business, including our collaborators, is found not to be in compliance with applicable laws, they may be
subject to criminal, civil, or administrative sanctions, including but not limited to, exclusions from participation in government healthcare
programs, which could also materially affect our business.
In particular, if we are found to have impermissibly promoted any of our product candidates, we may become subject to significant
liability and government fines. We, and any of our collaborators, must comply with requirements concerning advertising and promotion for
any of our product candidates for which we or they obtain marketing approval. Promotional communications with respect to therapeutics
are subject to a variety of legal and regulatory restrictions and continuing review by the FDA, Department of Justice, Department of Health
and Human Services’ Office of Inspector General, state attorneys general, members of Congress, and the public. When the FDA or
comparable foreign regulatory authorities issue regulatory approval for a product candidate, the regulatory approval is limited to those
specific uses and indications for which a product is approved. If we are not able to obtain FDA approval for desired uses or indications for
our products and product candidates, we may not market or promote our products for those indications and uses, referred to as off-label
uses, and our business may be adversely affected. We further must be able to sufficiently substantiate any claims that we make for our
products including claims comparing our products to other companies’ products and must abide by the FDA’s strict requirements regarding
the content of promotion and advertising.
While physicians may choose to prescribe products for uses that are not described in the product’s labeling and for uses that differ
from those tested in clinical studies and approved by the regulatory authorities, we are prohibited from marketing and promoting the
products for indications and uses that are not specifically approved by the FDA. These off-label uses are common across medical
specialties and may constitute an appropriate treatment for some patients in varied circumstances. Regulatory authorities in the United
States generally do not restrict or regulate the behavior of physicians in their choice of treatment within the practice of medicine.
Regulatory authorities do, however, restrict communications by biopharmaceutical companies concerning off-label use.
The FDA and other agencies actively enforce the laws and regulations regarding product promotion, particularly those prohibiting the
promotion of off-label uses, and a company that is found to have improperly promoted a product may be subject to significant sanctions.
The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined
several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent
67
Table of Contents
decrees of permanent injunctions under which specified promotional conduct is changed or curtailed. Thus, we and any of our collaborators
will not be able to promote any products we develop for indications or uses for which they are not approved.
In the United States, engaging in the impermissible promotion of our products, following approval, for off-label uses can also subject
us to false claims and other litigation under federal and state statutes, including fraud and abuse and consumer protection laws, which can
lead to civil and criminal penalties and fines, agreements with governmental authorities that materially restrict the manner in which we
promote or distribute therapeutic products and do business through, for example, corporate integrity agreements, suspension or exclusion
from participation in federal and state healthcare programs, and debarment from government contracts and refusal of future orders under
existing contracts. These false claims statutes include the federal civil False Claims Act, which allows any individual to bring a lawsuit
against a biopharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims or causing
others to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government
decides to intervene and prevails in the lawsuit, the individual will share in the proceeds from any fines or settlement funds. If the
government declines to intervene, the individual may pursue the case alone. These False Claims Act lawsuits against manufacturers of
drugs and biologics have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements, up to
$3.0 billion, pertaining to certain sales practices and promoting off-label uses. In addition, False Claims Act lawsuits may expose
manufacturers to follow-on claims by private payors based on fraudulent marketing practices. This growth in litigation has increased the
risk that a biopharmaceutical company will have to defend a false claim action, pay settlement fines or restitution, as well as criminal and
civil penalties, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare, Medicaid, or
other federal and state healthcare programs. If we or our future collaborators do not lawfully promote our approved products, if any, we
may become subject to such litigation and, if we do not successfully defend against such actions, those actions may have a material adverse
effect on our business, financial condition, results of operations and prospects.
Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these laws, the risks
cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove
costly. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal
expenses and divert our management’s attention from the operation of our business.
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could
make it difficult for us to sell our product candidates profitably.
In both domestic and foreign markets, sales of our product candidates, if approved, depend on the availability of coverage and
adequate reimbursement from third-party payors. Such third-party payors include government health programs such as Medicare and
Medicaid, managed care providers, private health insurers, and other organizations. In addition, because our product candidates represent
new approaches to the treatment of cancer, we cannot accurately estimate the potential revenue from our product candidates.
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the
costs associated with their treatment. Obtaining coverage and adequate reimbursement from governmental healthcare programs, such as
Medicare and Medicaid, and commercial payors is critical to new product acceptance.
Government authorities and third-party payors decide which drugs and treatments they will cover and the amount of reimbursement.
Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower
cost therapeutic alternatives are already available or subsequently become available. If reimbursement is not available, or is available only
to limited levels, our product candidates may be competitively disadvantaged, and we, or our collaborators, may not be able to successfully
commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow
us, or our collaborators, to establish or maintain a market share sufficient to realize a sufficient return on our or their investments.
Alternatively, securing favorable reimbursement terms may require us to compromise pricing and prevent us from realizing an adequate
margin over cost. Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party
payor’s determination that use of a product is:
● a covered benefit under its health plan;
● safe, effective and medically necessary;
● appropriate for the specific patient;
● cost-effective; and
● neither experimental nor investigational.
68
Table of Contents
Obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and
costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our
products. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to
achieve or sustain profitability or may require co-payments that patients find unacceptably high. Moreover, the factors noted above have
continued to be the focus of policy and regulatory debate that has, thus far, shown the potential for movement towards permanent policy
changes; this trend is apt to continue, and may result in more or less favorable impacts on pricing. Patients are unlikely to use our product
candidates unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our product candidates.
In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore,
coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is
often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product
candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.
Prices paid for a drug also vary depending on the class of trade. Prices charged to government customers are subject to price controls,
including ceilings, and private institutions obtain discounts through group purchasing organizations. Net prices for drugs may be further
reduced by mandatory discounts or rebates required by government healthcare programs and demanded by private payors. It is also not
uncommon for market conditions to warrant multiple discounts to different customers on the same unit, such as purchase discounts to
institutional care providers and rebates to the health plans that pay them, which reduces the net realization on the original sale.
In addition, federal programs impose penalties on manufacturers of drugs marketed under an NDA or BLA, in the form of mandatory
additional rebates and/or discounts if commercial prices increase at a rate greater than the Consumer Price Index-Urban, and these rebates
and/or discounts, which can be substantial, may impact our ability to raise commercial prices. Regulatory authorities and third-party payors
have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our
ability or that of our collaborators to sell our product candidates profitably. These payors may not view our products, if any, as cost-
effective, and coverage and reimbursement may not be available to our customers, or those of our collaborators, or may not be sufficient to
allow our products, if any, to be marketed on a competitive basis. Cost control initiatives could cause us, or our collaborators, to decrease,
discount, or rebate a portion of the price we, or they, might establish for products, which could result in lower than anticipated product
revenues. If the realized prices for our products, if any, decrease or if governmental and other third-party payors do not provide adequate
coverage or reimbursement, our prospects for revenue and profitability will suffer. Moreover, the recent and ongoing series of
congressional hearings relating to drug pricing has presented heightened attention to the biopharmaceutical industry, creating the potential
for political and public pressure, while the potential for resulting legislative or policy changes presents uncertainty.
Assuming coverage is approved, the resulting reimbursement payment rates might not be adequate. If payors subject our product
candidates to maximum payment amounts or impose limitations that make it difficult to obtain reimbursement, providers may choose to
use therapies which are less expensive when compared to our product candidates. Additionally, if payors require high copayments,
beneficiaries may decline prescriptions and seek alternative therapies. We may need to conduct post-marketing studies in order to
demonstrate the cost-effectiveness of any future products to the satisfaction of hospitals and other target customers and their third-party
payors. Such studies might require us to commit a significant amount of management time and financial and other resources. Our future
products might not ultimately be considered cost-effective. Adequate third-party coverage and reimbursement might not be available to
enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods
of controlling healthcare costs. In addition, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes
of new technologies and are challenging the prices charged. We, and our collaborators, cannot be sure that coverage will be available for
any product candidate that we, or they, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net
reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs
from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate
payment rates from both government-funded and private payors for any our product candidates for which we obtain marketing approval
could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our overall
financial condition.
69
Table of Contents
There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at
broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be
adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of
healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
● the demand for our product candidates, if we obtain regulatory approval;
● our ability to set a price that we believe is fair for our products;
● our ability to generate revenue and achieve or maintain profitability;
● the level of taxes that we are required to pay; and
● the availability of capital.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from
private payors, which may adversely affect our future profitability. A particular challenge for our product candidates arises from the fact
that they will primarily be used in an inpatient setting. Inpatient reimbursement generally relies on stringent packaging rules that may mean
that there is no separate payment for our product candidates. Additionally, data used to set the payment rates for inpatient admissions is
usually several years old and would not take into account all of the additional therapy costs associated with the administration of our
product candidates. If special rules are not created for reimbursement for immunotherapy treatments such as our product candidates,
hospitals might not receive enough reimbursement to cover their costs of treatment, which will have a negative effect on their adoption of
our product candidates.
We are subject to new legislation, regulatory proposals, and healthcare payor initiatives that may increase our costs of compliance,
and adversely affect our ability to market our products, obtain collaborators, and raise capital.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed
changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-
approval activities, and affect our ability, or the ability of our collaborators, to profitably sell any products for which we obtain marketing
approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more
rigorous coverage criteria and in additional downward pressure on the price that we, or our collaborators, may receive for any approved
products.
Since enactment of the ACA in 2010, in both the United States and certain foreign jurisdictions, there have been a number of
legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In August 2011, the
Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on
Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was
unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes
aggregate reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect on April 1, 2013 and were to
remain in effect until 2024. The Bipartisan Budget Act of 2015 extended the 2% sequestration to 2025. In January 2013, the American
Taxpayer Relief Act of 2012, or ATRA, was approved which, among other things, reduced Medicare payments to several providers, with
primary focus on the hospital outpatient setting and ancillary services, including hospitals, imaging centers and cancer treatment centers,
and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. On
January 20, 2017, the new administration signed an Executive Order directing federal agencies with authorities and responsibilities under
the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or
regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices, and,
for that reason, some final regulations have yet to take effect. In December 2017, Congress repealed the individual mandate for health
insurance required by the ACA and could consider further legislation to repeal other elements of the ACA. At the end of 2017, CMS
promulgated regulations that reduce the amount paid to hospitals for outpatient drugs purchased under the 340B program, and some states
have enacted transparency laws requiring manufacturers to report information on drug prices and price increases. On December 14, 2018,
the United States District Court for the Northern District of Texas struck down the ACA, deeming it unconstitutional given that Congress
repealed the individual mandate in 2017; on July 9, 2019, the U.S. Court of Appeals for the Fifth Circuit heard arguments on appeal in this
matter. On December 18, 2019, the Fifth Circuit ruled that the ACA’s individual mandate is unconstitutional given that the Tax Act
eliminated the tax penalty associated with the individual mandate. In concluding that the individual mandate is unconstitutional, the
question remains whether, or how much of, the rest of the ACA is severable from that constitutional defect. The Fifth Circuit further
remanded the case to the U.S. District Court for the Northern District of Texas to further analyze whether the other provisions of the
70
Table of Contents
ACA are severable as they currently exist under the law. It is unclear how the eventual decision from this appeal, subsequent appeals, and
other efforts to repeal and replace the ACA will impact the ACA and our business.
Additional federal and state healthcare reform measures may be adopted in the future that may result in more rigorous coverage
criteria, increased regulatory burdens and operating costs, decreased net revenue from our pharmaceutical products, decreased potential
returns from our development efforts, and additional downward pressure on the price that we receive for any approved drug. Any reduction
in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private
payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue,
attain profitability or commercialize our products.
Legislative and regulatory proposals may also be made to expand post-approval requirements and restrict sales and promotional
activities for drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance, or
interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be.
In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well
as subject us to more stringent product labeling and post-marketing testing and other requirements.
In addition, there have been a number of other policy, legislative and regulatory proposals aimed at changing the pharmaceutical
industry. For instance, on May 11, 2018, the current administration presented its “Blueprint” to lower drug prices and reduce out of pocket
costs of drugs, as well as additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal
healthcare programs, and incentivize manufacturers to lower the list price of their products. Although some proposals related to the
administration’s Blueprint may require additional authorization to become effective, may ultimately be withdrawn, or may face challenges
in the courts, the U.S. Congress and the administration have indicated that they will continue to seek new legislative and administrative
measures to control drug costs, including by addressing the role of pharmacy benefit managers in the supply chain. At the state level,
legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product
pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost
disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the
availability of healthcare and containing or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory
framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition
and results of operations.
Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In international markets, reimbursement and health care payment systems vary significantly by country, and many countries have
instituted price ceilings on specific products and therapies. In some countries, particularly the countries of the EU, the pricing of
prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can
take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement or pricing approval in
some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other
available therapies. There can be no assurance that our products will be considered cost-effective by third-party payors, that an adequate
level of reimbursement will be available, or that the third-party payors’ reimbursement policies will not adversely affect our ability to sell
our products profitably. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, our business could be harmed, possibly materially.
Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other
improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or other illegal activity by our employees, independent contractors, consultants,
commercial partners and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to:
comply with the laws of the FDA and other similar foreign regulatory bodies, provide true, complete and accurate information to the FDA
and other similar foreign regulatory bodies, comply with manufacturing standards we have established, comply with healthcare fraud and
abuse laws in the United States and similar foreign fraudulent misconduct laws, or report financial information or data accurately or to
disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those
products in the United States, our potential exposure under such laws will increase significantly, and our costs
71
Table of Contents
associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities
with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the
promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are
subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may
restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer
incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information
obtained in the course of patient recruitment for clinical trials.
We have adopted a Code of Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the
precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses
or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or
regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It
is possible that governmental and enforcement authorities will conclude that our, or our employees’, consultants’, collaborators’,
contractors’, or vendors’ business practices may not comply with current or future statutes, regulations or case law interpreting applicable
fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil,
criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid
and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, compliance
agreements, withdrawal of product approvals, and curtailment of our operations, among other things, any of which could adversely affect
our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product
candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other
foreign laws.
Risks Related to Our Intellectual Property
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, or lawsuits accusing our products
of patent infringement, which could be expensive, time-consuming and unsuccessful.
Competitors may infringe the patents of our licensors. To counter infringement or unauthorized use, we may be required to file
infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one
or more of our patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the
grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one
or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk
of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial
diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may be enjoined from
manufacturing, use, and marketing our products, or may have to pay substantial damages, including treble damages and attorneys’ fees for
willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be
impossible or require substantial time and monetary expenditure.
Periodic maintenance fees on any issued patent are due to be paid to the United States Patent and Trademark Office, or USPTO, and
foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies
require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process.
While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules,
there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or
complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or
patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees
and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which
would have a material adverse effect on our business.
We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.
The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be
substantial. Some of our competitors may be better able to sustain the costs of complex patent litigation because they have substantially
greater resources. If there is litigation against us, we may not be able to continue our operations.
72
Table of Contents
Should third parties file patent applications or be issued patents claiming technology also used or claimed by us, we may be required to
participate in interference proceedings in the USPTO to determine priority of invention. We may be required to participate in interference
proceedings involving our issued patents and pending applications. We may be required to cease using the technology or to license rights
from prevailing third parties as a result of an unfavorable outcome in an interference proceeding. A prevailing party in that case may not
offer us a license on commercially acceptable terms.
Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or the USPTO.
If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product
candidates, the defendant could counterclaim that the patent covering our product candidate, as applicable, is invalid and/or unenforceable.
In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there
are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar
claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-
examination, post grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could
result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following
legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain
that there is no invalidating prior art, of which we, our patent counsel and the patent examiner were unaware during prosecution. If a
defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the
patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our business.
If we are unable to protect our proprietary rights, we may not be able to compete effectively or operate profitably.
Our success is dependent in part on maintaining and enforcing the patents and other proprietary rights that we have licensed and may
develop, and on our ability to avoid infringing the proprietary rights of others. Certain of our intellectual property rights are licensed from
another entity, and as such the preparation and prosecution of these patents and patent applications was not performed by us or under our
control. Furthermore, patent law relating to the scope of claims in the biotechnology field in which we operate is still evolving and,
consequently, patent positions in our industry may not be as strong as in other more well-established fields. The patent positions of
biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles
remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date.
The issuance of a patent is not conclusive as to its validity or enforceability and it is uncertain how much protection, if any, will be
given to the patents we have licensed from the NIH, Moffitt, or MDACC if any of these parties, or we, attempt to enforce the patents and/or
if they are challenged in court or in other proceedings, such as oppositions, which may be brought in foreign jurisdictions to challenge the
validity of a patent. A third party may challenge the validity or enforceability of a patent after its issuance by the Patent Office. It is
possible that a competitor may successfully challenge our patents or that a challenge will result in limiting their coverage. Moreover, the
cost of litigation to uphold the validity of patents and to prevent infringement can be substantial. If the outcome of litigation is adverse to
us, third parties may be able to use our patented invention without payment to us. Moreover, it is possible that competitors may infringe our
patents or successfully avoid the patented technology through design innovation. To stop these activities, we may need to file a lawsuit.
These lawsuits are expensive and would consume time and other resources, even if we were successful in stopping the violation of our
patent rights. In addition, there is a risk that a court would decide that our patents are not valid and that we do not have the right to stop the
other party from using the inventions. There is also the risk that, even if the validity of our patents were upheld, a court would refuse to
stop the other party on the grounds that its activities are not covered by, that is, do not infringe, our patents.
Should third parties file patent applications, or be issued patents claiming technology also used or claimed by our licensor(s) or by us
in any future patent application, we may be required to participate in interference proceedings in the USPTO to determine priority of
invention for those patents or patent applications that are subject to the first-to-invent law in the United States, or may be required to
participate in derivation proceedings in the USPTO for those patents or patent applications that are subject to the first-inventor-to-file law
in the United States. We may be required to participate in such interference or derivation proceedings involving our issued patents and
pending applications. We may be required to cease using the technology or to license rights from prevailing third parties as a result of an
unfavorable outcome in an interference proceeding or derivation proceeding. A prevailing party in that case may not offer us a license on
commercially acceptable terms.
73
Table of Contents
We cannot prevent other companies from licensing most of the same intellectual properties that we have licensed or from otherwise
duplicating our business model and operations.
Certain intellectual properties that we are using to develop TIL-based cancer therapy products were licensed to us by the NIH. The
issued or pending patents that the NIH licensed to us are exclusive, and specific with respect to melanoma, breast, HPV-associated, bladder
and lung cancers. No assurance can be given that the NIH has not previously licensed, or that the NIH hereafter will not license to other
biotechnology companies some or all of the non-exclusive technologies available to us under the NIH License Agreement. In addition, one
pending U.S. patent application in the NIH License Agreement is not owned solely by the NIH. No assurance can be given that NIH’s co-
owner of the certain pending U.S. patent application in the NIH License Agreement has not previously licensed, or that the co-owner
thereafter will not license, to other biotechnology companies some or all of the technologies available to us. Co-ownership of these
intellectual properties will create issues with respect to our ability to enforce the intellectual property rights in courts, and will create issues
with respect to the accountability of one entity with respect to the other.
Since the NCI, Moffitt, MDACC, and others already use TIL therapy for the treatment of metastatic melanoma and other indications,
their methods and data are also available to third parties, who may want to enter into our line of business and compete against us. Other
than the Gen 2 manufacturing process, we currently do not own any exclusive rights on our entire product portfolio that could be used to
prevent third parties from duplicating our business plan or from otherwise directly competing against us. While additional technologies that
may be developed under our CRADA may be licensed to us on an exclusive basis, no assurance can be given that our existing exclusive
rights and will be sufficient to prevent others from competing with us and developing substantially similar products.
The use of our technologies could potentially conflict with the rights of others.
Our potential competitors or others may have or acquire patent rights that they could enforce against us. If they do so, then we may be
required to alter our products, pay licensing fees or cease activities. If our products conflict with patent rights of others, third parties could
bring legal actions against us or our collaborators, licensees, suppliers or customers, claiming damages and seeking to enjoin
manufacturing, use and marketing of the affected products. If these legal actions are successful, in addition to any potential liability for
damages (including treble damages and attorneys’ fees for willful infringement), we could be required to obtain a license to continue
manufacturing, promoting the use or marketing the affected products. We may not prevail in any legal action and a required license under
the patent may not be available on acceptable terms or at all.
We have conducted an extensive freedom-to-operate, or FTO, analyses of the patent landscape with respect to our lead product
candidates. Although we continue to undertake FTO analyses of our manufacturing processes, our lead TIL products, and contemplated
future processes and products, because patent applications do not publish for 18 months, and because the claims of patent applications can
change over time, no FTO analysis can be considered exhaustive. Furthermore, patent and other intellectual property rights in
biotechnology remains an evolving area with many risks and uncertainties. As such, we may not be able to ensure that we can market our
product candidates without conflict with the rights of others.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other cell therapy and biopharmaceutical companies, our success is dependent on intellectual property, particularly
patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is
therefore costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently
implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection
available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with
regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents,
once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing
patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and
patents that we might obtain in the future. While we do not believe that any of the patents owned or licensed by us will be found invalid
based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our
patents.
74
Table of Contents
We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the
world.
We have limited intellectual property rights outside the United States. Filing, prosecuting and defending patents on product candidates
in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the
United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect
intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent
third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our
inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not
obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have
patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our
patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents,
trade secrets and other intellectual property protection, particularly those relating to biopharmaceutical products, which could make it
difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from
other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of
not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages
or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights
around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed
confidential information of third parties.
We have received confidential and proprietary information from third parties and our employees and contractors. In addition, we
employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that
we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of
these third parties or our employees’ former employers. Litigation may be necessary to defend against or pursue these claims. For example,
we are currently engaged in litigation involving counterclaims that we have brought relating to theft of certain of our trade secrets, breach
of confidentiality, and related counterclaims. Even if we are successful in resolving these claims, litigation could result in substantial cost
and be a distraction to our management and employees.
Risks Related to Our Securities
Our existing directors and executive officers hold a substantial amount of our common stock and may be able to influence
significant corporate decisions.
As of December 31, 2019, our officers and directors beneficially owned approximately 9.4 % of our outstanding common stock. These
stockholders, if they act together, may be able to materially affect the outcome of matters presented to our stockholders, including the
election of our directors and other corporate actions such as:
● a merger with or into another company;
● a sale of substantially all of our assets; and
● amendments to our certificate of incorporation.
Additionally, the decisions of these stockholders may conflict with our interests or those of our other stockholders and the market price
of our stock may be adversely affected by market volatility.
Our stock price may be volatile, and our stockholders’ investment in our stock could decline in value.
75
Table of Contents
The market price of our common stock is likely to be volatile and could fluctuate widely in response to many factors, including but not
limited to:
● announcements of the results of clinical trials by us, our collaborators, or our competitors,or negative developments with respect
to similar products, including those being developed by our collaborators;
● developments with respect to patents or proprietary rights;
● announcements of technological innovations by us or our competitors;
● announcements of new products or new contracts by us or our competitors;
● actual or anticipated variations in our operating results due to the level of development expenses and other factors;
● changes in financial estimates by equities research analysts and whether our earnings meet or exceed such estimates;
● conditions and trends in the pharmaceutical, biotechnology and other industries;
● receipt, or lack of receipt, of funding in support of conducing our business;
● regulatory developments within, and outside of, the United States;
● litigation or arbitration;
● general volatility in the financial markets;
● general economic, political and market conditions and other factors; and
● the occurrence of any of the risks described in this Annual Report on Form 10-K
You may experience future dilution as a result of future equity offerings or other equity issuances.
We will have to raise additional capital in the future. To raise additional capital, we may in the future offer additional shares of our
common stock or other securities convertible into or exchangeable for our common stock at prices that may be lower than the current price
per share of our common stock. In addition, investors purchasing shares or other securities in the future could have rights superior to
existing stockholders. The price per share at which we sell additional shares of our common stock, or securities convertible or
exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by investors in prior offerings.
Any such issuance could result in substantial dilution to our existing stockholders.
Future sales of our common stock in the public market could cause our stock price to fall.
Our stock price could decline as a result of sales of a large number of shares of our common stock or the perception that these sales
could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate.
As of December 31, 2019, we had 126,411,808 shares of common stock outstanding. In addition, we had 13,195,747 shares of
common stock equivalents that would increase the number of common stock outstanding if these instruments were exercised or converted,
including stock options and restricted stock units to purchase common stock based on vesting requirements and common stock issuable
upon the conversion of preferred stock. The issuance and subsequent sale of the shares underlying these common stock equivalents could
depress the trading price of our common stock. On June 10, 2019, our certificate of incorporation was amended to increase the number of
authorized shares of our common stock, par value $0.000041666, from 150,000,000 shares to 300,000,000 shares, which was approved by
our stockholders at our 2019 Annual Meeting of Stockholders held on June 10, 2019. However, no additional shares have been issued to
date.
In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common
stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. For example, in January 2018
and October 2018, we issued 15,000,000 shares and 25,300,000 shares of common stock, respectively, in connection with underwritten
public offerings. Further, in September 2019, 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 $400 million. Such issuances could result in
substantial dilution to our existing stockholders and could cause our stock price to decline.
If equities or industry analysts do not publish research or reports about our company, or if they issue adverse or misleading
opinions regarding us or our stock, our stock price and trading volume could decline.
Although we have research coverage by equities analysts, if coverage is not maintained, the market price for our stock may be
adversely affected. Our stock price also may decline if any analyst who covers us issues an adverse or erroneous opinion regarding us,
76
Table of Contents
our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet analysts’
expectations. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which could cause our stock price or trading volume to decline and possibly adversely affect our ability to engage in future
financings
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our
financial results. As a result, we could become subject to sanctions or investigations by regulatory authorities and/or stockholder
litigation, which could harm our business and have an adverse effect on our stock price.
As a public reporting company, we are subject to various regulatory requirements, including the Sarbanes-Oxley Act of 2002, which
requires our management to assess and report on our internal controls over financial reporting. Nevertheless, in future years, our testing, or
the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls that we would
be required to remediate in a timely manner to be able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act
each year. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act each year, we could be subject to
sanctions or investigations by the SEC, Nasdaq or other regulatory authorities which would require additional financial and management
resources and could adversely affect the market price of our common stock. In addition, material weaknesses in our internal controls could
result in a loss of investor confidence in our financial reports.
Our Board of Directors could issue one or more additional series of preferred stock without stockholder approval with the effect of
diluting existing stockholders and impairing their voting and other rights.
Our certificate of incorporation , as amended, authorizes the issuance of up to 50,000,000 shares of “blank check” preferred stock (of
which only 17,000 shares were issued as Series A Convertible Preferred Stock and 11,500,000 shares were issued as Series B Convertible
Preferred Stock) with designations, rights and preferences as may be determined from time to time by our Board of Directors. Our Board of
Directors is empowered, without stockholder approval, to issue one or more series of preferred stock with dividend, liquidation,
conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance
of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example, it would
be possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of
any attempt to effect a change in control of our company.
We do not anticipate paying cash dividends for the foreseeable future, and therefore investors should not buy our stock if they wish
to receive cash dividends.
We have never declared or paid any cash dividends or distributions on our common stock. We currently intend to retain our future
earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common
stock in the foreseeable future.
Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to
change our management and hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be
lower as a result.
There are provisions in our certificate of incorporation, as amended, and amended and restated bylaws that may make it difficult for a
third party to acquire, or attempt to acquire, control of our company, even if a change in control was considered favorable by you and other
stockholders. For example, our Board of Directors has the authority to issue up to 38,483,000 additional shares of preferred stock and to fix
the price, rights, preferences, privileges, and restrictions of the preferred stock without any further vote or action by our stockholders. The
issuance of shares of preferred stock may delay or prevent a change in control transaction. As a result, the market price of our common
stock and the voting and other rights of our stockholders may be adversely affected. An issuance of shares of preferred stock may result in
the loss of voting control to other stockholders.
In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which regulates
corporate acquisitions by prohibiting Delaware corporations from engaging in specified business combinations with particular stockholders
of those companies. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control
transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions
that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are
willing to pay for our stock.
77
Table of Contents
Our certificate of incorporation, as amended, designates the Court of Chancery of the State of Delaware as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability
to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation, as amended, provides that, subject to limited exceptions, the Court of Chancery of the State of
Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought
on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to
us or our stockholders, creditors or other constituents (3) any action asserting a claim against us arising pursuant to any provision of the
Delaware General Corporation Law, our certificate of incorporation, as amended, or our amended bylaws, or (4) any other action asserting
a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in
shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our certificate of incorporation
described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors,
officers, and employees. Further, this choice of forum provision does not preclude or contract the scope of exclusive federal or concurrent
jurisdiction for any actions brought under the Securities Act or the Exchange Act. Section 27 of the Exchange Act creates exclusive federal
jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a
result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any
other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act creates concurrent
jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and
regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by
the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction. Accordingly, our exclusive forum
provision will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our
stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
If a court were to find these provisions of our certificate of incorporation, as amended inapplicable to, or unenforceable in respect of,
one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other
jurisdictions, which could adversely affect our business, results of operations and financial condition. Even if we are successful in
defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may be subject to claims for rescission or damages in connection with certain sales of shares of our common stock in the open
market.
In January 2014, the SEC declared effective a registration statement that we filed to cover the resale of shares issued and sold (or to be
issued and sold) by certain selling stockholders. On March 11, 2016, that registration statement (and the prospectus contained therein)
became ineligible for future use, and selling stockholders could no longer sell any shares of our common stock in open market transactions
by means of that prospectus. We believe that certain stockholders did sell up to 128,500 shares of our common stock in open market
transactions in May 2016 by means of the ineffective registration statement. Accordingly, those sales were not made in accordance with
Sections 5 and 10(a)(3) of the Securities Act, and the purchasers of those shares may have rescission rights (if they still own the shares) or
claims for damages (if they no longer own the shares). In addition, we also may have indemnification obligations to the selling
stockholders. The amount of any such liability is uncertain.
In connection with our reincorporation from Nevada to Delaware in 2017, we (as a Delaware corporation) untimely filed a post-
effective amendment to adopt a Form S-8 registration statement that we filed (as a Nevada corporation) to register the shares underlying
our2011 Equity Incentive Plan. Before we filed the required post-effective amendment, options to purchase 200,000 shares were exercised
under the 2011 Equity Incentive Plan. The effect of the delayed post-effective amendment filing on the 200,000 option shares is uncertain,
but the issuance and sale of the shares may not have been in compliance with the Form S-8 registration statement. The existence of any
liability to us, and the amount of any such liability to us, as a result of the issuance of the 200,000 shares is uncertain. Accordingly, no
accrual for a potential claim has been made in our financial statements.
Item 1B. Unresolved Staff Comments
None.
78
Table of Contents
Item 2. Properties
San Carlos Lease
Since August 2016, our corporate headquarters consisted of 8,733 square feet of space that we lease in San Carlos, California. The
corporate headquarters lease is for a term of 54 months and will expire in April 2021. Monthly lease payments are approximately $38,000.
In April 2017, we entered into a sublease agreement with Teradata US, Inc., pursuant to which we agreed to sublease office space
located adjacent to our corporate headquarters in San Carlos, California for approximately $26,000 per month. The space consists of
approximately 11,449 rentable square feet. On October 19, 2018, we entered into an agreement to lease 12,322 square feet of office space
located adjacent to our headquarters in San Carlos, California. This lease replaces the sublease of 11,449 square feet of office space in the
same facility that expired on October 31, 2018. The term of the lease is 30 months subsequent to the commencement date, November 1,
2018, and will expire in April 2021. Monthly lease payments are approximately $59,000, subject to an annual increase of 3%.
In June 19, 2019, we entered into a first amendment to our previously disclosed lease agreement with Hudson Skyway Landing, LLC
for additional space at our corporate headquarters in San Carlos, California. Under the amended lease, we leased an additional 8,110 square
feet, for a total of approximately 20,432 square feet of space on the first floor, not including the 8,733 square feet of space leased under the
August 2016 lease described above, of the building located at 999 Skyway Road, San Carlos, California, commonly known as Skyway
Landing II The term of the amended lease remains the same as that of the original lease and expires on April 30, 2021, unless earlier
terminated. Our monthly base rent for the additional space is approximately $39,000 for the first year, and $40,000 for the second year.
New York Lease
We leased office space in New York for a monthly rental of approximately $18,000 a month from January 2017 through July 2017. In
June 2017, we entered into an agreement to lease office space in New York, New York from August 1, 2017 to July 31, 2018 for
approximately $9,000 a month. On April 20, 2018, we entered into an agreement to extend the lease term to January 31, 2019 for
approximately $7,000 a month. On November 2, 2018, we extended the lease term to July 31, 2019 for approximately $4,000 a month. On
October 24, 2019, we entered into an agreement to extend the lease term to April 30, 2020 for approximately $4,000 a month. On January
23, 2020, we entered into an agreement to extend the lease term to July 31, 2020 for approximately $4,000 a month.
Tampa Lease
Our research and development facilities consist of 8,673 square feet in a facility located at the University of South Florida Research
Park in Tampa, Florida. The lease expired in December 2019 and rent payments were approximately $20,000 per month. In December
2019, we entered into an agreement to extend the lease term to December 18, 2024 for approximately $20,500 a month.
Philadelphia Office Lease
On May 2, 2019, we 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%.
We believe that our existing facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be
available in the future on commercially reasonable terms.
Item 3. Legal Proceedings.
Class Action Lawsuit. On April 10, 2017, the SEC announced settlements with us and with other public companies and unrelated
parties in the In the Matter of Certain Stock Promotion investigation. Our settlement with the SEC is consistent with our previous
disclosures (including in our Annual Report on Form 10-K that we 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
79
Table of Contents
for violations of the federal securities laws (Leonard DeSilvio v. Lion Biotechnologies, Inc., et al., case no. 3:17cv2086) against our
company and three of our 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, our former CEO, and our 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 our 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 the result of mediation, on September 28, 2018,
lead plaintiff filed an unopposed motion for settlement, the cost of which was expected to be borne by our insurance carrier and would
result in no loss to us. The court gave 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 our 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 us should be dismissed with prejudice. We do not expect to incur any
costs or expenses in connection with this settlement.
Derivative Lawsuits. On December 15, 2017, a purported stockholder derivative complaint was filed by plaintiff Kevin Fong against
us, as nominal defendant, and certain of our current and former officers and directors, and others, as defendants, in the U.S. District Court
for the District of Delaware (case no. 1:17-cv-1806). 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 our April 10, 2017 settlement thereof, and seeks unspecified damages on
behalf of our company and injunctive relief. On March 28, 2018, a purported stockholder derivative complaint was filed by plaintiff Nazeer
Khaleeluddin on our behalf, against us, as nominal defendant, and certain of our current and former officers and directors, and others, as
defendants, in the U.S. District Court for the District of Delaware (case no. 1:18-cv-00469). The complaint alleges, among other things,
violations of securities law, breach of fiduciary duty, aiding and abetting, waste of corporate assets, and unjust enrichment. The complaint
is based on claims arising from the SEC’s investigation in the In the Matter of Certain Stock Promotions investigation and our April 10,
2017 settlement thereof and seeks unspecified damages on behalf of our company and injunctive relief. On May 1, 2018, the court
consolidated this case with the aforementioned purported stockholder derivative case filed by plaintiff Kevin Fong. The consolidated case
is titled In re Iovance Biotherapeutics, Inc. Stockholder Derivative Litigation (lead case no. 17-cv-1806). On January 28, 2020, we reached
a proposed settlement with the plaintiffs, which is currently awaiting preliminary approval by the court. The terms of the settlement will be
disseminated to shareholders as part of the notice process for the settlement if preliminary approval is granted. If the proposed settlement is
given final approval by the court, we do not expect to incur any significant costs or expenses in connection with this settlement. Based on
the current stage of the litigation, and the uncertainty of final approval by the court, it is not possible to estimate the amount or range of
possible loss that might result from an adverse judgment or a settlement of these matters.
Solomon Capital, LLC. On April 8, 2016, a lawsuit, or the First Solomon Suit, titled Solomon Capital, LLC, Solomon Capital 401(K)
Trust, Solomon Sharbat and Shelhav Raff v. Lion Biotechnologies, Inc. was filed by Solomon Capital, LLC, Solomon Capital 401(k) Trust,
Solomon Sharbat and Shelhav Raff, which we refer to as the Solomon Plaintiffs, against us in the Supreme Court of the State of New York,
County of New York (index no. 651881/2016). The Solomon Plaintiffs allege that, between June and November 2012, they provided to us
$0.1 million and that they advanced and paid on our behalf an additional $0.2 million. The complaint further alleges that we 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 our common stock effected in March 2013), and (iii) allow the Solomon Plaintiffs to convert the foregoing funds
into our securities in the next transaction. The Solomon Plaintiffs allege that they should have been able to convert their advances and
payments into shares of our 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 us in an unspecified amount exceeding
$1.5 million, plus interest. On June 3, 2016, we filed an answer and counterclaims in the lawsuit. We have asserted counterclaims for
fraudulent inducement, fraudulent misrepresentation, fraudulent concealment, breach of fiduciary duty, and breach of contract, alleging
principally that the counterclaim defendants misrepresented their qualifications and failed to disclose that Solomon Sharbat was the subject
of an investigation by the Financial Industry Regulatory Authority, or FINRA, that resulted in the loss of his FINRA license. In our
counterclaims, we are seeking damages in an amount exceeding $0.5 million and
80
Table of Contents
an order rescinding any and all agreements that the plaintiffs contend entitled them to obtain shares of our stock. No trial date has been set
for the First Solomon Suit.
On September 27, 2019, the Solomon Plaintiffs filed a new lawsuit (through new legal counsel), or the Second Solomon Suit, titled
Solomon Capital, LLC, Solomon Capital 401(K) Trust, Solomon Sharbat and Shelhav Raff v. Iovance Biotherapeutics, Inc., f/k/a/ Lion
Biotechnologies Inc. f/k/a/ Genesis Biopharma Inc., and Manish Singh in the Supreme Court of the State of New York, County of New
York (index no. 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 us and the plaintiffs that the plaintiffs would be paid fees and commissions
(in cash and stock) if they obtained financing for us, and that they directly and indirectly introduced investors to us who invested, or were
willing to invest in our company. Finally, the Solomon Plaintiffs allege that they were promised a license to use our technology in Israel.
The plaintiffs claim that we breached the foregoing understandings, promises and agreements and, as a result, they are entitled to certain
damages. The Solomon Plaintiffs also allege that Manish Singh, our former Chief Executive Officer, committed fraud and took shares
belonging to them. On February 18, 2020, we filed a removal petition and removed the Second Solomon Suit to the United States District
Court for the Southern District of New York, where the case has been assigned case no. 1:20-cv-1391. We have not yet responded to the
complaint in the Second Solomon Suit.
We intend to vigorously defend these complaints and pursue our counterclaims, as applicable. At the current stage of the litigation, in
both the First Solomon Suit and the Second Solomon Suit, it is not possible to estimate the amount or range of possible loss that might
result from an adverse judgment or a settlement of these matters.
Litigation Involving Dr. Steven Fischkoff. On June 13, 2017, in an action titled Steven Fischkoff v. Lion Biotechnologies, Inc. and
Maria Fardis, Dr. Steven Fischkoff, our former Vice President and Chief Medical Officer, filed a lawsuit against us in the Supreme Court
of the State of New York, County of New York. Dr. Fischkoff was dismissed by us on March 28, 2017. Dr. Fischkoff was terminated “for
cause” as that term is defined in his employment agreement. In his complaint, Dr. Fischkoff alleges breaches of his employment agreement
and violation of New York Labor Law for failure to pay monies purportedly owed to him, and seeks to recover amounts including
severance pay and retention bonus (totaling $300,000), a prorated incentive bonus, and amounts relating to unvested options to 150,000
shares of our common stock, together with prejudgment interest, costs, expenses and attorneys’ fees. On July 5, 2017, we filed a removal
petition and removed the lawsuit to the United States District Court for the Southern District of New York, where the case has been
assigned case no. 1:17-cv-05041. On July 14, 2017, we filed a partial answer and counterclaims against Dr. Fischkoff, denying his
allegations, and alleging breach of contract and related claims, breach of fiduciary duty, and state and federal trade secret misappropriation
and related claims, and sought a temporary restraining order and preliminary injunction against Dr. Fischkoff. On July 18, 2017, the court
issued a temporary restraining order against Dr. Fischkoff requiring him to return our materials, prohibiting him from disclosing or using
our company materials, and granting expedited discovery. On June 25, 2018, pursuant to a stipulation between the parties, the court entered
a permanent injunction prohibiting Dr. Fischkoff from disclosing, possessing, or using any of our proprietary materials or trade secrets. On
July 5, 2018, the court entered an order dismissing two of Dr. Fischkoff’s claims against us and Dr. Fardis. On October 18, 2018,
Dr. Fischkoff amended his complaint to assert a new claim for defamation arising from SEC filings in which we provided the information
about this litigation. No trial date has been set in this matter, and the parties are currently engaged in fact discovery.
We intend to vigorously defend against Dr. Fischkoff’s lawsuit and pursue our counterclaims. 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.
Other Matters. During the second quarter of 2016, warrants representing 128,500 shares were exercised. The 128,500 shares of
common stock had previously been registered for re-sale. However, we believe that these 128,500 warrant shares were sold by the holders
in open market transactions in May 2016 at a time when the registration statement was ineffective. Accordingly, those sales were not made
in accordance with Sections 5 and 10(a)(3) of the Securities Act of 1933, as amended, and the purchasers of those shares may have
rescission rights (if they still own the shares) or claims for damages (if they no longer own the shares). The amount of any such liability is
uncertain and as such, an accrual for any potential loss has not been made. We believe that any claims brought against it would not result in
a material impact to our financial position or results of operations. We have not accrued a loss for a potential claim associated with this
matter as we are unable to estimate any at this time.
In connection with our reincorporation from Nevada to Delaware in 2017, we (as a Delaware corporation) untimely filed a post-
effective amendment to adopt a Form S-8 registration statement that we filed (as a Nevada corporation) to register the shares
81
Table of Contents
underlying our 2011 Equity Incentive Plan. Before we filed the required post-effective amendment, options to purchase 200,000 shares
were exercised under the 2011 Equity Incentive Plan. The effect of the delayed post-effective amendment filing on the 200,000 option
shares is uncertain, but the issuance and sale of the shares may not have been in compliance with the Form S-8 registration statement. The
existence of any liability to us, and the amount of any such liability as a result of the issuance of the 200,000 shares is uncertain.
Accordingly, we have not made any accrual for a potential claim in our consolidated financial statements.
We may be involved, from time to time, in legal proceedings and claims arising in the ordinary course of our business. Such matters
are subject to many uncertainties and outcomes are not predictable with assurance. We accrue amounts, to the extent they can be reasonably
estimated, that we believe are adequate to address any liabilities related to legal proceedings and other loss contingencies that we believe
will result in a probable loss. While there can be no assurances as to the ultimate outcome of any legal proceeding or other loss contingency
involving us, management does not believe any pending matter will be resolved in a manner that would have a material adverse effect on
our financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
PART II
Market Information
Our common stock is traded on the Nasdaq Global Market under the symbol “IOVA”.
Stockholders
As of December 31, 2019, there were approximately 20 holders of record of our common stock.
Dividends
We have never declared or paid any cash dividends on our common stock or any other securities. We anticipate that we will retain all
available funds and any future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the
foreseeable future. Payment of future cash dividends, if any, will be at the discretion of the board of directors after considering various
factors, including our financial condition, operating results, current and anticipated cash needs.
Under the terms of our Series A Convertible Preferred Stock, we may not declare, pay or set aside any dividends on shares of any class
or series of capital stock (other than dividends on shares of common stock payable in shares of common stock) unless the holders of our
Series A Convertible Preferred Stock first receive, or simultaneously receive, an equal dividend on each outstanding share of Series A
Convertible Preferred Stock.
Under the terms of our Series B Convertible Preferred Stock, holders shall be entitled to receive dividends on shares equal (on an as-if-
converted-to-Common-Stock basis) to and in the same form as dividends (other than dividends in the form of common stock) actually paid
on shares of our Series A Convertible Preferred Stock, common stock or other junior securities when, as and if such dividends (other than
dividends in the form of common stock) are paid on shares of our Series A Convertible Preferred Stock, common stock or other junior
securities. No other dividends shall be paid on shares of Series B Convertible Preferred Stock, and we may not pay dividends (other than
dividends in the form of common stock) on shares of our Series A Convertible Preferred Stock, common stock or other junior securities
unless it simultaneously complies with the previous sentence.
Unregistered Sales of Equity Securities
None.
82
Table of Contents
Repurchases of Common Stock
There were no share repurchases during the year ended December 31, 2019.
Stock Performance Graph
The following graph illustrates a comparison of the total cumulative stockholder return on our common stock since December 31,
2014 to two indices: the Russell 3000 and the NASDAQ Biotechnology Index. The stockholder return shown in the graph below is not
necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns.
Equity Compensation Plan Information
Information regarding our equity compensation plans is incorporated by reference from the information in our Proxy Statement for our
2020 Annual Meeting of Stockholders, which we will file with the SEC within 120 days after the end of the fiscal year to which this
Annual Report on Form 10-K relates.
83
Table of Contents
Item 6. Selected Financial Data (in thousands, except per share information)
The statements of operations data for the years ended December 31, 2019, 2018, and 2017 and the balance sheet data as of December
31, 2019 and 2018 have been derived from our audited financial statements included elsewhere in this Annual Report on Form 10-K. The
statements of operations data for the years ended December 31, 2016 and 2015 and the balance sheet data as of December 31, 2017, 2016,
and 2015 have been derived from our audited financial statements not included in this Annual Report on Form 10-K. The following
selected financial data should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and financial statements and related notes to those statements included elsewhere in this Annual Report on Form 10-K.
Revenue
Operating expenses:
Research and development
General and administrative
Other income
Net loss
Net loss Per Common Share
Total assets
Total liabilities
Total stockholders' equity
2019
Years Ended December 31,
2017
2018
(in thousands)
2016
2015
$
— $
— $
— $
— $
—
166,023
40,849
9,316
$ (197,556)
(1.59)
$
99,828
28,430
4,678
$ (123,580)
(1.27)
$
71,615
21,262
813
$ (92,064)
(1.41)
$
26,941
26,698
745
$ (52,894)
(1.85)
$
15,470
12,390
200
$ (27,660)
(0.62)
$
2019
As of December 31,
2017
2016
2018
2015
$ 344,655
$ 45,684
$ 298,971
$ 480,821
$ 14,628
$ 466,193
$ 155,373
$
9,892
$ 145,481
$ 171,886
$
4,968
$ 166,918
$ 105,653
$
1,630
$ 104,023
See "Management’s Discussion and Analysis of Financial Condition and Results of Operations" below, and the financial statements
and accompanying notes and previously filed Annual Reports on Form 10-K for further information regarding our results and financial
position for periods reported herein and for known factors that will impact comparability of future results.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our
financial statements and the notes to those financial statements that are included elsewhere in this report. 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 and elsewhere in this report. 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. 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.
Overview
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. Our lead product candidates include
lifileucel for metastatic melanoma and LN-145 for metastatic cervical cancer. 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
84
Table of Contents
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.
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
(National Clinical Trial identification number NCT02360579). Cohort 4 of the C-144-01 clinical trial is a single-arm cohort intended to be
used for the registration of lifileucel. The C-144-01 trial uses our proprietary Gen 2 manufacturing process. We completed and closed
enrollment of patients into Cohort 2 of the C-144-01 trial in 2018. We announced that the last patient was dosed in Cohort 4 of this trial in
January 2020. Cohort 4 was enrolled with a prospective definition of objective response rate, or ORR, 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.
In addition to our ongoing trial in metastatic melanoma, we are conducting clinical trials of LN-145, TIL therapy in cervical, head and
neck cancers, lung and other cancers. C-145-04 is an ongoing Phase 2, multicenter pivotal trial that will assess the safety and efficacy of
LN-145 for the treatment of patients with recurrent, metastatic or persistent cervical cancer (NCT03108495). In February 2019, LN-145
received Fast Track designation from the FDA for development in the treatment of cervical cancer with disease progression on or after
chemotherapy. 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, LN-145 received Breakthrough Therapy designation, or BTD, from the FDA for the development in the treatment of cervical
cancer.
Our current product candidate pipeline and selected investigator-sponsored proof-of-concept studies are summarized in the graph
below:
Financial Overview
Research and development activities are central to our business model. Product candidates in later stage of clinical development
generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and
duration of later-stage clinical trials. As a clinical stage company that is currently engaged in the development of novel cancer
immunotherapy products, we have not yet generated any revenues from our biotechnology business or otherwise since our formation. Our
ability to generate revenues in the future will depend on our ability to complete the development of our product candidates and to obtain
regulatory approval for them. Our major sources of funding to date have been proceeds from various public and private offerings of our
equity securities (both common stock and preferred stock), option and warrant exercises, and interest income.
85
Table of Contents
Results of Operations for the Years Ended December 31, 2019 and 2018
Revenues
We did not generate any revenues during the years ended December 31, 2019 and 2018, respectively, and we currently do not
anticipate that we will generate any revenues during 2020 from the sale or licensing of our product candidates. Our ability to generate
revenues in the future will depend on our ability to complete the development of our product candidates and to obtain regulatory approval
for them.
Costs and expenses
Research and Development Expense (in thousands)
Research and development expenses
Stock-based compensation expense included in research and development
Years Ended December 31,
2019
166,023
$
2018
99,828
$
Increase (Decrease)
%
66 %
$
$ 66,195
expense
11,396
9,305
2,091
22 %
Research and development expense for the year ended December 31, 2019 increased by $66.2 million, or 66%, compared to the year
ended December 31, 2018. The increase was primarily attributable to (i) a $27.4 million increase in manufacturing costs due to increased
production runs and additional manufacturing capacity costs to support the ongoing clinical trials, (ii) a $20.3 million increase in clinical
trial costs due to an increase in the number of patients in the clinical trials and purchases of clinical trial drugs, and (iii) a $12.6 million
increase in payroll and related expenses driven by a higher number of full-time research and development employees and dedicated
consultants as we expanded our internal research and clinical development programs in 2019.
We expect our research and development expenses to increase over the next several 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.
The duration, costs and timing of our clinical trials and development of our product candidates will depend on a number of factors that
include, but are not limited to, the number of patients that enroll in the trial, per patient trial costs, number of sites included in the trial,
discontinuation rates of patients, duration of patient follow-up, efficacy and safety profile of the product candidate, and the length of time
required to enroll eligible patients. Additionally, the probability of success for our product candidate will depend on a number of factors,
including competition, manufacturing capability and cost efficiency, and commercial viability.
General and Administrative Expense (in thousands)
General and administrative expenses
Stock-based compensation expense included in general and administrative
Years Ended December 31,
Increase (Decrease)
2019
40,849
2018
28,430
$
$ 12,419
%
44 %
$
$
expense
12,881
10,722
2,159
20 %
General and administrative expense for the year ended December 31, 2019 increased by $12.4 million, or 44%, compared to the year
ended December 31, 2018. The change was primarily attributable to a $3.8 million increase in payroll and related expenses, $2.2 million
increase in stock-based compensation expenses driven by a higher number of full-time general and administrative employees, a $3.2
million increase in intellectual property legal costs and a $2.0 million increase in market research activities as we prepare for
commercialization.
General and administrative expenses include personnel costs for our employees engaged in general and administrative activities, legal
fees, and expenses related to marketing and commercial activities, audit and tax fees, consultants and professional services, and general
corporate expenses. We anticipate general and administrative expenses will increase in 2020 as we continue to prepare for
commercialization, complete our manufacturing facility and support an expected increase in total headcount.
86
Table of Contents
Interest Income (in thousands)
Interest income, net
Years Ended December 31, Increase (Decrease)
2019
2018
$
%
$
9,316 $
4,678 $ 4,638
99 %
Interest income results from our interest-bearing cash and investment balances. Net interest income increased by $4.7 million due to
the higher interest income earned from full-year short-term investments for a full-year as compared to the prior year when we started
purchasing short-term investments during the second half of 2018. As our cash, cash equivalents and short term investment balance
decrease we anticipate interest income to decrease.
Net Loss (in thousands)
Net loss
Years Ended December 31, (Increase) Decrease
%
60 %
$ (197,556) $ (123,580) $ (73,976)
2018
2019
$
Net loss for the year ended December 31, 2019 increased by $74.0 million or 60%, compared to the year ended December 31, 2018.
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. We anticipate that we will continue to incur net losses in
the future as we further invest in our research and development activities, including our clinical development.
Results of Operations for the Years Ended December 31, 2018 and 2017
Revenues
We did not generate any revenues during the years ended December 31, 2018 and 2017, respectively.
Costs and expenses
Research and Development Expense (in thousands)
Years Ended December 31, Increase (Decrease)
Research and development expenses
Stock-based compensation expense included in research and development
2018
99,828 $
$
2017
71,615 $ 28,213
$
%
expense
9,305
5,270
4,035
39 %
77 %
Research and development expense for the year ended December 31, 2018 increased by $28.2 million, or 39%, compared to the year
ended December 31, 2017. The increase was primarily attributable to a $14.0 million increase in payroll and related expenses, including
stock-based compensation expenses, due to a higher number of full-time employees and dedicated consultants as we expanded our internal
research efforts and clinical development programs. Further, clinical trial costs increased by $12.9 million due to: higher patient enrollment
and an increase in the number of clinical sites in the clinical trial of lifileucel for the treatment of melanoma, LN-145 for the treatment of
cervical and head and neck cancers, and the initiation of clinical trials in 2018 for new indications. In addition, research and alliance costs
increased by $0.8 million for clinical trials run by our alliance partners and new research initiatives. These increases were partially offset
by a $0.5 million decrease in manufacturing costs due to a termination of a contract manufacturing organization early in 2018.
87
Table of Contents
General and Administrative Expense (in thousands)
General and administrative expenses
Stock-based compensation expense included in general and administrative
Years Ended December 31, Increase (Decrease)
%
34 %
$
$ 7,168
2018
28,430
2017
21,262
$
$
expense
10,722
6,698
4,024
60 %
General and administrative expense for the year ended December 31, 2018 increased by $7.2 million, or 34%, compared to the year
ended December 31, 2017. The change was primarily attributable to a $4.0 million increase in stock-based compensation expenses, $1.7
million increase in payroll and related expenses, driven by a higher number of full-time employees and higher stock prices during 2018,
and a $0.2 million increase in professional service fees.
Interest Income (in thousands)
Interest income, net
Years Ended December 31, Increase (Decrease)
%
475 %
$
$ 3,685
4,678
2017
2018
813
$
$
Interest income results from our interest-bearing cash and investment balances. Net interest income increased by $3.7 million due to
the higher average cash balances as a result of the proceeds received from our equity financings in January 2018 and October 2018, and
higher interest rates in 2018.
Net Loss (in thousands)
Net loss
Years Ended December 31, (Increase) Decrease
%
34 %
2018
$ (123,580)
$
$ (31,516)
2017
(92,064)
$
Net loss for the year ended December 31, 2018 increased by $31.5 million or 34%, compared to the year ended December 31, 2017.
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.
Liquidity and Capital Resources
We have incurred losses and generated negative cash flows from operations since inception. We expect to continue to incur significant
losses in 2020 and may incur significant losses and negative cash flows from operations for the foreseeable future. We have funded our
operations from various public and private offerings of our equity securities (both common stock and preferred stock), from option and
warrant exercises, and from interest income.
Corporate Capitalization. As of December 31, 2019, we had outstanding 126,411,808 shares of our $0.000041666 par value common
stock, 194 shares of our $0.001 par value Series A Convertible Preferred Stock, and 3,581,119 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 3,581,119 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. On January 29, 2018, we sold 15,000,000
shares of our common stock at a public offering price of $11.50 per share pursuant to the 2017 Shelf Registration Statement. We received
gross proceeds of approximately $172.5 million and net proceeds of approximately $162.0 million, after deducting underwriting discounts
and offering expenses. The 2017 Shelf Registration Statement was terminated upon effectiveness of the 2018 Shelf Registration Statement
(as discussed below).
88
Table of Contents
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. 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) of the Securities Act. 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. 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 common stock, preferred stock,
warrants, rights, debt securities and units 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. We have not yet sold any securities
pursuant to the 2019 Shelf Registration Statement.
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 2019 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. We do not have any commercial products and have not
yet generated any revenues from our biopharmaceutical business. We currently do not anticipate that we will generate any revenues during
2020 from the sale or licensing of any products. We have incurred a net loss of $197.6 million for the year ended December 31, 2019 and
used $158.9 million of cash in our operating activities for the year ended December 31, 2019. As of December 31, 2019, we had $14.0
million of cash and cash equivalents, $293.1 million of short-term investments, $5.5 million of restricted cash, $299.0 million of
stockholders’ equity and had working capital of $277.4 million.
We expect to further increase our research and development activities, which will increase the amount of cash we will use during 2020
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. Based on the funds we have
available as of the date of the filing of this Annual Report on Form 10-K, 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. We have latitude as to the timing and
amount of expenditures for our commercial-scale production facility under construction in Philadelphia, Pennsylvania.
Cash Flows
Cash Flows from Operating, Investing and Financing Activities (in thousands):
Years Ended December 31,
2018
2017
2019
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Operating Activities
$ (158,889)
90,025
6,131
(62,733)
$
$ (101,249)
(386,279)
424,307
(63,221)
$
$
$
(78,709)
58,677
58,688
38,656
Net cash used in operating activities of $158.9 million for the year ended December 31, 2019, resulted primarily from our net loss of
$197.6 million, adjusted by a noncash charge of $3.4 million for accretion of discounts on short-term investments, $24.3 million for stock-
based compensation expense, $7.0 million for noncash lease expense, and $1.2 million in noncash depreciation expenses. Further, it was
adjusted for a $17.1 million increase in accounts payable and accrued liabilities primarily due to increases in activities by our company, a
$6.1 million increase in right-of-use assets due to adoption of the new lease accounting standard, and a $1.0 million decrease in prepaid
expenses and other assets due to timing of certain upfront payments associated with our research agreements.
89
Table of Contents
Net cash used in operating activities of $101.2 million for the year ended December 31, 2018, resulted primarily from our net loss of
$123.6 million, adjusted by a noncash charge of $20.0 million for stock-based compensation expense, $1.0 million in noncash depreciation
expenses, and $1.3 million in noncash accretion of premium on short-term investments. Further, it was adjusted for a $4.7 million increase
in accounts payable and accrued liabilities primarily due to increases in activities by our company and a $2.0 million increase in prepaid
expenses and other assets due to timing of certain upfront payments associated with our research agreements.
Net cash used in operating activities of $78.7 million for the year ended December 31, 2017, resulted primarily from our net loss of
$92.1 million, adjusted by a noncash charge of $12.0 million for stock-based compensation expense, $1.0 million in noncash depreciation
expenses, a $4.9 million increase in accounts payable and accrued liabilities primarily due to increases in activities by our company, and a
$4.5 million increase in prepaid expenses and other assets due to timing of certain upfront payments associated with our research
agreements.
Investing Activities
Net cash provided by investing activities of $90.0 million for the year ended December 31, 2019, consisted primarily of $514.6 million
of proceeds from the maturities of short-term investments, which was partially offset by $417.7 million used for the purchases of short-
term investments and $6.9 million used for the purchase of property and equipment.
Net cash provided by investing activities of $386.3 million for the year ended December 31, 2018, consisted primarily of $426.1
million used for the purchase of short-term investments, $1.2 million used for the purchase of property and equipment, which was partially
offset by $41.0 million of proceeds from the maturities of short-term investments
Net cash provided by investing activities of $58.7 million for the year ended December 31, 2017, consisted primarily of $59.7 million
of proceeds from the maturities of short-term investments, offset by $1.0 million used for the purchase of property and equipment.
Financing Activities
Net cash provided by financing activities of $6.1 million for the year ended December 31, 2019, consisted primarily of $6.4 million of
proceeds from the exercise of stock options, partially offset by $0.3 million in connection with tax payments made by our company in
connection with vested restricted stock.
Net cash provided by financing activities of $424.3 million for the year ended December 31, 2018, consisted primarily of net proceeds
of $162.0 million from the issuance of shares in January 2018 public offering at $11.50 per share after deducting expenses of the offering
and $236.7 million from the issuance of shares in October 2018 public offering at $9.97 per share after deducting expenses of the offering,
$15.8 million of proceeds from the exercise of warrants, and $10.0 million from the exercise of options.
Net cash provided by financing activities of $58.7 million for the year ended December 31, 2017, consisted primarily of net proceeds
of $53.7 million from the issuance of shares in a private offering at $6.50 per share after deducting expenses of the offering, $5.6 million
from the exercise of options, $0.7 million of proceeds exercise of warrants, offset by $1.3 million in connection with tax payments made by
our company in connection with vested restricted stock.
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.
Contractual Obligations
We acquire assets still in development and enter into research and development arrangements with third parties that often require
milestone and royalty payments to the third-party contingent upon the occurrence of certain future events linked to the success of the asset
in development. Milestone payments may be required, contingent upon the successful achievement of an important point in the
development life-cycle of the pharmaceutical product (e.g., approval of the product for marketing by a regulatory agency). If required by
the arrangement, we may have to make royalty payments based upon a percentage of the sales of the pharmaceutical product in the
90
Table of Contents
event that regulatory approval for marketing is obtained. Because of the contingent nature of these milestone payments, they are not
included in the table of contractual obligations.
These arrangements may be material individually, and in the event that milestones for multiple products covered by these
arrangements were reached in the same period, the aggregate charge to expense could be material to the results of operations in any one
period. In addition, these arrangements often give us the discretion to unilaterally terminate development of the product, which would
allow us to avoid making the contingent payments.
Our current non-cancelable contractual obligations as of December 31, 2019 that will require future cash payments are as follows (in
thousands):
Contractual Obligations
Total
2020 2021 2022 2023 2024 Thereafter
Payments due by period
Operating lease obligations
Capital lease obligations
CMO contractual obligations
Purchase obligations
Total
$
3,772
41,452
31,422
24,559
$ 101,205
$ 1,940
—
22,010
18,159
$ 42,109
$
968
3,277
9,412
6,400
$ 20,057
$ 342
3,913
$ 269
3,992
$ 253
4,072
$
—
—
$ 4,255
—
—
$ 4,261
—
—
$ 4,325
$
—
26,198
—
—
26,198
Operating lease obligations consist of obligations under non-cancelable operating leases for our facilities in San Carlos, CA,
Philadelphia, PA, Tampa, FL, and New York, NY.
Contract Manufacturing Organization, or CMO, contractual obligations consist of embedded lease obligations for the manufacturing
facilities and minimum fixed commitment fees included in our manufacturing contracts, such as personnel, general support fee, and
minimum production or material fees. See Note 10 in the notes to the consolidated financial statements.
Purchase obligations include purchase commitments primarily relating to our contract manufacturing with vendors for clinical
materials with minimum purchase requirements. Purchase orders for goods and services that are cancellable upon notice and without
significant penalties are not included in the amounts above.
The contractual obligations table above excludes approximately $75 million to $85 million over three years for equipment and
construction costs for our commercial-scale production facility under construction in Philadelphia, PA, for which we have latitude as to the
timing and amount of expenditure.
Off-Balance Sheet Arrangements
At December 31, 2019, we had no obligations that would require disclosure as off-balance sheet arrangements.
91
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our exposure to market risk is limited primarily to interest income sensitivity, which is affected by changes in the general level of U.S.
interest rates, particularly because a significant portion of our investments are in interest bearing cash accounts consisting of short-term
debt securities issued by the U.S. government. The primary objective of our investment activities is to preserve principal. We adhere to an
investment policy that requires us to limit amounts invested in securities based on credit rating, maturity, industry group and investment
type and issuer, except for securities issued by the U.S. government. We do not have any derivative financial instruments or foreign
currency instruments. At December 31, 2019, we had $293.1 million invested in short-term marketable securities with a maturity date of
less than one year. As such we believe that we are not exposed to any material market risk. If interest rates had varied by 1% in the year
ended December 31, 2019, the fair value of our investment portfolio would increase or decrease by approximately $1.1 million.
Inflation Risk
Inflation has not had a material effect on our business, financial condition or results of operations during the years ended
December 31, 2019, 2018, or 2017.
Item 8. Financial Statements and Supplementary Data
Financial Statements are referred to in Item 15, listed in the Index to Financial Statements as a part of this Annual Report on Form 10-
K, and are incorporated herein by this reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures:
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of
assurance, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with
the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
(b) Management’s Annual Report on Internal Control Over Financial Reporting:
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over
financial reporting as of December 31, 2019 based on the framework in Internal Control—Integrated Framework 2013 issued by the
Committee of Sponsoring Organizations of the Treadway Commission , or COSO. Based on that evaluation, our management concluded
that our internal control over financial reporting was effective as of December 31, 2019.
92
Table of Contents
The independent registered public accounting firm, Marcum LLP, has issued an attestation report on our internal control over financial
reporting. The report on the audit of internal control over financial reporting is included in this Annual Report on Form 10-K.
(c) Changes in Internal Control Over Financial Reporting:
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a definitive Proxy
Statement for the Annual Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the Proxy
Statement), not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and the applicable
information included in the Proxy Statement is incorporated herein by reference.
Item 10. Directors, Executive Officers, and Corporate Governance
Information required by this Item 10 will be presented in the Proxy Statement “Election of Directors,” “Management Executive
Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Board of Directors and Corporate Governance,” and is
incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the sections entitled “Executive Compensation,”
“Executive Compensation—Compensation Discussion and Analysis” and “Directors’ Compensation” in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the sections entitled “Security Ownership of Certain
Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the section entitled “Certain Relationships and Related
Transactions” in the Proxy Statement.
Item 14. Principal Accountant’s Fees and Services
Information required by this Item is incorporated herein by reference to the section of the Proxy Statement entitled “Principal
Accountant Fees and Services.”
Item 15. Exhibits, Financial Statements Schedules
PART IV
The Company’s consolidated financial statements and related notes thereto are listed and included in this Annual Report on Form 10-K
beginning on page F-1. The following exhibits are filed with, or are incorporated by reference into, this Annual Report on Form 10-K.
93
Table of Contents
Exhibit
2.1
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
4.1
4.2
4.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
EXHIBIT INDEX
Description
Plan of Conversion (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed
with the Commission on June 2, 2017).
Articles of Conversion (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed
with the Commission on June 2, 2017).
Certificate of Conversion (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K
filed with the Commission on June 2, 2017).
Certificate of Incorporation (incorporated herein by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K
filed with the Commission on June 2, 2017).
Certificate of Designations of Rights, Preferences and Privileges of Series A Convertible Preferred Stock (incorporated
herein by reference to Exhibit 3.4 to the Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on
Form S-3 (file no. 333-214073) filed with the Commission on July 31, 2017).
Certificate of Designations of Rights, Preferences and Privileges of Series B Preferred Stock (incorporated herein by
reference to Exhibit 3.5 to the Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 (file
no. 333-214073 incorporated by reference into file no. 333-212373) filed with the Commission on July 31, 2017).
Certificate of Amendment of Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Registrant’s
Current Report on Form 8-K filed with the Commission on June 27, 2017).
Bylaws (incorporated herein by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed with the
Commission on June 2, 2017).
Amendment to the Bylaws (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K
filed with the Commission on June 27, 2017).
Form of Warrant (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with
the Commission on October 31, 2013).
Specimen of Stock Certificate (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Annual Report on
Form 10-K filed with the Commission on March 12, 2018).
Description of Securities (filed herewith).
Genesis Biopharma, Inc. 2010 Equity Compensation Plan (incorporated herein by reference to Exhibit 4.1 to the Registrant’s
Annual Report on Form 10-K filed with the Commission on March 31, 2010).#
Form of Stock Option Agreement under the Genesis Biopharma Inc. 2010 Equity Compensation Plan (incorporated herein by
reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2010).#
Genesis Biopharma, Inc. 2011 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Registrant’s
Current Report on Form 8-K filed with the Commission on October 20, 2011).#
Form of Incentive Stock Option Agreement under the Genesis Biopharma Inc. 2011 Equity Incentive Plan.#
Form of Non-Qualified Stock Option Agreement under the Genesis Biopharma Inc. 2011 Equity Incentive Plan.#
Lion Biotechnologies, Inc. 2014 Equity Incentive Plan, as amended (incorporated herein by reference to Appendix A to the
Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on July 7, 2016).#
Form of Incentive Stock Option Agreement under the Lion Biotechnologies, Inc. 2014 Equity Incentive Plan.#
Form of Non-Qualified Stock Option Agreement under the Lion Biotechnologies, Inc. 2014 Equity Incentive Plan.#
Iovance Biotherapeutics, Inc. 2018 Equity Incentive Plan (incorporated herein by reference to Appendix A to the Registrant’s
Definitive Proxy Statement on Schedule 14A filed with the Commission on April 25, 2018).#
Form of Incentive Stock Option Agreement under the Iovance Biotherapeutics, Inc. 2018 Equity Incentive Plan.#
Form of Non-Qualified Stock Option Agreement under the Iovance Biotherapeutics, Inc. 2018 Equity Incentive Plan.#
Patent License Agreement by and between Genesis Biopharma, Inc. and the National Institutes of Health effective October 5,
2011 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A filed with the
Commission on December 13, 2011).*
Cooperative Research and Development Agreement for Intramural-PHS Clinical Research, dated August 5, 2011, by and
between the U.S. Department of Health and Human Services, as represented by the National Cancer Institute, and Genesis
Biopharma, Inc. (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A
(Amendment No. 2) filed with the Commission on November 29, 2011).
Form of Director Stock Award Agreement (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current
Report on Form 8-K filed with the Commission on July 25, 2013).#
94
Table of Contents
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
Form of Registration Rights Agreement by and among Lion Biotechnologies, Inc. and the Investors thereunder (incorporated
herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on
October 31, 2013).
Cooperative Research and Development Agreement for the Development and Evaluation of the NCI Proprietary Adoptive
Cell Transfer Immunotherapy Using Tumor Infiltrating Lymphocytes in Patients with Metastatic Melanoma, Bladder, Lung,
Triple-negative Breast, and HPV-associated Cancers, Utilizing Lion Biotechnologies, Inc.’s Business Development Expertise
in Adoptive Cell Transfer Immunotherapy, executed by Lion Biotechnologies, Inc. on January 22, 2015 (incorporated herein
by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on January 27,
2015).*
Patent License Agreement, dated February 9, 2015, by and between the Company and the National Institutes of Health
(incorporated herein by reference to Exhibit 10.47 to the Registrant’s Annual Report on Form 10-K filed with the
Commission on March 16, 2015).*
Patent License Agreement, dated February 10, 2015, by and between Lion Biotechnologies, Inc. and the National Institutes
of Health (incorporated herein by reference to Exhibit 10.46 to the Registrant’s Annual Report on Form 10-K filed with the
Commission on March 16, 2015).*
First Amendment to Patent License Agreement, effective October 2, 2015, by and between Lion Biotechnologies, Inc. and
the National Institutes of Health (incorporated herein by reference to Exhibit 10.47 to the Registrant’s Quarterly Report on
Form 10-Q filed with the Commission on November 6, 2015).*
Form of Securities Purchase Agreement, dated June 2, 2016, by and among Lion Biotechnologies, Inc. and the Investors
thereunder (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the
Commission on June 3, 2016).
Form of Registration Rights Agreement, dated June 2, 2016, by and among Lion Biotechnologies, Inc. and the Investors
thereunder (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the
Commission on June 3, 2016).
Form of Retention Bonus Agreement (incorporated herein by reference to Exhibit 10.5 of the Registrant’s Current Report on
Form 8-K filed with the Commission on June 3, 2016).#
Amendment #2 to the Cooperative Research and Development Agreement # 02734, dated August 18, 2016, by and between
the National Cancer Institute and Lion Biotechnologies, Inc. (incorporated herein by reference to Exhibit 10.3 to Amendment
No. 2 to Registrant’s Amendment No. 2 to Registration Statement on Form S-1 filed with the Commission on August 31,
2016).
Exclusive and Co-Exclusive License Agreement, dated September 14, 2016, by and between Lion Biotechnologies, Inc.
and PolyBioCept AB (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q
filed with the Commission on November 4, 2016).*
Manufacturing Services Agreement, dated November 23, 2015, by and between WuXi AppTec, Inc. and Lion
Biotechnologies, Inc. (incorporated herein by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K
filed with the Commission on March 9, 2017).*
Description of 2018 Corporate Goals and Cash Bonus Plan (incorporated herein by reference to the Registrant’s Current
Report on Form 8-K filed with the Commission on February 12, 2018).#
Strategic Alliance Agreement, effective as of April 17, 2017, between Lion Biotechnologies, Inc. and The University of
Texas M.D. Anderson Cancer Center, (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report
on Form 10-Q filed with the Commission on August 3, 2017).*
Executive Employment Agreement, effective June 1, 2016, by and between Maria Fardis and Lion Biotechnologies, Inc.
(incorporated herein by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q filed with the
Commission on August 9, 2016).*,#
Executive Employment Agreement, effective as of August 14, 2017, by and between Timothy E. Morris and Iovance
Biotherapeutics, Inc. (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q
filed with the Commission on November 2, 2017).#
Consulting Agreement, dated as of September 8, 2017, by and between Iovance Biotherapeutics, Inc. and Iain Dukes
(incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission
on September 15, 2017).#
Executive Employment Agreement, effective September 30, 2016, by and between Frederick G. Vogt and Lion
Biotechnologies, Inc. (incorporated herein by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K
filed with the Commission on March 12, 2018).#
95
Table of Contents
10.32
10.33
10.34
10.35
10.36
10.37
10.38
21.1
23.1
24.1
31.1
31.2
32.1
32.2
101
First Amendment to the Strategic Alliance Agreement by and between Iovance Biotherapeutics, Inc. and The University of
Texas M.D. Anderson Cancer Center, effective as of August 2, 2017 (incorporated herein by reference to Exhibit 10.34 to the
Registrant’s Annual Report on Form 10-K filed with the Commission on March 12, 2018).
Second Amendment to the Strategic Alliance Agreement by and between Iovance Biotherapeutics, Inc. and The University
of Texas M.D. Anderson Cancer Center, effective February 16, 2018 (incorporated herein by reference to Exhibit 10.35 to
the Registrant’s Annual Report on Form 10-K filed with the Commission on March 12, 2018).
Office Lease dated as of August 4, 2016, by and between Lion Biotechnologies, Inc. and Hudson Skyway Landing, LLC
(incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Commission
on August 8, 2016).
Office Lease dated as of October 19, 2018, by and between Iovance Biotechnologies, Inc. and Hudson Skyway Landing,
LLC (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the
Commission on October 25, 2018).
Executive Employment Agreement effective as of July 18, 2019, by and between Friedrich-Reinhard Graf Finck von
Finckenstein, M.D. (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed
with the Commission on August 1, 2019).
First Amendment to the Office Lease, effective as of June 19, 2019, between Iovance Biotherapeutics, Inc. and Hudson
Skyway Landing, LLC (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q
filed with the Commission on November 4, 2019).
First Amendment to the Lease Agreement, effective as of August 20, 2019, between Iovance Biotherapeutics, Inc. and 300
Rouse Boulevard, LLC (incorporated herein by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q
filed with the Commission on November 4, 2019).
Subsidiaries of the Company.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (included on the signature page of this Annual Report).
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
Section 1350 Certification of Chief Executive Officer (furnished herewith).
Section 1350 Certification of Chief Financial Officer (furnished herewith).
The following financial information from the Annual Report on Form 10-K of Iovance Biotherapeutics, Inc. for the year
ended December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (1) Balance Sheets as of
December 31, 2019 and 2018; (2) Statements of Income for the years ended December 31, 2019 and 2018; (3) Statements of
Shareholders’ Equity for the years ended December 31, 2019 and 2018; (4) Statements of Cash Flows for the years ended
December 31, 2019 and 2018; and (5) Notes to Financial Statements.
* Certain portions of the Exhibit have been omitted based upon a request for confidential treatment filed by us with the Commission.
The omitted portions of the Exhibit have been separately filed by us with the Commission.
Indicates a management contract or compensatory plan or arrangement.
#
Item 16. Form 10-K Summary
We may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such
summary information.
96
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 25, 2020
IOVANCE BIOTHERAPEUTICS, INC.
By: /s/ Maria Fardis
Name: Maria Fardis
Title: Chief Executive Officer
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature appears below constitutes and appoints Maria Fardis and
Timothy E. Morris, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments to this
Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his or her substitute or
substituted, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Maria Fardis
Maria Fardis
/s/ Timothy E. Morris
Timothy E. Morris
/s/ Merrill A. McPeak
Merrill A. McPeak
/s/ Michael Weiser
Michael Weiser
/s/ Ryan D. Maynard
Ryan D. Maynard
/s/ Iain Dukes
Iain Dukes
/s/ Wayne Rothbaum
Wayne Rothbaum
/s/ Athena Countouriotis
Athena Countouriotis
Title
Chief Executive Officer (Principal
Executive Officer) and Director
Date
February 25, 2020
Chief Financial Officer and Treasurer
(Principal Financial Officer and Accounting Officer)
February 25, 2020
Director
Director
Director
Director
Director
Director
97
February 25, 2020
February 25, 2020
February 25, 2020
February 25, 2020
February 25, 2020
February 25, 2020
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
Index to Financial Statements
Contents
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
F-1
F-3
F-5
F-6
F-7
F-8
F-9
F-10
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Iovance Biotherapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Iovance Biotherapeutics, Inc. (the “Company”) as of December 31,
2019 and 2018 and the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of
the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and
2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity
with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
("PCAOB"), the Company’s internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and
our report dated February 25, 2020, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019
due to the adoption of the guidance in ASC Topic 842, Leases (“Topic 842”).
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation and Accounting for – Leases
Description of the Matter
As described in Notes 2 and 10 to the consolidated financial statements, the Company adopted Topic 842, on January 1, 2019. In
conjunction with the adoption of Topic 842, the Company evaluated the overall accounting implications, including review of contracts
F-1
Table of Contents
and manufacturing agreements to determine whether such agreements contained an embedded lease. On the adoption date, the Company
recorded approximately $10.4 million in operating lease right-of-use assets and approximately $10.7 million in operating lease liabilities on
its consolidated balance sheet for existing operating leases. The calculation of operating lease right-of-use assets and lease liabilities
includes an estimate of the present value of future lease payments. Since the Company’s leases do not provide an implicit rate, management
estimated their incremental borrowing rates used in its present value calculation, which required subjectivity. The incremental borrowing
rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the
lease payments in a similar economic environment.
Auditing management’s contract evaluation performed in conjunction with the adoption of Topic 842 was complex and required
judgment to analyze the terms within the contracts and manufacturing agreements to determine whether we concurred with management’s
evaluation. Further, auditing management’s assessment of its incremental borrowing rate is especially subjective and judgmental as the
Company has no outstanding debt nor committed credit facilities, secured or otherwise that would have comparable collateral or similar
terms as their underlying leases.
How We Addressed the Matter in Our Audit
Our audit procedures included, amongst others:
● We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls with regards
to the contract evaluation, and review of the methodology, inputs, and assumptions used to determine the incremental borrowing
rate.
● We tested the contracts and manufacturing agreements to determine whether management appropriately evaluated whether such
agreements contained an embedded lease.
● We reviewed the contractual terms of the lease agreements to ensure any lease term extensions and/or early termination clauses
were properly considered in determining the appropriate lease term for calculating the incremental borrowing rates.
● We tested the underlying leases and other information that served as the basis for valuation and tested inputs and terms used in the
valuation to determine completeness and accuracy.
● We evaluated the reasonableness of the valuation methods and assumptions used by management to estimate the incremental
borrowing rates for borrowing amounts and terms comparable to their outstanding leases by:
o Developing an independent estimate of the incremental borrowing rates by utilizing third party data related to comparable
o
company borrowings with comparable payment terms.
Performing a sensitivity analysis on incremental borrowing rates used to determine the impact rate changes could have on the
present value calculation of the Company’s operating lease right-of-use assets and operating lease liabilities.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2016.
New York, NY
February 25, 2020
F-2
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
To the Shareholders and Board of Directors of
Iovance Biotherapeutics, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Iovance Biotherapeutics, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets as of December 31, 2019 and 2018, and related consolidated statements of operations,
comprehensive loss, stockholders’ equity and cash flows and the related notes for each of the three years in the period ended December 31,
2019 of the Company and our report dated February 25, 2020 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
F-3
Table of Contents
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that degree of compliance with the policies or procedures may deteriorate.
/s/ Marcum LLP
Marcum LLP
New York, NY
February 25, 2020
F-4
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share information)
ASSETS
Current Assets
Cash and cash equivalents
Short-term investments
Prepaid expenses and other assets
Total Current Assets
Operating lease right-of-use assets
Property and equipment, net
Restricted cash
Long-term assets
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable
Accrued expenses
Operating lease liabilities
Total Current Liabilities
Non-Current Liabilities
Operating lease liabilities
Other liabilities
Total Non-Current Liabilities
Total Liabilities
Commitments and contingencies (Note 11)
Stockholders’ Equity
Series A Convertible Preferred stock, $0.001 par value; 17,000 shares designated, 194 shares issued and
outstanding as of December 31, 2019 and December 31, 2018 (aggregate liquidation value of $194)
Series B Convertible Preferred stock, $0.001 par value; 11,500,000 shares designated, 3,581,119 and 5,854,845
shares issued and outstanding as of December 31, 2019 and December 31, 2018 (aggregate liquidation value of
$17,010)
Common stock, $0.000041666 par value; 300,000,000 and 150,000,000 shares authorized, 126,411,808 and
123,415,576 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively
Accumulated other comprehensive loss
Additional paid-in capital
Accumulated deficit
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
December 31,
2019
December 31,
2018
$
$
$
$
$
$
13,969
293,112
9,412
316,493
10,695
8,536
5,450
3,481
344,655
15,567
16,265
7,252
39,084
4,248
2,352
6,600
45,684
82,152
386,371
6,851
475,374
—
2,683
—
2,764
480,821
2,739
11,659
—
14,398
—
230
230
14,628
—
4
5
220
869,354
(570,612)
298,971
344,655
$
—
6
5
(42)
838,984
(372,760)
466,193
480,821
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
Consolidated Statements of Operations
(In thousands, except per share information)
Years Ended December 31,
2018
2019
2017
Revenues
Costs and expenses
Research and development expenses
General and administrative expenses
Total costs and expenses
Loss from operations
Other income
Interest income, net
Net Loss
Net Loss Per Common Share, Basic and Diluted
Weighted-Average Common Share Outstanding, Basic and Diluted
$
— $
— $
—
166,023
40,849
206,872
99,828
28,430
128,258
71,615
21,262
92,877
(206,872)
(128,258)
(92,877)
9,316
(197,556)
(1.59)
124,336
4,678
(123,580)
(1.27)
97,277
$
$
$
813
(92,064)
(1.41)
65,242
The accompanying notes are an integral part of these consolidated financial statements.
F-6
IOVANCE BIOTHERAPEUTICS, INC.
Consolidated Statements of Comprehensive Loss
(in thousands)
Years Ended December 31,
2018
2017
2019
Net Loss
Other comprehensive gain (loss):
Net unrealized gain (loss) on short-term investments
Comprehensive Loss
$ (197,556)
$ (123,580)
$
(92,064)
262
$ (197,294)
(42)
$ (123,622)
$
(29)
(92,093)
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Balance - December 31, 2017
1,694
—
7,378,241
7
73,164,914
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
Consolidated Statements of Stockholders' Equity
(In thousands, except share information)
Balance - January 1, 2017
Series A
Preferred Stock
Shares Amount
1,694
—
Series B Convertible
Preferred Stock
Shares
7,946,673
Amount
8
Common Stock
Shares
62,248,074
Additional
Paid-In
Amount Capital
323,994
11,968
3
Accumulated
Comprehensive Accumulated
Income (Loss)
Deficit
Total
Stockholder
Equity
Stock-based compensation expense
Vesting of restricted shares issued for services
Tax payments related to shares witheld for vested
restricted stock awards
Common stock issued upon exercise of warrants
Common stock issued upon exercise of stock
options
Conversion of convertible preferred stock into
common stock
Common stock sold in public offering, net of
offering costs
Unrealized loss on short- term investments
Net loss
Stock-based compensation expense
Vesting of restricted shares issued for services
Tax payments related to shares witheld for vested
restricted stock awards
Common stock issued upon exercise of warrants
Common stock issued upon exercise of stock
options
Common stock sold in public offering, net of
offering costs
Conversion of convertible preferred stock into
common stock
Cancellation of resticted shares
Unrealized loss on short- term investments
Net loss
Balance - December 31, 2018
Adoption of ASU 2018-07
Stock-based compensation expense
Vesting of restricted stock shares issued for service
Tax payments related to shares witheld for vested
restricted stock units
Common stock issued upon exercise of stock
options
Common stock issued from preferred stock
conversion
Unrealized gain on short- term investments
Cancellation of common shares from settlement of
dispute
Net loss
Balance - December 31, 2019
225,970
—
—
265,000
—
—
(1,252)
662
1,011,284
—
5,616
(568,432)
(1)
568,432
1
8,846,154
—
53,662
45,833
6,301,216
1,336,514
3
—
1
394,651
20,027
(223)
15,753
9,959
29
(157,116)
(29)
—
(92,064)
(249,180)
(1,500)
—
(1,523,396)
(1)
40,300,000
1
398,816
2,273,396
(6,297)
—
—
1
194
$ —
5,854,845
$
6
123,415,576
$
27,514
(42)
$
(42)
$
(123,580)
(372,760)
(296)
$
5
1
$ 838,984
296
24,277
(1)
—
(312)
727,492
—
6,443
(2,273,726)
(2)
2,273,726
—
2
262
(32,500)
(1)
(335)
194
$ —
3,581,119
$
4
126,411,808
$
5
$ 869,354
$
220
$
(197,556)
(570,612)
$
(336)
(197,556)
298,971
The accompanying notes are an integral part of these consolidated financial statements.
F-8
166,918
11,968
—
(1,252)
662
5,616
—
53,662
(29)
(92,064)
145,481
20,027
—
(223)
15,754
9,959
398,817
—
—
(42)
(123,580)
466,193
—
24,277
—
(312)
6,443
—
262
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
Consolidated Statements of Cash Flows
(In thousands)
Cash Flows from Operating Activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Noncash lease expense
Accretion (amortization) of discounts and premiums on investments
Depreciation and amortization
Gain on settlement of dispute
Loss on disposal of assets
Changes in assets and liabilities:
Prepaid expenses, other assets, and long-term assets
Operating lease liabilities (Right-of-use assets)
Accounts payable
Accrued expenses and other liabilities
Net cash used in operating activities
Cash Flows from Investing Activities
Maturities of short-term investments
Purchase of short-term investments
Purchase of property and equipment
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities
Tax payments related to shares withheld for vested restricted stock units
Proceeds from the issuance of common stock upon exercise of warrants
Proceeds from the issuance of common stock upon exercise of options
Proceeds from the issuance of preferred stock and common stock, net
Net cash provided by financing activities
Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period
Cash, Cash Equivalents, and Restricted Cash, End of Period (Note 2)
Supplemental disclosure of cash flow information:
Cash paid for income taxes
Interest paid
Supplemental disclosure of noncash investing and financing activities:
Net unrealized gain (loss) on short-term investments
Acquisitions of property and equipment included in accounts payable
Conversion of convertible preferred stock to common stock
Vesting of restricted stock units
Years Ended December 31,
2018
2019
2017
$ (197,556)
$ (123,580)
(92,064)
24,277
6,954
(3,421)
1,169
(336)
16
(3,278)
(6,148)
12,706
6,728
(158,889)
20,027
—
(1,332)
956
—
9
(2,065)
—
1,507
3,229
(101,249)
514,601
(417,659)
(6,917)
90,025
41,000
(426,081)
(1,198)
(386,279)
11,968
—
19
952
—
—
(4,508)
—
369
4,555
(78,709)
59,705
—
(1,028)
58,677
(312)
—
6,443
—
6,131
(62,733)
82,152
19,419
$
(223)
(1,252)
15,754
662
9,959
5,616
398,817
53,662
424,307
58,688
(63,221)
38,656
145,373
106,717
82,152 $ 145,373
—
—
$
262
122
2
1
—
—
(42)
—
1
—
—
—
(29)
—
1
—
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-9
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL ORGANIZATION, BUSINESS AND LIQUIDITY
General Organization and Business
Iovance Biotherapeutics, Inc. (the “Company”, “we”, “us” or “our”) is 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 (NCI), which conducted initial clinical trials in diseases such as
metastatic melanoma and cervical cancer. The Company has developed a new, shorter manufacturing process for TIL therapy 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. The Company’s lead product candidates include lifileucel for metastatic melanoma and LN-145 for
metastatic cervical cancer. In addition to metastatic melanoma and metastatic cervical cancer, it 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.
On June 1, 2017, the Company reincorporated to become a company governed by Delaware corporation laws.
Liquidity
The Company is currently engaged in the development of therapeutics to fight cancer, specifically solid tumors. The Company
currently does not have any commercial products and has not yet generated any revenues from its business. The Company currently does
not anticipate that it will generate any 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 $197.6 million for the year ended December 31, 2019
and used $158.9 million of cash in its operating activities during the year ended December 31, 2019. As of December 31, 2019, the
Company had $312.5 million in cash, cash equivalents, short-term investments, and restricted cash ( $14.0 million of cash and cash
equivalents, $293.1 million in short-term investments and $5.5 million in restricted cash).
The Company expects to further increase its research and development activities, 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 initiation of pre-commercial activities. Based on the funds the Company has available as of the date
these financial statements are issued, the Company believes that it has sufficient capital to fund its anticipated operating expenses and
capital expenditures for at least next twelve months from the date these financial statements are issued. The Company has latitude as to the
timing and amount of expenditures for its commercial-scale production facility under construction in Philadelphia, Pennsylvania.
Concentrations of Risk
The Company is subject to credit risk from its portfolio of cash equivalents and short-term investments. Under its investment policy,
the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for
securities issued by the U.S. government. The Company does not believe it is exposed to any significant concentrations of credit risk from
these financial instruments. The goals of its investment policy, in order of priority, are as follows: safety and preservation of principal and
diversification of risk and liquidity of investments sufficient to meet cash flow requirements.
F-10
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
Cash, Cash Equivalents, and Short-term Investments
The Company’s cash and cash equivalents include short-term investments with original maturities of three months or less when
purchased. The Company's short-term investments are classified as “available-for-sale”. The Company includes these investments in
current assets and carries them at fair value. Unrealized gains and losses on available-for-sale securities are included in accumulated other
comprehensive loss. The cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity. Such
amortization and accretion are included in net interest income in the consolidated statements of operations. Gains and losses on securities
sold are recorded based on the specific identification method and are included in net interest income in the consolidated statements of
operations. The Company has not incurred any realized gains or losses from sales of securities to date. The Company’s investment policy
limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S.
government and U.S. government agencies as well as corporate debt securities, and places restrictions on maturities and concentration by
type and issuer.
Restricted Cash
The Company maintains a certain minimum balance, currently $5.5 million in a segregated bank account in connection with a letter of
credit for the benefit of the landlord for its commercial manufacturing facility used as a security deposit for the lease (See Note 10 -
Leases). This amount is classified as Restricted Cash on the Balance Sheet. The letter of credit will expire on May 28, 2020, however, it
will be automatically extended, without written agreement, for one-year periods to May 28 in each succeeding calendar year, through at
least 60 days after the lease expiration date. Further, on the expiration of the seventh year of the lease, and each anniversary date thereafter,
the letter of credit may be decreased by $1.0 million, with a minimum security deposit of $1.5 million maintained through the end of the
lease term. As of December 31, 2019, restricted cash consisted of $5.5 million and this amount has been classified as a non-current asset on
the Company’s consolidated balance sheets.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash, reported within the consolidated balance
sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:
December 31,
December 31,
December 31,
2019
2018
2017
Cash
Restricted cash (included in non-current assets on the consolidated balance sheets)
Total cash, cash equivalents and restricted cash
$
$
13,969
5,450
19,419
$
$
Property and Equipment, net
82,152
$
—
$
82,152
145,373
—
145,373
Property and equipment is stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment is
depreciated or amortized on the straight-line method over the following estimated useful lives:
Computer equipment
Office furniture and equipment
Lab equipment
Leasehold improvements
2 years
5 years
5 years
Lesser of the remaining economic life of the asset or the lease-term
Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains
and losses on disposals are included within operating expenses in the consolidated statements of operations.
Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future undiscounted cash
flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the
asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended December 31, 2019, 2018,
and 2017, the Company did not recognize any impairments for its property and equipment.
F-11
Table of Contents
Loss per Share
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during
the period.
Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of shares of common stock
outstanding and the dilutive common stock equivalent shares outstanding during the period. The Company’s potentially dilutive common
stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options and warrants
(ii) vesting of restricted stock units and restricted stock awards, and (iii) conversion of preferred stock, are only included in the calculation
of diluted net loss per share when their effect is dilutive.
At December 31, 2019, 2018, and 2017, the following outstanding common stock equivalents have been excluded from the calculation
of net loss per share because their impact would be anti-dilutive.
Stock options
Warrants
Series A Convertible Preferred*
Series B Convertible Preferred*
Restricted stock units
*on an as-converted basis
9,494,712
—
97,000
3,581,119
22,916
13,195,747
6,889,287
—
97,000
5,854,845
68,742
12,909,874
2017
6,072,368
6,301,216
847,000
7,378,241
114,582
20,713,407
As of December 31,
2018
2019
The dilutive effect of potentially dilutive securities would be reflected in diluted earnings per common share by application of the
treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company's common stock could result
in a greater dilutive effect from potentially dilutive securities.
Fair Value Measurements
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements
and Disclosures, fair value is defined as the price at which an asset could be exchanged, or a liability transferred in a transaction between
knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based
on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not
available, valuation models are applied.
Assets and liabilities recorded at fair value in the Company’s financial statements are categorized based upon the level of judgment
associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with
the inputs to fair valuation of these assets and liabilities, are as follows:
Level 1—These are investments where values are based on unadjusted quoted prices for identical assets in an active market that the
Company has the ability to access.
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 December 31, 2019 and 2018.
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 December 31, 2019 and 2018.
F-12
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 consolidated balance sheets.
As of December 31, 2019 and 2018, 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):
US treasury securities
US government agency securities
Total
US treasury securities
US government agency securities
Total
Use of Estimates
Assets at Fair Value as of December 31, 2019
Total
Level 1 Level 2 Level 3
$ 242,249
50,863
$ 293,112
$
$
— $
—
— $
— $ 242,249
—
50,863
— $ 293,112
Assets at Fair Value as of December 31, 2018
Level 1
$ 265,393
120,978
$ 386,371
$
$
Level 2
Level 3
Total
— $
—
— $
— $ 265,393
—
120,978
— $ 386,371
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates. Significant estimates include the assumptions made in valuing
stock instruments issued for services and used in measuring operating right-of-use assets and operating lease liabilities, valuation of short-
term investments, accounting for potential liabilities, and the valuation allowance associated with the Company’s deferred tax assets.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Iovance Biotherapeutics, Inc. and its wholly-owned
subsidiary, Iovance Biotherapeutics GmbH. All intercompany accounts and transactions have been eliminated. The U.S. dollar is the
functional currency for all the Company's consolidated operations.
Leases
The Company determines if an arrangement includes a lease at inception. Operating leases are included in its consolidated balance
sheet as Operating lease right-of-use assets and Operating lease liabilities as of 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. Operating lease right-of-use assets and liabilities are recognized at the lease
commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease
payments, the Company uses an estimated incremental borrowing rate that is applicable to the Company based on the information available
at the later of the lease commencement date or the date of adoption of Accounting Standard Update (ASU) No. 2016-02 and ASU No.
2018-10, Leases (together “Topic 842”). The operating lease right-of-use assets also include any lease payments made less lease incentives.
The Company’s leases may include options to extend or terminate the lease, which is considered in the lease term when it is reasonably
certain that the Company will exercise any such options. Lease expense is recognized on a straight-line basis over the expected lease term.
The Company has elected not to apply the recognition requirements of Topic 842 for short-term leases.
For lease agreements entered into after the adoption of Topic 842 that include lease and non-lease components, such components are
generally accounted for separately.
F-13
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prior period amounts continue to be reported in accordance with the Company's historic accounting under previous lease guidance,
Topic 840. See “Recently Adopted Accounting Standards - Leases” below, for more information about the impact of the adoption on Topic
842.
Stock-Based Compensation
The Company periodically grants stock options to employees in non-capital raising transactions as compensation for services rendered.
The Company accounts for stock option grants to employees based on the authoritative guidance provided by the FASB where the value of
the award is measured on the date of grant and recognized over the vesting period. Upon the adoption of ASU No. 2018-07, Compensation-
Stock Compensation (“Topic 718”), the Company accounts for stock option grants to non-employees in a similar manner as stock option
grants to employees except for the term used in the grant date fair value, therefore no longer requiring a re-measurement at the then-current
fair values at each reporting date until the share options have vested. The nonemployee awards that contain a performance condition that
affects the quantity or other terms of the award are measured based on the outcome that is probable.
The fair value of the Company's common stock option grants is estimated using a Black-Scholes option pricing model, which uses
certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends.
The stock-based compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model. The
assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.
The Company has in the past issued restricted stock units (RSU) and restricted stock awards (RSA) as part of its share-based
compensation programs. The Company measures the compensation cost with respect to RSUs and RSAs issued to employees based upon
the estimated fair value of the equity instruments at the date of the grant, which is recognized as an expense over the period during which
an employee is required to provide services in exchange for the awards.
The fair value of RSUs and RSAs is based on the closing price of the Company’s common stock on the grant date.
Total stock-based compensation expense related to all of the Company’s stock-based awards was recorded on the consolidated
statements of operations as follows (in thousands):
Years Ended December 31,
2018
2019
2017
Research and development
General and administrative
Total stock-based compensation expense
$
$
11,396
12,881
24,277
$
$
9,305
10,722
20,027
$
$
5,270
6,698
11,968
Total stock-based compensation broken down based on each individual instrument was as follows (in thousands):
Years Ended December 31,
2018
2019
2017
Stock option expense
Restricted stock award expense
Restricted stock unit expense
Total stock-based compensation expense
Research and Development Expenses
$
$
23,964
$
—
313
24,277
$
19,758
$
—
269
20,027
$
10,862
34
1,072
11,968
Research and development expenses include personnel and facility-related expenses, outside contracted services including clinical trial
costs, manufacturing and process development costs, research costs and other consulting services. Research and development costs are
expensed as incurred. Nonrefundable advance payments for goods or services that will be used or rendered for future
F-14
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
research and development activities are deferred and amortized over the period that the goods are delivered, or the related services are
performed, subject to an assessment of recoverability.
Clinical development costs are a significant component of research and development expenses. The Company has a history of
contracting with third parties that perform various clinical trial activities on its behalf in connection with the ongoing development of its
product candidates. The financial terms of these contracts are subject to negotiations and may vary from contract to contract and may result
in uneven payment flow. The Company accrues and expenses costs for clinical trial activities performed by third parties based upon
estimates of the percentage of work completed over the life of the individual trial in accordance with agreements established with contract
research organizations and clinical trial sites. The Company determines its estimates through discussions with internal clinical personnel
and outside service providers as to the progress or stage of completion of trials or services and the agreed upon fee to be paid for such
services.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for
personnel in executive, finance, accounting, legal, investor relations, facilities, business development, marketing, commercial and human
resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, sublicense
royalty expenses, legal fees relating to corporate matters, insurance, public company expenses relating to maintaining compliance with
Nasdaq listing rules and Securities and Exchange Commission (“SEC”) requirements, investor relations costs, and fees for accounting and
consulting services. General and administrative costs are expensed as incurred, and the Company accrues for services provided by third
parties related to the above expenses by monitoring the status of services provided and receiving estimates from its service providers and
adjusting its accruals as actual costs become known.
Income Taxes
The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible
temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. 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 and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. The Company will classify as income tax expense any interest and
penalties. The Company has no material uncertain tax positions for any of the reporting periods presented.
Concentrations
The Company is subject to credit risk from its portfolio of cash equivalents and short-term investments. Under its investment policy, it
limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued
by the U.S. government. The Company is not exposed to any significant concentrations of credit risk from these financial instruments. The
goals of its investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk; liquidity of
investments sufficient to meet cash flow requirements; and a competitive after-tax rate of return. The Company maintains cash, cash
equivalents and short-term investment balances at three financial institutions. At times, the amounts on deposit may exceed the federally
insured limits. Management believes that the financial institutions which hold its cash are financially sound and, accordingly, minimal
credit risk exists. As of December 31, 2019, and 2018, respectively, the Company’s cash balances were in excess of insured limits
maintained at the financial institutions.
Preferred Stock
The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and
measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are
F-15
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)
are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity.
Convertible Instruments
The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when
accounting for hybrid contracts that feature conversion options. The accounting standards require companies to bifurcate conversion
options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The
criteria include circumstances in which (i) the economic characteristics and risks of the embedded derivative instrument are not clearly and
closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded
derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting
principles with changes in fair value reported in earnings as they occur and (iii) a separate instrument with the same terms as the embedded
derivative instrument would be considered a derivative instrument. The derivative is subsequently marked to market at each reporting date
based on current fair value, with the changes in fair value reported in results of operations.
Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent
issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in
their bifurcation from the host instrument.
The Company also records, when necessary, deemed dividends for the intrinsic value of the conversion options embedded in preferred
stock based upon the difference between the fair value of the underlying common stock at the commitment date of the transaction and the
effective conversion price embedded in the preferred stock.
Recent Accounting Standards
Leases
On January 1, 2019, the Company adopted Topic 842, which establishes a new lease accounting method for lessees. The updated
guidance requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with
additional qualitative and quantitative disclosures. The Company elected the package of practical expedients requiring no reassessment of
whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or initial direct
costs for any existing leases. The standard had a material impact on its consolidated balance sheets by recognizing Operating lease right-of-
use assets and Operating lease liabilities for operating leases but did not have an impact on its consolidated statement of operations or cash
flows. The adoption of Topic 842 resulted in recognition of Operating lease right-of-use assets of $10.4 million, $4.9 million of Operating
lease liabilities - current, and $5.8 million of Operating lease liabilities - noncurrent as of January 1, 2019, the date of adoption.
Improvements to Nonemployee Share-Based Payment Accounting
On January 1, 2019, the Company adopted Topic 718, which eliminates the separate accounting method for nonemployee share-based
payment awards and requires companies to account for share-based payment transactions with nonemployees in the same manner as share-
based payment transactions with employees except for the term used in the grant date fair value. Under the new guidance, nonemployee
share-based payment transactions are measured at the grant-date fair value and are no longer remeasured at the then-current fair values at
each reporting date until the share options have vested. The guidance requires a modified-retrospective approach in transition. The
Company compared the cumulative amounts that were recorded for its nonemployee share-based payments through December 31, 2018
immediately preceding the date of adoption to the cumulative amounts that should be recognized at the adoption date and recognized a
cumulative effect of the transition adjustment of $0.3 million to retained earnings as of the date of adoption, January 1, 2019.
Fair Value Measurements Disclosure
In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the
Disclosure Requirements for Fair Value Measurement, which eliminates disclosure requirement regarding transfers between level 1 and
level 2 of the fair value of hierarchy, however, adds disclosure requirements on the range and weighted average used to develop
F-16
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
significant unobservable inputs for level 3 fair value measurements. The Company adopted the guidance on January 1, 2019, however,
there was no adjustment required to its disclosures as it did not have fair value assets classified under level 2 or 3 as of December 31, 2019
and 2018.
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, and ASU 2019-11 (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). 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”. Topic 326 also requires the impairment calculation on
an individual security level and requires an entity use present value of cash flows when estimating the CECL. The credit-related losses are
required to be recognized through earnings and non-credit related losses are reported in other comprehensive income. In April 2019, the
FASB further clarified the scope of Topic 326 and addressed issues related to accrued interest receivable balances, recoveries, variable
interest rates and prepayment. Topic 326 will be effective for public entities in fiscal years beginning after December 15, 2019, including
interim periods within those fiscal years. The new guidance will require modified retrospective application to all outstanding instruments,
with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of the first period in which the guidance
becomes effective. The Company will adopt this guidance on January 1, 2020, however, the Company does not believe the adoption of this
new guidance will have any material impact on its consolidated financial statements.
Cloud Computing Arrangements
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15), to help
entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing
guidance for determining when the arrangement includes a software license. The guidance provided generally means that an intangible
asset is recognized for the software license and, to the extent that the payments attributable to the software license are made over time, a
liability also is recognized. If a cloud computing arrangement does not include a software license, the entity should account for the
arrangement as a service contract. This generally means that the fees associated with the hosting element (service) of the arrangement are
expensed as incurred. ASU 2018-15 is effective for fiscal years beginning subsequent to December 15, 2019. The Company plans to adopt
this guidance on January 1, 2020, and believes it will have a material impact on its consolidated balance sheets and statements of
operations during 2020 by deferring recognition of costs as it prepares to invest in information technology infrastructure for its commercial
manufacturing build-out.
Segment reporting
The Company operates in one segment, focused on developing and commercializing ACT using autologous TIL for the treatment of
metastatic melanoma and other solid cancers.
Subsequent Events
Management of the Company evaluates events that have occurred after the balance sheet date through the date the financial
statements are issued. Based upon the review, the Company identified the following subsequent events.
Research collaboration and exclusive worldwide license agreement
On January 12, 2020, the Company announced that it had entered into a research collaboration and exclusive worldwide license
agreement whereby the Company will license gene-editing technology from Cellectis S.A. (“Cellectis”), a clinical-stage biopharmaceutical
company, in order to develop TIL therapies that have been genetically edited. 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.
On January 12, 2020, the Company announced that it had obtained a license from Novartis Pharma AG (“Novartis”) to develop and
commercialize an antibody cytokine engrafted protein, referred to as IOV-3001. Under the agreement, Iovance has paid an upfront
F-17
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
payment to Novartis and may pay future milestones related to initiation of patent 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.
NOTE 3. CASH AND CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Cash equivalents, and short-term investments consist of the following (in thousands):
Cash equivalents - Money market funds
Cash equivalents total
December 31, December 31,
2019
2018
$
$
10,049
10,049
$
$
25,968
25,968
Cash equivalents in the tables above exclude cash demand deposits of $3.9 million and $56.2 million as of December 31, 2019 and
2018, respectively (in thousands).
Short-term Investments
US treasury securities
US government agency securities
Short-term investments total
December 31, December 31,
2019
242,249
50,863
293,112
$
$
2018
265,393
120,978
386,371
$
$
The cost and fair value of cash equivalents and short-term investments at December 31, 2018 and 2019 were as follows (in thousands):
As of December 31, 2019
US treasury securities
US government agency securities
Total
As of December 31, 2018
US treasury securities
US government agency securities
Total
Cost
Accretion Gains
Losses
Gross
Gross
Unrealized Unrealized
$ 241,709
50,712
$ 292,421
$
$
364
107
471
$
$
179
44
223
$
$
Fair Value
$ 242,249
50,863
$ 293,112
(3)
—
(3)
Cost
Accretion Gains
Losses
Gross
Gross
Unrealized Unrealized
$ 264,619
120,653
$ 385,272
$
$
813
328
1,141
$
$
19
21
40
$
$
Fair Value
$ 265,393
120,978
$ 386,371
(58)
(24)
(82)
Unrealized gains and losses are included in accumulated other comprehensive loss. All short-term investments held by the Company as
of December 31, 2019 and 2018 have a maturity of less than one year.
F-18
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. BALANCE SHEET COMPONENTS
Property and equipment, net consists of the following (in thousands):
Lab equipment
Leasehold improvements
Computer equipment
Office furniture and equipment
Construction in progress
Total Property and equipment, cost
Less: Accumulated depreciation and amortization
property and equipment, net
December 31, December 31,
2019
2018
$
$
4,530
2,372
258
457
5,417
13,034
(4,498)
8,536
$
$
4,160
1,776
337
263
107
6,643
(3,960)
2,683
Depreciation expense for the years ended December 31, 2019, 2018 and 2017 was approximately $1.2 million, $1.0 million and $1.0
million, respectively.
Accrued liabilities consist of the following (in thousands):
Accrued payroll and employee related expenses
Legal and related services
Clinical related
Manufacturing related
Deferred rent - current
Accrued other
NOTE 5. STOCKHOLDERS’ EQUITY
Public Offerings
December 31, December 31,
2019
2018
$
$
$
6,866
866
4,692
2,184
—
1,657
16,265
$
4,113
825
3,424
2,684
124
489
11,659
In January 2018, the Company closed an underwritten public offering of 15,000,000 shares of the Company’s common stock at a
public offering price of $11.50 per share, before underwriting discounts, which included 1,956,521 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 gross proceeds
from the offering, before deducting the underwriting discounts and commissions and other offering expenses payable by the Company,
were $172.5 million, with net proceeds to the Company of $162.0 million.
On October 17, 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. The gross
proceeds from the offering, before deducting the underwriting discounts and commissions and other estimated offering expenses payable
by the Company, were $252.2 million, with net proceeds to the Company of $236.7 million.
On June 10, 2019, the certificate of incorporation of the Company was amended to increase the number of authorized shares of the
Company’s common stock, par value $0.000041666, from 150,000,000 shares to 300,000,000 shares (the “Certificate of Amendment”).
The Certificate of Amendment was approved by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders held
on June 10, 2019.
F-19
Table of Contents
Preferred Stock
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s certificate of incorporation authorizes the issuance of up to 50,000,000 shares of “blank check” preferred stock. At
December 31, 2019, 17,000 shares were designated as 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
A total of 17,000 shares of Series A Convertible Preferred Stock have been authorized for issuance under the Company’s Certificate of
Designation of Preferences and Rights of Series A Convertible Preferred Stock. The shares of Series A Convertible Preferred Stock have a
stated value of $1,000 per share and are initially convertible into shares of common stock at a price of $2.00 per share, subject to
adjustment.
The Series A Convertible Preferred Stock may, at the option of each investor, be converted into fully paid and non-assessable shares of
common stock. The holders of shares of Series A Convertible Preferred Stock do not have the right to vote on matters that come before the
Company’s stockholders. In the event of any dissolution or winding up of the Company, proceeds shall be paid pari passu among the
holders of common stock and preferred stock, pro rata based on the number of shares held by each holder. 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. The common shares issued were determined on a formula basis of 500 common
shares for each share of Series A Convertible Preferred Stock converted.
No Shares of Series A Convertible Preferred Stock were converted during the year ended December 31, 2019. A total of 1,500 shares
of Series A Convertible Preferred Stock were converted into 750,000 shares of common stock during the year ended December 31, 2018.
At December 31, 2019 and 2018, 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
A total of 11,500,000 shares of Series B Convertible Preferred Stock are authorized for issuance under the Company’s Series B
Certificate of Designation of Rights, Preferences and Privileges of Series B Convertible Preferred Stock. The shares of Series B
Convertible Preferred Stock have a stated value of $4.75 per share and are convertible into shares of the Company’s common stock at an
initial conversion price of $4.75 per share.
Holders of Series B Convertible Preferred Stock are entitled to dividends on an as-if-converted basis in the same form as any dividends
actually paid on shares of the Series A Convertible Preferred Stock or the Company’s common stock. 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.
A total of 2,273,726 shares of Series B Convertible Preferred Stock were converted into 2,273,726 shares of common stock during the
year ended December 31, 2019. A total of 1,523,396 shares of Series B Convertible Preferred Stock were converted into 1,523,396 shares
of common stock during the year ended December 31, 2018. At December 31, 2019 and 2018, 3,581,119 and 5,854,845 shares of Series B
Preferred Stock (that are convertible into 3,581,119 and 5,854,845 shares of common stock) remained outstanding, respectively.
Cancellation of Common Shares
On September 30, 2013, the Company and a third party entered into an agreement under which the Company issued 50,000 shares of
unregistered stock in the Company to the third party. On January 16, 2019, the two parties entered into a confidential settlement agreement
in connection with a dispute related to their prior relationship and activities. 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 consolidated statement of operations.
F-20
Table of Contents
Warrants
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There were no remaining outstanding warrants as of December 31, 2019 and 2018. A summary of the changes of stock warrants is
presented in the following table.
Outstanding at January 1, 2017
Issued
Exercised
Expired/Cancelled
Outstanding at December 31, 2017
Issued
Exercised
Expired/Cancelled
Outstanding at December 31, 2018
Outstanding at December 31, 2019
NOTE 6. STOCK BASED COMPENSATION
Stock Plans
Shares
Under
Weighted Weighted
Average
Average
Exercise Remaining
Aggregate
Intrinsic
Value
Warrants Price
Life
(in thousands)
6,566,216
$
—
(265,000)
6,301,216
—
$
—
(6,301,216)
—
— $
— $
2.51
—
2.50
—
2.51
—
2.51
—
—
—
— $
— $
—
—
On October 14, 2011, the Company 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. The 2011 Plan initially had 180,000 shares of common stock reserved
for issuance in the form of incentive stock options, non-qualified options, common stock, and grant appreciation rights. The 2011 Plan was
not approved by the Company’s stockholders within the required one-year period following its adoption and, accordingly, no incentive
stock options can be granted under that plan. In August 2013, the Company’s Board of Directors and a majority of the Company’s
stockholders approved an amendment to increase the number of shares available under the 2011 Plan from 180,000 shares to 1,700,000
shares, and an amendment to increase the number options or other awards that can be granted to any one person during a twelve (12) month
period from 50,000 shares to 300,000 shares. The foregoing amendment to the 2011 Plan became effective in September 2013. On August
20, 2014, the Company’s Board of Directors 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 December 31, 2019, 151,240
shares were available for future grant under the 2011 Plan.
On September 19, 2014, the Company’s Board of Directors adopted the Iovance Biotherapeutics, Inc. 2014 Equity Incentive Plan (the
“2014 Plan”). The 2014 Plan was approved by the Company’s stockholders at the Company’s 2014 Annual Meeting of Stockholders held
in November 2014. The 2014 Plan, as approved by the stockholders, authorized the issuance up to an aggregate of 2,350,000 shares of the
Company’s common stock. On April 10, 2015, the Board amended the 2014 Plan to increase the total number of shares that can be issued
under the 2014 Plan to 4,000,000 shares of the Company’s common stock. The increase in shares available for issuance under the 2014
Plan was approved by the Company’s stockholders at the Company’s 2015 Annual Meeting of Stockholders in June 2015.
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 December 31, 2019, 174,292 shares were available for grant under the
Company’s 2014 Plan.
On April 22, 2018, the Board of Directors adopted the Iovance Biotherapeutics, Inc. 2018 Equity Incentive Plan (the “2018 Plan”).
The 2018 Plan was approved by the Company’s stockholders at the annual meeting of stockholders held in June 2018. The 2018 Plan as
approved by the stockholders authorized the issuance up to an aggregate of 6,000,000 shares of common stock reserved for issuance in the
form of incentive (qualified) stock options, non-qualified options, common stock, stock appreciation rights, restricted stock awards,
restricted stock units, other stock-based awards, other cash-based awards or any combination of the foregoing. At December 31, 2019,
3,297,600 shares of common stock were available for grant under the Company’s 2018 Plan.
F-21
Table of Contents
Restricted Stock Units
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On June 1, 2016, the Company entered into a restricted stock unit agreement with the Company’s new Chief Executive Officer, Maria
Fardis, Ph.D., pursuant to which the Company granted Dr. Fardis 550,000 non-transferrable restricted stock units at fair market value of
$5.87 per share as an inducement of employment pursuant to the exception to The Nasdaq Global Market rules that generally require
stockholder approval of equity incentive plans. The 550,000 restricted stock units vest in installments as follows: (i) 137,500 restricted
stock units vested upon the first anniversary of the effective date of Dr. Fardis’ employment agreement; (ii) 275,000 restricted stock units
vest upon the satisfaction of certain clinical trial milestones; and (iii) 137,500 restricted stock units vest in equal monthly installments over
the 36-month period following the first anniversary of the effective date of Dr. Fardis’ employment, provided that Dr. Fardis has been
continuously employed with the Company as of such vesting dates. At December 31, 2019, 22,916 restricted stock units remained
unvested.
Stock-based compensation expense for restricted stock units 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 restricted stock units were $0.3 million, $0.3
million, and $1.1 million for the years ended December 31, 2019, 2018, and 2017, respectively, recorded as part of general and
administrative expenses.
As of December 31, 2019, $0.1 million of total unrecognized compensation costs related to non-vested restricted stock units to be
recognized over a weighted average period of 0.42 years.
Stock Options
A summary of the status of stock options at December 31, 2019, and the changes during the three years then ended, is presented in the
following table:
Outstanding at January 1, 2017
Issued
Exercised
Expired/Cancelled
Outstanding at December 31, 2017
Issued
Exercised
Expired/Cancelled
Outstanding at December 31, 2018
Issued
Exercised
Expired/Cancelled
Outstanding at December 31, 2019
Exercisable at December 31, 2019
Weighted
Average
Weighted
Remaining
Average
Exercise Contractual
Aggregate
Intrinsic
Value
Number
of
Options
Price
Life
(in thousands)
6,233,150 $
2,188,800
(1,011,284)
(1,338,298)
6,072,368 $
2,960,620
(1,336,514)
(807,187)
6,889,287 $
4,166,600
(727,492)
(833,683)
9,494,712 $
4,548,959 $
7.24
6.68
5.55
6.79
7.42
14.73
7.45
10.04
10.25
14.73
8.85
13.87
12.00
9.61
8.05 years $
6.95 years $
149,493
82,864
The Company recorded stock-based compensation expenses related to stock options of $24.0 million, $19.8 million, and $10.9 million
for the years ended December 31, 2019, 2018, and 2017, respectively. As of December 31, 2019, there was $41.2 million of total
unrecognized compensation expenses related to non-vested employee options to be recognized over a weighted average period
of 1.97 years.
The weighted average grant date fair value for employee options granted under the Company's stock option plans during the years
ended December 31, 2019, 2018, and 2017 was $9.48, $14.44, and $6.58 per option respectively.
F-22
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 year ended December 31, 2019 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
December 31, 2019. The intrinsic value of the Company’s stock options changes based on the closing price of the Company’s common
stock.
The total pre-tax intrinsic value of stock options exercised during the year ended December 31, 2019, 2018, and 2017 were $5.3
million, $2.3 million, and $2.6 million, respectively.
The following table summarizes the assumptions relating to options granted pursuant to the Company’s equity incentive plans for the
years ended December 31, 2019, 2018, and 2017:
Expected dividend yield
Risk-free interest rate
Expected term (in years)
Expected volatility
2019
0%
Years Ended December 31,
2018
0%
2.97% - 2.27%
6.50 - 5.13
71.62% - 70.63% 200.28% - 167.54% 209.69% - 190.46%
2017
0%
2.34% - 1.72%
6.50 - 5.13
2.59% - 1.62%
6.14 - 6.06
Expected Dividend Yield —The Company has never paid dividends and does not expect to pay dividends in the foreseeable future.
Risk-Free Interest Rate —The risk-free interest rate was based on the market yield currently available on United States Treasury
securities with maturities approximately equal to the option’s expected term.
Expected Term —The expected term of the stock option grants was calculated based on historical exercises, cancellations, and
forfeitures of stock options and outstanding option shares
Expected Volatility —The expected volatility is based on the historical volatility for the Company's stock over a period equal to the
expected terms of the options.
Forfeiture Rate —The Company recognizes forfeitures as they occur.
Each of the inputs discussed above is subjective and generally requires significant management judgment.
F-23
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of outstanding and exercisable stock options as of December 31, 2019 is as follows:
Range of Exercise
Prices
$5.05 - $5.87
$5.88 - $7.55
$7.56 - $9.10
$9.11 - $10.69
$10.70 - $11.15
$11.16 - $11.26
$11.27 - $16.50
$16.51 - $19.75
$19.76 - $25.78
$25.79 - 117.00
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Weighted
Average
Weighted
Average
Remaining
Weighted
Average
Number of Contractual Exercise Price Number of Contractual Exercise Price
Shares
Life
Per Share
Shares
Life
Per Share
1,086,300
1,413,645
970,107
962,900
118,950
1,574,900
1,283,110
1,046,000
994,800
44,000
9,494,712
6.71
6.57
6.87
8.69
6.43
9.17
8.22
8.69
9.66
8.28
8.05
$
$
5.56
7.25
8.44
9.70
11.06
11.26
14.93
17.62
21.79
42.15
12.00
945,048
1,329,098
830,055
248,689
88,750
—
719,738
378,581
—
9,000
4,548,959
$
6.65
6.51
6.60
7.60
5.45
—
7.95
8.12
—
1.73
6.95
$
5.56
7.28
8.45
9.44
11.05
—
15.23
17.33
—
99.12
9.61
Restricted Common Stock Awards
There were no unvested restricted common stock awards as of December 31, 2019, 2018, and 2017. During the year ended December
31, 2019, 2018 and 2017, no expense was recognized in connection with these awards.
NOTE.7 EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution plan covering substantially all U.S. employees under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the “IRC”). The Company's matching contribution to the plan was $0.9 million, 0.5 million, and $0.3
million for the years ended December 31, 2019, 2018, and 2017, respectively.
NOTE 8. INCOME TAXES
Net deferred tax assets (liabilities) are summarized as follows (in thousands):
As of December 31,
2018
2019
Deferred income tax asset:
Net operating loss carry forward
Stock-based compensation
Tax credit carry forwards
Lease liabilities
Depreciation and amortization
Reserves and accruals
Deferred tax assets before valuation allowance
Less: valuation allowance
Net deferred income tax assets
Deferred tax liabilities:
Depreciation and amortization
Net deferred tax assets (liabilities)
$
95,473
8,851
22,711
2,529
98
1,410
131,072
(128,720)
2,352
(2,352)
$
56,971
5,823
14,356
1,049
78,199
(78,146)
53
(53)
—
$
— $
F-24
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of the effective income tax rate to the U.S. statutory rate is as follows:
Years ended December 31,
2018
2019
2017
Federal statutory tax rate
Orphan Drug & Research credits
Permanent and other differences
Tax rate change
State tax, net of federal benefit
Valuation allowance
Effective tax rate
The components of income tax expense (benefit) are as follows (in thousands):
(21)%
(4)
1
—
(2)
(26)%
26 %
— %
(21)%
(3)
1
—
(1)
(24)%
24 %
— %
(34)%
—
4
23
—
(7)%
7 %
— %
Years Ended December 31,
2018
2019
2017
Federal:
Current
Deferred
State and Local
Current
Deferred
Change in Valuation Allowance
Total income tax expense (benefit)
$
$
— $
— $
(47,010)
(28,277)
—
(7,391)
—
—
(3,564)
50,574
(2,020)
30,297
— $
— $
—
944
6,447
—
The Company had net operating loss carryovers (“NOLs”) for federal and state income tax purposes of approximately $426.8 million
and $128.5 million, respectively, as of December 31, 2019. $142.4 million of federal NOLs will expire beginning in 2027, while $284.4
million generated after Tax Reform will have an indefinite life. The state NOLs will expire if unused in years 2031 through 2038.
The Company’s utilization of NOLs is subject to an annual limitation due to ownership changes that have occurred previously or that
could occur in the future as provided in Section 382 of the IRC (“Section 382”), as well as similar state provisions. Section 382 limits the
utilization of NOLs when there is a greater than 50% change of ownership as determined under the regulations. Since its formation, the
Company has raised capital through the issuance of capital stock and various convertible instruments which, combined with the purchasing
shareholders’ subsequent disposition of these shares, has resulted in an ownership change as defined by Section 382, and could result in an
ownership change in the future upon subsequent disposition.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for taxable
income during the periods in which temporary differences representing net future deductible amounts become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this
assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to
future realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended December 31,
2019, 2018, and 2017, the change in the valuation allowance was approximately $50.6 million, $30.3 million, and 6.4 million respectively.
The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose
uncertain positions that the Company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must
be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be
taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.”
A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is
F-25
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax
position that was not recognized as a result of applying the provisions of ASC 740.
If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as income tax
expenses in the consolidated statement of operations. Penalties would be recognized as a component of “General and Administrative
Expenses” in the consolidated statement of operations.
A reconciliation of the beginning and ending balances of the unrecognized tax benefits during the years ended December 31, 2019,
2018, and 2017 is as follows (in thousands):
Years Ended December 31,
2018
2019
2017
Unrecognized benefit - beginning of period
Gross decreases - prior period tax positions
Gross increase current period tax positions
Unrecognized benefit - end of period
$
$
6,344
$
—
3,694
10,038
$
4,111
118
2,115
6,344
$
$
—
2,780
1,331
4,111
No interest or penalties on unpaid tax were recorded during the years ended December 31, 2019, 2018, and 2017, respectively. The
Company does not anticipate any significant changes within 12 months of this reporting date of its uncertain tax positions.
The Company files tax returns in the U.S. federal and state jurisdictions. The U.S. federal and U.S. state taxing authorities may choose
to audit tax returns for tax years beyond the statute of limitation period due to significant tax attribute carryforwards from prior years,
making adjustments only to carryforward attributes. The Company is not currently under examination by income tax authorities in federal,
state or other foreign jurisdictions.
NOTE 9. LICENSES AND AGREEMENTS
National Institutes of Health (NIH) and the National Cancer Institute (NCI)
Cooperative Research and Development Agreement (CRADA)
In August 2011, the Company signed a five-year CRADA with the NCI to work with Dr. Steven Rosenberg on developing adoptive
cell immunotherapies that are designed to destroy metastatic melanoma cells using a patient’s tumor infiltrating lymphocytes.
In January 2015, the Company executed an amendment to the CRADA to include four new indications. As amended, in addition to
metastatic melanoma, the CRADA included the development of TIL therapy for the treatment of patients with bladder, lung, triple-negative
breast, and Human Papilloma Virus (“HPV”)-associated cancers.
In August 2016, the NCI and the Company entered a second amendment to the CRADA. The principal changes effected by the second
amendment included (i) extending the term of the CRADA by another five years to August 2021, and (ii) modifying the focus on the
development of unmodified TIL as a stand-alone therapy or in combination with U.S. Food and Drug Administration (“FDA”) - licensed
products and commercially available reagents routinely used for adoptive cell therapy. The parties will continue the development of
improved methods for the generation and selection of TIL with anti-tumor reactivity in metastatic melanoma, bladder, lung, breast, and
HPV-associated cancers.
Pursuant to the terms of the CRADA, as amended, the Company is required to make quarterly payments of $0.5 million to the NCI for
support of research activities. To the extent the Company licenses patent rights relating to a TIL-based product candidate, the Company
will be responsible for all patent-related expenses and fees, past and future, relating to the TIL-based product candidate. 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. 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 $2.2 million, $2.0 million, and 2.0 million for the years ended December 31, 2019, 2018 and 2017, respectively, as research
and development expenses.
F-26
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Patent License Agreement Related to the Development and Manufacture of TIL
Effective October 5, 2011, the Company entered into an Exclusive Patent License Agreement (the “Patent License Agreement”) with
the NIH, an agency of the United States Public Health Service within the Department of Health and Human Services (NIH), which was
subsequently amended on February 9, 2015 and October 2, 2015. Pursuant to the Patent License Agreement, as amended, the NIH granted
the Company licenses, including exclusive, co-exclusive, and non-exclusive licenses, to certain technologies relating to autologous tumor
infiltrating lymphocyte adoptive cell therapy products for the treatment of metastatic melanoma, lung, breast, bladder and HPV-positive
cancers. 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.
Exclusive Patent License Agreement Related to TIL Selection
On February 10, 2015, the Company entered into an exclusive patent license agreement (the “Exclusive Patent License Agreement”)
with the NIH under which the Company received an exclusive license to the NIH’s rights to patent-pending technologies related to methods
for improving adoptive cell therapy through more potent and efficient production of TIL from melanoma tumors by selecting for T cell
populations that express various inhibitory receptors. Unless terminated sooner, the license shall remain in effect until the last licensed
patent right expires. Under the Exclusive Patent License Agreement, the Company agreed to pay customary royalties based on a percentage
of net sales of a licensed product (which percentage is in the mid-single digits), a percentage of revenues from sublicensing arrangements,
and lump sum benchmark payments upon the successful completion of clinical studies involving licensed technologies, the receipt of the
first FDA approval or foreign equivalent for a licensed product or process resulting from the licensed technologies, the first commercial
sale of a licensed product or process in the United States, and the first commercial sale of a licensed product or process in any foreign
country.
H. Lee Moffitt Cancer Center
Research Collaboration and Clinical Grant Agreements with Moffitt
In December 2016, the Company entered into a new three-year Sponsored Research Agreement with H. Lee Moffitt Cancer Center
(“Moffitt”). At the same time, the Company entered into a clinical grant agreement with Moffitt to support an ongoing clinical trial at
Moffitt that combines TIL therapy with nivolumab for the treatment of patients with metastatic melanoma. In June 2017, the Company
entered into a second clinical grant agreement with Moffitt to support a new clinical trial at Moffitt that combines TIL therapy with
nivolumab for the treatment of patients with non-small cell lung cancer, under which the Company obtained a non-exclusive, royalty-free
license to any new Moffitt inventions made in the performance of the agreement. Under both clinical grant agreements with Moffit, the
Company has non-exclusive rights to clinical data arising from the respective clinical trials. In the years ended December 31, 2019, 2018
and 2017, the Company recorded research and development costs of $0.7 million, $1.2 million, and $1.2 million, 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.
Pursuant to the First Moffitt License, the Company paid an upfront licensing fee in the amount of $0.1 million. A patent issuance fee
will also be payable under the First Moffitt License, upon the issuance of the first U.S. patent covering the subject technology. In addition,
the Company agreed to pay milestone license fees upon completion of specified milestones, customary royalties based on a specified
percentage of net sales (which percentage is in the low single digits) and sublicensing payments, as applicable, and annual minimum
royalties beginning with the first sale of products based on the licensed technologies, which minimum royalties will be credited against the
percentage royalty payments otherwise payable in that year. 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
F-27
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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. Pursuant to the Second Moffitt License, the Company paid an upfront licensing fee in the
amount of $0.1 million for the year ended December 31, 2018. An annual license maintenance fee is 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 $0.1 million for the years
ended December 31, 2019 and 2018 as research and development expenses in connection with this agreement.
M.D. Anderson Cancer Center
Strategic Alliance Agreement
On April 17, 2017, the Company entered into a Strategic Alliance Agreement (the “SAA”) with M.D. Anderson Cancer Center
(“MDACC”) under which the Company and MDACC agreed to conduct clinical and preclinical research studies. The Company agreed in
the SAA to provide total funding not to exceed approximately $14.2 million for the performance of the multi-year studies under the SAA.
In return, the Company acquired all rights to inventions resulting from the studies and has been granted a non-exclusive, sub-licensable,
royalty-free, and perpetual license to specified background intellectual property of MDACC reasonably necessary to exploit, including the
commercialization thereof. The Company has also been granted certain rights in clinical data generated by MDACC outside of the clinical
trials to be performed under the SAA. The SAA’s term shall continue in effect until the later of the fourth anniversary of the SAA or the
completion or termination of the research and receipt by the Company of all deliverables due from MDACC thereunder. In May 2017, the
Company made a prepayment of $1.4 million under this agreement. The Company recorded $3.4 million and $0.8 million associated with
the SAA for the year ended December 31, 2019 and 2018 as research and development expenses, respectively. No expense was recognized
in 2017.
MedImmune
In December 2015, the Company entered into a collaboration agreement (the “MedImmune Agreement”) with MedImmune, the global
biologics research and development arm of AstraZeneca (“MedImmune”), to conduct clinical and preclinical research immuno-oncology.
Under the MedImmune Agreement, the Company funded and sought to conduct at least one clinical trial combining MedImmune's PD-L1
inhibitor, durvalumab, with TIL for the treatment of patients. MedImmune will supply durvalumab for the clinical trials. On April 3, 2019,
the Company and MedImmune announced that the study was closed because of a changing treatment landscape and a lack of enrollment,
and the collaboration agreement was terminated as of April 1, 2019.
WuXi
In November 2016, the Company entered into a three-year manufacturing and services agreement (“MSA”) with WuXi AppTech, Inc.
(“WuXi”) pursuant to which WuXi agreed to provide manufacturing and other services. 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 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. Both statements of work provide for
adjustments to the targeted production capacity levels and the corresponding fixed quarterly fees upon written notice from the Company of
30 days and 90 days for the first and second dedicated suites, respectively. The quarterly fixed fees payable for each of the dedicated
manufacturing suites ranges from $1.2 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 $28.4 million, $15.1 million, and $13.9 million for the years ended
December 31, 2019, 2018, and 2017 respectively, as research and development expenses.
F-28
Table of Contents
NOTE 10. LEASES
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As described further in "Note 2. Summary of Significant Accounting Policies", the Company adopted Topic 842 as of January 1, 2019.
Prior period amounts have not been adjusted and continue to be reported in accordance with its historic accounting under ASU Topic 840-
Leases (Topic 840).
Facilities Leases
The Company has evaluated the following existing facility leases and determined that, effective upon the adoption of Topic 842,
they were all operating leases. Operating lease right-of-use assets and liabilities were recognized as of January 1, 2019 based on the present
value of the remaining lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company utilized a
third party in determining an incremental borrowing rate based on the information available as of the adoption date of Topic 842 to obtain
the present value of lease payments. The Company's lease terms may include options to extend or terminate the lease which are included in
the lease term when it is reasonably certain that it will exercise any such options. Lease expense is recognized on a straight-line basis over
the expected lease term. The Company elected not to apply the recognition requirements of Topic 842 for short-term leases that have a
lease term of 12 months or less.
Tampa Lease
In December 2014, the Company commenced a five-year non-cancellable operating lease with the University of South Florida
Research Foundation for a 5,115 square foot facility located in Tampa, Florida. The facility is part of the University of South Florida
research park and is used as the Company’s research and development facilities. The Company had the option to extend the lease term of
this facility for an additional five-year period on the same terms and conditions, except that the base rent for the renewal term will be
increased in accordance with the applicable consumer price index.
In April 2015, the Company amended the original lease agreement to increase the rentable space to 6,043 square feet. In September
2016, the Company further increased the rentable space to 8,673 square feet. The per square foot cost and term of the lease were
unchanged, and rent payments are approximately $20,000 per month. In December 2019, the Company entered into an agreement to extend
the lease term to December 18, 2024 for approximately $20,500 a month.
San Carlos Lease
On August 4, 2016, the Company entered into an agreement to lease 8,733 square feet in San Carlos, California. The term of the lease
is 54 months subsequent to the commencement date and will expire in April 2021. Monthly lease payments are approximately $38,000.
On April 28, 2017, the Company entered into a sublease agreement with Teradata US, Inc., pursuant to which the Company agreed to
sublease certain office space located adjacent to the Company's headquarters for approximately $26,000 per month. The space consists of
approximately 11,449 rentable square feet in the building located in San Carlos, California. The sublease for this space expired on October
31, 2018. Monthly lease payments were approximately $26,000.
On October 19, 2018, the Company entered into an agreement to lease 12,322 square feet of office space located adjacent to the
Company's headquarters in San Carlos, California. This lease replaces the sublease of 11,449 square feet of office space in the same facility
that expired on October 31, 2018. The term of the lease is 30 months subsequent to the commencement date, November 1, 2018, and will
expire in April 2021. Monthly lease payments are approximately $59,000, subject to an annual increase of 3%.
On June 19, 2019, the Company entered into a first amendment (the "Amended Lease") to its previously disclosed lease agreement
with Hudson Skyway Landing, LLC (the "Lease") for additional space at its corporate headquarters in San Carlos, California. Under the
Amended Lease, the Company will lease an additional 8,110 square feet (the "Expansion Space"), for a total of approximately 20,432
square feet of space on the first floor of the building located at 999 Skyway Road, San Carlos, California, commonly known as Skyway
Landing II. The term of the Amended Lease remains the same as that of the Lease and expires on April 30, 2021, unless earlier terminated
in accordance with the Amended Lease. The Company's monthly base rent for the Expansion Space under the Amended Lease will be
approximately $39,000 for the first year, and $40,000 for the second year.
F-29
Table of Contents
New York Lease
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 April 20, 2018, the Company entered into an agreement to extend the lease term to
January 31, 2019 for approximately $7,000 a month. On November 2, 2018, the Company entered into an agreement to extend the lease
term to July 31, 2019 for approximately $4,000 a month.
On May 1, 2019, the Company entered into an agreement to extend the lease term to January 31, 2020 for approximately $4,000 a
month. On October 24, 2019, the Company entered into an agreement to extend the lease term to April 30, 2020 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%.
Commercial Manufacturing Facility Agreement
On May 28, 2019, the Company entered into a lease agreement with 300 Rouse Boulevard, LLC (the “Commercial Manufacturing
Facility Lease”) for a build-to-suit commercial manufacturing facility, laboratories, and offices located in Philadelphia, Pennsylvania.
Under the Commercial Manufacturing Facility Lease, the Company will lease approximately 136,000 rentable square feet of space in a
building to be located at 300 Rouse Boulevard, Philadelphia, Pennsylvania (the “Premises”). The commercial manufacturing facility is
expected to be constructed in two phases: Phase I-A, the construction of the commercial manufacturing facility, with approximately 66,000
rentable square feet of space; 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 Commencement Date shall be extended by one day for each day of landlord delay, net
of any tenant delay, as defined in the Lease. The Commercial Manufacturing Facility Lease includes an option to extend the term of the
lease, exercisable under certain conditions as described in the Commercial Manufacturing Facility Lease, such that the overall term, when
added to the initial term, shall be 359 months, by giving the landlord prior written notice thereof at least 18 months in advance of the
expiration date.
Beginning on the Commencement Date, the Company’s monthly base rent under the Lease will be approximately $320,000, subject to
an annual increase of 2% for the first ten years, and an annual increase of the greater of 2% or 75% of the average ten-year consumer price
index. The Company will also be responsible for paying operating expenses, which are expected to be approximately $53,000 per month in
2020.
Manufacturing Contracts
The Company uses contract manufacturing organizations (collectively the “CMOs” and each a “CMO”) to manufacture and supply
TILs for clinical and commercial purposes. The CMO contractual obligations consist of the use of manufacturing facilities and minimum
fixed commitment fees, such as personnel, general support fees, and minimum production or material fees. In addition to the minimum
fixed commitment fees, the CMO contractual obligations include variable costs such as production and material costs in excess of the
minimum quantity specified in each CMO agreement. During the term of each CMO agreement, the Company has access to and control of
the use of a dedicated suite in each of the CMOs’ facilities for manufacturing activities. In conjunction with the adoption of Topic 842 on
January 1, 2019, the Company reevaluated all of its material contracts it has, to determine whether they contain a lease under Topic 840.
An arrangement is considered a lease or contains a lease if an underlying asset is explicitly or implicitly identified and use of the asset is
controlled by the customer. Based on this evaluation, the Company concluded that all of its contracts with CMOs contained embedded
operating leases because the suites used for its production are implicitly identified, is only used by the Company exclusively during the
contractual term of the arrangements, and the CMOs have no substantive contractual rights to substitute the facilities used by the Company.
Further, the Company controls the use of the facilities by obtaining all of the economic benefits from the use of the facilities and direct the
use of the facilities throughout the period of use. The terms of the CMO
F-30
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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. The Company identified the use of a dedicated
suite as a single lease deliverable, and related labor services as a single non-lease deliverable in each of the CMO arrangements. Judgment
is required to determine the relative standalone selling price of each deliverable as the observable standalone selling prices are not readily
available. Therefore, management used estimates and assumptions in determining relative standalone selling price of lease of a suite and
labor service using information that includes market and other observable inputs to the extent possible.
The Company leases certain furniture and equipment that has a lease term of 12 months or less. Since the commencement date does
not include an option to purchase the underlying asset, the Company elected not to apply the recognition requirements of Topic 842 for
short-term leases, however, the lease costs that pertain to the short-term leases are disclosed in the components of lease costs table below.
The balance sheet classification of the Company’s right-of-use asset and lease liabilities was as follows:
Operating lease right-of-use assets
Operating lease liabilities
Current portion included in current liabilities
Long-term portion included in non-current liabilities
Total operating lease liabilities
December 31, 2019
$
$
10,695
7,252
4,248
11,500
The components of lease expenses, which were included in Total expenses in the Company’s consolidated statement of operations,
were as follows:
Operating lease cost
Variable lease cost
Short-term lease cost
Total lease cost
For the Year
Ended
December 31, 2019
$
$
9,213
5,801
72
15,086
Variable lease cost is determined based on performance or usage in accordance with the contractual agreements, and not based on an
index or rate.
Cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2019 was $8.6 million,
respectively, and were included in Net cash used by operating activities in its consolidated statement of cash flows. Upon the adoption of
Topic 842 on January 1, 2019, the Company increased noncash balances of operating lease right-of-use assets and operating lease liabilities
by $10.4 million and $10.7 million, respectively. The Company additionally increased operating lease right-of-use assets by $7.8 million
and operating lease liability by $8.9 million for the twelve months ended December 31, 2019 as a result of lease modifications and
additional lease agreements entered by the Company.
F-31
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2019, the maturities of the Company's operating lease liabilities were as follows (in thousands):
Facility
leases
CMO
embedded
leases
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: Present value adjustment
Operating lease liabilities
$
$
$
$
1,940
968
342
269
253
—
$
3,772
(368)
3,404
$
5,881
2,640
$
—
—
—
—
$
8,521
(425)
8,096
$
Total
7,821
3,608
342
269
253
—
12,293
(793)
11,500
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. 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 or the date of lease modifications. As of December 31, 2019, the weighted average remaining lease term
is 1.74 years and the weighted average discount rate used to determine the operating lease liabilities was 7.7%. As of December 31, 2019,
the Company has a finance lease for the commercial manufacturing facility that has not yet commenced. This finance lease will commence
in 2020 with a lease term of 20 years.
NOTE 11. 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
its 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, its former CEO, and its 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 its 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 the result of mediation, on September 28, 2018,
lead plaintiff filed an unopposed motion for settlement, the cost of which, if approved, is expected to be borne by the Company’s insurance
carrier and would result in no loss to the Company. The court gave preliminary approval to the proposed settlement on November 30, 2018,
and the final hearing is currently scheduled for April 12, 2019.
Derivative Lawsuits. On December 15, 2017, a purported stockholder derivative complaint was filed by plaintiff Kevin Fong against
the Company, as nominal defendant, and certain of its current and former officers and directors, and others, as defendants, in the U.S.
District Court for the District of Delaware (case no. 1:17-cv-1806). 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. District Court for the District of Delaware (case no. 1:18-cv-
00469). The complaint alleges, among other things, violations of securities law, breach
F-32
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of fiduciary duty, aiding and abetting, waste of corporate assets, and unjust enrichment. The complaint is based on claims arising from the
SEC’s investigation in the In the Matter of Certain Stock Promotions investigation and the Company’s April 10, 2017 settlement thereof,
and seeks unspecified damages on behalf of the Company and injunctive relief. On May 1, 2018, the court consolidated this case with the
aforementioned purported stockholder derivative case filed by plaintiff Kevin Fong. The consolidated case is titled In re Iovance
Biotherapeutics, Inc. Stockholder Derivative Litigation (lead case no. 17-cv-1806). On January 28, 2020, the parties reached a proposed
settlement, which is currently awaiting preliminary approval by the court. The terms of the settlement will be disseminated to shareholders
as part of the notice process for the settlement if preliminary approval is granted. If the proposed settlement is given final approval by the
court, the Company does not expect to incur any significant costs or expenses in connection with this settlement. Based on the current stage
of the litigation, and the uncertainty of final approval by the court, it is not possible to estimate the amount or range of possible loss that
might result from an adverse judgment or a settlement of these matters.
Solomon Capital, LLC. On April 8, 2016, a lawsuit titled Solomon Capital, LLC, Solomon Capital 401(K) Trust, Solomon Sharbat and
Shelhav Raff v. Lion Biotechnologies, Inc. was filed by Solomon Capital, LLC, Solomon Capital 401(k) Trust, Solomon Sharbat and
Shelhav Raff against the Company in the Supreme Court of the State of New York, County of New York (index no. 651881/2016) (the
"First Solomon Suit"). The 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 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 our common stock effected in March 2013), and (iii) allow the plaintiffs to convert the foregoing funds into its
securities in the next transaction. The 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. Based on the foregoing, the 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. The Company has asserted counterclaims for fraudulent inducement, fraudulent misrepresentation, fraudulent concealment,
breach of fiduciary duty, and breach of contract, alleging principally that the counterclaim defendants misrepresented their qualifications
and failed to disclose that Solomon Sharbat was the subject of an investigation by the Financial Industry Regulatory Authority ("FINRA")
that resulted in the loss of his FINRA license. In our counterclaims, the Company are seeking damages in an amount exceeding $0.5
million and an order rescinding any and all agreements that the plaintiffs contend entitled them to obtain shares of Company stock. No trial
date has been set for the lawsuit.
On September 27, 2019, the Solomon Plaintiffs filed a new lawsuit (through new legal counsel) titled Solomon Capital, LLC, Solomon
Capital 401(K) Trust, Solomon Sharbat and Shelhav Raff v. Iovance Biotherapeutics, Inc., f/k/a/ Lion Biotechnologies Inc. f/k/a/ Genesis
Biopharma Inc., and Manish Singh in the Supreme Court of the State of New York, County of New York (index no. 655668/2019) (the
“Second Solomon Suit”). 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, or were willing to invest. Finally, the Solomon Plaintiffs allege that they were promised a license to use the Company’s
technology in Israel. The plaintiffs claim that the Company breached the foregoing understandings, promises and agreements and, as a
result, they are entitled to certain damages. The Solomon Plaintiffs also allege that Manish Singh, the Company’s former Chief Executive
Officer, committed fraud and took shares belonging to them. On February 18, 2020, the Company filed a removal petition and removed the
Second Solomon Suit to the United States District Court for the Southern District of New York, where the case has been assigned case no.
1:20-cv-1391. The Company has not yet responded to the complaint in the Second Solomon Suit.
The Company intends to vigorously defend these complaints and pursue its counterclaims, as applicable. At the current stage of the
litigation, in both the First Solomon Suit and the Second Solomon Suit, it is not possible to estimate the amount or range of possible loss
that might result from an adverse judgment or a settlement of these matters.
Litigation Involving Dr. Steven Fischkoff. On June 13, 2017, in an action titled Steven Fischkoff v. Lion Biotechnologies, Inc. and
Maria Fardis, Dr. Steven Fischkoff, the Company’s former Vice President and Chief Medical Officer, filed a lawsuit against the Company
in the Supreme Court of the State of New York, County of New York. Dr. Fischkoff was dismissed by the Company on March 28, 2017.
Dr. Fischkoff was terminated “for cause” as that term is defined in his employment agreement. In his complaint, Dr. Fischkoff alleges
breaches of his employment agreement and violation of New York Labor Law for failure to pay monies purportedly owed to him, and seeks
to recover amounts including severance pay and retention bonus (totaling $300,000), a prorated incentive bonus, and amounts relating to
unvested options to 150,000 shares of the Company's common stock, together with prejudgment
F-33
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
interest, costs, expenses and attorneys’ fees. On July 5, 2017, the Company filed a removal petition and removed the lawsuit to the United
States District Court for the Southern District of New York, where the case has been assigned case no. 1:17-cv-05041. On July 14, 2017,
the Company filed a partial answer and counterclaims against Dr. Fischkoff, denying his allegations, and alleging breach of contract and
related claims, breach of fiduciary duty, and state and federal trade secret misappropriation and related claims, and sought a temporary
restraining order and preliminary injunction against Dr. Fischkoff. On July 18, 2017, the court issued a temporary restraining order against
Dr. Fischkoff requiring him to return the Company's materials, prohibiting him from disclosing or using the Company’s materials, and
granting expedited discovery. On June 25, 2018, pursuant to a stipulation between the parties, the court entered a permanent injunction
prohibiting Dr. Fischkoff from disclosing, possessing, or using any of the Company’s proprietary materials or trade secrets. On July 5,
2018, the court entered an order dismissing two of Dr. Fischkoff’s claims against the Company and Dr. Fardis. On October 18, 2018, Dr.
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. No trial date has been set in this matter, and the parties are currently engaged in fact discovery.
The Company intends to vigorously defend against Dr. Fischkoff’s lawsuit and pursue the Company’s counterclaims. 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.
Other Matters. During the second quarter of 2016, warrants representing 128,500 shares were exercised. The 128,500 shares of
common stock had previously been registered for re-sale. However, the Company believes that these 128,500 warrant shares were sold by
the holders in open market transactions in May 2016 at a time when the registration statement was ineffective. Accordingly, those sales
were not made in accordance with Sections 5 and 10(a)(3) of the Securities Act of 1933, as amended, and the purchasers of those shares
may have rescission rights (if they still own the shares) or claims for damages (if they no longer own the shares). The amount of any such
liability is uncertain and as such, an accrual for any potential loss has not been made. The Company believes that any claims brought
against it would not result in a material impact to the Company’s financial position or results of operations. The Company has not accrued a
loss for a potential claim associated with this matter as it is unable to estimate any at this time.
In connection with the Company’s reincorporation from Nevada to Delaware in 2017, the Company (as a Delaware corporation)
untimely filed a post-effective amendment to adopt a Form S-8 registration statement that the Company filed (as a Nevada corporation) to
register the shares underlying the Company’s 2011 Equity Incentive Plan. Before the Company filed the required post-effective
amendment, options to purchase 200,000 shares were exercised under the 2011 Equity Incentive Plan. The effect of the delayed post-
effective amendment filing on the 200,000 option shares is uncertain, but the issuance and sale of the shares may not have been in
compliance with the Form S-8 registration statement. The existence of any liability to the Company, and the amount of any such liability to
the Company, as a result of the issuance of the 200,000 shares is uncertain. Accordingly, no accrual for a potential claim has been made by
the Company in its financial statements.
The Company may be involved, from time to time, in legal proceedings and claims arising in the ordinary course of its business. Such
matters are subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues amounts, to the extent
they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss
contingencies that it believes will result in a probable loss. While there can be no assurances as to the ultimate outcome of any legal
proceeding or other loss contingency involving the Company, management does not believe any pending matter will be resolved in a
manner that would have a material adverse effect on its financial position, results of operations or cash flows.
NOTE 12. QUARTERLY UNAUDITED RESULTS
The results of operations by quarter for the years ended December 31, 2019 and 2018 are as follow:
2019
2018
Revenue
Net loss
Net loss per share, basic and diluted
Weighted average share used in computing net loss
per share, basic and diluted
Q1
Q2
Q3
Q4
Q1
Q2
(in thousands, except per share information)
— $
$
$ (36,950)
(0.30)
$
— $
— $
$ (47,551)
(0.38)
$
$ (49,487)
(0.40)
$
$ (63,568)
(0.50)
$
— $
$
$
— $
—
$ (30,660)
(0.34)
$
(26,515)
(0.31)
Q3
$
—
$ (33,830)
(0.36)
$
Q4
—
(32,575)
(0.27)
$
$
$
123,415
123,567
124,035
126,273
84,350
90,236
95,077
119,085
F-34
Table of Contents
IOVANCE BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. RELATED PARTY TRANSACTIONS
A former member of the Company’s board of directors was an attorney at a law firm, TroyGould PC, that rendered legal services to the
Company during the period of his directorship until June 6, 2018, but did not provide legal services to the Company himself during that
period. The Company paid TroyGould PC $0.4 million, $0.5 million, and $0.7 million during the years ended December 31, 2019, 2018,
and 2017, respectively.
On September 14, 2017, the Company entered into a three-year consulting agreement with Iain Dukes, D. Phil, the Chairman of the
Board. As compensation for his consulting services, the Company granted Dr. Dukes a stock option to purchase up to 150,000 shares of the
Company’s common stock, at an exercise price of $7.30 per share. Under the consulting agreement, Dr. Dukes agreed to provide the
Company with services regarding business development opportunities, licensing transactions and technology acquisitions by the Company,
and any such strategic initiatives appropriate for the Company that Dr. Dukes may identify. The granted stock options vest in 12 quarterly
installments (with 1/12th of the option shares having vested on the date of grant). 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 $0.4 million, $0.7 million and $0.2 million
in stock-based compensation expense related to this consulting agreement during the years ended December 31, 2019, 2018 and 2017,
respectively.
F-35
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.3
The following description sets forth certain material terms and provisions of our securities that are registered under Section 12 of
the Securities Exchange Act of 1934. This description also summarizes relevant provisions of the General Corporation Law of Delaware
(the “DGCL”). The following description is a summary and does not purport to be complete. It is subject to, and qualified in its entirety by
reference to, the applicable provisions of the DGCL and our certificate of incorporation, as amended (our “Certificate of Incorporation”),
and our amended and restated bylaws (our “Bylaws”), each of which is incorporated by reference as an exhibit to the Annual Report on
Form 10-K of which this Exhibit 4.3 is a part. We encourage you to read our Certificate of Incorporation, our Bylaws, and the applicable
provisions of the DGCL for additional information.
DESCRIPTION OF COMMON STOCK
We are presently authorized to issue 300,000,000 shares of $0.000041666 par value common stock. As of December 31, 2019, we
had issued and outstanding 126,411,808 shares of common stock
We have one class of common stock. Holders of our common stock are entitled to one vote per share on all matters to be voted
upon by stockholders and do not have cumulative voting rights in the election of directors. Holders of shares of common stock are entitled
to receive on a pro rata basis such dividends, if any, as may be declared from time to time by our board of directors in its discretion from
funds legally available for that use, subject to any preferential dividend rights of outstanding preferred stock. They are also entitled to share
on a pro rata basis in any distribution to our common stockholders upon our liquidation, dissolution or winding up, subject to the prior
rights of any outstanding preferred stock. Common stockholders do not have preemptive rights to subscribe to any additional stock
issuances by us, and they do not have the right to require the redemption of their shares or the conversion of their shares into any other
class of our stock. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of any series of preferred stock that we may designate and issue in the future.
The following provisions of our Certificate of Incorporation, and our Bylaws, could have the effect of delaying or discouraging
another party from acquiring control of us and could encourage persons seeking to acquire control of us to first negotiate with our board of
directors:
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
our Certificate of Incorporation and bylaws prohibit our stockholders from filling board vacancies, calling special
stockholder
our Certificate of Incorporation and bylaws require advance written notice of stockholder proposals and director
nominations;
our Certificate of Incorporation requires any action instituted against our officers or directors in connection with their
service to us to be brought in the state of Delaware.
our bylaws provide that our board of directors will establish the authorized number of directors from time to time;
our bylaws provide for the removal of a director only with cause and by the affirmative vote of the holders of at least
two-thirds of the shares then entitled to vote at an election of our directors;
our Certificate of Incorporation does not permit cumulative voting in the election of directors; and
our Certificate of Incorporation permits our board of directors to determine the rights, privileges and preferences of any
new series of preferred stock, some of which could impede the ability of a person to acquire control of our company.
In addition, we are subject to the provisions of Section 203 of the DGCL. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A
"business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder.
Subject to specified exceptions,
an "interested stockholder" is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
Further, our Certificate of Incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of
Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought
on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to
us or our stockholders, creditors or other constituents, (3) any action asserting a claim against us arising pursuant to any provision of the
DGCL, our Certificate of Incorporation or our Bylaws, or (4) any other action asserting a claim against us that is governed by the internal
affairs doctrine.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice
of and to have consented to the provisions of our Certificate of Incorporation described above. This choice of forum provision may limit a
stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other
employees, which may discourage such lawsuits against us and our directors, officers, and employees. Further, this choice of forum
provision does not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities
Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Section 27 of
the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act
or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or
liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of
the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by
the Securities Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to
enforce any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent
jurisdiction. Accordingly, our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the
rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and
regulations.
The transfer agent and registrar of our common stock is Continental Stock Transfer and Trust Company. The address of our
transfer agent and registrar is 1 State Street, 30th Floor, New York, New York 10004, and its telephone number is (212) 509-4000.
Our common stock is traded on The Nasdaq Global Market under the symbol “IOVA.”
DESCRIPTION OF PREFERRED STOCK
We have authority to issue 50,000,000 shares of preferred stock, par value $0.001 per share. As of December 31, 2019, we had
issued and outstanding 194 shares designated as Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”) that are
convertible into 97,000 shares of common stock, and 3,581,119 shares designated as Series B Preferred (the “Series B Convertible
Preferred Stock”) that are convertible into 3,581,119 shares of common stock. There are no other series of shares of our preferred stock
currently issued or outstanding. The rights and restrictions granted or imposed on the shares of the Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock are described below.
Under our Certificate of Incorporation, our board of directors has the authority, without further action by stockholders, to
designate one or more series of preferred stock and to fix the voting powers, designations, preferences, limitations, restrictions and relative
rights granted to or imposed upon the preferred stock, including dividend rights, conversion rights, voting rights, rights and terms of
redemption, liquidation preference and sinking fund terms, any or all of which may be preferential to or greater than the rights of the
common stock.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect
the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or
preventing a change in our control and may
adversely affect the market price of the common stock and the voting and other rights of the holders of common stock.
Our board of directors will determine and the prospectus relating to any particular issuance of preferred stock will describe the
terms of such preferred stock, including, to the extent applicable, the following:
(cid:0)
(cid:0)
the distinguishing designation of the series of preferred stock;
the number of shares of the series of preferred stock offered, the liquidation preference per share and the offering price of
the series;
the dividend rate(s), period(s) or payment date(s) or method(s) of calculation applicable to the series of preferred stock;
(cid:0)
(cid:0) whether dividends are cumulative or non-cumulative and, if cumulative, the date from which dividends on the series of
preferred stock will accumulate;
the procedures for any auction and remarketing, if any, for the series of preferred stock;
the provisions for a sinking fund, if any, for the series of preferred stock;
the provision for redemption, if applicable, of the series of preferred stock;
any listing of the series of preferred stock on any securities exchange;
the terms and conditions, if applicable, upon which the series of preferred stock will be convertible into common stock,
including the conversion price or manner of calculation and conversion period;
voting rights, if any, of the series of preferred stock;
a discussion of any material or special U.S. federal income tax considerations applicable to the series of preferred stock;
the relative ranking and preferences of the series of preferred stock as to dividend rights and rights upon the liquidation,
dissolution or winding up of our affairs;
any limitations on issuance of any series of preferred stock ranking senior to or on a parity with the series of preferred
stock being offered as to dividend rights and rights upon liquidation, dissolution or winding up of our affairs; and
any other specific terms, preferences, rights, limitations or restrictions of the series of preferred stock.
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
(cid:0)
Unless our board of directors determines otherwise and we specify otherwise in the applicable prospectus, the preferred stock will
rank, relating to dividends and upon our liquidation, dissolution or winding up:
(cid:0)
(cid:0)
(cid:0)
senior to all classes or series of our common stock and to all of our equity securities ranking junior to the preferred stock;
on a parity with all of our equity securities the terms of which specifically provide that the equity securities rank on a
parity with the preferred stock; and
junior to all of our equity securities the terms of which specifically provide that the equity securities rank senior to the
preferred stock.
Series A Convertible Preferred Stock
In October 2013, we created a new class of preferred stock, the Series A Convertible Preferred Stock, designated as “Series A
Convertible Preferred Stock.” The shares of Series A Convertible Preferred Stock have a stated value of $1,000 per share and are initially
convertible into shares of common stock at a price of $2.00 per share (subject to adjustment as described below). The rights of the Series A
Convertible Preferred Stock are set forth in the Certificate of Designation of Preferences and Rights of Series A Convertible Preferred
Stock (the “Series A Certificate of Designation”), which gives the holders of the Series A Convertible Preferred Stock the rights,
preferences and privileges described in the following paragraphs.
The Series A Convertible Preferred Stock may, at the option of the holder, be converted at any time or from time to time into fully
paid and non-assessable shares of common stock at the conversion price in effect at the time of conversion; provided, that a holder of
Series A Convertible Preferred Stock may at any given time convert only up to that number of shares of Series A Convertible Preferred
Stock so that, upon conversion, the aggregate
beneficial ownership of the common stock (calculated pursuant to Rule 13d-3 of the Exchange Act) of such holder and all persons affiliated
with such holder, is not more than 4.99% of the common stock then outstanding (subject to adjustment up to 9.99% solely at the holder’s
discretion upon 60 days’ prior notice). The number of shares into which one share of Series A Convertible Preferred Stock shall be
convertible is determined by dividing the stated value of $1,000 per share by the initial Conversion Price. The "Conversion Price" per share
for the Series A Convertible Preferred Stock is initially equal to $2.00 (subject to appropriate adjustment for certain events, including stock
splits, stock dividends, combinations, recapitalizations or other recapitalizations affecting the Series A Convertible Preferred Stock).
The Series A Convertible Preferred Stock will automatically be converted into common stock at the then-applicable Conversion
Price (1) upon the written consent of the holders holding at least a majority of the outstanding shares of Series A Convertible Preferred
Stock or (2) if required by us to be able to list our common stock on a national securities exchange; provided, any such conversions will
continue to be limited by, and subject to the beneficial ownership conversion limitations set forth above.
Except as otherwise required by law, the holders of shares of Series A Convertible Preferred Stock do not have the right to vote on
matters that come before the stockholders; provided, that we may not, without the prior written consent of a majority of the outstanding
Series A Convertible Preferred Stock: (1) amend, alter, or repeal any provision of our Certificate of Incorporation (including the Series A
Certificate of Designation) or Bylaws in a manner adverse to the Series A Convertible Preferred Stock; (2) create or authorize the creation
of or issue any other security convertible into or exercisable for any equity security, having rights, preferences or privileges senior to or on
parity with the Series A Convertible Preferred Stock, or increase the authorized number of shares of Series A Convertible Preferred Stock;
or (3) enter into any agreement with respect to any of the foregoing.
In the event of any dissolution or winding up of our company, whether voluntary or involuntary, the proceeds would be paid pari
passu among the holders of shares of our common stock, Series A Convertible Preferred Stock and Series B Convertible Preferred Stock,
pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted
to common stock.
We may not declare, pay or set aside any dividends on shares of any class or series of our capital stock (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, or simultaneously receive, an equal dividend on each outstanding share of Series A Convertible Preferred Stock.
Series B Convertible Preferred Stock
In June 2016, we created a new class of Preferred Stock designated as “Series B Preferred Stock,” which are now convertible into
common stock. The rights of the Series B Convertible Preferred Stock are set forth in the Certificate of Designation of Preferences and
Rights of Series B Convertible Preferred Stock Stock (the “Series B Certificate of Designation”). A total of 11,500,000 shares of Series B
Convertible Preferred Stock are authorized for issuance under the Series B Certificate of Designation. The shares of Series B Convertible
Preferred Stock have a stated value of $4.75 per share and are convertible into shares of our common stock at a conversion price of $4.75
per share, subject to certain adjustments.
Holders of Series B Convertible Preferred Stock are entitled to dividends on an as-if-converted basis in the same form as any
dividends actually paid on shares of our Series A Convertible Preferred Stock or other securities. So long as any Series B Convertible
Preferred Stock remains outstanding, we may not redeem, purchase or otherwise acquire any material amount of our Series A Convertible
Preferred Stock or other securities.
The shares of Series B Convertible Preferred Stock are convertible, at the option of each holder, at any time or from time to time
into shares of our common stock at the conversion price in effect at the time of conversion, except that, subject to certain limited
exceptions, no holder of Series B Convertible Preferred Stock may convert the Series B Convertible Preferred Stock if, after giving effect
to the conversion, the holder and all affiliated persons would own beneficially more than 4.99% of our common stock (subject to
adjustment to up to 9.99% solely at the holder’s discretion upon 61 days’ prior notice to us). The conversion price of $4.75 is subject to
appropriate
adjustment in the event of a stock split, stock dividend, combination or other recapitalization affecting our common stock.
Holders of a majority of the outstanding shares of Series B Convertible Preferred Stock are entitled to elect to convert all of the
outstanding shares of the Series B Convertible Preferred Stock into shares of common stock, subject to the beneficial ownership limitations
of each holder set forth above.
Except as otherwise required by law, the holders of Series B Convertible Preferred Stock have no right to vote on matters
submitted to a vote of our stockholders. Without the prior written consent of a majority of the outstanding shares of Series B Convertible
Preferred Stock, however, we may not: (i) amend our Certificate of Incorporation (including the Series B Certificate of Designation) in a
manner adverse to the Series B Convertible Preferred Stock; (ii) create or authorize the creation of any other security convertible into or
exercisable for any equity security ranking as to dividends, redemption or distribution of assets upon a liquidation senior to, the Series B
Convertible Preferred Stock, or increase the authorized number of shares of Series B Convertible Preferred Stock; or (iii) enter into any
agreement with respect to any of the foregoing.
In the event of the dissolution and winding up of our company, the proceeds available for distribution to our stockholders would
be paid pari passu among the holders of shares of our common stock, Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock, pro rata based upon the number of shares held by each such holder, treating for this purpose all such securities as if they
had been converted into our common stock.
IOVANCE BIOTHERAPEUTICS, INC.
OPTION CERTIFICATE
(Incentive Stock Option)
Exhibit 10.4
THIS IS TO CERTIFY that Iovance Biotherapeutics, Inc., a Delaware corporation (the “Company”), has granted to the employee named
below (“Optionee”) an incentive stock option (the “Option”) to purchase shares of the Company’s Common Stock (the “Shares”) under its
2011 Equity Incentive Plan (the “Plan”) and upon the terms and conditions set forth below and in the attached Stock Option Agreement:
Name of Optionee:
%%FIRST_NAME%-% %%LAST_NAME%-%
Address of Optionee:
Number of Shares:
Option Exercise Price:
Date of Grant:
%%ADDRESS_LINE_1%-%
%%ADDRESS_LINE_2%-%
%%CITY%-%, %%STATE%-% %%ZIPCODE%-%
%%COUNTRY%-%
%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
%%OPTION_PRICE%-%
%%OPTION_DATE,'Month DD, YYYY'%-%
Option Expiration Date:
%%EXPIRE_DATE_PERIOD1,'Month DD, YYYY'%-%
Exercise Schedule: The Option shall become exercisable (“vest”) as follows:
%%SHARES_PERIOD1%-%
%%VEST_TYPE_PERIOD1%-%
%%SHARES_PERIOD2%-%
%%VEST_TYPE_PERIOD2%-%
%%VEST_DATE_PERIOD1,'Month DD,
YYYY'%-%
%%VEST_DATE_PERIOD2,'Month DD,
YYYY'%-%
In Witness Whereof, the Company has granted to Optionee the Option as of the Date of Grant set forth above.
OPTIONEE
%%FIRST_NAME%-% %%LAST_NAME%-%
IOVANCE BIOTHERAPEUTICS, INC.
By Timothy E. Morris
Chief Financial Officer
STOCK OPTION AGREEMENT
(Incentive Stock Option)
This STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of the Date of Grant set forth in the Option Certificate to
which this Agreement is attached (the “Certificate”) by and between Iovance Biotherapeutics, Inc., a Delaware corporation (the “Company”)
on behalf of itself and its Affiliates, and the optionee (the “Optionee”) named in the Certificate.
Pursuant to the 2011 Equity Incentive Plan of the Company (the “Plan”), the Administrator has determined that Optionee is to be granted, on
the terms and conditions set forth in this Agreement and in the Plan, an option to purchase shares of the Company’s common stock (the
“Common Stock”). It is intended that the option qualify as an “incentive stock option” within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended from time to time (the “Code”). Capitalized terms not otherwise defined in this Agreement shall have
the meanings ascribed to them in the Plan.
The Company and Optionee agree as follows:
1. Grant of Option. The Company hereby grants to Optionee, upon the terms and subject to the conditions set forth in this Agreement, an
Option (the “Option”) to purchase all or any portion of that number of shares of Common Stock set forth in the Certificate (the “Option
Shares”), at the exercise price set forth in the Certificate (the “Exercise Price”).
2. Vesting.
2.1. The Option shall “vest” (that is, become exercisable) in installments upon and after the dates set forth under the caption “Exercise
Schedule” in the Certificate. The installments shall be cumulative; i.e., the Option may be exercised, as to any or all Shares covered by an
installment, at any time or times after the installment first becomes exercisable and until expiration or termination of the Option.
2.2. No vesting shall occur after the Employment Termination Date (as defined in Section 4.2 of this Agreement).
2.3. Notwithstanding anything to the contrary contained in this Option Agreement, the Option may not be exercised, in whole or in part,
unless and until any then-applicable requirements of all state and federal laws and regulatory agencies shall have been fully complied with
to the satisfaction of the Company and its counsel.
3. Exercise of the Option.
3.1. The Option may be exercised, in whole or in part, only by delivery to the Company of:
3.1.1. notice, provided electronically or as the Company may otherwise specify, of the exercise of the Option stating the number of Option
Shares being purchased (the “Purchased Shares”); and
3.1.2. payment of the Exercise Price (i) in cash or cash equivalent; or (ii) with the prior approval of the Administrator, by delivery to the
Company of such other consideration (such as a note or shares of Common Stock) acceptable to the Administrator.
3.2. Following receipt of the exercise notice, any other applicable documents and the payment referred to above, the Company shall,
within 30 days, cause certificates (which may be in book-entry form) representing the Purchased Shares to be issued and delivered to
Optionee (including through electronic delivery to a brokerage account); provided; however, that the Company shall not be obligated to issue
a fraction or fractions of a share otherwise issuable upon exercise of the Option, and may pay to Optionee, in cash or cash equivalent, the
fair market value of any such fraction or fractions of a share as of the date of exercise.
3.3. If requested by the Administrator, Optionee shall also deliver this Agreement to the Secretary of the Company, who shall endorse
hereon a notation of the exercise and return this Agreement to Optionee. The date of exercise of an Option that is validly exercised shall be
deemed to be the date on which there shall have been delivered to the Administrator the instruments referred to in this Section 3. Optionee
shall not be deemed to be a holder of any Option Shares pursuant to exercise of the Option until the date of issuance of a stock certificate to
him or her for such shares following payment in full for the Option Shares purchased.
3.4. If approved by the Company, the Optionee may exercise the Option by means of a broker assisted sale of the Option Shares by
delivery of irrevocable directions to a Company approved securities broker (on a form prescribed by the Company) to sell the Option Shares
and to deliver all or part of the sale proceeds to the Company in payment of the Exercise Price and/or tax withholding obligations or other
required deductions. In the event of any broker-assisted sale of Option Shares, Optionee will be responsible for all broker’s fees and other
costs of sale, and Optionee agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to
any such sale.
3.4. Should this Option become a non-qualified stock option, in whole or in part, for any reason, then, as a condition to exercise of this
Option, the Company may require Optionee to pay over to the Company all applicable federal, state and local taxes which the Company is
required to withhold with respect to the exercise of such non-qualified stock option. At the discretion of the Administrator and upon the
request of Optionee, the minimum statutory withholding tax requirements may be satisfied by the withholding of Shares otherwise issuable
to Optionee upon the exercise of this Option.
4. Termination of Option.
4.1. The Option shall terminate and expire upon the earliest to occur of: (i) the Option Expiration Date set forth in the Option Certificate;
(ii) the Termination Date; and (iii) a Corporate Transaction unless otherwise specified (x) in Optionee’s employment agreement or other
applicable written agreement with the Company, or (y) by the Administrator.
4.2. For purposes of this Agreement:
4.2.1. “Employment Termination Date” shall mean the first day Optionee is not an employee of the Company or any of its Affiliates.
Optionee’s employment shall not be deemed to terminate by reason of a transfer to or from the Company or an Affiliate or among such
entities, or sick leave, military leave or other leave of absence approved by the Administrator, if the period of any such leave does not
exceed 90 days or, if longer, if Optionee’s right to reemployment by the Company or any Affiliate is guaranteed either contractually or by
statute.
4.2.2. “Termination Date” shall be: (a) the date 90 days following the Employment Termination Date unless Optionee’s employment is
terminated For Cause or as a result of the death or disability of Optionee; (b) upon the Employment Termination Date if Optionee’s
employment is terminated For Cause; or (c) the date one year following the Employment Termination Date as a result of the death or
disability of Optionee.
4.2.3. “For Cause” shall mean Optionee’s loss of employment by the Company or any of its Affiliates due to Optionee’s (a) willful breach
or habitual neglect or continued incapacity to perform Optionee’s required duties, (b) commission of acts of dishonesty, fraud,
misrepresentation or other acts of moral turpitude in connection with Optionee’s services to the Company or its Affiliates or which in the
determination of the Administrator would prevent the effective performance of Optionee’s duties or (c) termination For Cause under any
employment agreement between the Company and Optionee (as for cause is defined therein).
5. Adjustment. The number of shares and Exercise Price of this Option shall be subject to adjustment under the circumstances
contemplated by the Plan and the Option Expiration Date may be accelerated by the Administrator upon the circumstances set forth in the
Plan.
6. Corporate Transactions. Upon the occurrence of a Corporate Transaction, the Option shall be subject to the actions of the Administrator
as contemplated in the Plan, including without limitation the termination of the Option immediately prior to the consummation of the
Corporate Transaction.
7. Modification. Subject to the terms and conditions and within the limitations of the Plan, the Administrator may modify, extend or renew the
Option or accept the surrender of, and authorize the grant of a new option in substitution for, the Option (to the extent not previously
exercised). No modification of the Option shall be made which, without the consent of Optionee, would cause the Option to fail to continue to
qualify as an “incentive stock option” within the meaning of Section 422 of the Code or would alter or impair any rights of Optionee under the
Option.
8. Disqualifying Disposition. Optionee agrees that, should he or she make a “disposition” (as defined in Section 424(c) of the Code) of all or
any of the Purchased Shares within two years from the date of the grant of the Option or within one year after the issuance of such
Purchased Shares, he or she shall immediately advise the Company in writing as to the occurrence of the sale and the price realized upon
the sale of such Purchased Shares. Optionee
agrees that he or she shall maintain all Purchased Shares in his or her name so long as he or she maintains beneficial ownership of such
Purchased Shares.
9. Incorporation of Plan. This Agreement is made pursuant to the Plan, and it is intended, and shall be interpreted in a manner, to comply
with the Plan. Any provision of this Agreement inconsistent with the Plan shall be superseded and governed by the Plan.
10. Restrictions on Sale of Purchased Shares. Optionee understands that: (a) unless the issuance of the Purchased Shares to Optionee
upon exercise of the Option is registered under the Securities Act of 1933, as amended (the “Securities Act”), the Purchased Shares will be
“restricted securities” within the meaning of Rule 144 under such Act; (b) the Purchased Shares may not be sold, transferred or assigned by
the Optionee except pursuant to an effective registration statement under the Securities Act or an exemption from registration under the
Securities Act; and (c) the Company is under no obligation to file a registration statement under the Securities Act covering the Option
Shares. Optionee agrees that any certificates evidencing Purchased Shares may bear a legend indicating that their transferability is
restricted in accordance with applicable state and federal securities laws.
11. General Provisions.
11.1. Further Assurances. Optionee shall promptly take all actions and execute all documents requested by the Company that the
Company deems to be reasonably necessary to effectuate the term and intent of this Agreement.
11.2. Notices. All notices, requests, demands and other communications (collectively, “Notices”) given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service, courier, or by United States first class, registered or certified mail, postage prepaid,
addressed to the party at the address set forth on the signature page of this Agreement. Any Notice, other than a Notice sent by registered
or certified mail, shall be effective when received; a Notice sent by registered or certified mail, postage prepaid return receipt requested,
shall be effective on the earlier of when received or the third day following deposit in the United States mails. Any party may from time to
time change its address for further Notices hereunder by giving notice to the other party in the manner prescribed in this Section.
11.3. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way
be construed to be a waiver of such provision or of any other provision hereof.
11.4. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware
applicable to contracts made in, and to be performed within, that State.
11.5. Transfer of Rights under this Agreement. The Company may at any time transfer and assign its rights and delegate its obligations
under this Agreement to any other person, corporation, firm or entity, with or without consideration.
11.6. Option Non-transferable. Optionee may not sell, transfer, assign or otherwise dispose of the Option except by will or the laws of
descent and distribution, and only Optionee or his or her legal representative or guardian may exercise the Option during Optionee’s lifetime.
11.7. No Right to Employment. Nothing in this Option shall interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate Optionee’s employment, consulting or advising at any time, nor confer upon Optionee any right to continue in the
employ of, consult with or advise the Company or any of its Affiliates.
11.8. Delivery of Plan to Optionee. Optionee acknowledges that a copy of the Plan has been delivered to Optionee and that Optionee
has read the Plan prior to signing this Agreement.
11.9. Successors and Assigns. Except to the extent specifically limited by the terms and provision of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal
representatives.
11.10. Miscellaneous. Titles and captions contained in this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement for any other purpose. Except as specifically provided herein, neither this Agreement nor any right
pursuant hereto or interest herein shall be assignable by any of the parties hereto without the prior written consent of the other party hereto.
11.11. Tax Treatment. Optionee acknowledges that the tax treatment of the Option, the Option Shares or any events or transactions with
respect thereto may be dependent upon various factors or events that are not determined by the Plan or this Agreement. The Company
makes no representations with respect to and hereby disclaims all responsibility as to such tax treatment.
11.12. Entire Agreement. This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect
to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect
thereto. Notwithstanding the foregoing or anything to the contrary herein, if the Optionee is a party to an employment, consulting, change-in-
control, severance or other agreement with the Company that modifies or supplements the terms of this Agreement (a “Superseding
Agreement”), or is the subject of a resolution by the board of directors of the Company or its compensation committee evidencing the grant
of an award that modifies or supplements the terms of this Agreement (a “Resolution”), such modified or supplemented terms shall control in
the event of any conflict between such terms and the terms of this Agreement, provided that in the event that the Superseding Agreement or
Resolution is silent on a matter addressed in this Agreement, then such silence is not a conflict. No change, modification or waiver of any
provision of this Agreement shall be valid unless the same be in writing and signed by the parties hereto, except for any changes permitted
without consent under the Plan.
The signature page of this Agreement consists of the Certificate.
IOVANCE BIOTHERAPEUTICS, INC.
OPTION CERTIFICATE
(Non-Qualified Stock Option)
Exhibit 10.5
THIS IS TO CERTIFY that Iovance Biotherapeutics, Inc., a Delaware corporation (the “Company”), has granted to the optionee named
below (“Optionee”) a non-qualified stock option (the “Option”) to purchase shares of the Company’s Common Stock (the “Shares”) under its
2011 Equity Incentive Plan (the “Plan”) and upon the terms and conditions set forth below and in the attached Stock Option Agreement:
Name of Optionee:
%%FIRST_NAME%-% %%LAST_NAME%-%
Address of Optionee:
Number of Shares:
Option Exercise Price:
Date of Grant:
%%ADDRESS_LINE_1%-%
%%ADDRESS_LINE_2%-%
%%CITY%-%, %%STATE%-% %%ZIPCODE%-%
%%COUNTRY%-%
%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
%%OPTION_PRICE%-%
%%OPTION_DATE,'Month DD, YYYY'%-%
Option Expiration Date:
%%EXPIRE_DATE_PERIOD1,'Month DD, YYYY'%-%
Exercise Schedule: The Option shall become exercisable (“vest”) as follows:
%%SHARES_PERIOD1%-%
%%VEST_TYPE_PERIOD1%-%
%%VEST_DATE_PERIOD1,'Month DD,
YYYY'%-%
%%SHARES_PERIOD2%-%
%%VEST_TYPE_PERIOD2%-%
%%VEST_DATE_PERIOD2,'Month DD,
YYYY'%-%
In Witness Whereof, the Company has granted to Optionee the Option as of the Date of Grant set forth above.
OPTIONEE
IOVANCE BIOTHERAPEUTICS, INC.
%%FIRST_NAME%-% %%LAST_NAME%-%
By Timothy E. Morris
Chief Financial Officer
STOCK OPTION AGREEMENT
(Non-Qualified Stock Option)
This STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of the Date of Grant set forth in the Option Certificate to
which this Agreement is attached (the “Certificate”) by and between Iovance Biotherapeutics, Inc., a Delaware corporation (the “Company”)
on behalf of itself and its Affiliates, and the optionee (the “Optionee”) named in the Certificate.
Pursuant to the 2011 Equity Incentive Plan of the Company (the “Plan”), the Administrator has determined that Optionee is to be granted, on
the terms and conditions set forth in this Agreement and in the Plan, an option to purchase shares of the Company’s common stock (the
“Common Stock”). It is intended that the option not qualify as an “incentive stock option” within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended from time to time (the “Code”). Capitalized terms not otherwise defined in this Agreement shall have
the meanings ascribed to them in the Plan.
The Company and Optionee agree as follows:
1. Grant of Option. The Company hereby grants to Optionee, upon the terms and subject to the conditions set forth in this Agreement, an
Option (the “Option”) to purchase all or any portion of that number of shares of Common Stock set forth in the Certificate (the “Option
Shares”), at the exercise price set forth in the Certificate (the “Exercise Price”).
2. Vesting.
2.1. The Option shall “vest” (that is, become exercisable) in installments upon and after the dates set forth under the caption “Exercise
Schedule” in the Certificate. The installments shall be cumulative; i.e., the Option may be exercised, as to any or all Shares covered by an
installment, at any time or times after the installment first becomes exercisable and until expiration or termination of the Option.
2.2. No vesting shall occur after the Employment Termination Date (as defined in Section 4.2 of this Agreement).
2.3. Notwithstanding anything to the contrary contained in this Option Agreement, the Option may not be exercised, in whole or in part,
unless and until any then-applicable requirements of all state and federal laws and regulatory agencies shall have been fully complied with
to the satisfaction of the Company and its counsel.
3. Exercise of the Option.
3.1. The Option may be exercised, in whole or in part, only by delivery to the Company of:
3.1.1. notice, provided electronically or as the Company may otherwise specify, of the exercise of the Option stating the number of
Option Shares being purchased (the “Purchased Shares”); and
3.1.2. payment of the Exercise Price (i) in cash or cash equivalent; or (ii) with the prior approval of the Administrator, by delivery to the
Company of such other consideration (such as a note or shares of Common Stock) acceptable to the Administrator.
3.2. Following receipt of the exercise notice, any other applicable documents and the payment referred to above, the Company shall,
within 30 days, cause certificates (which may be in book-entry form) representing the Purchased Shares to be issued and delivered to
Optionee (including through electronic delivery to a brokerage account); however, that the Company shall not be obligated to issue a fraction
or fractions of a share otherwise issuable upon exercise of the Option, and may pay to Optionee, in cash or cash equivalent, the fair market
value of any such fraction or fractions of a share as of the date of exercise.
3.3. If requested by the Administrator, Optionee shall also deliver this Agreement to the Secretary of the Company, who shall endorse
hereon a notation of the exercise and return this Agreement to Optionee. The date of exercise of an Option that is validly exercised shall be
deemed to be the date on which there shall have been delivered to the Administrator the instruments referred to in this Section 3. Optionee
shall not be deemed to be a holder of any Option Shares pursuant to exercise of the Option until the date of issuance of a stock certificate to
him or her for such shares following payment in full for the Option Shares purchased.
3.4. If approved by the Company, the Optionee may exercise the Option by means of a broker assisted sale of the Option Shares by
delivery of irrevocable directions to a Company approved securities broker (on a form prescribed by the Company) to sell the Option Shares
and to deliver all or part of the sale proceeds to the Company in payment of the Exercise Price and/or tax withholding obligations or other
required deductions. In the event of any broker-assisted sale of Option Shares, Optionee will be responsible for all broker’s fees and other
costs of sale, and Optionee agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to
any such sale.
3.5. As a condition to exercise of this Option, the Company may require Optionee to pay over to the Company all applicable federal,
state and local taxes which the Company is required to withhold with respect to the exercise of this Option. At the discretion of the
Administrator and upon the request of Optionee, the minimum statutory withholding tax requirements may be satisfied by the withholding of
Shares otherwise issuable to Optionee upon the exercise of this Option.
4. Termination of Option.
4.1. The Option shall terminate and expire upon the earliest to occur of: (i) the Option Expiration Date set forth in the Option Certificate;
(ii) the Termination Date; and (iii) a Corporate Transaction unless otherwise specified (x) in Optionee’s employment agreement or other
applicable written agreement with the Company, or (y) by the Administrator.
4.2. For purposes of this Agreement:
4.2.1. “Employment Termination Date” shall mean the first day Optionee is not a director, employee or consultant to the Company and its
Affiliates. As long as Optionee is at least one of employee, director or consultant, the Employment Termination Date shall not be deemed to
have occurred. For example, if Optionee is an employee and a director, the termination of employment as an employee while remaining a
director shall not establish an Employment Termination Date (which would only be established if and when Optionee ceases to be a
director). Optionee’s employment shall not be deemed to terminate by reason of a transfer to or from the Company or an Affiliate or among
such entities, or sick leave, military leave or other leave of absence approved by the Administrator, if the period of any such leave does not
exceed 90 days or, if longer, if Optionee’s right to reemployment by the Company or any Affiliate is guaranteed either contractually or by
statute.
4.2.2. “Termination Date” shall be: (a) the date 90 days following the Employment Termination Date unless Optionee’s employment is
terminated For Cause or as a result of the death or disability of Optionee; (b) upon the Employment Termination Date if Optionee’s
employment is terminated For Cause; (c) the date one year following the Employment Termination Date as a result of the death or disability
of Optionee; or (d) in the case of an Optionee that received this Option as a director, the date which is the earlier of the Option Expiration
Date and the date that is two years after the date of such termination.
4.2.3. “For Cause” shall mean Optionee’s loss of employment by the Company or any of its Affiliates due to Optionee’s (a) willful breach
or habitual neglect or continued incapacity to perform Optionee’s required duties, (b) commission of acts of dishonesty, fraud,
misrepresentation or other acts of moral turpitude in connection with Optionee’s services to the Company or its Affiliates or which in the
determination of the Administrator would prevent the effective performance of Optionee’s duties or (c) termination For Cause under any
employment agreement between the Company and Optionee (as for cause is defined therein).
5. Adjustment. The number of shares and Exercise Price of this Option shall be subject to adjustment under the circumstances
contemplated by the Plan and the Option Expiration Date may be accelerated by the Administrator upon the circumstances set forth in the
Plan.
6. Corporate Transactions. Upon the occurrence of a Corporate Transaction, the Option shall be subject to the actions of the Administrator
as contemplated in the Plan, including without limitation the termination of the Option immediately prior to the consummation of the
Corporate Transaction.
7. Modification. Subject to the terms and conditions and within the limitations of the Plan, the Administrator may modify, extend or renew the
Option or accept the surrender of, and authorize the grant of a new option in substitution for, the Option (to the extent not previously
exercised). No modification of the Option shall be made which, without the consent of Optionee, would alter or impair any rights of Optionee
under the Option.
8. Incorporation of Plan. This Agreement is made pursuant to the Plan, and it is intended, and shall be interpreted in a manner, to comply
with the Plan. Any provision of this Agreement inconsistent with the Plan shall be superseded and governed by the Plan.
9. Restrictions on Sale of Purchased Shares. Optionee understands that: (a) unless the issuance of the Purchased Shares to Optionee
upon exercise of the Option is registered under the Securities Act of 1933, as amended (the “Securities Act”), the Purchased Shares will be
“restricted securities” within the meaning of Rule 144 under such Act; (b) the Purchased Shares may not be sold, transferred or assigned by
the Optionee except pursuant to an effective registration statement under the Securities Act or an exemption from registration under the
Securities Act; and (c) the Company is under no obligation to file a registration statement under the Securities Act covering the Option
Shares. Optionee agrees that any certificates evidencing Purchased Shares may bear a legend indicating that their transferability is
restricted in accordance with applicable state and federal securities laws.
10. General Provisions.
10.1. Further Assurances. Optionee shall promptly take all actions and execute all documents requested by the Company that the
Company deems to be reasonably necessary to effectuate the term and intent of this Agreement.
10.2. Notices. All notices, requests, demands and other communications (collectively, “Notices”) given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service, courier, or by United States first class, registered or certified mail, postage prepaid,
addressed to the party at the address set forth on the signature page of this Agreement. Any Notice, other than a Notice sent by registered
or certified mail, shall be effective when received; a Notice sent by registered or certified mail, postage prepaid return receipt requested,
shall be effective on the earlier of when received or the third day following deposit in the United States mails. Any party may from time to
time change its address for further Notices hereunder by giving notice to the other party in the manner prescribed in this Section.
10.3. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way
be construed to be a waiver of such provision or of any other provision hereof.
10.4. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware
applicable to contracts made in, and to be performed within, that State.
10.5. Transfer of Rights under this Agreement. The Company may at any time transfer and assign its rights and delegate its obligations
under this Agreement to any other person, corporation, firm or entity, with or without consideration.
10.6. Option Non-transferable. Optionee may not sell, transfer, assign or otherwise dispose of the Option except by will or the laws of
descent and distribution, and only Optionee or his or her legal representative or guardian may exercise the Option during Optionee’s lifetime.
10.7. No Right to Employment. Nothing in this Option shall interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate Optionee’s employment, consulting or advising at any time, nor confer upon Optionee any right to continue in the
employ of, consult with or advise the Company or any of its Affiliates.
10.8. Delivery of Plan to Optionee. Optionee acknowledges that a copy of the Plan has been delivered to Optionee and that Optionee
has read the Plan prior to signing this Agreement.
10.9. Successors and Assigns. Except to the extent specifically limited by the terms and provision of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal
representatives.
10.10. Miscellaneous. Titles and captions contained in this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement for any other purpose. Except as specifically provided herein, neither this Agreement nor any right
pursuant hereto or interest herein shall be assignable by any of the parties hereto without the prior written consent of the other party hereto.
10.11. Tax Treatment. Optionee acknowledges that the tax treatment of the Option, the Option Shares or any events or transactions with
respect thereto may be dependent upon various factors or events that are not determined
by the Plan or this Agreement. The Company makes no representations with respect to and hereby disclaims all responsibility as to such tax
treatment.
10.12. Entire Agreement. This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with
respect to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect
thereto. Notwithstanding the foregoing or anything to the contrary herein, if the Optionee is a party to an employment, consulting, change-in-
control, severance or other agreement with the Company that modifies or supplements the terms of this Agreement (a “Superseding
Agreement”), or is the subject of a resolution by the board of directors of the Company or its compensation committee evidencing the grant
of an award that modifies or supplements the terms of this Agreement (a “Resolution”), such modified or supplemented terms shall control in
the event of any conflict between such terms and the terms of this Agreement, provided that in the event that the Superseding Agreement or
Resolution is silent on a matter addressed in this Agreement, then such silence is not a conflict. No change, modification or waiver of any
provision of this Agreement shall be valid unless the same be in writing and signed by the parties hereto, except for any changes permitted
without consent under the Plan.
The signature page of this Agreement consists of the Certificate.
IOVANCE BIOTHERAPEUTICS, INC.
OPTION CERTIFICATE
(Incentive Stock Option)
Exhibit 10.7
THIS IS TO CERTIFY that Iovance Biotherapeutics, Inc., a Delaware corporation (the “Company”), has granted to the employee named
below (“Optionee”) an incentive stock option (the “Option”) to purchase shares of the Company’s Common Stock (the “Shares”) under its
2014 Equity Incentive Plan (the “Plan”) and upon the terms and conditions set forth below and in the attached Stock Option Agreement:
Name of Optionee:
%%FIRST_NAME%-% %%LAST_NAME%-%
Address of Optionee:
Number of Shares:
Option Exercise Price:
Date of Grant:
%%ADDRESS_LINE_1%-%
%%ADDRESS_LINE_2%-%
%%CITY%-%, %%STATE%-% %%ZIPCODE%-%
%%COUNTRY%-%
%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
%%OPTION_PRICE%-%
%%OPTION_DATE,'Month DD, YYYY'%-%
Option Expiration Date:
%%EXPIRE_DATE_PERIOD1,'Month DD, YYYY'%-%
Exercise Schedule: The Option shall become exercisable (“vest”) as follows:
%%SHARES_PERIOD1%-%
%%VEST_TYPE_PERIOD1%-%
%%SHARES_PERIOD2%-%
%%VEST_TYPE_PERIOD2%-%
%%VEST_DATE_PERIOD1,'Month
DD, YYYY'%-%
%%VEST_DATE_PERIOD2,'Month
DD, YYYY'%-%
In Witness Whereof, the Company has granted to Optionee the Option as of the Date of Grant set forth above.
OPTIONEE
IOVANCE BIOTHERAPEUTICS, INC.
%%FIRST_NAME%-% %%LAST_NAME%-%
By Timothy E. Morris
Chief Financial Officer
STOCK OPTION AGREEMENT
(Incentive Stock Option)
This STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of the Date of Grant set forth in the Option Certificate to
which this Agreement is attached (the “Certificate”) by and between Iovance Biotherapeutics, Inc., a Delaware corporation (the “Company”)
on behalf of itself and its Affiliates, and the optionee (the “Optionee”) named in the Certificate.
Pursuant to the 2014 Equity Incentive Plan of the Company (the “Plan”), the Administrator has determined that Optionee is to be granted, on
the terms and conditions set forth in this Agreement and in the Plan, an option to purchase shares of the Company’s common stock (the
“Common Stock”). It is intended that the option qualify as an “incentive stock option” within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended from time to time (the “Code”). Capitalized terms not otherwise defined in this Agreement shall have
the meanings ascribed to them in the Plan.
The Company and Optionee agree as follows:
1. Grant of Option. The Company hereby grants to Optionee, upon the terms and subject to the conditions set forth in this Agreement, an
Option (the “Option”) to purchase all or any portion of that number of shares of Common Stock set forth in the Certificate (the “Option
Shares”), at the exercise price set forth in the Certificate (the “Exercise Price”).
2. Vesting.
2.1. The Option shall “vest” (that is, become exercisable) in installments upon and after the dates set forth under the caption “Exercise
Schedule” in the Certificate. The installments shall be cumulative; i.e., the Option may be exercised, as to any or all Shares covered by an
installment, at any time or times after the installment first becomes exercisable and until expiration or termination of the Option.
2.2. No vesting shall occur after the Employment Termination Date (as defined in Section 4.2 of this Agreement).
2.3. Notwithstanding anything to the contrary contained in this Option Agreement, the Option may not be exercised, in whole or in part,
unless and until any then-applicable requirements of all state and federal laws and regulatory agencies shall have been fully complied with
to the satisfaction of the Company and its counsel.
3. Exercise of the Option.
3.1. The Option may be exercised, in whole or in part, only by delivery to the Company of:
3.1.1. notice, provided electronically or as the Company may otherwise specify, of the exercise of the Option stating the number of Option
Shares being purchased (the “Purchased Shares”); and
3.1.2. payment of the Exercise Price (i) in cash or cash equivalent; or (ii) with the prior approval of the Administrator, by delivery to the
Company of such other consideration (such as a note or shares of Common Stock) acceptable to the Administrator.
3.2. Following receipt of the exercise notice, any other applicable documents and the payment referred to above, the Company shall,
within 30 days, cause certificates (which may be in book-entry form) representing the Purchased Shares to be issued and delivered to
Optionee (including through electronic delivery to a brokerage account); provided; however, that the Company shall not be obligated to issue
a fraction or fractions of a share otherwise issuable upon exercise of the Option, and may pay to Optionee, in cash or cash equivalent, the
fair market value of any such fraction or fractions of a share as of the date of exercise.
3.3. If requested by the Administrator, Optionee shall also deliver this Agreement to the Secretary of the Company, who shall endorse
hereon a notation of the exercise and return this Agreement to Optionee. The date of exercise of an Option that is validly exercised shall be
deemed to be the date on which there shall have been delivered to the Administrator the notice referred to in this Section 3. Optionee shall
not be deemed to be a holder of any Option Shares pursuant to exercise of the Option until the date of issuance of the Purchased Shares to
him or her for such shares following payment in full for the Option Shares purchased.
3.4. If approved by the Company, the Optionee may exercise the Option by means of a broker assisted sale of the Option Shares by
delivery of irrevocable directions to a Company approved securities broker (on a form prescribed by the Company) to sell the Option Shares
and to deliver all or part of the sale proceeds to the Company in payment of the Exercise Price and/or tax withholding obligations or other
required deductions. In the event of any broker-assisted sale of Option Shares, Optionee will be responsible for all broker’s fees and other
costs of sale, and Optionee agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to
any such sale.
3.5. Should this Option become a non-qualified stock option, in whole or in part, for any reason, then, as a condition to exercise of this
Option, the Company may require Optionee to pay over to the Company all applicable federal, state and local taxes which the Company is
required to withhold with respect to the exercise of such non-qualified stock option. At the discretion of the Administrator and upon the
request of Optionee, the minimum statutory withholding tax requirements may be satisfied by the withholding of Shares otherwise issuable
to Optionee upon the exercise of this Option.
4. Termination of Option.
4.1. The Option shall terminate and expire upon the earliest to occur of: (i) the Option Expiration Date set forth in the Option Certificate;
(ii) the Termination Date; and (iii) a Corporate Transaction, unless otherwise specified (x) in a Superseding Agreement or Resolution (each
as defined hereinafter), or (y) by the Administrator.
4.2. For purposes of this Agreement:
4.2.1. “Employment Termination Date” shall mean the first day Optionee is not an employee of the Company or any of its Affiliates.
Optionee’s employment shall not be deemed to terminate by reason of a transfer to or from the Company or an Affiliate or among such
entities, or sick leave, military leave or other leave of absence approved by the Administrator, if the period of any such leave does not
exceed 90 days or, if longer, if Optionee’s right to reemployment by the Company or any Affiliate is guaranteed either contractually or by
statute.
4.2.2. “Termination Date” shall be: (a) the date 90 days following the Employment Termination Date unless Optionee’s employment is
terminated For Cause or as a result of the death, disability, or Retirement (as defined hereinafter) of Optionee; (b) upon the Employment
Termination Date if Optionee’s employment is terminated For Cause; or (c) the date one year following the Employment Termination Date as
a result of the death, disability, or Retirement of Optionee.
4.2.3. “For Cause” shall mean Optionee’s loss of employment by the Company or any of its Affiliates due to Optionee’s (a) willful breach
or habitual neglect or continued incapacity to perform Optionee’s required duties, (b) commission of acts of dishonesty, fraud,
misrepresentation or other acts of moral turpitude in connection with Optionee’s services to the Company or its Affiliates or which in the
determination of the Administrator would prevent the effective performance of Optionee’s duties or (c) termination For Cause under any
employment agreement between the Company and Optionee (as for cause is defined therein).
4.2.4. “Retirement” shall mean, unless otherwise defined in a Superseding Agreement or in a Resolution, the termination of an
Optionee’s employment with the Company or its Affiliates after the Optionee has attained the age of 55 years and the Optionee has stated
at the time of resignation, in writing, his or her intention to leave the Company’s industry or to leave the general workforce. Notwithstanding
the foregoing, the term “Retirement” shall not apply to any Optionee whose employment is terminated For Cause. In the event that the
Optionee accepts full-time or part-time employment during the one-year period following the Optionee’s Employment Termination Date, the
Optionee’s termination will be deemed, for all purposes hereunder and for the purposes of Section 4.2.2 herein, to have been a voluntary
resignation, and not a termination upon Retirement, such that the Termination Date shall be the date 90 days following the Employment
Termination Date.
5. Adjustment. The number of shares and Exercise Price of this Option shall be subject to adjustment under the circumstances
contemplated by the Plan and the Option Expiration Date may be accelerated by the Administrator upon the circumstances set forth in the
Plan.
6. Corporate Transactions. Upon the occurrence of a Corporate Transaction, the Option shall be subject to the actions of the Administrator
as contemplated in the Plan, including without limitation the termination of the Option immediately prior to the consummation of the
Corporate Transaction.
7. Modification. Subject to the terms and conditions and within the limitations of the Plan, the Administrator may modify, extend or renew the
Option or accept the surrender of, and authorize the grant of a new option in substitution for, the Option (to the extent not previously
exercised). No modification of the Option shall be made which, without the consent of Optionee, would cause the Option to fail to continue to
qualify as an “incentive stock option” within the meaning of Section 422 of the Code or would alter or impair any rights of Optionee under the
Option.
8. Disqualifying Disposition. Optionee agrees that, should he or she make a “disposition” (as defined in Section 424(c) of the Code) of all or
any of the Purchased Shares within two years from the date of the grant of the Option or within one year after the issuance of such
Purchased Shares, he or she shall immediately advise the Company in writing as to the occurrence of the sale and the price realized upon
the sale of such Purchased Shares. Optionee agrees that he or she shall maintain all Purchased Shares in his or her name so long as he or
she maintains beneficial ownership of such Purchased Shares.
9. Incorporation of Plan. This Agreement is made pursuant to the Plan, and it is intended, and shall be interpreted in a manner, to comply
with the Plan. Any provision of this Agreement inconsistent with the Plan shall be superseded and governed by the Plan.
10. Restrictions on Sale of Purchased Shares. Optionee understands that: (a) unless the issuance of the Purchased Shares to Optionee
upon exercise of the Option is registered under the Securities Act of 1933, as amended (the “Securities Act”), the Purchased Shares will be
“restricted securities” within the meaning of Rule 144 under such Act; (b) the Purchased Shares may not be sold, transferred or assigned by
the Optionee except pursuant to an effective registration statement under the Securities Act or an exemption from registration under the
Securities Act; and (c) the Company is under no obligation to file a registration statement under the Securities Act covering the Option
Shares. Optionee agrees that any certificates evidencing Purchased Shares may bear a legend indicating that their transferability is
restricted in accordance with applicable state and federal securities laws.
11. General Provisions.
11.1. Further Assurances. Optionee shall promptly take all actions and execute all documents requested by the Company that the
Company deems to be reasonably necessary to effectuate the term and intent of this Agreement.
11.2. Notices. All notices, requests, demands and other communications (collectively, “Notices”) given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service, courier, or by United States first class, registered or certified mail, postage prepaid,
addressed to the party at the address set forth on the signature page of this Agreement. Any Notice, other than a Notice sent by registered
or certified mail, shall be effective when received; a Notice sent by registered or certified mail, postage prepaid return receipt requested,
shall be effective on the earlier of when received or the third day following deposit in the United States mails. Any party may from time to
time change its address for further Notices hereunder by giving notice to the other party in the manner prescribed in this Section.
11.3. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way
be construed to be a waiver of such provision or of any other provision hereof.
11.4. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware
applicable to contracts made in, and to be performed within, that State.
11.5. Transfer of Rights under this Agreement. The Company may at any time transfer and assign its rights and delegate its obligations
under this Agreement to any other person, corporation, firm or entity, with or without consideration.
11.6. Option Non-transferable. Optionee may not sell, transfer, assign or otherwise dispose of the Option except by will or the laws of
descent and distribution, and only Optionee or his or her legal representative or guardian may exercise the Option during Optionee’s lifetime.
11.7. No Right to Employment. Nothing in this Option shall interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate Optionee’s employment, consulting or advising at any time, nor confer upon Optionee any right to continue in the
employ of, consult with or advise the Company or any of its Affiliates.
11.8. Delivery of Plan to Optionee. Optionee acknowledges that a copy of the Plan has been delivered to Optionee and that Optionee
has read the Plan prior to signing this Agreement.
11.9. Successors and Assigns. Except to the extent specifically limited by the terms and provision of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal
representatives.
11.10. Miscellaneous. Titles and captions contained in this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement for any other purpose. Except as specifically provided herein, neither this Agreement nor any right
pursuant hereto or interest herein shall be assignable by any of the parties hereto without the prior written consent of the other party hereto.
11.11. Tax Treatment. Optionee acknowledges that the tax treatment of the Option, the Option Shares or any events or transactions with
respect thereto may be dependent upon various factors or events that are not determined by the Plan or this Agreement. The Company
makes no representations with respect to and hereby disclaims all responsibility as to such tax treatment.
11.12. Entire Agreement. This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect
to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect
thereto. Notwithstanding the foregoing or anything to the contrary herein, if the Optionee is a party to an employment, consulting, change-in-
control, severance or other applicable written agreement with the Company that modifies or supplements the terms of this Agreement (each,
a “Superseding Agreement”), or is the subject of a resolution by the board of directors of the Company or its compensation committee
evidencing the grant of an award that modifies or supplements the terms of this Agreement (a “Resolution”), such modified or supplemented
terms shall control in the event of any conflict between such terms and the terms of this Agreement, provided that in the event that the
Superseding Agreement or Resolution is silent on a matter addressed in this Agreement, then such silence is not a conflict. No change,
modification or waiver of any provision of this Agreement shall be valid unless the same be in writing and signed by the parties hereto,
except for any changes permitted without consent under the Plan.
The signature page of this Agreement consists of the Certificate.
IOVANCE BIOTHERAPEUTICS, INC.
OPTION CERTIFICATE
(Non-Qualified Stock Option)
Exhibit 10.8
THIS IS TO CERTIFY that Iovance Biotherapeutics, Inc., a Delaware corporation (the “Company”), has granted to the optionee named
below (“Optionee”) a non-qualified stock option (the “Option”) to purchase shares of the Company’s Common Stock (the “Shares”) under its
2014 Equity Incentive Plan (the “Plan”) and upon the terms and conditions set forth below and in the attached Stock Option Agreement:
Name of Optionee:
%%FIRST_NAME%-% %%LAST_NAME%-%
Address of Optionee:
Number of Shares:
Option Exercise Price:
Date of Grant:
%%ADDRESS_LINE_1%-%
%%ADDRESS_LINE_2%-%
%%CITY%-%, %%STATE%-% %%ZIPCODE%-%
%%COUNTRY%-%
%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
%%OPTION_PRICE%-%
%%OPTION_DATE,'Month DD, YYYY'%-%
Option Expiration Date:
%%EXPIRE_DATE_PERIOD1,'Month DD, YYYY'%-%
Exercise Schedule: The Option shall become exercisable (“vest”) as follows:
%%SHARES_PERIOD1%-%
%%VEST_TYPE_PERIOD1%-%
%%SHARES_PERIOD2%-%
%%VEST_TYPE_PERIOD2%-%
%%VEST_DATE_PERIOD1,'Month DD,
YYYY'%-%
%%VEST_DATE_PERIOD2,'Month DD,
YYYY'%-%
In Witness Whereof, the Company has granted to Optionee the Option as of the Date of Grant set forth above.
OPTIONEE
%%FIRST_NAME%-% %%LAST_NAME%-%
IOVANCE BIOTHERAPEUTICS, INC.
By Timothy E. Morris
Chief Financial Officer
STOCK OPTION AGREEMENT
(Non-Qualified Stock Option)
This STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of the Date of Grant set forth in the Option Certificate to
which this Agreement is attached (the “Certificate”) by and between Iovance Biotherapeutics, Inc., a Delaware corporation (the “Company”)
on behalf of itself and its Affiliates, and the optionee (the “Optionee”) named in the Certificate.
Pursuant to the 2014 Equity Incentive Plan of the Company (the “Plan”), the Administrator has determined that Optionee is to be granted, on
the terms and conditions set forth in this Agreement and in the Plan, an option to purchase shares of the Company’s common stock (the
“Common Stock”). It is intended that the option not qualify as an “incentive stock option” within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended from time to time (the “Code”). Capitalized terms not otherwise defined in this Agreement shall have
the meanings ascribed to them in the Plan.
The Company and Optionee agree as follows:
1. Grant of Option. The Company hereby grants to Optionee, upon the terms and subject to the conditions set forth in this Agreement, an
Option (the “Option”) to purchase all or any portion of that number of shares of Common Stock set forth in the Certificate (the “Option
Shares”), at the exercise price set forth in the Certificate (the “Exercise Price”).
2. Vesting.
2.1. The Option shall “vest” and become exercisable in installments upon and after the dates set forth under the caption “Exercise
Schedule” in the Certificate. The installments shall be cumulative; i.e., the Option may be exercised, as to any or all Shares covered by an
installment, at any time or times after the installment first becomes exercisable and until expiration or termination of the Option.
2.2. No vesting shall occur after the Employment Termination Date (as defined in Section 4.2 of this Agreement).
2.3. Notwithstanding anything to the contrary contained in this Option Agreement, the Option may not be exercised, in whole or in part,
unless and until any then-applicable requirements of all state and federal laws and regulatory agencies shall have been fully complied with
to the satisfaction of the Company and its counsel.
3. Exercise of the Option.
3.1. The Option may be exercised, in whole or in part, only by delivery to the Company of:
3.1.1. notice, provided electronically or as the Company may otherwise specify, of the exercise of the Option stating the number of Option
Shares being purchased (the “Purchased Shares”); and
3.1.2. payment of the Exercise Price (i) in cash or cash equivalent; or (ii) with the prior approval of the Administrator, by delivery to the
Company of such other consideration (such as a note or shares of Common Stock) acceptable to the Administrator.
3.2. Following receipt of the exercise notice, any other applicable documents and the payment referred to above, the Company shall,
within 30 days, cause certificates (which may be in book-entry form) representing the Purchased Shares to be issued and delivered to
Optionee (including through electronic delivery to a brokerage account); provided; however, that the Company shall not be obligated to issue
a fraction or fractions of a share otherwise issuable upon exercise of the Option, and may pay to Optionee, in cash or cash equivalent, the
fair market value of any such fraction or fractions of a share as of the date of exercise.
3.3. If requested by the Administrator, Optionee shall also deliver this Agreement to the Secretary of the Company, who shall endorse
hereon a notation of the exercise and return this Agreement to Optionee. The date of exercise of an Option that is validly exercised shall be
deemed to be the date on which there shall have been delivered to the Administrator the notice referred to in this Section 3. Optionee shall
not be deemed to be a holder of any Option Shares pursuant to exercise of the Option until the date of issuance of the Purchased Shares to
him or her for such shares following payment in full for the Option Shares purchased.
3.4. If approved by the Company, the Optionee may exercise the Option by means of a broker assisted sale of the Option Shares by
delivery of irrevocable directions to a Company approved securities broker (on a form prescribed by the Company) to sell the Option Shares
and to deliver all or part of the sale proceeds to the Company in payment of the Exercise Price and/or tax withholding obligations or other
required deductions. In the event of any
broker-assisted sale of Option Shares, Optionee will be responsible for all broker’s fees and other costs of sale, and Optionee agrees to
indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale.
3.5. As a condition to exercise of this Option, the Company may require Optionee to pay over to the Company all applicable federal,
state and local taxes which the Company is required to withhold with respect to the exercise of this Option. At the discretion of the
Administrator and upon the request of Optionee, the minimum statutory withholding tax requirements may be satisfied by the withholding of
Shares otherwise issuable to Optionee upon the exercise of this Option.
4. Termination of Option.
4.1. The Option shall terminate and expire upon the earliest to occur of: (i) the Option Expiration Date set forth in the Option Certificate;
(ii) the Termination Date; and (iii) a Corporate Transaction unless otherwise specified (x) in a Superseding Agreement or Resolution (each as
defined hereinafter), or (y) by the Administrator.
4.2. For purposes of this Agreement:
4.2.1. “Employment Termination Date” shall mean the first day Optionee is not a director, employee or consultant to the Company and its
Affiliates. As long as Optionee is at least one of employee, director or consultant, the Employment Termination Date shall not be deemed to
have occurred. For example, if Optionee is an employee and a director, the termination of employment as an employee while remaining a
director shall not establish an Employment Termination Date (which would only be established if and when Optionee ceases to be a
director). Optionee’s employment shall not be deemed to terminate by reason of a transfer to or from the Company or an Affiliate or among
such entities, or sick leave, military leave or other leave of absence approved by the Administrator, if the period of any such leave does not
exceed 90 days or, if longer, if Optionee’s right to reemployment by the Company or any Affiliate is guaranteed either contractually or by
statute.
4.2.2. “Termination Date” shall be: (a) the date 90 days following the Employment Termination Date unless Optionee’s employment is
terminated For Cause or as a result of the death, disability, or Retirement (as defined hereinafter) of Optionee; (b) upon the Employment
Termination Date if Optionee’s employment is terminated For Cause; (c) the date one year following the Employment Termination Date as a
result of the death, disability, or Retirement of Optionee; or (d) in the case of an Optionee that received the Option as a director, the date
which is the earlier of the Option Expiration Date and the date that is two years after the date of such termination.
4.2.3. “For Cause” shall mean Optionee’s loss of employment by the Company or any of its Affiliates due to Optionee’s (a) willful breach
or habitual neglect or continued incapacity to perform Optionee’s required duties, (b) commission of acts of dishonesty, fraud,
misrepresentation or other acts of moral turpitude in connection with Optionee’s services to the Company or its Affiliates or which in the
determination of the Administrator would prevent the effective performance of Optionee’s duties or (c) termination For Cause under any
employment agreement between the Company and Optionee (as for cause is defined therein).
4.2.4. “Retirement” shall mean, unless otherwise defined in a Superseding Agreement or in a Resolution, the termination of an Optionee’s
employment with the Company or its Affiliates after the Optionee has attained the age of 55 years and the Optionee has stated at the time of
resignation, in writing, his or her intention to leave the Company’s industry or to leave the general workforce. Notwithstanding the foregoing,
the term “Retirement” shall not apply to any Optionee whose employment is terminated For Cause or to any Optionee who is solely a
director or consultant. In the event that the Optionee accepts full-time or part-time employment during the one-year period following the
Optionee’s Employment Termination Date, the Optionee’s termination will be deemed, for all purposes hereunder and for the purposes of
Section 4.2.2 herein, to have been a voluntary resignation, and not a termination upon Retirement, such that the Termination Date shall be
the date 90 days following the Employment Termination Date.
5. Adjustment. The number of shares and Exercise Price of this Option shall be subject to adjustment under the circumstances
contemplated by the Plan and the Option Expiration Date may be accelerated by the Administrator upon the circumstances set forth in the
Plan.
6. Corporate Transactions. Upon the occurrence of a Corporate Transaction, the Option shall be subject to the actions of the Administrator
as contemplated in the Plan, including without limitation the termination of the Option immediately prior to the consummation of the
Corporate Transaction.
7. Modification. Subject to the terms and conditions and within the limitations of the Plan, the Administrator may modify, extend or renew the
Option or accept the surrender of, and authorize the grant of a new option in substitution for, the Option (to the extent not previously
exercised). No modification of the Option shall be made which, without the consent of Optionee, would alter or impair any rights of Optionee
under the Option.
8. Incorporation of Plan. This Agreement is made pursuant to the Plan, and it is intended, and shall be interpreted in a manner, to comply
with the Plan. Any provision of this Agreement inconsistent with the Plan shall be superseded and governed by the Plan.
9. Restrictions on Sale of Purchased Shares. Optionee understands that: (a) unless the issuance of the Purchased Shares to Optionee
upon exercise of the Option is registered under the Securities Act of 1933, as amended (the “Securities Act”), the Purchased Shares will be
“restricted securities” within the meaning of Rule 144 under such Act; (b) the Purchased Shares may not be sold, transferred or assigned by
the Optionee except pursuant to an effective registration statement under the Securities Act or an exemption from registration under the
Securities Act; and (c) the Company is under no obligation to file a registration statement under the Securities Act covering the Option
Shares. Optionee agrees that any certificates evidencing Purchased Shares may bear a legend indicating that their transferability is
restricted in accordance with applicable state and federal securities laws.
10. General Provisions.
10.1. Further Assurances. Optionee shall promptly take all actions and execute all documents requested by the Company that the
Company deems to be reasonably necessary to effectuate the term and intent of this Agreement.
10.2. Notices. All notices, requests, demands and other communications (collectively, “Notices”) given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service, courier, or by United States first class, registered or certified mail, postage prepaid,
addressed to the party at the address set forth on the signature page of this Agreement. Any Notice, other than a Notice sent by registered
or certified mail, shall be effective when received; a Notice sent by registered or certified mail, postage prepaid return receipt requested,
shall be effective on the earlier of when received or the third day following deposit in the United States mails. Any party may from time to
time change its address for further Notices hereunder by giving notice to the other party in the manner prescribed in this Section.
10.3. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way
be construed to be a waiver of such provision or of any other provision hereof.
10.4. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware
applicable to contracts made in, and to be performed within, that State.
10.5. Transfer of Rights under this Agreement. The Company may at any time transfer and assign its rights and delegate its obligations
under this Agreement to any other person, corporation, firm or entity, with or without consideration.
10.6. Option Non-transferable. Optionee may not sell, transfer, assign or otherwise dispose of the Option except by will or the laws of
descent and distribution, and only Optionee or his or her legal representative or guardian may exercise the Option during Optionee’s lifetime.
10.7. No Right to Employment. Nothing in this Option shall interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate Optionee’s employment, consulting or advising at any time, nor confer upon Optionee any right to continue in the
employ of, consult with or advise the Company or any of its Affiliates.
10.8. Delivery of Plan to Optionee. Optionee acknowledges that a copy of the Plan has been delivered to Optionee and that Optionee
has read the Plan prior to signing this Agreement.
10.9. Successors and Assigns. Except to the extent specifically limited by the terms and provision of this Agreement, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal
representatives.
10.10. Miscellaneous. Titles and captions contained in this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement for any other purpose. Except as specifically provided herein, neither this Agreement nor any right
pursuant hereto or interest herein shall be assignable by any of the parties hereto without the prior written consent of the other party hereto.
10.11. Tax Treatment. Optionee acknowledges that the tax treatment of the Option, the Option Shares or any events or transactions with
respect thereto may be dependent upon various factors or events that are not determined by the Plan or this Agreement. The Company
makes no representations with respect to and hereby disclaims all responsibility as to such tax treatment.
10.12. Entire Agreement. This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect
to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect
thereto. Notwithstanding the foregoing or anything to the contrary herein,
if the Optionee is a party to an employment, consulting, change-in-control, severance or other applicable written agreement with the
Company that modifies or supplements the terms of this Agreement (each, a “Superseding Agreement”), or is the subject of a resolution by
the board of directors of the Company or its compensation committee evidencing the grant of an award that modifies or supplements the
terms of this Agreement (a “Resolution”), such modified or supplemented terms shall control in the event of any conflict between such terms
and the terms of this Agreement, provided that in the event that the Superseding Agreement or Resolution is silent on a matter addressed in
this Agreement, then such silence is not a conflict. No change, modification or waiver of any provision of this Agreement shall be valid
unless the same be in writing and signed by the parties hereto, except for any changes permitted without consent under the Plan.
The signature page of this Agreement consists of the Certificate.
IOVANCE BIOTHERAPEUTICS, INC.
2018 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION AWARD AGREEMENT
Exhibit 10.10
THIS INCENTIVE STOCK OPTION AWARD AGREEMENT (this “Agreement”), is entered into as of
[ ], 20[ ] (the “Date of Grant”), by and between Iovance Biotherapeutics, Inc., a Delaware corporation (the
“Company”) on behalf of itself and its Affiliates, and [ ] (the “Participant”). Capitalized terms used in
this Agreement and not otherwise defined herein have the meanings ascribed to such terms in the Iovance
Biotherapeutics, Inc. 2018 Equity Incentive Plan, as amended, restated or otherwise modified from time to time in
accordance with its terms (the “Plan”).
WHEREAS, the Compensation Committee of the board of directors (the “Committee”), through its own
action or through the action of the full board of directors, has determined that it is in the best interests of the
Company and its stockholders to grant the award provided for herein to the Participant on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the covenants of the parties contained in
this Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto, for themselves, their successors and assigns, hereby agree as follows:
1. Grant of Option.
(a) Grant. The Company hereby grants to the Participant an option (the “Option”) to purchase
[ ] shares of Common Stock (the “Option Shares”) on the terms and subject to the conditions set forth in
this Agreement and as otherwise provided in the Plan. The Option is intended to qualify as an Incentive Stock
Option; provided, that to the extent that the aggregate Fair Market Value (determined at the time of grant) of the
Option Shares with respect to which the Option plus all other Incentive Stock Options the Participant holds are
exercisable for the first time by the Participant during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), the Option and all other such Incentive Stock Options
or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as
Nonqualified Stock Options. The Option shall vest in accordance with Section 2. The Exercise Price shall be
$[ ] per Option Share.
(b) Incorporation by Reference. The provisions of the Plan are incorporated herein by reference.
Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions
of the Plan and any interpretations, rules and regulations and additional terms adopted by the Committee from time
to time pursuant to the Plan. The Committee shall have final authority to interpret and construe the Plan and this
Agreement and to make any and all determinations under them, and its decision shall be binding and conclusive
upon the Participant and the Participant’s beneficiary in respect of any questions arising under the Plan or this
Agreement. The Participant acknowledges that the Participant has received a copy of the Plan and has had an
opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan.
1
2. Vesting. Except as may otherwise be provided herein, the Option shall vest and become exercisable
as to [_______] of the Option Shares on the one-year anniversary of Date of Grant, and the remaining Option
Shares shall vest as to [_______] of Option Shares at the end of each quarter over the next [____] year(s),
commencing with the first quarter following the first anniversary of the Date of Grant (each such date, a “Vesting
Date”), subject to the Participant’s continued employment with, appointment as a director of, or engagement to
provide services to, the Company or any of its Affiliates through the applicable Vesting Date. Any fractional Option
Share resulting from the application of the vesting schedule shall be aggregated and the Option Share resulting from
such aggregation shall vest on the final Vesting Date.
3. Termination of Employment or Services.
(a) Generally. Except as otherwise provided herein, if the Participant’s employment with, or
engagement to provide services to the Company or any of its Affiliates terminates for any reason, the unvested
portion of the Option shall be canceled immediately and the Participant shall have no rights with respect to the
Option Shares subject to such unvested portion.
(b) Death or Disability. Notwithstanding anything to the contrary in Section 3, if the
Participant’s employment with, or engagement to provide services to the Company or any of its Affiliates
terminates due to the Participant’s death or Disability, any unvested portion of the Option shall become fully vested
as of the date of such termination, which shall be the final Vesting Date.
(c) Termination Without Cause. Notwithstanding anything to the contrary in Section 3, if the
Participant’s employment with, or engagement to provide services to the Company or any of its Affiliates is
terminated by the Company without Cause, either on or within 12 months after, the date of a Change in Control, any
unvested portion of the Option shall become fully vested as of the date of termination, which shall be the final
Vesting Date.
(d) Retirement. The term “Retirement” shall mean, unless otherwise defined in a Superseding
Agreement or in a Resolution, the termination of a Participant’s employment with the Company or its Affiliates
after the Participant has attained the age of 55 years and the Participant has stated at the time of resignation, in
writing, his or her intention to leave the Company’s industry or to leave the general workforce. Notwithstanding the
foregoing, the term “Retirement” shall not apply to any Participant whose employment is terminated with Cause. In
the event that the Participant accepts full-time or part-time employment during the one-year period following the
Participant’s employment termination date, the Participant’s termination will be deemed, for all purposes hereunder,
to have been a voluntary resignation, and not a termination upon Retirement.
4. Expiration.
(a) In no event shall all or any portion of the Option be exercisable after the tenth annual
anniversary of the Date of Grant (such ten-year period, the “Option Period”); provided, that if the Option Period
would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s securities
trading policy (or Company-imposed “blackout
2
period”), the Option Period shall be automatically extended until the 30th day following the expiration of such
prohibition (but not to the extent that any such extension would otherwise violate Section 409A of the Code).
(b) If, prior to the end of the Option Period, the Participant’s employment with, or engagement
to provide services to, the Company and all Affiliates is terminated without Cause or by the Participant for any
reason, then the Option shall expire on the earlier of the last day of the Option Period and the date that is 90 days
after the date of such termination; provided, however, that if the Participant’s employment or engagement to provide
services to the Company and its Affiliates is terminated and the Participant is subsequently rehired or reengaged by
the Company or any Affiliate within 90 days following such termination and prior to the expiration of the Option,
the Participant shall not be considered to have undergone a termination of employment or service, as applicable. In
the event of a termination described in this subsection (b), the Option shall remain exercisable by the Participant
until its expiration only to the extent that the Option was exercisable at the time of such termination.
(c) If (i) the Participant’s employment with or engagement to provide services to, the Company
is terminated prior to the end of the Option Period on account of the Participant’s Disability, (ii) the Participant dies
while still in the employ or engagement of the Company or an Affiliate, (iii) the Participant dies following a
termination described in subsection (b) above but prior to the expiration of an Option, or (iv) the Participant’s
employment with, or engagement to provide services to, the Company is terminated prior to the end of the Option
Period on account of his or her Retirement, the Option shall expire on the earlier of the last day of the Option Period
and the date that is one (1) year after the date of death or termination on account of Disability of or Retirement by
the Participant, as applicable. In such event, the Option shall remain exercisable by the Participant or Participant’s
beneficiary, as applicable, until its expiration only to the extent that the Option was exercisable by the Participant at
the time of such event.
(d) If the Participant ceases employment with or engagement to provide services to the Company
or any Affiliates due to a termination for Cause, the Option (whether vested or unvested) shall be cancelled
immediately and the Participant shall have no rights with respect to the Option Shares.
5. Method of Exercise and Form of Payment.
(a) No Option Shares shall be delivered pursuant to any exercise of the Option until the
Participant has paid in full to the Company the Exercise Price and an amount equal to any U.S. federal, state, local
and non-U.S. income and employment taxes required to be withheld. The Option may be exercised by delivery of
written or electronic notice of exercise to the Company or its designee (including a third-party-administrator) in
accordance with the terms hereof. The Exercise Price and all applicable required withholding taxes shall be payable
(i) in cash, check or cash equivalent; or (ii) by such other method as the Committee may permit, including without
limitation: (A) shares of Common Stock valued at the Fair Market Value at the time the Option is exercised
(including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient
number of shares of Common Stock in lieu of actual delivery of such shares to the Company), provided that such
shares of Common Stock are
3
not subject to any pledge or other security interest; (B) in other property having a Fair Market Value equal to the
Exercise Price and all applicable required withholding taxes; or (C) if there is a public market for the shares of
Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is
delivered a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise
deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the
Exercise Price and all applicable required withholding taxes. Any fractional shares of Common Stock resulting
from the application of this Section 5 shall be settled in cash.
(b) By exercising the Option the Participant agrees that the Participant will notify the Company
in writing within fifteen (15) days after the date of any disposition of any of the Option Shares acquired upon
exercise of the Option that occurs within two (2) years after the date of the Option grant or within one (1) year after
such Option Shares are acquired.
6. Rights as a Stockholder. The Participant shall not be deemed for any purpose to be the owner of
any shares of Common Stock subject to this Option unless, until and to the extent that (i) this Option shall have
been exercised pursuant to its terms, (ii) the Company shall have issued and delivered to the Participant the Option
Shares and (iii) the Participant’s name shall have been entered as a stockholder of record with respect to such
Option Shares on the books of the Company. The Company shall cause the actions described in clauses (ii) and (iii)
of the preceding sentence to occur promptly following settlement as contemplated by this Agreement, subject to
compliance with applicable laws.
7. Compliance with Legal Requirements.
(a) Generally. The granting and exercising of the Option, and any other obligations of the
Company under this Agreement, shall be subject to all applicable U.S. federal, state and local laws, rules and
regulations, all applicable non-U.S. laws, rules and regulations and to such approvals by any regulatory or
governmental agency as may be required. The Participant agrees to take all steps that the Committee or the
Company determines are reasonably necessary to comply with all applicable provisions of U.S. federal and state
securities law and non-U.S. securities law in exercising the Participant’s rights under this Agreement.
(b) Tax Withholding. Any exercise of the Option shall be subject to the Participant’s satisfying
any applicable U.S. federal, state and local tax withholding obligations and non-U.S. tax withholding obligations.
The Company shall have the right and is hereby authorized to withhold from any amounts payable to the Participant
in connection with the Option or otherwise the amount of any required withholding taxes in respect of the Option,
its exercise or any payment or transfer of the Option or under the Plan and to take any such other action as the
Committee or the Company deem necessary to satisfy all obligations for the payment of such withholding taxes (up
to the maximum permissible withholding amounts), including the right to use a broker-assisted “cashless exercise”
as described in Section 5(i)(C) hereof. The Participant may elect to satisfy, and the Company may require the
Participant to satisfy, in whole or in part, the tax obligations by withholding shares of Common Stock that would
otherwise be received upon exercise of the Option with a Fair Market Value equal to such withholding liability. For
exercises of the Option occurring during a blackout period under the Company’s insider trading policy, the
Company shall arrange for the sale of a number of shares
4
of Common Stock to be delivered to the Participant to satisfy the applicable withholding obligations. Such shares of
Common Stock shall be sold on behalf of the Participant through the Company’s transfer agent on the facilities of
any exchange on which the Common Stock is listed at the time of such sale.
8. Miscellaneous.
(a) Transferability. The Option may not be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered (a “Transfer”) by the Participant other than by will or by the laws of descent
and distribution, pursuant to a qualified domestic relations order or as otherwise permitted under Section 14(b) of
the Plan. Any attempted Transfer of the Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall be null and void and without effect.
(b) Waiver. Any right of the Company contained in this Agreement may be waived in writing by
the Committee. No waiver of any right hereunder by any party shall operate as a waiver of any other right, or as a
waiver of the same right with respect to any subsequent occasion for its exercise, or as a waiver of any right to
damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other
breach or a waiver of the continuation of the same breach.
(c) Section 409A. The Option is not intended to be subject to Section 409A of the Code.
Notwithstanding the foregoing or any provision of the Plan or this Agreement, if any provision of the Plan or this
Agreement contravenes Section 409A of the Code or could cause the Participant to incur any tax, interest or
penalties under Section 409A of the Code, the Committee may, in its sole discretion and without the Participant’s
consent, modify such provision to (i) comply with, or avoid being subject to, Section 409A of the Code, or to avoid
the incurrence of taxes, interest and penalties under Section 409A of the Code, and/or (ii) maintain, to the maximum
extent practicable, the original intent and economic benefit to the Participant of the applicable provision without
materially increasing the cost to the Company or contravening the provisions of Section 409A of the Code. This
Section 8(c) does not create an obligation on the part of the Company to modify the Plan or this Agreement and
does not guarantee that the Option or the Option Shares will not be subject to interest and penalties under Section
409A.
(d) Notices. Any notices provided for in this Agreement or the Plan shall be in writing and shall
be deemed sufficiently given if either hand delivered or if sent by fax, pdf/email or overnight courier, or by postage-
paid first-class mail. Notices sent by mail shall be deemed received three business days after mailing but in no event
later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant’s address
indicated by the Company’s records, or if to the Company, to the attention of the General Counsel at the Company’s
principal executive office.
(e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement, and each other provision of this
Agreement shall be severable and enforceable to the extent permitted by law.
5
(f) No Rights to Employment, Directorship or Service. Nothing contained in this Agreement
shall be construed as giving the Participant any right to be retained, in any position, as an employee, consultant or
director of the Company or any of its Affiliates or shall interfere with or restrict in any way the rights of the
Company or any of its Affiliates, which are hereby expressly reserved, to remove, terminate or discharge the
Participant at any time for any reason whatsoever.
(g) Fractional Shares. In lieu of issuing a fraction of a share of Common Stock resulting from
any exercise of the Option or an adjustment of the Option pursuant to Section 11 of the Plan or otherwise, the
Company shall be entitled to pay to the Participant an amount in cash equal to the Fair Market Value of such
fractional share.
(h) Beneficiary. The Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such
designation.
(i) Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and of the Participant and the beneficiaries, executors, administrators,
heirs and successors of the Participant.
(j) Entire Agreement. This Agreement and the Plan contain the entire agreement and
understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior
communications, representations and negotiations in respect thereto. Notwithstanding the foregoing or anything to
the contrary herein, if the Participant is a party to an employment, consulting, change-in-control, severance or other
applicable written agreement with the Company that modifies or supplements the terms of this Agreement (each, a
“Superseding Agreement”), or is the subject of a resolution by the Committee or the board of directors of the
Company evidencing the grant of an award that modifies or supplements the terms of this Agreement (a
“Resolution”), such modified or supplemented terms shall control in the event of any conflict between such terms
and the terms of this Agreement, provided that in the event that the Superseding Agreement or Resolution is silent
on a matter addressed in this Agreement, then such silence is not a conflict. No change, modification or waiver of
any provision of this Agreement shall be valid unless the same be in writing and signed by the parties hereto, except
for any changes permitted without consent under Section 11 or 13 of the Plan.
(k) Governing Law and Venue. This Agreement shall be construed and interpreted in accordance
with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof, or principles of
conflicts of laws of any other jurisdiction that could cause the application of the laws of any jurisdiction other than
the State of Delaware.
(l) Dispute Resolution; Consent to Jurisdiction. All disputes between or among any Persons
arising out of or in any way connected with the Plan, this Agreement or the Option shall be solely and finally settled
by the Committee, acting in good faith, the determination of which shall be final. Any matters not covered by the
preceding sentence shall be solely and finally settled in accordance with the Plan, and the Participant and the
Company consent to the personal jurisdiction of the United States federal and state courts sitting in Wilmington,
Delaware, as the exclusive jurisdiction with respect to matters arising out of or
6
related to the enforcement of the Committee’s determinations and resolution of matters, if any, related to the Plan or
this Agreement not required to be resolved by the Committee. Each such Person hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the last known address of such Person, such
service to become effective ten (10) days after such mailing.
(m) Waiver of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in any legal proceeding directly or indirectly arising out of or
relating to this Agreement or the transactions contemplated (whether based on contract, tort or any other theory).
Each party hereto (A) certifies that no representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (B)
acknowledges that it and the other parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this section.
(n) Headings. The headings of the Sections hereof are provided for convenience only and are not
to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.
(o) Counterparts. This Agreement may be executed in counterparts (including via electronic
signature or acceptance, facsimile, or electronic image scan (pdf)), each of which shall be deemed to be an original,
but both of which together shall constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the other parties.
(p) Electronic Delivery. By accepting this Agreement, the Participant consents to the electronic
delivery of prospectuses, annual reports and other information required to be delivered by U.S. Securities and
Exchange Commission rules (which consent may be revoked in writing by the Participant at any time upon three
business days’ notice to the Company, in which case subsequent prospectuses, annual reports and other information
will be delivered in hard copy to the Participant).
(q) Electronic Participation in Plan. The Company may, in its sole discretion, decide to deliver
any documents related to current or future participation in the Plan by electronic means. The Participant hereby
consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or
electronic system established and maintained by the Company or a third party designated by the Company.
[Signature page follows]
7
IN WITNESS WHEREOF, this Incentive Stock Option Award Agreement has been executed by the
Company and the Participant as of the day first written above.
IOVANCE BIOTHERAPEUTICS, INC.
By:
Name:
Title:
PARTICIPANT
[Insert Name]
8
IOVANCE BIOTHERAPEUTICS, INC.
2018 EQUITY INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
Exhibit 10.11
THIS NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”), is entered into as
of [ ], 20[ ] (the “Date of Grant”), by and between Iovance Biotherapeutics, Inc., a Delaware corporation
(the “Company”) on behalf of itself and its Affiliates, and [ ] (the “Participant”). Capitalized terms used
in this Agreement and not otherwise defined herein have the meanings ascribed to such terms in the Iovance
Biotherapeutics, Inc. 2018 Equity Incentive Plan, as amended, restated or otherwise modified from time to time in
accordance with its terms (the “Plan”).
WHEREAS, the Compensation Committee of the board of directors (the “Committee”), through its own
action or through the action of the full board of directors, has determined that it is in the best interests of the
Company and its stockholders to grant the award provided for herein to the Participant on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the covenants of the parties contained in
this Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto, for themselves, their successors and assigns, hereby agree as follows:
1. Grant of Option.
(a) Grant. The Company hereby grants to the Participant an option (the “Option”) to purchase
[ ] shares of Common Stock (the “Option Shares”) on the terms and subject to the conditions set forth in
this Agreement and as otherwise provided in the Plan. The Option is a Nonqualifed Stock Option. The Option
shall vest in accordance with Section 2. The Exercise Price shall be $[ ] per Option Share.
(b) Incorporation by Reference. The provisions of the Plan are incorporated herein by reference.
Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions
of the Plan and any interpretations, rules and regulations and additional terms adopted by the Committee from time
to time pursuant to the Plan. The Committee shall have final authority to interpret and construe the Plan and this
Agreement and to make any and all determinations under them, and its decision shall be binding and conclusive
upon the Participant and the Participant’s beneficiary in respect of any questions arising under the Plan or this
Agreement. The Participant acknowledges that the Participant has received a copy of the Plan and has had an
opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan.
2. Vesting. Except as may otherwise be provided herein, the Option shall vest and become exercisable
as to [_______] of the Option Shares on the one-year anniversary of Date of Grant, and the remaining Option
Shares shall vest as to [_______] of Option Shares at the end of each quarter over the next [____] year(s),
commencing with the first quarter following the first anniversary of the Date of Grant (each such date, a “Vesting
Date”), subject to the Participant’s
1
continued employment with, appointment as a director of, or engagement to provide services to, the Company or
any of its Affiliates through the applicable Vesting Date. Any fractional Option Share resulting from the application
of the vesting schedule shall be aggregated and the Option Share resulting from such aggregation shall vest on the
final Vesting Date.
3. Termination of Employment or Services.
(a) Generally. Except as otherwise provided herein, if the Participant’s employment with,
membership on the board of directors, or engagement to provide services to the Company or any of its Affiliates
terminates for any reason, the unvested portion of the Option shall be canceled immediately and the Participant shall
have no rights with respect to the Option Shares subject to such unvested portion.
(b) Death or Disability. Notwithstanding anything to the contrary in Section 3, if the
Participant’s employment with, membership on the board of directors, or engagement to provide services to the
Company or any of its Affiliates terminates due to the Participant’s death or Disability, any unvested portion of the
Option shall become fully vested as of the date of such termination, which shall be the final Vesting Date.
(c) Termination Without Cause. Notwithstanding anything to the contrary in Section 3, if the
Participant’s employment with, membership on the board of directors, or engagement to provide services to the
Company or any of its Affiliates is terminated by the Company without Cause on or within 12 months after, the date
of a Change in Control, any unvested portion of the Option shall become fully vested as of the date of termination,
which shall be the final Vesting Date.
(d) The term “Retirement” shall mean, unless otherwise defined in a Superseding Agreement or
in a Resolution, the termination of a Participant’s employment with the Company or its Affiliates after the
Participant has attained the age of 55 years and the Participant has stated at the time of resignation, in writing, his or
her intention to leave the Company’s industry or to leave the general workforce. Notwithstanding the foregoing, the
term “Retirement” shall not apply to any Participant whose employment is terminated with Cause or to any
Participant who is solely a director or consultant. In the event that the Participant accepts full-time or part-time
employment during the one-year period following the Participant’s employment termination date, the Participant’s
termination will be deemed, for all purposes hereunder, to have been a voluntary resignation, and not a termination
upon Retirement.
4. Expiration.
(a) In no event shall all or any portion of the Option be exercisable after the tenth annual
anniversary of the Date of Grant (such ten-year period, the “Option Period”); provided, that if the Option Period
would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s securities
trading policy (or Company-imposed “blackout period”), the Option Period shall be automatically extended until
the 30th day following the expiration of such prohibition (but not to the extent that any such extension would
otherwise violate Section 409A of the Code).
2
(b) If, prior to the end of the Option Period, the Participant’s employment with, or engagement
to provide services to, the Company and all Affiliates is terminated without Cause or by the Participant for any
reason, then the Option shall expire on the earlier of the last day of the Option Period and the date that is 90 days
after the date of such termination; provided, however, that if the Participant’s employment or engagement to provide
services to the Company and its Affiliates is terminated and the Participant is subsequently rehired or reengaged by
the Company or any Affiliate within 90 days following such termination and prior to the expiration of the Option,
the Participant shall not be considered to have undergone a termination of employment or service, as applicable. In
the event of a termination described in this subsection (b), the Option shall remain exercisable by the Participant
until its expiration only to the extent that the Option was exercisable at the time of such termination.
(c) If (i) the Participant’s employment with or engagement to provide services to, the Company
is terminated prior to the end of the Option Period on account of the Participant’s Disability, (ii) the Participant dies
while still in the employ or engagement of the Company or an Affiliate, (iii) the Participant dies following a
termination described in subsection (b) above but prior to the expiration of an Option, or (iv) the Participant’s
employment with, or engagement to provide services to, the Company is terminated prior to the end of the Option
Period on account of his or her Retirement, the Option shall expire on the earlier of the last day of the Option Period
and the date that is one (1) year after the date of death or termination on account of Disability of or Retirement by
the Participant, as applicable. In such event, the Option shall remain exercisable by the Participant or Participant’s
beneficiary, as applicable, until its expiration only to the extent that the Option was exercisable by the Participant at
the time of such event.
(d) If the Participant’s Option Shares were awarded pursuant to a directorship, and prior to the
end of the Option Period, the Participant’s directorship with the Company is terminated without Cause or by the
Participant for any reason, then the Option shall expire on the earlier of the last day of the Option Period and the
date that is two years after the date of such termination.
(e) If the Participant ceases employment with or engagement to provide services to the Company
or any Affiliates or is removed as a director due to a termination for Cause, the Option (whether vested or unvested)
shall be cancelled immediately and the Participant shall have no rights with respect to the Option Shares.
5. Method of Exercise and Form of Payment.
(a) No Option Shares shall be delivered pursuant to any exercise of the Option until the
Participant has paid in full to the Company the Exercise Price and an amount equal to any U.S. federal, state, local
and non-U.S. income and employment taxes required to be withheld. The Option may be exercised by delivery of
written or electronic notice of exercise to the Company or its designee (including a third-party-administrator) in
accordance with the terms hereof. The Exercise Price and all applicable required withholding taxes shall be payable
(i) in cash, check or cash equivalent; or (ii) by such other method as the Committee may permit, including without
limitation: (A) shares of Common Stock valued at the Fair Market Value at the time the Option is exercised
(including, pursuant to procedures approved by the Committee, by
3
means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual delivery of
such shares to the Company), provided that such shares of Common Stock are not subject to any pledge or other
security interest; (B) in other property having a Fair Market Value equal to the Exercise Price and all applicable
required withholding taxes; or (C) if there is a public market for the shares of Common Stock at such time, by
means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable
instructions to a stockbroker to sell the shares of Common Stock otherwise deliverable upon the exercise of the
Option and to deliver promptly to the Company an amount equal to the Exercise Price and all applicable required
withholding taxes. Any fractional shares of Common Stock resulting from the application of this Section 5 shall be
settled in cash.
6. Rights as a Stockholder. The Participant shall not be deemed for any purpose to be the owner of
any shares of Common Stock subject to this Option unless, until and to the extent that (i) this Option shall have
been exercised pursuant to its terms, (ii) the Company shall have issued and delivered to the Participant the Option
Shares and (iii) the Participant’s name shall have been entered as a stockholder of record with respect to such
Option Shares on the books of the Company. The Company shall cause the actions described in clauses (ii) and (iii)
of the preceding sentence to occur promptly following settlement as contemplated by this Agreement, subject to
compliance with applicable laws.
7. Compliance with Legal Requirements.
(a) Generally. The granting and exercising of the Option, and any other obligations of the
Company under this Agreement, shall be subject to all applicable U.S. federal, state and local laws, rules and
regulations, all applicable non-U.S. laws, rules and regulations and to such approvals by any regulatory or
governmental agency as may be required. The Participant agrees to take all steps that the Committee or the
Company determines are reasonably necessary to comply with all applicable provisions of U.S. federal and state
securities law and non-U.S. securities law in exercising the Participant’s rights under this Agreement.
(b) Tax Withholding. Any exercise of the Option shall be subject to the Participant’s satisfying
any applicable U.S. federal, state and local tax withholding obligations and non-U.S. tax withholding obligations.
The Company shall have the right and is hereby authorized to withhold from any amounts payable to the Participant
in connection with the Option or otherwise the amount of any required withholding taxes in respect of the Option,
its exercise or any payment or transfer of the Option or under the Plan and to take any such other action as the
Committee or the Company deem necessary to satisfy all obligations for the payment of such withholding taxes (up
to the maximum permissible withholding amounts), including the right to use a broker-assisted “cashless exercise”
as described in Section 5(i)(C) hereof. The Participant may elect to satisfy, and the Company may require the
Participant to satisfy, in whole or in part, the tax obligations by withholding shares of Common Stock that would
otherwise be received upon exercise of the Option with a Fair Market Value equal to such withholding liability. For
exercises of the Option occurring during a blackout period under the Company’s insider trading policy, the
Company shall arrange for the sale of a number of shares of Common Stock to be delivered to the Participant to
satisfy the applicable withholding obligations. Such shares of Common Stock shall be sold on behalf of the
Participant through the
4
Company’s transfer agent on the facilities of any exchange on which the Common Stock is listed at the time of such
sale.
8. Miscellaneous.
(a) Transferability. The Option may not be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered (a “Transfer”) by the Participant other than by will or by the laws of descent
and distribution, pursuant to a qualified domestic relations order or as otherwise permitted under Section 14(b) of
the Plan. Any attempted Transfer of the Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall be null and void and without effect.
(b) Waiver. Any right of the Company contained in this Agreement may be waived in writing by
the Committee. No waiver of any right hereunder by any party shall operate as a waiver of any other right, or as a
waiver of the same right with respect to any subsequent occasion for its exercise, or as a waiver of any right to
damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other
breach or a waiver of the continuation of the same breach.
(c) Section 409A. The Option is not intended to be subject to Section 409A of the Code.
Notwithstanding the foregoing or any provision of the Plan or this Agreement, if any provision of the Plan or this
Agreement contravenes Section 409A of the Code or could cause the Participant to incur any tax, interest or
penalties under Section 409A of the Code, the Committee may, in its sole discretion and without the Participant’s
consent, modify such provision to (i) comply with, or avoid being subject to, Section 409A of the Code, or to avoid
the incurrence of taxes, interest and penalties under Section 409A of the Code, and/or (ii) maintain, to the maximum
extent practicable, the original intent and economic benefit to the Participant of the applicable provision without
materially increasing the cost to the Company or contravening the provisions of Section 409A of the Code. This
Section 8(c) does not create an obligation on the part of the Company to modify the Plan or this Agreement and
does not guarantee that the Option or the Option Shares will not be subject to interest and penalties under Section
409A.
(d) Notices. Any notices provided for in this Agreement or the Plan shall be in writing and shall
be deemed sufficiently given if either hand delivered or if sent by fax, pdf/email or overnight courier, or by postage-
paid first-class mail. Notices sent by mail shall be deemed received three business days after mailing but in no event
later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant’s address
indicated by the Company’s records, or if to the Company, to the attention of the General Counsel at the Company’s
principal executive office.
(e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement, and each other provision of this
Agreement shall be severable and enforceable to the extent permitted by law.
(f) No Rights to Employment, Directorship or Service. Nothing contained in this Agreement
shall be construed as giving the Participant any right to be retained, in any
5
position, as an employee, consultant or director of the Company or any of its Affiliates or shall interfere with or
restrict in any way the rights of the Company or any of its Affiliates, which are hereby expressly reserved, to
remove, terminate or discharge the Participant at any time for any reason whatsoever.
(g) Fractional Shares. In lieu of issuing a fraction of a share of Common Stock resulting from
any exercise of the Option or an adjustment of the Option pursuant to Section 11 of the Plan or otherwise, the
Company shall be entitled to pay to the Participant an amount in cash equal to the Fair Market Value of such
fractional share.
(h) Beneficiary. The Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such
designation.
(i) Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and of the Participant and the beneficiaries, executors, administrators,
heirs and successors of the Participant.
(j) Entire Agreement. This Agreement and the Plan contain the entire agreement and
understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior
communications, representations and negotiations in respect thereto. Notwithstanding the foregoing or anything to
the contrary herein, if the Participant is a party to an employment, consulting, change-in-control, severance or other
applicable written agreement with the Company that modifies or supplements the terms of this Agreement (each, a
“Superseding Agreement”), or is the subject of a resolution by the Committee or the board of directors of the
Company evidencing the grant of an award that modifies or supplements the terms of this Agreement (a
“Resolution”), such modified or supplemented terms shall control in the event of any conflict between such terms
and the terms of this Agreement, provided that in the event that the Superseding Agreement or Resolution is silent
on a matter addressed in this Agreement, then such silence is not a conflict. No change, modification or waiver of
any provision of this Agreement shall be valid unless the same be in writing and signed by the parties hereto, except
for any changes permitted without consent under Section 11 or 13 of the Plan.
(k) Governing Law and Venue. This Agreement shall be construed and interpreted in accordance
with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof, or principles of
conflicts of laws of any other jurisdiction that could cause the application of the laws of any jurisdiction other than
the State of Delaware.
(l) Dispute Resolution; Consent to Jurisdiction. All disputes between or among any Persons
arising out of or in any way connected with the Plan, this Agreement or the Option shall be solely and finally settled
by the Committee, acting in good faith, the determination of which shall be final. Any matters not covered by the
preceding sentence shall be solely and finally settled in accordance with the Plan, and the Participant and the
Company consent to the personal jurisdiction of the United States federal and state courts sitting in Wilmington,
Delaware, as the exclusive jurisdiction with respect to matters arising out of or related to the enforcement of the
Committee’s determinations and resolution of matters, if any, related to the Plan or this Agreement not required to
be resolved by the Committee. Each such
6
Person hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit,
action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the last
known address of such Person, such service to become effective ten (10) days after such mailing.
(m) Waiver of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in any legal proceeding directly or indirectly arising out of or
relating to this Agreement or the transactions contemplated (whether based on contract, tort or any other theory).
Each party hereto (A) certifies that no representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (B)
acknowledges that it and the other parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this section.
(n) Headings. The headings of the Sections hereof are provided for convenience only and are not
to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.
(o) Counterparts. This Agreement may be executed in counterparts (including via electronic
signature or acceptance, facsimile, or electronic image scan (pdf)), each of which shall be deemed to be an original,
but both of which together shall constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the other parties.
(p) Electronic Delivery. By accepting this Agreement, the Participant consents to the electronic
delivery of prospectuses, annual reports and other information required to be delivered by U.S. Securities and
Exchange Commission rules (which consent may be revoked in writing by the Participant at any time upon three
business days’ notice to the Company, in which case subsequent prospectuses, annual reports and other information
will be delivered in hard copy to the Participant).
(q) Electronic Participation in Plan. The Company may, in its sole discretion, decide to deliver
any documents related to current or future participation in the Plan by electronic means. The Participant hereby
consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or
electronic system established and maintained by the Company or a third party designated by the Company.
[Signature page follows]
7
IN WITNESS WHEREOF, this Agreement has been executed by the Company and the Participant as of the
day first written above.
IOVANCE BIOTHERAPEUTICS, INC.
By:
Name:
Title:
PARTICIPANT
[Insert Name]
8
Subsidiaries Of The Company
Iovance Biotechnologies GmbH, a company formed under the laws of Switzerland.
Iovance Biotherapeutics Manufacturing LLC, a limited liability company formed under the laws of the
Commonwealth of Pennsylvania.
Exhibit 21.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statements of Iovance Biotherapeutics, Inc. on Form S-3 (File
No. 333-233578), Form S-3 (File No. 333-214073), Form S-3 (File No. 333-212373), Form S-8 (File No. 333-217638), Form
S-8 (File No. 333-214567), Form S-8 (File No. 333-205097), and Form S-8 (File No. 333-227242) of our report dated
February 25, 2020, with respect to our audits of the consolidated financial statements of Iovance Biotherapeutics, Inc. as of
December 31, 2019 and 2018 and for each of the three years in the period ended December 31, 2019 and our report dated
February 25, 2020 with respect to our audit of the effectiveness of internal control over financial reporting of Iovance
Biotherapeutics, Inc. as of December 31, 2019, which reports are included in this Annual Report on Form 10-K of Iovance
Biotherapeutics, Inc. for the year ended December 31, 2019.
Exhibit 23.1
/s/ Marcum LLP
Marcum LLP
New York, NY
February 25, 2020
Exhibit 31.1
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Maria Fardis, certify that:
1. I have reviewed this Annual Report on Form 10-K of Iovance Biotherapeutics, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report.
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: February 25, 2020
/s/ Maria Fardis
Maria Fardis
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Timothy E. Morris, certify that:
1. I have reviewed this Annual Report on Form 10-K of Iovance Biotherapeutics, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report.
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: February 25, 2020
/s/ Timothy E. Morris
Timothy E. Morris
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, Maria Fardis, Chief Executive Officer of Iovance Biotherapeutics, Inc. (Company), do hereby certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(cid:0) the Annual Report on Form 10-K of the Company for the year ended December 31, 2019 (Report) fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(cid:0) the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company for the periods presented therein.
Date: February 25, 2020
/s/ Maria Fardis
Maria Fardis
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
I, Timothy E. Morris, Chief Financial Officer of Iovance Biotherapeutics, Inc. (Company), do hereby certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(cid:0) the Annual Report on Form 10-K of the Company for the year ended December 31, 2019 (Report) fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(cid:0) the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company for the periods presented therein.
Date: February 25, 2020
/s/ Timothy E. Morris
Timothy E. Morris
Chief Financial Officer
(Principal Financial and Accounting Officer)
BOARD OF DIRECTORS
OFFICERS
Iain Dukes, D.Phil.
Maria Fardis, Ph.D., M.B.A.
VENTURE PARTNER, ORBIMED ADVISORS LLC
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Maria Fardis, Ph.D., M.B.A.
Timothy E. Morris
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER
Friedrich Graf Finckenstein, M.D.
CHIEF MEDICAL OFFICER
Frederick G. Vogt, Ph.D., Esq.
GENERAL COUNSEL
IOVANCE BIOTHERAPEUTICS, INC.
Athena Countouriotis, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
TURNING POINT THERAPEUTICS
Ryan Maynard
CHIEF FINANCIAL OFFICER, PAULUS HOLDINGS, LTD.,
D/B/A LETSGETCHECKED
General Merrill A. McPeak
CHIEF OF STAFF, U.S. AIR FORCE (RET.)
Wayne Rothbaum
PRESIDENT, QUOGUE CAPITAL, LLC
Michael Weiser, M.D., Ph.D.
PRINCIPAL, ACTIN BIOMED, LLC
2019 AUDITORS
Marcum LLP
SECURITIES COUNSEL
DLA Piper LLP
NEW YORK, NEW YORK
SHORT HILLS,
NEW JERSEY
SECURITIES LISTING
The Nasdaq
Global Market
COMMON STOCK: IOVA
REGISTRAR &
TRANSFER AGENT
Continental
Stock Transfer
1 STATE STREET,
30TH FLOOR
CORPORATE
HEADQUARTERS
999 SKYWAY ROAD
SUITE 150
SAN CARLOS, CA 94070
TEL: (650) 260–7120
NEW YORK, NY 10004
INFO@IOVANCE.COM
TEL: (212) 845–3215
WEBSITE
WWW.IOVANCE.COM
CORPORATE HEADQUARTERS
999 SKYWAY ROAD, SUITE 150
SAN CARLOS, CA 94070
TEL: (650) 260–7120
INFO@IOVANCE.COM
WEBSITE
WWW.IOVANCE.COM