IOVA - Iovance Biotherapeutics: Testing Shareholders' Patience

2023-10-22 09:12:19 ET

Summary

• Iovance Biotherapeutics is on the cusp of its first FDA approval for its TIL therapy in the treatment of metastatic melanoma.
• The company operates on the belief that adoptive cell therapy can effectively fight solid tumors while avoiding side effects.
• Iovance's lead candidate, lifileucel, has shown promising results in clinical trials for metastatic melanoma, and the company has filed a BLA with the FDA.
• An updated analysis follows in the paragraphs below.

Trees that are slow to grow bear the best fruit .”? Moliere

Today, we take another look at a small developmental concern that is on the cusp of its first FDA approval and has recently seen some significant insider buying. An analysis follows below.

The last time we looked at Iovance Biotherapeutics, Inc. ( IOVA ) (December 2022), its stock was trading at ~$7.50 a share and management was anticipating filing a BLA for its TIL therapy (lifileucel) in the treatment of metastatic melanoma in 1Q23 after nearly two years of delays related to potency-determining assay validation, as well as some concerns from the investment community about its efficacy. Owing to these issues, its (then) share price represented an ~85% decline in the prior 23 months.

As a reminder, Iovance Biotherapeutics, Inc. is a San Carlos, California based clinical-stage biopharmaceutical concern focused on the development of TIL therapy to treat solid tumor cancers. The company currently has one recently acquired commercial asset (Proleukin) and three clinical programs – two will be covered in this report – comprising five trials targeting three indications, as both monotherapies and in combination with other anti-cancer medicines. Iovance was formed when failed biotech firm Genesis Biopharma reverse-merged with Lion Biotechnologies in 2013 and subsequently effectuated a 1-for-1,000 split. Dubbed Iovance since 2017, its stock trades just under $3.50 a share, translating to an approximate market cap of $825 million.

TIL Process

The company operates on the belief that adoptive cell therapy – specifically TIL therapy – can leverage components of the patient’s own immune system to effectively fight solid tumors while avoiding side effects inherent in many onco-therapies. To accomplish this end, a biopsy is performed to extract part of the tumor. The tumor is then fragmented and placed in media that promotes the separation of TILs from the tumor. Once isolated, TIL is then expanded ex vivo. Prior to reintroduction, the patient receives non-myeloablative lymphodepleting chemotherapy to suppress the tumor environment, enhancing the treatment’s effectiveness.

The one-time TIL therapy is then supplemented with up to six doses of interleukin-2 (IL-2) to further augment its effects. To procure enough supply of IL-2, Iovance acquired the worldwide rights to IL-2 product Proleukin from Clinigen Ltd. for an upfront consideration of $210.2 million in May 2023. The company is obligated to pay Clinigen an additional $50 million upon first approval for its lead program (lifileucel) in advanced melanoma, as well as double-digit royalties and earn outs.

The current manufacturing process (known as Gen 2) produces cryopreserved TIL in 22 days. (A 16-day Gen 3 product is being employed in some earlier-stage Iovance clinical trials.) This protocol is similar to chimeric antigen receptor T cell (CAR-T) production, except that no genetic modification is required. That said, CAR-Ts have demonstrated little efficacy against solid tumors. From this platform, Iovance has created two later-stage clinical candidates.

Pipeline – The Lifileucel Saga

Lifileucel . As highlighted in the previous article, the company’s lead candidate is lifileucel, a TIL therapy being investigated both as a monotherapy and in combination for the treatment of metastatic melanoma and metastatic cervical cancer. The registrational trial for the melanoma indication (C-144-01) was a multi-cohort study for patients with at least one systemic therapy, including a PD-1 inhibitor, BRAF inhibitor (if so mutated), or a combination of BRAF and MEK inhibitors. Results from Cohort 2 (n=66) were promising with patients exhibiting an objective response rate (ORR) of 36% including 3 complete responses (CRs). In a group with a mean of 3.3 prior therapies, the disease control rate (DCR) was 80% and the median duration of response [MDOR] still had not been reached after 45.1 months of follow up. Based on the data readouts, lifileucel received regenerative medicines advanced therapy (RMAT) designation from the FDA in 2018.

After a seemingly productive End of Phase 2 meeting with the FDA, Iovance initiated Cohort 4 of C-144-01 in March 2019 with patient dosing completed in January 2020.

With the company on track to file a BLA for lifileucel as a later line therapy for metastatic melanoma in 2021 – even after what was perceived to be a minor delay to determine which assay to use for determining TIL potency – its stock reflected the optimism, trading as high as $54.21 a share in January 2021. However, its timeline was pushed out a second time over the assay issue in May 2021. That news was immediately followed by the resignation of CEO Maria Fardis. In the next trading session (May 18, 2021), shares of IOVA plummeted 39% to $16.33. Finally, after multiple meetings with the FDA, it appeared as if an agreement was reached regarding the potency assays for lifileucel in 1H22.

Included in these discussions with the FDA was a determination of a minimum duration of follow up threshold in Cohort 4 to support its BLA submission. That data was announced in May 2022 and wasn’t as robust relative to Cohort 2 (or its own preliminary data readout of May 2020). Cohort 4 (n=87) demonstrated an ORR of 28.7% (versus 34.8% for Cohort 2) and CRs of 4.6% (7.6%). Furthermore, mDOR was 10.4 months versus ‘not reached’ in Cohort 2 – at that time 36.6 months. The market’s response was severe, devaluing shares of IOVA 54% in the subsequent trading session to $7.02.

Undeterred, Iovance stated that the main variable in the deviation of results between the two cohorts was their baseline patient populations. On average, Cohort 4 patients had a greater number of tumor lesions (84% with more than three lesions in Cohort 4 versus 65% in Cohort 2) and higher lactate dehydrogenase levels (64% vs 41%), an understood negative prognostic factor in melanoma. Combining the two cohorts, management generated a 31.4% ORR with mDOR not reached at median study follow-up of 36.5 months. These data still compared favorably with chemotherapy – which typically has a 4%-10% ORR and median overall survival ((MOS)) of 7.8 months (versus 13.9 months for lifileucel) – and thus supportive of approval.

With no FDA-green lighted options after progression on checkpoint (e.g., anti-PD-1) therapy and BRAF/MEK inhibitors for ~20,000 patients in the U.S. and EU5 requiring second-or-third line treatments, the company filed a rolling BLA for lifileucel in metastatic melanoma in August 2022 with the expectation of completing the application in 4Q22. However, the ongoing bugaboo of supplemental assay validation requests reared its head yet again, with Iovance stating on November 18, 2022 that to sate this latest inquiry from the FDA, application completion would be pushed into 1Q23.

The application was finally accepted by the FDA for priority (six-month) review in 2Q23 and originally assigned a PDUFA date of November 23, 2023. However, on September 14, 2023, Iovance announced that the FDA had pushed its decision date on lifileucel to February 24, 2024, citing the agency’s own insufficient resources. The company emphasized in its press release that there were “no major review issues” and “no plans to hold an advisory committee meeting”. Furthermore, all inspections were successfully completed and the FDA “expressed no concerns on the status of…TILVANCE-301,” a confirmatory trial combining lifileucel and Merck’s anti-PD-1 mega-blockbuster therapy Keytruda (pembrolizumab) in a frontline setting. It seemed the information had been leaked, as shares of IOVA traded 9% lower on above average volume (nearly six million) on September 13, 2023 and another 15% lower (on volume of ~20 million) after the news broke, closing the September 14th session at $4.64.

If the 670-patient TILVANCE-301 study demonstrates lifileucel-Keytruda combo’s effectiveness over Keytruda monotherapy treating melanoma in a frontline setting, the market for Iovance’s therapy could expand significantly, with ~98,000 cases diagnosed annually in the U.S. The Phase 2 data were encouraging, with eight of twelve patients (67%) achieving an OR, including three CRs (25%). These data compare very favorably to Keytruda monotherapy, which demonstrated a 33% ORR and a CR rate of 6% in clinical trials. The first patient was randomized for the Phase 3 study in 2Q23.

Even with this latest timeline setback tacked on to two plus years of delays, Iovance is still the clear leader in the TIL space, with others – including Chinese concern GRIT Biotechnology (Phase 2 scheduled for initiation by YE23), Instil Bio ( TIL ) (Phase 1), Achilles Therapeutics ( ACHL ) (Phase 1/2 TIL alternative clonal neoantigen-reactive T cells), KSQ Therapeutics (Phase 1), Obsidian Therapeutics (Phase 1), Immatics ( IMTX ) (Phase 1), WindMIL Therapeutics (Phase 1 marrow-infiltrating lymphocytes), Lyell Immunopharma ( LYEL ) (Phase 1), Cellular Biomedicine Group (Phase 1 China) – all chasing solid tumor indications with TIL or TIL-like therapies.

Lifileucel is also under study as a monotherapy for the treatment of cervical cancer following progression on or after chemo and PD-1 therapy. It has received Breakthrough Therapy and RMAT designations for this indication and is undergoing assessment in Cohort 2 of a Phase 2 study (C-145-04), which was expanded in 3Q22 to support (if successful) a BLA submission. The trial is enrolling but essentially had to be restarted after Keytruda received approval in a frontline setting in 4Q21.

LN-145 . Iovance’s other TIL candidate that has advanced beyond early-stage trials is LN-145, which is undergoing evaluation as a monotherapy and in combo with Keytruda as a treatment for non-small cell lung cancer (NSCLC) and head and neck squamous cell carcinoma (HNSCC). The latter indication has seemingly been deprioritized.

For NSCLC, the market found the preliminary results of a potentially registrational Phase 2 study (IOV-LUN-202) – recently expanded to 120 patients – somewhat encouraging. Of the 23 evaluable unresectable or metastatic NSCLC patients (in Cohorts 1 and 2) who had progressed on or after prior anti-PD-1 treatment and chemotherapy, LN-145 was able to induce an ORR of 26% (6/23) with one CR and five PRs. All responses remained ongoing and thus the mDOR had not been reached. The company indicated that the FDA may accept the results of IOV-LUN-202 for approval. The multi-cohort trial is expected to be completed in 2H24. The market briefly rallied on this July 10, 2023 news, but Iovance used the positivity to raise capital – more on that shortly.

The foundation for IOV-LUN-202 is Cohort 3B of the company’s IOV-COM-202 study. In that trial, LN-145 demonstrated an ORR of 21% (with one CR ongoing for more than 29 months) in 28 metastatic NSCLC patients who had progressed on prior anti-PD-1 therapy. Considering all but four of the 28 patients had progressed on at least two prior systemic therapies, these results were enough for Iovance to initiate IOV-LUN-202 in 2Q21.

Also encouraging were the results of a proof-of-concept trial involving a LN-145/Keytruda combo in immune checkpoint inhibitor-naïve NSCLC patients with endothelial growth factor receptor disease (Cohort 3A). With a June 26, 2023 data cut, at 18.2 months of follow-up, the combo achieved an ORR of 58% (7/12) with three ongoing responses, likely supportive of a registrational trial in a frontline setting that the company plans to discuss with the FDA before YE23.

Manufacturing

As a novel autologous cell therapy, the manufacturing of TIL is critical. To that end, the company opened a 136,000 sq. ft. production facility dubbed Iovance Cell Therapy Center in Philadelphia in September 2021, which will supply the preponderance of its TIL therapies with annual capacity of over 2,000 patients with a manufacturing success rate above 90%.

Balance Sheet & Analyst Commentary:

The secondary offering conducted after the LN-145 news raised net proceeds of $161.4 million at $7.50 a share, upping Iovance’s pro forma cash and short-term investment position to $412.3 million and its runway into 4Q24. The company also holds $60 million of restricted cash for future milestone payments related to Proleukin. However, at its current burn rate of ~$95 million per quarter, look for news of an FDA approval for lifileucel to be met with another secondary.

Despite the seemingly never-ending saga with lifileucel, the Street is focused on the Iovance’s opportunity to bring to market the first individualized one-time T-cell therapy for solid tumor cancer. Since September, eight analyst firms including Piper Sandler and Barclays have reiterated Buy ratings on IOVA. Price targets range from $14 to $38 a share.

Ironically, the last time we reported on Iovance, board member Wayne Rothbaum, who represents the interests of Quogue Capital, had just purchased 10 million shares in a publicly executed block trade at $6.50 share. On September 15, 2023, he acquired five million shares at $5.30, increasing his firm’s position to 23.1 million shares, or slightly under 10% ownership interest.

Verdict:

Obviously, Mr. Rothbaum was excited to hear that the delay regarding the priority review was on the FDA’s end, and that there were no glaring lifileucel-related issues that could result in a CRL or further delays. It also appears that the revised PDUFA date is a worse-case scenario, with the likelihood of a decision rendered before February 24, 2024. That said, Iovance is still best approached through a covered call scenario as any euphoria surrounding a lifileucel FDA approval will rationally be capped by another capital raise. In other words, if an FDA approval is expedited ahead of the PDUFA date, the upside forsaken by the out-of-the-money call will likely be small.

Longer-term, Iovance looks to be the pioneer in cell therapy for solid tumors, making it a potential takeout candidate. However, at the current pace of its cash burn, its therapies need to be at or near a front-line setting (i.e., multi-blockbusters) to make its stock a solid investment as a standalone entity. For now, the risk/reward profit on IOVA merits a small 'watch item' position within a well-diversifed biotech portfolio. FDA approval and a capital raise could justify a larger holding some time in 2024.

He that can have patience can have what he will .”? Benjamin Franklin

For further details see: