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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 June 30, 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 July 28, 2021, the issuer had 155,032,000 shares of common stock, par value $0.000041666 per share, outstanding.

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

FORM 10-Q

For the Quarter Ended June 30, 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

39

Item 4.

Controls and Procedures

39

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

85

Item 5.

Other Information

85

Item 6.

Exhibits

86

SIGNATURES

87

1

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

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

    

June 30, 

December 31, 

    

2021

    

2020

ASSETS

  

 

  

  

 

  

Current Assets

  

 

  

Cash and cash equivalents

$

82,763

$

67,329

Short-term investments

 

573,605

 

562,108

Prepaid expenses and other assets

 

10,272

 

6,663

Total Current Assets

 

666,640

 

636,100

 

  

 

  

Property and equipment, net

80,120

59,159

Operating lease right-of-use assets

52,508

54,756

Long-term investments

 

46,288

Restricted cash

6,084

5,525

Long-term assets

 

1,150

 

12,918

Total Assets

$

852,790

$

768,458

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

 

  

 

  

Current Liabilities

 

  

 

  

Accounts payable

$

21,914

$

13,513

Accrued expenses

 

34,192

 

35,074

Operating lease liabilities - current

4,428

6,284

Total Current Liabilities

 

60,534

 

54,871

 

  

 

  

Non-Current Liabilities

 

  

 

  

Operating lease liabilities – noncurrent

 

46,843

 

45,375

Long-term note payable

1,000

Other liabilities

11,714

Total Non-Current Liabilities

 

47,843

 

57,089

Total Liabilities

 

108,377

 

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 June 30, 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 June 30, 2021 and December 31, 2020, respectively

 

3

 

4

Common stock, $0.000041666 par value; 300,000,000 shares authorized, 154,799,721 and 146,874,917 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

7

 

6

Accumulated other comprehensive income

 

33

 

19

Additional paid-in capital

 

1,731,363

 

1,486,662

Accumulated deficit

 

(986,993)

 

(830,193)

Total Stockholders’ Equity

 

744,413

 

656,498

Total Liabilities and Stockholders’ Equity

$

852,790

$

768,458

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

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations

(unaudited; in thousands, except per share information)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2021

    

2020

    

2021

    

2020

Costs and expenses

 

 

 

 

Research and development expenses

 

62,119

 

49,274

 

118,068

106,226

General and administrative expenses

 

19,307

 

14,353

 

38,928

28,211

Total costs and expenses

 

81,426

 

63,627

 

156,996

134,437

 

 

 

  

Loss from operations

 

(81,426)

 

(63,627)

 

(156,996)

(134,437)

Other income

 

 

 

  

Interest income, net

 

75

 

609

 

196

1,824

Net Loss

$

(81,351)

$

(63,018)

$

(156,800)

$

(132,613)

Net Loss Per Share of Common Stock, Basic and Diluted

$

(0.53)

$

(0.47)

$

(1.04)

$

(1.02)

Weighted Average Shares of Common Stock Outstanding, Basic and Diluted

 

153,751

 

133,162

 

150,571

 

129,848

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

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited; in thousands)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2021

    

2020

    

2021

    

2020

Net Loss

$

(81,351)

$

(63,018)

$

(156,800)

$

(132,613)

Other comprehensive gain/(loss):

 

 

 

 

Unrealized gain on short-term investments

 

(63)

 

(595)

 

14

 

97

Comprehensive Loss

$

(81,414)

$

(63,613)

$

(156,786)

$

(132,516)

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

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended June 30, 2021 and 2020

(unaudited; in thousands, except share information)

Series A 

Series B Convertible

Additional

Accumulated 

Total

Preferred Stock

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholder

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balance - March 31, 2021

 

194

$

 

2,842,158

$

3

 

149,315,299

$

6

$

1,552,968

$

96

$

(905,642)

$

647,431

Stock-based compensation expense

 

14,414

 

14,414

Common stock issued upon purchase of employee stock purchase plan

55,315

 

970

 

970

Common stock issued upon exercise of stock options

 

233,251

 

 

2,742

 

2,742

Unrealized loss on short-term investments

 

(63)

 

(63)

Common stock sold in public offering, net of offering costs

5,195,856

1

160,269

160,270

Net loss

 

(81,351)

 

(81,351)

Balance - June 30, 2021

 

194

$

 

2,842,158

$

3

 

154,799,721

$

7

$

1,731,363

$

33

$

(986,993)

$

744,413

Balance - March 31, 2020

 

194

$

 

3,581,119

$

4

 

126,823,156

$

5

$

882,599

$

912

$

(640,207)

$

243,313

Stock-based compensation expense

 

10,537

 

10,537

Vesting of restricted shares issued for services

 

6,176

 

 

 

Tax payments related to shares withheld for vested restricted stock units

 

(165)

 

(165)

Common stock issued upon exercise of stock options

 

129,672

 

 

1,237

 

1,237

Unrealized loss on short-term investments

 

(595)

 

(595)

Common stock sold in public offering, net of offering costs

19,475,806.00

1

566,999

567,000

Net loss

 

(63,018)

 

(63,018)

Balance - June 30, 2020

 

194

$

 

3,581,119

$

4

 

146,434,810

$

6

$

1,461,207

$

317

$

(703,225)

$

758,309

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

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

For the Six Months Ended June 30, 2021 and 2020

(unaudited; in thousands, except share information)

Series A 

Series B Convertible

Additional

Accumulated 

Total

Preferred Stock

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholder

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

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

 

31,355

 

31,355

Common stock issued upon purchase of employee stock purchase plan

55,315

970

970

Common stock issued upon exercise of stock options

 

656,429

 

 

9,221

 

9,221

Common stock sold in public offering, net of offering costs

6,474,099

1

203,154

203,155

Common stock issued from preferred stock conversion

(738,961)

(1)

738,961

1

Unrealized gain on short-term investments

 

14

 

14

Net loss

 

(156,800)

 

(156,800)

Balance - June 30, 2021

 

194

$

 

2,842,158

$

3

 

154,799,721

$

7

$

1,731,363

$

33

$

(986,993)

$

744,413

Balance - December 31, 2019

 

194

$

 

3,581,119

$

4

 

126,411,808

$

5

$

869,354

$

220

$

(570,612)

$

298,971

Stock-based compensation expense

 

19,949

 

19,949

Vesting of restricted shares issued for services

 

13,449

 

Tax payments related to shares withheld for vested restricted stock units

 

(283)

 

(283)

Common stock issued upon exercise of stock options

533,747

 

 

5,188

 

5,188

Unrealized gain on short-term investments

97

 

 

97

Common stock sold in public offering, net of offering costs

19,475,806

1

566,999

567,000

Net loss

(132,613)

(132,613)

Balance - June 30, 2020

 

194

$

 

3,581,119

$

4

 

146,434,810

$

6

$

1,461,207

$

317

$

(703,225)

$

758,309

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)

Six Months Ended

June 30, 

    

2021

    

2020

Cash Flows from Operating Activities

Net loss

$

(156,800)

$

(132,613)

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

 

 

Stock-based compensation expense

31,355

19,949

Non-cash lease expense

2,407

3,328

Accretion (amortization) of discounts and premiums on investments

3,862

(17)

Depreciation and amortization

738

 

512

Changes in assets and liabilities:

Prepaid expenses, other assets, and long-term assets

8,159

 

(1,064)

Right-of-use assets

(159)

Operating lease liabilities

(388)

 

(3,739)

Accounts payable

4,950

 

(7,096)

Accrued expenses and other liabilities

 

(10,523)

 

18,813

Net cash used in operating activities

 

(116,399)

 

(101,927)

Cash Flows from Investing Activities

Maturities of investments

 

320,151

 

216,678

Purchase of investments

 

(381,784)

 

(534,717)

Purchase of property and equipment

 

(20,321)

 

(5,612)

Net cash used by investing activities

 

(81,954)

 

(323,651)

Cash Flows from Financing Activities

Tax payments related to shares withheld for vested restricted stock units

 

 

(283)

Proceeds from the issuance of common stock upon exercise of options and employee stock purchase plan

10,191

5,188

Proceeds from the issuance of common stock, net

203,155

567,393

Proceeds from the issuance of debt

1,000

Net cash provided by financing activities

 

214,346

 

572,298

Net increase in cash, cash equivalents, and restricted cash

 

15,993

 

146,720

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

 

72,854

 

19,419

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

$

88,847

$

166,139

Supplemental disclosure of non-cash investing and financing activities:

Net unrealized gain on short-term investments

$

14

$

97

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

 

(1,378)

 

(5,212)

Accrued offering costs in accrued expenses

 

 

(393)

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 and six months ended June 30, 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 $156.8 million for the six months ended June 30, 2021 and used $116.4 million of cash in its operating activities during the six months ended June 30, 2021. For the six months ended June 30, 2021, the Company received net proceeds of approximately $203.2 million from the “at the market” offering program the Company has in place with Jefferies LLC, acting as sales agent. As of June 30, 2021, the Company had $708.7 million in cash, cash equivalents, investments, and restricted cash ($82.8 million of cash and cash equivalents, $573.6 million in short-term investments, $46.3 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 as well as initiating the construction of the tenant improvements for its new headquarters in San Carlos, California, 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, 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.

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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 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 and six months ended June 30, 2021 and 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 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 June 30, 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):

    

June 30, 

    

June 30, 

2021

2020

Cash and cash equivalents

$

82,763

$

160,614

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

 

6,084

 

5,525

Total cash, cash equivalents and restricted cash

$

88,847

$

166,139

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 (iv) conversion of preferred stock, are only included in the calculation of diluted net loss per share when their effect is dilutive.

As of June 30, 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.

June 30, 

    

2021

    

2020

Stock options

14,537,031

 

12,594,736

Series A Convertible Preferred Stock*

97,000

 

97,000

Series B Convertible Preferred Stock*

2,842,158

 

3,581,119

2020 ESPP

39,766

Restricted stock units

1,253,540

 

18,769,495

 

16,272,855

* 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 June 30, 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 June 30, 2021 and December 31, 2020, the fair value of the Company’s financial assets, which consist of cash equivalents and investments classified as available-for-sale securities, that were measured on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of June 30, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

U.S. treasury securities

$

313,661

$

$

$

313,661

U.S. government agency securities

 

 

11,145

 

 

11,145

Corporate securities

34,207

34,207

Commercial paper

277,094

277,094

Money market funds

46,882

46,882

Total

$

360,543

$

322,446

$

$

682,989

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

Money market funds

49,720

49,720

Total

$

611,828

$

$

$

611,828

The available-for-sale securities in the Company’s Condensed Consolidated Balance Sheets are as follows (in thousands):

June 30, 

December 31, 

2021

    

2020

Cash equivalents

$

63,096

$

49,720

Short-term investments

573,605

562,108

Long-term investments

46,288

Cash Equivalents and Investments total

$

682,989

$

611,828

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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.

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.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

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 and six months ended June 30, 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 June 30, 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.

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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 model. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

The Company periodically issues 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 classif