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Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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, 2023

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)

825 Industrial Road, Suite 400, 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

 

IOVA

 

The Nasdaq Global Market

At August 3, 2023, the issuer had 247,776,653 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, 2023

 

Table of Contents

 

Page

PART I FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

4

Item 2.

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

33

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

44

PART II OTHER INFORMATION

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

Item 2.

Unregistered Sales of Securities and Use of Proceeds

94

Item 3.

Defaults Upon Senior Securities

94

Item 4.

Mine Safety Disclosure

94

Item 5.

Other Information

94

Item 6.

Exhibits

95

SIGNATURES

96

1

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Forward-Looking Statements and Market Data

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this report are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “might,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “aim,” “potential,” “continue,” “ongoing,” “goal,” “forecast,” “guidance,” “outlook,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.

These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

the success, cost, enrollment, and timing of our clinical trials;
the success, cost and timing of our product development activities;
the ability of us or our third-party contract manufacturers to continue to manufacture tumor infiltrating lymphocytes, or TIL, in accordance with our selected process;
our ability to design, construct and staff our own manufacturing facility on a timely basis and within the estimated expenses;
the success of competing therapies that are or may become available;
regulatory developments in the United States of America, or U.S., and foreign countries;
the timing of and our ability to obtain and maintain U.S. Food and Drug Administration, or the FDA, or other regulatory authority approval of, or other action with respect to, our product candidates, including with respect to the approval of the Biologics License Application (BLA) for lifileucel for patients with advanced melanoma;
our ability to attract and retain key scientific or management personnel;
the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;
our ability to successfully commercialize Proleukin® and any other product candidates for which we obtain FDA or other regulatory approvals;
the ability and willingness of our third-party research institution collaborators to continue research and development activities relating to our product candidates;
the potential of our other research and development and strategic collaborations;
our expectations regarding our ability to obtain and maintain intellectual property protection for our manufacturing methods and product candidates;
our plans to research, develop and commercialize our product candidates;
the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
fluctuations in the trading price of our common stock; and
our use of cash and other resources.

2

Table of Contents

Actual results may differ from those set forth in this Quarterly Report on Form 10-Q due to the risks and uncertainties inherent in our business, including, without limitation: the FDA may not agree with our interpretation of the results of its clinical trials; later developments with the FDA that may be inconsistent with already completed FDA meetings; the preliminary clinical results, including efficacy and safety results, from ongoing Phase 2 and Phase 3 trials may not be reflected in the final analyses of these trials including new cohorts within these trials; the results obtained in our ongoing clinical trials, such as the studies and trials referred to in this Quarterly Report on Form 10-Q, may not be indicative of results obtained in future clinical trials or supportive of product approval; regulatory authorities may potentially delay the timing of FDA or other regulatory authority approval of, or other action with respect to, our product candidates, specifically, our description of FDA interactions are subject to FDA’s interpretation, as well as FDA’s authority to request new or additional information; we may not be able to obtain or maintain FDA or other regulatory authority approval of its product candidates; our ability to address FDA or other regulatory authority requirements relating to our clinical programs and registrational plans, such requirements including, but not limited to, clinical and safety requirements as well as manufacturing and control requirements; risks related to our accelerated FDA review designations; our ability to obtain and maintain intellectual property rights relating to our product pipeline; and the acceptance by the market of our product candidates and their potential reimbursement by payors, if approved.

We caution you that the risks, uncertainties and other factors referenced above may not contain all the risks, uncertainties and other factors that are important to you. In addition, we cannot guarantee future results, level of activity, performance or achievements. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date of this Quarterly Report on Form 10-Q or as of the date on which it is made. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether because of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.

Unless the context requires otherwise, in this report the terms “Iovance,” the “Company,” “we,” “us” and “our” refer to Iovance Biotherapeutics, Inc.

3

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

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

    

June 30, 

December 31, 

    

2023

    

2022

ASSETS

  

 

  

  

 

  

Current Assets

  

 

  

Cash and cash equivalents

$

230,010

$

231,731

Trade accounts receivable

33

Short-term investments

 

20,884

 

240,114

Inventory

9,720

Prepaid expenses and other assets

 

14,231

 

7,271

Total Current Assets

 

274,878

 

479,116

 

  

 

  

Property and equipment, net

112,549

105,232

Intangible assets, net

235,511

Operating lease right-of-use assets

67,631

73,015

Restricted cash

66,430

6,430

Long-term assets

 

294

 

189

Total Assets

$

757,293

$

663,982

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

 

  

 

  

Current Liabilities

 

  

 

  

Accounts payable

$

31,157

$

26,603

Accrued expenses

 

46,620

 

52,295

Operating lease liabilities

10,866

12,587

Total Current Liabilities

 

88,643

 

91,485

 

  

 

  

Non-Current Liabilities

 

  

 

  

Operating lease liabilities – non-current

 

68,844

 

71,859

Deferred tax liabilities

20,237

Long-term note payable

1,000

1,000

Total Non-Current Liabilities

 

90,081

 

72,859

Total Liabilities

 

178,724

 

164,344

 

  

 

  

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, 2023 and December 31, 2022

 

 

Series B Convertible Preferred stock, $0.001 par value; 11,500,000 shares designated, 2,842,158 shares issued and outstanding as of June 30, 2023 and December 31, 2022

 

3

 

3

Common stock, $0.000041666 par value; 500,000,000 shares authorized, 224,688,434 and 187,812,072 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

9

 

8

Accumulated other comprehensive income (loss)

 

325

 

(902)

Additional paid-in capital

 

2,360,468

 

2,068,867

Accumulated deficit

 

(1,782,236)

 

(1,568,338)

Total Stockholders’ Equity

 

578,569

 

499,638

Total Liabilities and Stockholders’ Equity

$

757,293

$

663,982

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

Table of Contents

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, 

2023

    

2022

    

2023

    

2022

Revenue

Product revenue

$

238

$

$

238

$

Total revenue

238

238

 

 

 

 

Costs and expenses

 

 

 

 

Cost of sales

$

2,050

$

$

2,050

$

Research and development

86,347

73,406

169,081

141,706

Selling, general and administrative

 

21,927

 

26,328

 

50,049

49,741

Total costs and expenses

 

110,324

 

99,734

 

221,180

191,447

 

 

 

  

  

Loss from operations

 

(110,086)

 

(99,734)

 

(220,942)

(191,447)

Other income

 

 

  

Interest income, net

 

3,081

 

385

 

6,567

491

Net Loss before income taxes

$

(107,005)

$

(99,349)

$

(214,375)

$

(190,956)

Income tax benefit

477

477

Net Loss

$

(106,528)

$

(99,349)

$

(213,898)

$

(190,956)

Net Loss Per Share of Common Stock, Basic and Diluted

$

(0.47)

$

(0.63)

$

(0.98)

$

(1.21)

Weighted Average Shares of Common Stock Outstanding, Basic and Diluted

 

224,481

 

157,274

 

219,117

 

157,194

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited; in thousands)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2023

    

2022

    

2023

    

2022

Net Loss

$

(106,528)

$

(99,349)

$

(213,898)

$

(190,956)

Other comprehensive loss:

 

 

 

 

Unrealized gain/(loss) on investments

 

118

 

(354)

 

894

 

(2,096)

Foreign currency translation adjustment

333

333

Comprehensive Loss

$

(106,077)

$

(99,703)

$

(212,671)

$

(193,052)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended June 30, 2023 and 2022

(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 (Loss)

    

Deficit

    

Equity

Balance - March 31, 2023

 

194

$

 

2,842,158

$

3

 

224,358,979

$

9

$

2,342,703

$

(126)

$

(1,675,708)

$

666,881

Stock-based compensation expense

 

16,740

 

16,740

Common stock issued upon purchase of employee stock purchase plan

226,196

1,271

-

1,271

Vesting of restricted shares issued for services

 

147,364

 

 

 

Tax payments related to shares retired for vested restricted stock units

(51,965)

 

(301)

 

(301)

Common stock issued upon exercise of stock options

7,860

55

-

 

55

Unrealized gain on investments

 

118

 

118

Foreign currency cumulative translation adjustment

333

333

Net loss

 

(106,528)

 

(106,528)

Balance - June 30, 2023

 

194

$

 

2,842,158

$

3

 

224,688,434

$

9

$

2,360,468

$

325

$

(1,782,236)

$

578,569

Balance - March 31, 2022

 

194

$

2,842,158

$

3

157,168,321

$

7

$

1,818,377

$

(2,343)

$

(1,264,052)

$

551,992

Stock-based compensation expense

22,468

 

22,468

Common stock issued upon purchase of employee stock purchase plan

80,203

582

 

582

Vesting of restricted shares issued for services

898,392

Tax payments related to shares retired for vested restricted stock units

(346,335)

(2,649)

(2,649)

Unrealized loss on short-term investments

(354)

 

(354)

Net loss

 

(99,349)

 

(99,349)

Balance - June 30, 2022

 

194

$

 

2,842,158

$

3

 

157,800,581

$

7

$

1,838,778

$

(2,697)

$

(1,363,401)

$

472,690

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

7

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC

Condensed Consolidated Statements of Stockholders’ Equity

For the Six Months Ended June 30, 2023 and 2022

(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 (Loss)

    

Deficit

    

Equity

Balance - December 31, 2022

 

194

$

 

2,842,158

$

3

 

187,812,072

$

8

$

2,068,867

$

(902)

$

(1,568,338)

$

499,638

Stock-based compensation expense

 

32,405

 

32,405

Vesting of restricted stock shares issued for services

917,621

Tax payments related to shares retired for vested restricted stock units

(355,541)

(2,230)

(2,230)

Common stock issued upon purchase through employee stock purchase plan

226,196

1,271

 

1,271

Common stock issued upon exercise of stock options

 

7,860

 

 

55

 

55

Common stock sold in public offering, net of offering costs

36,080,226

1

260,100

 

260,101

Unrealized loss on investments

 

894

894

Foreign currency cumulative translation adjustment

333

333

Net loss

 

(213,898)

(213,898)

Balance - June 30, 2023

194

$

 

2,842,158

$

3

 

224,688,434

$

9

$

2,360,468

$

325

$

(1,782,236)

$

578,569

Balance - December 31, 2021

 

194

$

2,842,158

$

3

157,004,742

$

7

$

1,794,695

$

(601)

$

(1,172,445)

$

621,659

Stock-based compensation expense

 

44,733

 

44,733

Common stock issued upon purchase through employee stock purchase plan

80,203

582

582

Vesting of restricted shares issued for services

 

898,392

 

 

 

Tax payments related to shares retired for vested restricted stock units

(346,335)

 

(2,649)

 

(2,649)

Common stock issued upon exercise of stock options

 

163,579

 

 

1,417

 

1,417

Unrealized loss on investments

 

(2,096)

 

(2,096)

Net loss

 

(190,956)

 

(190,956)

Balance - June 30, 2022

 

194

$

 

2,842,158

$

3

 

157,800,581

$

7

$

1,838,778

$

(2,697)

$

(1,363,401)

$

472,690

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

8

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited; in thousands)

Six Months Ended

June 30, 

    

2023

    

2022

Cash Flows from Operating Activities

Net loss

$

(213,898)

$

(190,956)

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

 

 

Stock-based compensation expense

32,405

44,733

Unrealized exchange gains

(181)

Amortization of intangible assets

1,933

Amortization of right-of-use assets

5,910

6,184

Depreciation and amortization of property and equipment

5,695

 

4,042

Deferred tax benefit

(477)

 

Accretion of discounts and premiums on investments

(855)

995

Loss on write-off of fixed assets

314

Changes in assets and liabilities:

Prepaid expenses, other assets and long-term assets

(7,065)

 

(2,661)

Trade accounts receivable

(33)

Inventories

(9,549)

Operating lease liabilities

(5,261)

 

902

Accounts payable

3,171

 

65

Accrued expenses and other liabilities

 

(5,562)

 

(15,055)

Net cash used in operating activities

 

(193,767)

 

(151,437)

Cash Flows from Investing Activities

Maturities of investments

 

226,633

 

284,136

Purchase of investments

 

(5,323)

 

(85,841)

Cash paid for acquisition, net of cash acquired

(209,509)

Purchase of property and equipment

 

(15,184)

 

(16,016)

Net cash (used in) provided by investing activities

 

(3,383)

 

182,279

Cash Flows from Financing Activities

Tax payments related to shares withheld for vested restricted stock units

 

(2,230)

 

(2,649)

Proceeds from the issuance of common stock under employee stock purchase plan

 

1,271

 

582

Proceeds from the issuance of common stock upon exercise of options

55

1,417

Proceeds from the issuance of common stock, net

260,101

Net cash provided by (used in) financing activities

 

259,197

 

(650)

Effect of exchange rate changes

(3,768)

Net increase in cash, cash equivalents and restricted cash

 

58,279

 

30,192

Cash, Cash Equivalents and Restricted Cash Beginning of Period

 

238,161

 

84,313

Cash, Cash Equivalents and Restricted Cash End of Period

$

296,440

$

114,505

Supplemental disclosure of non-cash investing and financing activities:

Fair value of net assets acquired

$

222,637

$

Net unrealized gain (loss) on investments

894

(2,096)

Acquisition of property and equipment included in accounts payable and accrued expenses

 

3,813

 

967

Accrued capitalized acquisition costs

3,440

Lease liabilities arising from obtaining right-of-use asset from new leases

177

553

Lease liabilities arising from obtaining right-of-use asset from lease modifications

349

7,493

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

9

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IOVANCE BIOTHERAPEUTICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. GENERAL ORGANIZATION, BUSINESS AND LIQUIDITY

General Organization and Business

Iovance Biotherapeutics, Inc. (the “Company”) is a biopharmaceutical company pioneering a transformational approach to treating cancer by harnessing the human immune system’s ability to recognize and destroy diverse cancer cells using therapies personalized for each patient. The Company’s mission is to be the global leader in innovating, developing and delivering tumor infiltrating lymphocyte (“TIL”) therapies for patients with solid tumor cancers. The Company’s autologous TIL therapy platform uses a centralized, scalable, and proprietary 22-day manufacturing process to grow polyclonal T-cells unique to each patient and yields a cryopreserved, individualized therapy. In May 2023, the Company acquired the worldwide rights to Proleukin® (aldesleukin), a commercialized interleukin-2 (“IL-2”) product used to promote T-cell activity following TIL infusion. The acquisition of Proleukin® provides a new revenue source, secures the IL-2 supply chain and logistics surrounding TIL therapy administration, and lowers cost of goods and clinical trial expenses for Proleukin® used with TIL therapies.

The Company is currently conducting clinical trials to investigate multiple TIL therapies for multiple indications, including its lead product candidate, lifileucel, for advanced, or metastatic or unresectable, melanoma. The Company completed a rolling Biologics License Application (“BLA”) submission to the U.S. Food and Drug Administration (the “FDA”) for lifileucel for patients with advanced melanoma in March 2023, and the FDA accepted its BLA and granted lifileucel Priority Review in May 2023. The FDA assigned November 25, 2023 as the target action date for a decision under the Prescription Drug User Free Act (“PDUFA”). The Company is also pursuing registrational strategies for lifileucel in advanced cervical cancer and for its TIL therapy LN-145 in metastatic non-small cell lung cancer (“NSCLC”). In addition, the Company is investigating next generation approaches to optimize TIL products, manufacturing processes and treatment regimens, including a first-in-human clinical trial of its lead genetically modified TIL therapy, IOV-4001. The Company is also exploring a shorter manufacturing process, tumor tissue procurement via core biopsy, additional genetically modified TIL therapies including multiple immune checkpoint gene edits, and cytokine-tethered TIL therapies, as well as a novel IL-2 analog, designated IOV-3001, as potential avenues to improve efficacy, manufacturing timelines, sample collection and supportive treatments involved in the overall TIL therapy process and treatment regimen.

Basis of Presentation of Unaudited Condensed Consolidated Financial Information

The accompanying unaudited Condensed Consolidated Financial Statements of the Company for the three and six months ended June 30, 2023 and 2022 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 that may be expected for the year ended December 31, 2023 or for any other period. The Condensed Consolidated Balance Sheet as of December 31, 2022 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023. These interim financial statements should be read in conjunction with that report. The reporting currency of the Company is U.S. dollars. The functional currency for most of its foreign subsidiaries is their local currency.

Liquidity

The Company is currently engaged in the development of therapeutics to fight solid tumor cancers. With the completion of the rolling BLA submission for lifileucel for advanced melanoma in March 2023, the Company expects to generate revenue from the sale of its product lifileucel, if the BLA is approved. Furthermore, upon the completion of the closing of the acquisition of the worldwide rights to Proleukin® (as discussed below in Note 4 - Proleukin® Acquisition) in the second quarter of 2023, the Company began to generate revenue from the sales of Proleukin® during the three months ended June 30, 2023. However, such revenues for Proleukin® and lifileucel may not be material during the 12 months from the date these Condensed Consolidated Financial Statements are issued. The Company has incurred a net loss of $213.9 million for the six months ended June 30, 2023 and used $193.8 million of cash in its operating activities during the six months ended June 30, 2023. As of June 30, 2023, the Company had $317.3 million in cash, cash

10

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equivalents, investments, and restricted cash ($230.0 million of cash and cash equivalents, $20.9 million in short-term investments and $66.4 million in restricted cash).

The Company expects to continue to incur significant expenses to support its preparations for the commercialization and launch of lifileucel (if approved), including continuing to prepare the Iovance Cell Therapy Center (the “iCTC”), its manufacturing facility in Philadelphia, to support the Company’s ongoing and planned clinical programs, including its NSCLC registration directed study and its frontline advanced melanoma Phase 3 confirmatory trial, TILVANCE-301, to expand the combination of TIL and immune checkpoint inhibitors (“ICI’s”) in ICI naïve patient cohorts, and to support Proleukin® integration activities during 2023 and beyond. Based on the funds the Company has available as of the date these consolidated financial statements are issued, which include estimated net proceeds (after deducting underwriting and other offering expenses) of $161.4 million from the public offering of its common stock completed on July 13, 2023, 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 Condensed Consolidated Financial Statements are issued.

Concentrations of Risk

The Company is subject to credit risk from its portfolio of cash, cash equivalents, trade accounts receivable and investments. Under its investment policy, the Company limits amounts invested in 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 are safety and preservation of principal, diversification of risk, and liquidity of investments sufficient to meet cash flow requirements.

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.” The Company includes these investments in current assets or non-current assets in the Condensed Consolidated Balance Sheets based on the length of maturity from the reporting date and carries them at fair value. Unrealized gains and losses on available-for-sale securities are recorded in the Condensed Consolidated Statements of Comprehensive Loss. Impairment losses related to credit losses (if any) are recorded as an allowance for credit losses with an offsetting entry to Interest income, net. No impairment losses related to credit losses were recognized for the three and six months ended June 30, 2023 and 2022. 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 Interest income, net 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 Interest income, net 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 paper, 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 in a segregated bank account in connection with its letters of credit for which amounts are restricted as to their use by the Company. Currently, the Company’s letters of credit are primarily comprised of one for the benefit of the landlord for the iCTC used as a security deposit for the lease in the amount $5.45 million and one for $0.6 million for the benefit of the landlord for the Company’s current headquarters’ lease (See Note 12 - Leases), as well as one for $60.0 million, for the future milestone payment as required by the terms of the Option Agreement for the Proleukin® acquisition (See Note 4 – Proleukin® Acquisition). The letter of credit for $