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Table of Contents

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

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

For the transition period from     to    .

Commission File Number 001-36860

IOVANCE BIOTHERAPEUTICS, INC.

(Exact name of issuer as specified in its charter)

Delaware

75-3254381

(State or other jurisdiction of

(I.R.S. employer

incorporation or organization)

identification number)

999 Skyway Road, Suite 150, San Carlos, CA 94070

(Address of principal executive offices and zip code)

(650) 260-7120

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No

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

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

Large accelerated filer  þ

Accelerated filer

Non-accelerated filer   

Smaller reporting company

 

Emerging growth company

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

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

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

Title of each class

   

Trading Symbol(s)

   

Name of each exchange on which registered

Common stock, par value $0.000041666 per value

 

IOVA

 

The Nasdaq Stock Market, LLC

At April 26, 2021, the issuer had 152,849,282 shares of common stock, par value $0.000041666 per share, outstanding.

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

FORM 10-Q

For the Quarter Ended March 31, 2021

 

Table of Contents

 

Page

PART I FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

2

Item 2.

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

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

Item 4.

Controls and Procedures

38

PART II OTHER INFORMATION

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 2.

Unregistered Sales of Securities and Use of Proceeds

84

Item 3.

Defaults Upon Senior Securities

84

Item 4.

Mine Safety Disclosure

84

Item 5.

Other Information

84

Item 6.

Exhibits

85

SIGNATURES

86

1

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

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

    

March 31, 

December 31, 

    

2021

    

2020

ASSETS

  

 

  

  

 

  

Current Assets

  

 

  

Cash and cash equivalents

$

131,954

$

67,329

Short-term investments

 

461,976

 

562,108

Prepaid expenses and other assets

 

11,288

 

6,663

Total Current Assets

 

605,218

 

636,100

 

  

 

  

Property and equipment, net

72,750

59,159

Operating lease right-of-use assets

55,131

54,756

Long-term investments

 

10,227

Restricted cash

6,084

5,525

Long-term assets

 

1,163

 

12,918

Total Assets

$

750,573

$

768,458

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

 

  

 

  

Current Liabilities

 

  

 

  

Accounts payable

$

13,369

$

13,513

Accrued expenses

 

35,774

 

35,074

Operating lease liabilities - current

5,916

6,284

Total Current Liabilities

 

55,059

 

54,871

 

  

 

  

Non-Current Liabilities

 

  

 

  

Operating lease liabilities – noncurrent

 

47,083

 

45,375

Long-term note payable

1,000

Other liabilities

11,714

Total Non-Current Liabilities

 

48,083

 

57,089

Total Liabilities

 

103,142

 

111,960

 

  

 

  

Commitments and contingencies

 

  

 

  

 

  

 

  

Stockholders’ Equity

 

  

 

  

Series A Convertible Preferred stock, $0.001 par value; 17,000 shares designated, 194 shares issued and outstanding as of March 31, 2021 and December 31, 2020

 

 

Series B Convertible Preferred stock, $0.001 par value; 11,500,000 shares designated, 2,842,158 and 3,581,119 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

3

 

4

Common stock, $0.000041666 par value; 300,000,000 shares authorized, 149,315,299 and 146,874,917 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

6

 

6

Accumulated other comprehensive income

 

96

 

19

Additional paid-in capital

 

1,552,968

 

1,486,662

Accumulated deficit

 

(905,642)

 

(830,193)

Total Stockholders’ Equity

 

647,431

 

656,498

Total Liabilities and Stockholders’ Equity

$

750,573

$

768,458

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

2

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations

(unaudited; in thousands, except per share information)

Three Months Ended

March 31, 

    

2021

    

2020

Costs and expenses

 

 

Research and development expenses

 

55,949

56,952

General and administrative expenses

 

19,621

13,858

Total costs and expenses

 

75,570

70,810

 

  

Loss from operations

 

(75,570)

(70,810)

Other income

 

  

Interest income, net

 

121

1,215

Net Loss

$

(75,449)

$

(69,595)

Net Loss Per Share of Common Stock, Basic and Diluted

$

(0.51)

$

(0.55)

Weighted Average Shares of Common Stock Outstanding, Basic and Diluted

 

147,370

 

126,568

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

3

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited; in thousands)

Three Months Ended

March 31, 

    

2021

    

2020

Net Loss

$

(75,449)

$

(69,595)

Other comprehensive loss:

 

 

Unrealized gain on short-term investments

 

77

 

692

Comprehensive Loss

$

(75,372)

$

(68,903)

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

4

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2021 and 2020

(unaudited; in thousands, except share information)

Series A 

Series B

Convertible

Convertible

Additional

Accumulated other

Total

Preferred Sock

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balance - December 31, 2020

 

194

$

 

3,581,119

$

4

 

146,874,917

$

6

$

1,486,662

$

19

$

(830,193)

$

656,498

Stock-based compensation expense

 

16,941

 

16,941

Common stock issued upon exercise of stock options

 

423,178

 

 

6,479

 

6,479

Common stock sold in public offering, net of offering costs

1,278,243

42,885

42,885

Common stock issued from preferred stock conversion

(738,961)

(1)

738,961

1

Unrealized gain on short-term investments

 

77

 

77

Net loss

 

(75,449)

 

(75,449)

Balance - March 31, 2021

 

194

$

 

2,842,158

$

3

 

149,315,299

$

6

$

1,552,968

$

96

$

(905,642)

$

647,431

Balance - December 31, 2019

 

194

$

 

3,581,119

$

4

 

126,411,808

$

5

$

869,354

$

220

$

(570,612)

$

298,971

Stock-based compensation expense

 

9,412

 

9,412

Vesting of restricted shares issued for services

 

7,273

 

Tax payments related to shares withheld for vested restricted stock units

 

(118)

 

(118)

Common stock issued upon exercise of stock options

404,075

 

 

3,951

 

3,951

Unrealized gain on short-term investments

692

 

 

692

Net loss

(69,595)

(69,595)

Balance - March 31, 2020

 

194

$

 

3,581,119

$

4

 

126,823,156

$

5

$

882,599

$

912

$

(640,207)

$

243,313

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

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited; in thousands)

Three Months Ended

March 31, 

    

2021

    

2020

Cash Flows from Operating Activities

Net loss

$

(75,449)

$

(69,595)

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

 

 

Stock-based compensation expense

16,941

9,412

Noncash lease expense

2,285

1,870

Accretion (amortization) of discounts and premiums on investments

2,066

(50)

Depreciation and amortization

372

 

252

Changes in assets and liabilities:

Prepaid expenses, other assets, and long-term assets

7,130

 

(1,316)

Right-of-use assets

(2,660)

Operating lease liabilities

1,340

 

(2,461)

Accounts payable

(15)

 

(7,768)

Accrued expenses and other liabilities

 

(14,401)

 

4,364

Net cash used in operating activities

 

(62,391)

 

(65,292)

Cash Flows from Investing Activities

Maturities of investments

 

158,286

 

113,665

Purchase of investments

 

(70,370)

 

(12,923)

Purchase of property and equipment

 

(10,705)

 

(637)

Net cash provided by investing activities

 

77,211

 

100,105

Cash Flows from Financing Activities

Tax payments related to shares withheld for vested restricted stock units

 

 

(118)

Proceeds from the issuance of common stock upon exercise of options

6,479

3,951

Proceeds from the issuance of common stock, net

42,885

Proceeds from the issuance of debt

1,000

Net cash provided by financing activities

 

50,364

 

3,833

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

 

65,184

 

38,646

Cash, Cash Equivalents, and Restricted Cash, Beginning of Period

 

72,854

 

19,419

Cash, Cash Equivalents, and Restricted Cash, End of Period

$

138,038

$

58,065

Supplemental disclosure of non-cash investing and financing activities:

Net unrealized (loss) gain on short-term investments

$

77

$

692

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

 

(3,258)

 

(4,686)

Conversion of convertible preferred stock to common stock

(1)

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

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IOVANCE BIOTHERAPEUTICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. 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 (“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 (“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 metastatic cervical cancer. Lifileucel for metastatic cervical cancer was formerly known as LN-145. In addition to metastatic melanoma and metastatic cervical cancer, the Company is investigating the effectiveness and safety of TIL therapy and peripheral blood lymphocyte therapy for the treatment of squamous cell carcinoma of the head and neck, non-small cell lung cancer, and chronic lymphocytic leukemia through its sponsored trials, as well as in other oncology indications through collaborations. On June 1, 2017, the Company reincorporated from a Nevada corporation to a Delaware corporation.

Basis of Presentation of Unaudited Condensed Consolidated Financial Information

The unaudited condensed consolidated financial statements of the Company for the three months ended March 31, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for audited financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company's financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2020, was derived from the audited financial statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2021. These interim financial statements should be read in conjunction with that report.

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 significant revenues from the sale or licensing of any of its product candidates during the 12 months from the date these financial statements are issued. The Company has incurred a net loss of $75.4 million for the three months ended March 31, 2021 and used $62.4 million of cash in its operating activities during the three months ended March 31, 2021. For the three months ended March 31, 2021, the Company received net proceeds of approximately $42.9 million from the “at the market” offering program the Company has in place with Jefferies LLC, acting as sales agent. As of March 31, 2021, the Company had $610.2 million in cash, cash equivalents, investments, and restricted cash ($131.9 million of cash and cash equivalents, $462.0 million in short-term investments, $10.2 million in long-term investments, and $6.1 million in restricted cash).

The Company expects to continue its research and development activities, increase pre-commercial activities and continue the construction of the tenant improvements for its new manufacturing facility, which will increase the amount of cash used during 2021 and beyond. Specifically, the Company expects continued spending on its current and planned clinical trials, continued expansion of manufacturing activities, including construction of a manufacturing facility, higher payroll expenses as the Company increases its professional and scientific staff and continuation of pre-commercial activities. 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 as planned for at least the next twelve months from the date these financial statements are issued.

Impact of COVID-19

In December 2019, a novel coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization (“WHO”) declared COVID-19 a pandemic (the “COVID-19 Pandemic”). The Secretary of

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Health and Human Services declared a public health emergency on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 Pandemic. The full impact of the COVID-19 Pandemic is unknown and rapidly evolving. While the potential economic impact brought by and over the duration of the COVID-19 Pandemic may be difficult to assess or predict, the COVID-19 Pandemic has resulted in significant disruption of global financial markets, which could in the future negatively affect the Company's liquidity. In addition, a recession or market volatility resulting from the COVID-19 Pandemic could affect the Company’s business. Given the nature and type of the Company’s short-term investments in U.S. government securities, the Company does not believe the COVID-19 Pandemic has had or will have a material impact on the Company's current investment liquidity.

Concentrations of Risk

The Company is subject to credit risk from its portfolio of cash equivalents and 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, liquidity of investments sufficient to meet cash flow requirements of its business, and maximization of total return while maintaining safety and liquidity.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents, and Investments

The Company’s cash and cash equivalents include short-term investments with original maturities of three months or less when purchased. The Company's investments are classified as “available-for-sale” and are presented at fair value as either a current or non-current asset based on the length of maturity from the reporting date. Unrealized gains and losses on available-for-sale securities are included in accumulated other comprehensive income. Any impairment losses related to credit losses (if any) are included in an allowance for credit losses with an offsetting entry to net loss. No impairment losses related to credit losses were recognized for the three months ended March 31, 2021 or March 31, 2020. 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 Condensed 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 Condensed Consolidated Statements of Operations. The Company has not incurred any realized gains or losses from sales of securities to date. The Company’s investment policy limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S. government and U.S. government agencies as well as corporate debt securities and commercial papers, and places restrictions on maturities and concentration by type and issuer, except for securities issued by the U.S. government.

Restricted Cash

The Company maintains a required minimum balance, currently $6.1 million in a segregated bank account in connection with three letters of credit, one for $5,450,000 million for the benefit of the landlord for its commercial manufacturing facility used as a security deposit for the lease (See Note 10 - Leases), the second one for $74,685 for the benefit of a utilities service provider, and the third one for $559,082 for the benefit of the landlord for its new headquarters lease. The total amount is classified as Restricted Cash on the Condensed Consolidated Balance Sheet. The first letter of credit originally expired on May 28, 2020, however, it automatically extends for additional one-year periods, without written agreement, to May 28 in each succeeding calendar year, through at least 60 days after the lease expiration date. Further, on the expiration of the seventh year of the lease, and each anniversary date thereafter, the letter of credit may be decreased by $1,000,000, with a minimum security deposit of $1,450,000 maintained through the end of the lease term. The second letter of credit of $74,685 expired on March 9, 2021, however, it automatically extends, without written agreement, to the expiration date of December 1, 2022. The third letter of credit of $559,082 expires on February 1, 2032, however, it will be automatically extended, without written agreement, for one year periods to February in each succeeding calendar year. As of March 31, 2021 and December 31, 2020, restricted cash consisted of $6.1 million and $5.5 million, respectively. This amount has been classified as a non-current asset on the Company’s Condensed Consolidated Balance Sheets.

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

    

March 31, 

    

March 31, 

2021

2020

Cash and cash equivalents

$

131,954

$

52,540

Restricted cash (included in non-current assets on the condensed consolidated balance sheets)

 

6,084

 

5,525

Total cash, cash equivalents and restricted cash

$

138,038

$

58,065

Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock 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 shares of common stock issuable upon (i) the exercise of outstanding stock options and warrants, (ii) purchases though the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), (iii) vesting of restricted stock units and restricted stock awards, and (iv) conversion of preferred stock, are only included in the calculation of diluted net loss per share when their effect is dilutive.

As of March 31, 2021 and 2020, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive.

March 31, 

    

2021

    

2020

Stock options

15,419,226

 

12,136,899

Series A Convertible Preferred Stock*

97,000

 

97,000

Series B Convertible Preferred Stock*

2,842,158

 

3,581,119

2020 ESPP

55,963

Restricted stock units

 

11,458

18,414,347

 

15,826,476

* on an as-converted basis

The effect of potentially dilutive securities would be reflected in diluted earnings per share of common stock 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 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.

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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.

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 March 31, 2021 or December 31, 2020.

The Company’s financial instruments consist of cash, cash equivalents, short and long-term investments, and long-term notes payable, all of which are reported at their respective fair value on its Condensed Consolidated Balance Sheets.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s financial instruments consist of Level 1 and Level 2 assets. Where quoted prices are available in an active market, securities are classified as Level 1.

When quoted market prices are not available for a specific security, the Company estimates the fair value by using quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to, benchmark yields, interest rate curves, reported trades, broker/dealer quotes and market reference data. Level 2 assets consist of commercial paper and government agency securities. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for the asset.

As of March 31, 2021 and December 31, 2020, financial assets measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of March 31, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

U.S. treasury securities

$

380,219

$

$

$

380,219

U.S. government agency securities

 

 

62,035

 

 

62,035

Commercial paper

29,949

29,949

Total

$

380,219

$

91,984

$

$

472,203

Assets at Fair Value as of December 31, 2020

    

Level 1

    

Level 2

    

Level 3

    

Total

US treasury securities

$

470,109

$

$

$

470,109

US government agency securities

 

91,999

 

 

 

91,999

Total

$

562,108

$

$

$

562,108

Use of Estimates

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, accounting for potential liabilities, capitalization of internal-use software development costs, 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 subsidiaries, Iovance Biotherapeutics Manufacturing LLC, Iovance Biotherapeutics GmbH, and Iovance Biotherapeutics B.V. All intercompany accounts and transactions have been eliminated. The U.S. dollar is the functional currency for all of the Company's consolidated operations.

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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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for business entities include a five-year net operating loss (“NOL”) carrybacks, suspension of annual deduction limitation of 80% taxable income from net operating losses generated in a tax year beginning after December 31, 2017, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and technical correction to allow accelerated deductions for qualified improvement property. The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic. The Company evaluated the impact of the CARES Act and determined the impact is immaterial for the three months ended March 31, 2021.

Leases

The Company determines if an arrangement includes a lease at inception. Operating leases are included in its Condensed Consolidated Balance Sheet as Operating lease right-of-use assets and Operating lease liabilities as of March 31, 2021 and December 31, 2020. 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.

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 all stock-based payment awards made to employee, including the employee stock purchase plans 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 shares underlying the options have vested. The non-employee awards that contain a performance condition that affects the quantity or other terms of the award are measured based on the outcome that is probable.

The fair value of the Company's common stock option grants is estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected 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

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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 (“RSUs”) and restricted stock awards (“RSAs”) 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.

Accrued Research and Development Costs

Research and development costs are expensed as incurred. Clinical development costs compose a significant component of research and development costs. The Company has a history of contracting with third parties that perform various clinical trial activities on its behalf. Service agreements with contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”) are recognized as the services are incurred. The Company accrues for expenses resulting from obligations under agreements with its third-parties for which the timing of payments does not match the periods over which the materials or services are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. The Company makes judgements and estimates in determining the accrual balance in each reporting period.

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

Preferred Stock

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred stock subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred stock (including preferred stock 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 stock is 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.

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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 Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to stockholders’ equity; the methodology for calculating income tax expense or benefit in an interim period; and the recognition of deferred tax liabilities outside basis difference. This ASU became effective for the Company on January 1, 2021, however, the adoption of this new standard did not have a material impact on its condensed consolidated financial statements and related disclosures.

NOTE 3. CASH EQUIVALENTS AND INVESTMENTS

Cash equivalents consist of the following (in thousands):

March 31, 

December 31, 

2021

    

2020

Cash equivalents - Money market funds

$

74,424

$

49,720

Cash equivalents total

$

74,424

$

49,720

Cash equivalents in the tables above exclude cash demand deposits of $57.5 million and $17.6 million as of March 31, 2021 and December 31, 2020, respectively (in thousands).

The following table summarizes the Company’s available-for-sale debt securities (in thousands):

March 31, 

December 31, 

2021

    

2020

Short-term investments

$

461,976

$

562,108

Long-term investments

10,227

Investments total

$

472,203

$

562,108

The following table summarizes the classification of the Company’s available-for-sale debt securities in its Condensed Consolidated Balance Sheets (in thousands):

March 31, 

December 31, 

Investments

2021

    

2020

U.S. treasury securities

$

380,219

$

470,109

U.S. government agency securities

 

62,034

 

91,999

Commercial paper

 

29,950

 

Investments total

$

472,203

$

562,108

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The cost and fair value of investments as of March 31, 2021 and December 31, 2020 were as follows (in thousands):

Gross

Gross

Amortized

Unrealized

Unrealized

As of March 31, 2021

    

Cost

    

Gains

    

Losses

    

Fair Value

U.S. treasury securities

$

380,135

$

85

$

(1)

$

380,219

U.S. government agency securities

 

62,018

 

16

 

 

62,034

Commercial papers

29,954

(4)

29,950

Total

$

472,107

$

101

$

(5)

$

472,203

Gross

Gross

Amortized

Unrealized

Unrealized

As of December 31, 2020

    

Cost

    

Gains

    

Losses

    

Fair Value

U.S. treasury securities

$

470,108

$

30

$

(29)

$

470,109

U.S. government agency securities

 

91,981

 

20

 

(2)

 

91,999

Total

$

562,089

$

50

$

(31)

$

562,108

The following table summarizes the Company’s available-for-sale debt securities by contractual maturity (in thousands):

March 31, 2021

Amortized Cost

    

Fair Value

Within one year

$

461,878

$

461,976

One year to two years

10,228

10,227

Investments total

$

472,106

$

472,203

All available-for-sale securities held as of March 31, 2021 and December 31, 2020 had contractual maturities of less than two years. No significant available-for-sale securities held as of the periods presented have been in a continuous unrealized loss position for more than 12 months. As of March 31, 2021, unrealized losses on available-for-sale investments are not attributed to credit risk. The Company determined that it has the ability and intent to hold all marketable securities that have been in a continuous loss position until maturity or recovery. To date, the Company has not recorded any impairment charges on its marketable securities.

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following (in thousands):

March 31, 

December 31, 

    

2021

    

2020

Lab equipment

$

4,911

$

4,656

Leasehold improvements

 

2,573

 

2,573

Computer equipment

 

619

 

270

Office furniture and equipment

 

480

 

480

Construction in progress

 

70,117

 

56,758

Total Property and equipment, cost

 

78,700

 

64,737

Less: Accumulated depreciation and amortization

 

(5,950)

 

(5,578)

Property and Equipment, net

$

72,750

$

59,159

Depreciation expense for the three months ended March 31, 2021 and 2020, was approximately $0.4 million and $0.3 million, respectively.

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NOTE 5. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

March 31, 

December 31, 

2021

    

2020

Clinical related

$

12,869

$

15,661

Accrued payroll and employee related expenses

7,902

9,032

Commercial manufacturing facility related

8,153

4,342

R&D Manufacturing related

 

4,169

 

3,266

Legal and related services

 

963

 

1,061

Accrued other

 

1,718

 

1,712

$

35,774

$

35,074

NOTE 6. STOCKHOLDERS’ EQUITY

Authorized Shares of Common Stock

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.

Public Offerings

In June 2020, the Company closed an underwritten public offering of 16,935,484 shares of the Company’s common stock at a public offering price of $31.00 per share, before underwriting discounts, which included 2,540,322 shares issued upon the exercise in full by the underwriter of its option to purchase additional shares at the public offering price less the underwriting discount (the "June 2020 Public Offering"). The gross proceeds from the offering, before deducting the underwriting discounts and commissions and other offering expenses payable by the Company, were $603.7 million, with net proceeds to the Company of $567.0 million.

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

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.

Preferred Stock

The Company’s certificate of incorporation authorizes the issuance of up to 50,000,000 shares of “blank check” preferred stock. As of March 31, 2021, 17,000 shares were designated as Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”) and 11,500,000 shares were designated as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”).

Series A Convertible Preferred Stock

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. Each share of Series A Preferred Stock is initially convertible into 500 shares of common stock.

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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.

No Shares of Series A Convertible Preferred Stock were converted during the three months ended March 31, 2021 or 2020. As of March 31, 2021 and December 31, 2020, 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. Each share of Series B Preferred Stock is initially convertible into 1 share of common stock.

The Series B 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 B 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. 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.

During the three months ended March 31, 2021, a total of 738,961 of Series B Convertible Preferred Stock were converted into 738,961 shares of common stock. No shares of Series B Convertible Preferred Stock were converted during the three months ended March 31, 2020. As of March 31, 2021 and December 31, 2020, 2,842,158 and 3,581,119 shares of Series B Preferred Stock (that are convertible into 2,842,158 and 3,581,119 shares of common stock) remained outstanding, respectively.

At the Market Offering Program

On February 8, 2021, the Company entered into an Open Market Sale Agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) with respect to an “at the market” offering program, under which the Company may, from time to time, in its sole discretion, issue and sell through Jefferies, acting as sales agent, up to $350.0 million of shares of the Company’s common stock, par value $0.000041666 per share (the “Common Shares”). The issuance and sale, if any, of the Common Shares by the Company under the Sales Agreement will be made pursuant to a prospectus supplement, dated February 8, 2021, to the Company’s registration statement on Form S-3ASR, originally filed with the Securities and Exchange Commission on May 27, 2020, which became effective immediately upon filing.

Pursuant to the Sales Agreement, Jefferies may sell the Common Shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”). Jefferies will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the Common Shares from time to time, based upon instructions from the Company (including any price or size limits or other customary parameters or conditions the Company may impose).

The Company will pay Jefferies a commission of up to 3.0% of the gross sales proceeds of any Common Shares sold through Jefferies under the Sales Agreement.

The Company is not obligated to make any sales of Common Shares under the Sales Agreement. The offering of Common Shares pursuant to the Sales Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through Jefferies, of all Common Shares subject to the Sales Agreement and (ii) termination of the Sales Agreement in accordance with its terms.

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For the three months ended March 31, 2021, the Company received approximately $42.9 million in net proceeds, net of offering costs, through the sale of 1,278,243 shares of its common stock through the Sales Agreement at a weighted average price per share of $34.67.

NOTE 7. STOCK BASED COMPENSATION

Restricted Stock Units

On June 1, 2016, the Company entered into an RSU agreement with the Company’s Chief Executive Officer, Maria Fardis, Ph.D., M.B.A., pursuant to which the Company granted Dr. Fardis 550,000 non-transferrable RSUs at a fair market value price of $5.87 per share as an inducement to her employment pursuant to the exception to The Nasdaq Global Market rules that generally require stockholder approval of equity incentive plans. The 550,000 RSUs vested 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 vested upon the satisfaction of certain clinical trial milestones; and (iii) 137,500 restricted stock units vested in equal monthly installments over the 36-month period following the first anniversary of the effective date of Dr. Fardis’ employment, such that the RSUs were fully vested as of June 1, 2020. As of March 31, 2021, the Company had no RSUs outstanding.

Stock-based compensation expense for RSUs are measured based on the closing fair market value of the Company’s common stock on the date of grant. No stock-based compensation expenses relating to RSUs were recorded for the three months ended March 31, 2021, and $0.1 million of stock-based compensation expenses were recorded for the same period ended in 2020 as part of general and administrative expenses.

Equity Incentive Plans

On October 14, 2011, the Company’s Board of Directors (the “Board”) adopted the 2011 Equity Incentive Plan (the “2011 Plan”). Employees, directors, consultants and advisors of the Company are eligible to participate in the 2011 Plan. 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 Board 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 Board amended the 2011 Plan to increase the number of shares available for issuance upon the exercise of stock options under the 2011 Plan from 1,700,000 to 1,900,000 shares, effective immediately. As of March 31, 2021, 11,240 shares were available for future grant under the 2011 Plan.

On September 19, 2014, the Board 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. As of March 31, 2021, 9,220 shares were available for grant under the Company’s 2014 Plan.

On April 22, 2018, the Board 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. On June 8, 2020, the Company's stockholders approved an amendment to the 2018 Plan to increase the number of shares available for issuance upon the exercise of stock options under the 2018 Plan from 6,000,000 to 14,000,000 shares, which became effective immediately. As of March 31, 2021, 4,281,126 shares of common stock were available for grant under the Company’s 2018 Plan.

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Stock Options

A summary of the status of stock options as of March 31, 2021, and the changes during the three months then ended, is presented in the following table:

Weighted

 

Weighted

Average

Aggregate

Number

Average

Remaining

Intrinsic

of

Exercise

Contract

Value

    

Options

    

Price

    

Life

    

(in thousands)

Outstanding as of December 31, 2020

12,615,638

 

$

18.08

Granted

 

3,704,589

 

45.40

 

 

Exercised

 

(423,178)

 

15.31

 

 

Expired/Forfeited

 

(477,823)

 

29.79

 

 

Outstanding as of March 31, 2021

 

15,419,226

$

24.35

 

7.98

$

169,189

 

 

 

 

Options exercisable as of March 31, 2021

 

7,388,773

$

13.49

 

6.60

$

134,955

The aggregate intrinsic value in the table above reflects the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the quarter ended March 31, 2021 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 March 31, 2021. The intrinsic value of the Company’s stock options changes based on the closing price of the Company’s common stock.

Employee Stock Purchase Plan

In June 2020, the Company adopted the 2020 ESPP upon its approval by the Company’s shareholders at its Annual Stockholders Meeting on June 8, 2020. The Company reserved 500,000 shares of its common stock for issuance under the 2020 ESPP.

Under the 2020 ESPP, employees of the Company can purchase shares of its common stock based on a percentage of their compensation subject to certain limits. The purchase price per share is equal to the lower of 85% of the fair market value of its common stock on the offering date or the purchase date with a six month look-back feature. The 2020 ESPP purchases are settled with common stock from the 2020 ESPP’s previously authorized and available pool of shares.

The compensation expense related to the 2020 ESPP for the three months ended March 31, 2021 was $0.3 million. As of March 31, 2021, no shares were issued under the 2020 ESPP and there was $0.2 million of unrecognized compensation cost associated with the 2020 ESPP, which will be recognized over the remaining 2.3 months.

Stock-Based Compensation

Total stock-based compensation expense related to all of the Company’s stock-based awards was recorded on the statements of operations as follows (in thousands):

Three Months Ended

March 31, 

    

2021

    

2020

Research and development

$

9,202

$

4,318

General and administrative

 

7,739

 

5,094

Total stock-based compensation expenses

$

16,941

$

9,412

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Total stock-based compensation expenses broken down based on each individual instrument were as follows (in thousands):

Three Months Ended

March 31, 

    

2021

    

2020

Stock option expenses

$

16,660

$

9,345

Restricted stock unit expenses

 

 

67

ESPP expenses

 

281

 

Total stock-based compensation expenses

$

16,941

$

9,412

The Company recorded stock-based compensation expenses related to stock options of $16.7 million and $9.3 million for the three months ended March 31, 2021 and 2020 respectively. As of March 31, 2021, there was $148.4 million of total unrecognized compensation expense related to the options to be recognized over a weighted average period of 2.17 years.

The weighted average grant date fair value for employee options granted under the Company’s stock option plans during the three months ended March 31, 2021 and 2020 was $26.42 and $15.67 per option, respectively.

The following table summarizes the assumptions relating to options granted pursuant to the Company’s equity incentive plans for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,