Earnings Call Transcript - IOVA Q1 2025

Operator, Operator

Good day and thank you for standing by. Welcome everyone to the Iovance Biotherapeutics First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sara Pellegrino, SVP, IR and Corporate Communications. Please go ahead.

Sara Pellegrino, SVP, IR and Corporate Communications

Good afternoon and thank you for joining the Iovance conference call and webcast to discuss our first quarter 2025 financial results, as well as recent corporate updates. Dr. Fred Vogt, our Interim Chief Executive Officer and President will provide an introduction and focus on the U.S. Commercial launch of Amtagvi, including revenue and revenue guidance. Dan Kirby, Chief Commercial Officer, will discuss the Amtagvi commercial launch; Dr. Igor Bilinsky, our Chief Operating Officer, will provide a manufacturing update. Jean-Marc Bellemin, our CFO, will review our financial results, including revenue and revenue guidance, gross margin, and cash burn guidance; and Dr. Friedrich Finckenstein, our Chief Medical Officer, will summarize key pipeline programs. Additional members of our leadership team, including Dr. Raj Puri, our Chief Regulatory Officer; and Dr. Brian Gastman, our EVP of Medical Affairs, will be available for the Q&A session. Earlier this afternoon, we issued a press release that can be found on our corporate website at iovance.com. Before we start, I would like to remind everyone that statements made during this conference call will include forward-looking statements regarding Iovance's goals, business focus, business plans and transactions, revenue and revenue guidance, commercial activities, clinical trials and results, regulatory approvals and interactions, plans and strategies, research and preclinical activities, potential future applications of our technologies, manufacturing capabilities, regulatory feedback and guidance, payer interactions, licenses and collaborations, cash position and expense guidance, and future updates. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time-to-time in our SEC filings. Our results may differ materially from those projected during today's call. We undertake no obligation to publicly update any forward-looking statements. With that, I will turn the call over to Fred.

Fred Vogt, Interim CEO

Thank you, Sara and welcome to the Iovance first quarter 2025 conference call. We are four quarters into our U.S. launch of Amtagvi, the first FDA-approved TIL cell therapy and the first treatment for patients with advanced melanoma who progress following anti-PD-1 treatment and have appropriate targeted therapy. In the first 12 months of our U.S. launch, we've executed towards our long-term adoption goals and generated more than $210 million in revenue. This includes infusions from nearly 300 Amtagvi patients in the first launch year, starting with our first infusions in April of 2024. Total first quarter product revenue was $49.3 million, including $43.6 million from more than 80 Amtagvi infusions and $5.7 million from Proleukin sales. Following steady growth throughout 2024, revenue was lower in the first quarter of this year, driven by three key contributors. First, our internal manufacturing facility, the ICTC, completed annual scheduled maintenance in December of last year, as we previously discussed on last quarter's call. As a result of limited production starts for multi-week Amtagvi manufacturing across our network, capacity was reduced by more than half for about one month. In addition, volume was impacted by higher rates of patient drop-off and lower manufacturing success rates but has since rebounded. Today, we are seeing healthy demand with a record number of production starts in the second quarter. Lower Proleukin sales were the second factor contributing to lower first quarter revenue. We expect two of the three largest U.S. ship wholesalers to start replenishing Proleukin in line with growing Amtagvi demand in the second quarter. We're also growing the other components of our franchise, including sales of Proleukin to third parties for use with manufacturing and clinical research. The third contributor to first quarter revenue was the variable pace at which ATCs began treating patients as this differs from center to center. For context, 16% of ATCs have treated more than 10 patients. Our ATCs have ample room to grow, and we anticipate near-term contributions from ATCs that came online in the latter half of 2024 into 2025. We are also confident in our growth prospects under our new Chief Commercial Officer, Dan Kirby. Dan brings valuable leadership experience in cell therapy commercial organizations since the earliest developments in the field. In less than three months, Dan is already strengthening our commercial operations to drive ATC adoption and amplify earlier community referrals to our ATC network. The commercial team is working aggressively to implement key learnings from the first year as we continue to execute our U.S. launch. We are also excited about upcoming milestones related to our ex-U.S. launch expansion and pipeline development in lung cancer and beyond. We anticipate three potential approvals for Amtagvi in the United Kingdom, Canada, and the European Union and additional regulatory submissions are also underway in Australia and Switzerland. We are on track to report updated data from our registrational trial of TIL cells in previously treated advanced non-small cell lung cancer and first clinical data in endometrial cancer. And we continue to advance our robust pipeline of next-generation TIL cell therapies for patients with solid tumors. Looking ahead, I will briefly comment on our revised full-year revenue guidance and cash spend outlook. We revised our guidance to between $250 million and $300 million in total product revenue for the full year 2025. We consider our experience with growth trajectory at the ATCs, timelines for new ATCs to begin treating their first patients and expectations for large community practices and community referrals to drive momentum in the second half of 2025. These demand trends are consistent with the trajectory of other cell therapy launches moving from year one to year two. After aligning our manufacturing slot plans with our new demand forecast, we are maintaining our prior cash runway guidance into the second half of 2026. We remain confident in a peak sales opportunity of more than $1 billion in the U.S. and more than $2 billion globally for Amtagvi in the current approved indication. We also continue to expect that gross margin can exceed 70% in the coming years. Amtagvi and Proleukin are showing steady growth in the second quarter and will accelerate in the second half of the year. Current momentum is strong, and we project between 100 and 110 commercial patient infusions in the second quarter. We're also motivated by positive feedback from key opinion leaders and patient success stories that reinforce the unmet medical need and value of Amtagvi. On a macro level, as Igor will describe, we are well prepared to supply ongoing demand to deliver commercial Amtagvi as well as our investigational TIL products to patients around the world. Iovance is competitively positioned with a fully U.S.-based patent portfolio and manufacturing network. Tariffs should have a minimal impact on Amtagvi and Proleukin. I'm happy to go into more detail during the Q&A, I will now turn the call to Dan Kirby for a detailed commercial launch update.

Dan Kirby, Chief Commercial Officer

Thank you, Fred. After my first 90 days at Iovance, I am excited about the potential of Amtagvi to help patients globally. I have recognized both the strengths of our launch and the opportunities for optimizing adoption and accelerating growth. Amtagvi represents a significant advancement for patients who have not responded to first-line treatment for melanoma and is the first cell therapy designed for patients with solid tumor cancers. I want to start by acknowledging what is working well. I am genuinely impressed by our committed commercial organization and cross-functional field teams. These teams have laid a strong foundation for Amtagvi by raising awareness about the unmet needs in advanced melanoma and showcasing Amtagvi's robust clinical profile. They have successfully activated our 70 ATCs within our treatment network, prepared for new centers, achieved early inclusion in NCCN guidelines, and secured favorable reimbursement access for over 95% of U.S. covered lives. Thanks to these efforts, Amtagvi is a successful cell therapy and a pioneer in the solid tumor space. Today, I will outline our status and immediate initiatives aimed at enhancing our performance across three critical focus areas. First, we will discuss our strategy for expanding and retaining our ATC network to boost adoption. The second area will cover our plans to enhance engagement with medical oncologists to prompt earlier consideration of Amtagvi. Lastly, we will explore how we can further integrate Amtagvi within U.S. community oncology networks. To begin with our ATC strategy, during the launch year, we intentionally prioritized 70 experienced cell therapy centers, most located in major cancer centers, to treat nearly all currently handled melanoma patients within a two-hour radius. Performance metrics from these centers indicate significant growth and potential for Amtagvi. Currently, 79% or 56 ATCs have completed tumor resections, which serve as the initial material for TIL manufacturing. Additionally, 69% or 48 ATCs have infused more patients, while 16% or 11 ATCs have infused over 10 patients. ATC adoption is progressing positively, and we anticipate more growth from early launch centers with consistent patient volumes. Newer centers that were activated later in the launch are also contributing as they build experience. We are now in the process of activating over 10 more high-quality centers for our next wave of ATCs, particularly those aligned with large community networks that provide access to patients needing Amtagvi as second-line treatment. The next set of ATCs incorporates lessons learned, best practices, and the characteristics that make our top-performing centers stand out, all while considering clinic referral patterns. Simultaneously, we are working closely with all active ATCs to enhance early referrals and best practices for tumor sample procurement. As we look to expand Amtagvi's commercialization outside the U.S., we are in the process of onboarding 10 international treatment centers for launches planned in the United Kingdom, Canada, and Europe, aiming to have 15 international centers onboarded as ATCs by the end of this year. Now, moving to the second focus area. In the past three months, we revised our goal to gain a better understanding of physicians' perspectives on Amtagvi. Initially, our team effectively educated the cell therapy community and key oncologists about Amtagvi's benefits. Our market research reveals that many physicians view Amtagvi as a second-line treatment, but there is a gap between our targeted physicians and community oncologists regarding treatment sequencing; while our initial targets see Amtagvi as second-line, many community oncologists consider it for third-line therapy or later. This discrepancy presents a significant market opportunity for Amtagvi. Our primary goal is to establish Amtagvi as the preferred option for all suitable patients. To achieve this, we are working to educate referring oncologists to consider Amtagvi earlier in the treatment process, highlighting the promise of cell therapy in existing solid tumor treatment practices. There is a considerable patient population with great potential to drive earlier referrals to our ATCs. Unfortunately, some patients who start the Amtagvi journey pass away in hospice before surgery due to delayed referrals. With updated plans, we are intensifying our initiatives and educational efforts targeting community medical oncologists to promote earlier referrals and alter treatment sequencing. We will inform practitioners about the advantages of durable responses from one-time cell therapies like Amtagvi compared to temporary responses and ongoing side effects linked to other treatments. We will introduce new educational initiatives regarding disease states and increase our presence at relevant medical meetings to enhance understanding of TIL and cell therapy. For the first time in the context of advanced melanoma and solid tumors, we have demonstrated that a cell therapy derived from a patient's own immune cells can provide long-term benefits with curative intent. In our third area of focus, we are strengthening relationships within community oncology networks that treat patients eligible for Amtagvi. We are increasing resources within our community field teams to enhance the frequency and speed of referrals while also identifying new ATC targets. Recently, we have observed growing momentum in patient referrals to current ATCs and the identification of new ones. Since my arrival, we have engaged with executive leadership in all major U.S. community cancer networks and are now collaborating with leading community clinic networks to find and onboard several preferred centers for Amtagvi. We are also striving to eliminate any lingering barriers to access and adoption. For example, we are exploring alternative distribution channels to provide flexibility and broader acceptance of one-time therapies like Amtagvi while preserving our current pricing strategy. In addition to Amtagvi, our commercial organization is committed to supporting Proleukin across three main business segments: its use in Amtagvi, its role in manufacturing, and its clinical use. Beyond the core business associated with Amtagvi, manufacturing and clinical use provide an existing revenue base for Proleukin. My team is actively identifying opportunities to drive sales growth across all three segments. As Fred mentioned, we expect strong Proleukin sales in our primary channel to resume throughout 2025, with two distributors anticipated to reorder in the second quarter. To summarize, I am thrilled to lead our commercial organization into a promising future. Launching a first-in-class therapy presents unique opportunities to effect real change. I am deeply committed to Iovance's vision of establishing a new treatment paradigm for physicians who care for patients with solid tumors. We have just begun to tap into Amtagvi's potential, which could benefit more than 30,000 melanoma patients annually. Amtagvi holds immense promise in solid tumor cancers, which account for 90% of all cancers. I will now turn the call over to Igor Bilinsky, our Chief Operating Officer, to discuss our advancements in manufacturing.

Igor Bilinsky, Chief Operating Officer

Thank you, Dan. Today, I will provide an update on our progress in manufacturing. Our Philadelphia-based manufacturing network consists of 2 FDA-approved facilities, our internal manufacturing facility, the Iovance Cell Therapy Center, or ICTC, and an American-owned contract manufacturer. This network serves commercial patients in the U.S. as well as clinical trial patients across Europe, Australia, and Asia. Our experience in supplying TIL cell therapies to clinical patients around the world provides a strong foundation for delivering commercial product in the EU, U.K., and Canada in the near-term. Today, I'm pleased to report a major step forward in the ongoing review of our marketing authorization application, or MAA, for the European Union approval of Amtagvi. Recently, as part of the MAA process, the European Medicines Agency, or EMA, inspected and confirmed that the ICTC and our contract manufacturers facility are both GMP-compliant. These successful EMA inspections further validate our manufacturing network capabilities to meet regulatory standards from multiple health care authorities as we prepare to serve commercial patients in the European Union. As part of the ongoing launch, we steadily ramped up our staff manufacturing capacity to align with demand while tightly controlling expenses. As a result of our revised revenue guidance and updated demand forecast, as Fred described, we expect to realize additional cost savings by aligning our manufacturing capacity growth plans with demand. Owning our own manufacturing facility provides us with tremendous flexibility to scale up efficiently when needed. As mentioned previously, ICTC conducted and successfully completed annual scheduled maintenance. Given the three-week manufacturing process for Amtagvi, the network capacity was reduced by more than 50% for approximately one month in December 2024, thus lowering available capacity for Q1 Amtagvi infusions. Following maintenance, production resumed successfully with full capacity available for Q2 Amtagvi infusions. I will also comment on our manufacturing success rate in the first quarter. Delivering final product within defined specifications is critical for treating patients. Throughout the first nine months of the U.S. launch, our commercial manufacturing experience was consistent with prior clinical experience. The rate of patient drop-off in our success rate increased somewhat in the first quarter, thus impacting our cost of goods and gross margin, as Jean-Marc will further discuss. Following Q1, manufacturing success rates have since rebounded. During this year, we also expect to shorten our manufacturing turnaround time, which is currently 34 days from receipt of sales at the manufacturing facility to Amtagvi being ready for return shipment to the ADC. In addition, we continue being laser-focused on driving operational efficiencies and economies of scale to optimize the cost of goods and improve gross margin over time. Shifting to the current macroeconomic and geopolitical environment. Iovance is operating at a strategic advantage within the biopharma industry. We expect Amtagvi and Proleukin to see minimal impact from tariffs. Our intellectual property for Amtagvi and investigational TIL cell therapies is domiciled in the U.S. Amtagvi manufacturing is based in the U.S. Most of the Amtagvi cost is U.S.-based with direct materials procured from ex-U.S. vendors currently representing less than 5% of the Amtagvi cost of goods. For Proleukin, we have also brought sufficient Proleukin inventory to the U.S. that we expect to be sufficient for meeting demand into 2027. Our TIL cell therapy expertise and manufacturing capabilities are protected by a robust patent estate domiciled in the U.S. We own approximately 280 granted or allowed U.S. and international patents and patent rights for Amtagvi and other TIL-related technologies. We expect these patents to provide exclusivity through at least 2042. I'm available to answer questions during the Q&A, and I will now hand the call to Jean-Marc, our Chief Financial Officer.

Jean-Marc Bellemin, CFO

Thank you, Igor. Today, I will review our cash position and results for the first quarter of 2025. I will also highlight our financial outlook, including revenue, expense guidance, and gross margin. As of March 31st, 2025, our cash position was approximately $366 million. Our current cash position is sufficient to fund current and planned operations, including manufacturing expansion into the second half of 2026. I will now transition to our financial results. Net loss for the first quarter of 2025 was $116.2 million or $0.36 per share compared to a net loss of $113 million or $0.42 per share for the first quarter of 2024. Total product revenue consists of Amtagvi infusion in the U.S. and Proleukin sales. Total product revenue was $49.3 million for the first quarter of 2025, including $43.6 million for Amtagvi and $5.7 million for Proleukin compared to total product revenue of $0.7 million for the first quarter of 2024 for Proleukin. The U.S. commercial launch of Amtagvi and Proleukin sales drove the revenue increase in the first quarter of this year over the prior year period. I will now highlight our cost of sales, which includes cost of inventory, overhead, and related cash and non-cash expenses that are directly associated with sales of Amtagvi and Proleukin as well as manufacturing costs for Proleukin. Cost of sales for the first quarter of 2025 was $49.7 million, including $15 million in period costs associated with patient drop-off and manufacturing success rates, an increase quarter over quarter, as Igor previously described. $5.4 million for non-cash expenses, including fair market value step-up and intangible asset amortization and $1.3 million in royalties payable on product sales. During the first quarter of 2024, cost of sales was $7.3 million, primarily related to non-cash amortization for acquired intangible assets. The increase in cost of sales in the first quarter of 2025 over the prior year period was primarily attributable to cash and non-cash expenses associated with Amtagvi product sales tied to the U.S. launch, along with period costs associated with patient drop-off and manufacturing success rates. Average standard gross margin is 32% for the first four launch quarters. Standard gross margin for the first quarter of 2025 was 10% or $5 million compared to total product revenue of $49.3 million. First quarter was negatively impacted by lower revenue and higher cost of sales, as previously described. As we increase volume and capacity utilization, we expect gross margin to surpass 70% in the coming years. Our priorities are to drive revenue while optimizing our cost of sales with a correspondingly higher gross margin as we expand our manufacturing, coordinate and continue our focus on ATC engagement and training and realize efficiencies in manufacturing and release testing. I will now shift to our operating expenses. Research and development expenses were $76.9 million for the first quarter of 2025, a decrease of 4% compared to $79.8 million for the same prior year period that was primarily attributable to the transition of Amtagvi from clinical to commercial manufacturing. This decrease was partially offset by higher headcount and related costs, including stock-based compensation and clinical trial costs resulting from continued enrollment in existing trials. Selling, general, and administrative expenses were $43.9 million for the first quarter of 2025, an increase of 40% compared to $31.4 million for the prior year period. Higher selling, general, and administrative expenses were primarily attributable to increases in headcount and related costs, including stock-based compensation, to support the growth in the overall business, and related corporate infrastructure, marketing and legal costs, and costs to support the commercialization of Amtagvi and Proleukin. Looking ahead, we revised our guidance to between $250 million and $300 million in total product revenue for the full year 2025. After aligning our manufacturing slot expansion strategy with our new demand forecast, we are maintaining our current cash runway guidance into the second half of 2026. Cash burn for the full year 2025 is expected to remain in line with prior guidance of less than $300 million with a strong focus on optimizing spending and reducing expenses throughout the organization, including flat expenses related to Amtagvi manufacturing headcount expansion for the latter half of 2025. As we grow revenue and as gross margin improves, we expect further reduction in our net cash spend with ample flexibility to control both capital and operating expenses as we approach breakeven. For additional information, please see the company's selected consolidated balance sheet and statements of operations in this afternoon's press release and our Form 10-Q to be filed later today. I will now hand the call to Friedrich, our Chief Medical Officer, to discuss our clinical pipeline.

Friedrich Graf Finckenstein, Chief Medical Officer

Thank you, Jean-Marc. Building on the team's comments about Amtagvi, the durability of responses following one-time treatment is a key differentiator from other available and emerging therapies. We will present five-year results from our C-144-01 trial at the American Society of Clinical Oncology or ASCO Annual Meeting on June 2nd. Compared to prior data updates, these results show consistent trends for overall survival and durability over a five-year period. Our clinical programs and next-generation approaches are the next frontier for TIL cell therapy in solid tumors, which represent more than 90% of all diagnosed cancers in the U.S. Future growth drivers include global label expansion for Lifileucel into frontline advanced melanoma, other solid tumor types such as non-small cell lung cancer, and next-generation therapies. Today, I will summarize our latest pipeline updates. First, we are making progress towards the broader commercial opportunity for Amtagvi in frontline advanced melanoma. Our global registrational Phase 3 trial, TILVANCE-301, remains on track to support accelerated and full approvals of Amtagvi in combination with pembrolizumab in frontline advanced melanoma as well as regular approval of Amtagvi in our initial indication in post anti-PD-1 melanoma. A proof-of-concept cohort is also investigating Lifileucel in combination with nivolumab and relatimab in the U.S. Our registrational program in advanced non-small cell lung cancer, the single-arm Phase 2 IOV-LUN-202 clinical study is designed to show efficacy and safety of Lifileucel monotherapy in patients progressing after anti-PD-1 therapy. There is a significant unmet medical need as most patients progress and chemotherapy, the current standard-of-care in this treatment setting provides limited rate and duration of responses. We remain on track as planned to share additional data from IOV-LUN-202 in the second half of 2025. The trial is designed with the potential to support a potential regulatory decision on U.S. accelerated approval in post anti-PD-1 non-small cell lung cancer in 2027. In frontline non-small cell lung cancer, our strategy is to establish a new regimen consisting of Lifileucel plus pembrolizumab following standard-of-care chemotherapy pembrolizumab. Multiple cohorts are investigating patients with EGFR wild-type non-small cell lung cancer who are the majority of patients with an unmet medical need in this treatment setting. Turning to another significant opportunity, advanced endometrial cancer, our IOV-END-201 clinical trial is investigating Lifileucel as the frontline standard-of-care of chemotherapy and anti-PD-1. We look forward to sharing initial data from END-201 in the second half of this year. As the leader in TIL cell therapy, Iovance is also at the forefront of next-generation approaches to optimize TIL and TIL treatment regimens. I'll briefly summarize our three lead next-generation programs. Our PD-1 inactivated TIL cell therapy, IOV-4001, continues to enroll patients in a trial in previously treated advanced melanoma or non-small cell lung cancer. Building on our successful Proleukin franchise, we are treating patients in a Phase 1/2 clinical trial of IOV-3001, a second-generation modified IL-2 analog for use with the TIL cell therapy treatment regimen. And lastly, IOV-5001 is a genetically engineered inducible and tethered IL-12 TIL cell therapy with potential for enhanced activity, which could facilitate expansion into a wide range of common solid tumor cancers beyond our current pipeline with significant market opportunity. We plan to submit an investigational new drug application to the FDA this year for IOV-5001. I'm happy to address questions about these programs and additional trials during the Q&A session. I'll now turn the call over to the operator to begin the question-and-answer session.

Operator, Operator

Our first question comes from Andrew Tsai with Jefferies. Your line is open.

Andrew Tsai, Analyst

Hey. Thanks. Good afternoon. Thanks for taking my question. Appreciate the update. My question is around the line of sight you're having amidst the revised guidance. Presumably, you do have some direct line of sight, maybe at least a month in advance into the number of patients who are waiting to get dosed in the Q. Can you confirm whether you're seeing or have seen a spike or an inflection in patient uptake as of today to give you the confidence around your guidance of 110 patients for Q2? Thank you.

Dan Kirby, Chief Commercial Officer

So Andrew, this is Dan. Thank you very much. Yes, we're confident in that number, and we are seeing demand, as we stated in the script, in quarter two be strong.

Operator, Operator

Thank you. Our next question comes from Tyler Van Buren with TD Cowen. Your line is open.

Tyler Van Buren, Analyst

Hey guys. Thanks very much for all the information. So, for the 11 ATCs that have infused more than 10 patients, were most of them involved in the clinical program? And it's just a matter of getting the other ones that weren't up to speed? Maybe you could discuss the barriers of the other 37 ATCs that have infused more than one patient but haven't infused 10 plus and what tactics you're employing to get them to increase their utilization?

Fred Vogt, Interim CEO

Yes, Tyler, I'll start, and I'll pass it over to Dan to give you a little bit more on the second part of that question. On the trial, only a few of those ATCs were actually involved in the trial. It's not necessarily a correlation between the clinical trial unit at the site and their experience and what the site does with commercial Amtagvi. A lot of times it's different people, and we have to work closely with that unit at each ATC to get them up to speed. So, there is some learning there, but we're able to overcome it. And obviously, we're learning quite a bit ourselves about how to do that, and we're getting better and better all the time. And that's why we have confidence that many of those other ATCs are going to come along quickly. And in fact, we're seeing that today. But Dan, do you want to take the second part of the question?

Dan Kirby, Chief Commercial Officer

Sure. And looking at just with cell therapy in general, there's actually patients coming into treat, and there's a cell therapy experience level at these centers. So, what we'll say is that the larger centers that got off to a quicker start, those are the ones with the infrastructure from various cell therapy launches that were ready for Amtagvi to enter in. The other ones are ramping up to speed. They're doing this with other cell therapies as well. But infrastructure such as billing, mechanism, cell therapy lab, etc., are coming online with that. So we are seeing them increase their ramp a lot quicker once they get that infrastructure in place. Does that answer your question?

Tyler Van Buren, Analyst

Yes. Thank you.

Operator, Operator

Thank you. Our next question comes from Salim Syed with Mizuho. Your line is open.

Salim Syed, Analyst

Great. Thanks for the question guys and for your color there. I guess on your guidance kind of going forward here for 2025, if I'm doing my math correctly here and assuming something like 20% Proleukin, sort of backing into that the balance of the year, you're going to have something like 250 or 325 infusions. So, roughly like, call it, 100, 110, something like 100 per quarter roughly. Is that a correct way to sort of think about this, which essentially applies no growth versus like the 2Q number?

Fred Vogt, Interim CEO

No, Salim, that's not the correct way to look at it. As you know, we generated $164 million in revenue last year, which included a significant amount of Proleukin. This year, we're anticipating revenue of $250 million to $300 million, indicating substantial growth. If you prefer to consider just infusions, you can analyze the four quarters. We began infusing our first two patients in April 2024. By the end of March, we had approximately 280 patients infused. Our guidance suggests that we will likely exceed 500 patients infused this year across the four quarters of the fiscal year. Additionally, we will see further growth into 2026 as well. This points to a growth rate of 50% or more year-over-year, with significant potential for further upside. Dan, do you want to add anything?

Dan Kirby, Chief Commercial Officer

Sure. So, what I would say is the way you can look at this is that we expect continued growth throughout this year. So it will not be flattening; it will continue to grow. That's driven by two factors. One, as we talked about the increase in adoption in our centers, both the ones that started in the very beginning and the ones that ramped up through 2024 and the addition of new ATCs that have enhanced referral networks within the community to get patients not only in quantity but also quality, meaning they're getting earlier referrals.

Salim Syed, Analyst

Okay. Thank you so much.

Operator, Operator

Thank you. Our next question comes from Andrea Newkirk with Goldman Sachs. Your line is open.

Andrea Newkirk, Analyst

Good afternoon. Thanks for taking the question. Maybe a follow-up there, Fred, on what your guidance is implying per infusion. I just want to make sure I understood this. But are you suggesting that 500 infusions should be on top for 2025? And if that's the case, then what are you assuming for Proleukin through the remainder of this year even after the uptick expected in 2Q?

Fred Vogt, Interim CEO

So, if you just take the guidance we gave, subtract off the number like what Salim just gave you for Proleukin and divide that through by 550 or so, you're going to get something in the high 400s, close to 500 depending. And if you think there's some upside here, there could be some upside on top of that. Does that answer the question?

Andrea Newkirk, Analyst

Okay. Thank you. And then just really quickly, Igor, could you just speak to what drove the higher patient drops or lower manufacturing success in the quarter? And what gives you the confidence that this will reverse on the forward?

Igor Bilinsky, Chief Operating Officer

Thank you for the question, Andrea. Much of this is related to patient selection and the tumor procurement technique. As I mentioned, we have already observed a return to normal in Q2. What gives us confidence is the success rate trends among ATCs that have been operational for a significant period and the experience curve they have been able to develop. This reassures us that the process is teachable and can be applied to other ATCs within the network.

Operator, Operator

Thank you. Our next question comes from Yanan Zhu with Wells Fargo. Your line is open.

Yanan Zhu, Analyst

Thank you for taking our questions. I have a clarifying question. I might be missing something. If each Amtagvi product is approximately over $500,000, that totals $0.5 million. If we have 500 patients infused this year, that alone would amount to $250 million, which is the lower bound of the guidance. If that's accurate, then adding IL-2 should push the lower bound of guidance above $250 million. I am trying to determine if my assumption about the per patient price is incorrect. Thank you for clarifying. My actual question is regarding COGS. It seems that COGS as a ratio of revenue has increased over the last quarter. I'd like to understand what portion of COGS is attributed to patient attrition, such as patient deaths or manufacturing failures. Any insight you can provide would be appreciated. Thank you.

Fred Vogt, Interim CEO

Yes. Yanan, regarding our guidance, we believe it to be quite conservative. As you calculate, there is likely to be some upside based on what we're presenting. If we achieve 500 infusions, the upper end could exceed 300. With this new guidance, we want to demonstrate that we can surpass expectations with this launch. It may not align perfectly with your predictions, as you might estimate around 450 patients if you're being conservative. Nevertheless, it still represents growth compared to the first three quarters of the launch. If you consider it on a fiscal year basis or a four-quarter schedule, during the first four quarters of our launch, we treated around 280 patients. Now, regarding the COGS question, let me address that; it involves the ratio of scrap, and Jean-Marc and perhaps Igor may need to assist with that.

Dan Kirby, Chief Commercial Officer

Can I just say one thing? First, the quarter's $250 million represents a 50% growth over 2024 sales revenue. This is certainly an increase at the lower end. We would love to see even more upside from this. Regarding patient health, I want to clarify that the patients referred to were those who went to hospice or passed away before the manufacturing process began. They were already in hospice before we initiated tumor procurement, so they would not impact COGS. Igor, would you like to address the COGS question along with Jean-Marc?

Fred Vogt, Interim CEO

I think Jean-Marc may need to take that.

Jean-Marc Bellemin, CFO

I'm happy to address the COGS question. You're correct that we experienced an increase in the overall cost of sales. As Igor mentioned earlier, we noticed a spike in the out-of-spec results in the first quarter, which we expect will improve over time. It's important to consider this in relation to our overall revenue. The cost of goods and the cost of sales did rise in Q1, particularly in connection with revenue, but we anticipate that this will definitely improve in Q2. Additionally, our standard gross margin remained positive in Q1, as I previously indicated.

Yanan Zhu, Analyst

Got it. Thanks for the color.

Operator, Operator

Thank you. Our next question comes from Colleen Kusy with Baird. Your line is open.

Colleen Kusy, Analyst

Good afternoon. Thanks for taking our question. So, you reported patient dropout and out-of-spec rate together, but can we assume that, that out-of-spec rate went up? And if so, what drove that? Was it anything to do with the annual maintenance? And then would we expect that same one-month interruption going forward every year? Thank you.

Fred Vogt, Interim CEO

So, Colleen, thanks for the question. So, again, regarding the patient drop-offs and manufacturing success rate, these closely relate to each ATC's track record in patient selection and tumor tissue procurement. And again, the increase we saw in Q1, we believe it to be transient. It's already normalized in Q2 to date. So, that's what we believe is driving it. We have new ATCs, new surgeons, and some of that needs to be optimized over time, which our teams are working on. What was the second part of the question?

Colleen Kusy, Analyst

Just the annual maintenance, whether that will be a similar one-month, 50% reduction in capacity?

Fred Vogt, Interim CEO

We are currently completing the build-out of the shelf space at ICTC. The shelf space will be operational later, but not this year. Once it is operational, maintenance will only affect part of the ICTC facility, not the entire facility.

Igor Bilinsky, Chief Operating Officer

It will have less impact.

Fred Vogt, Interim CEO

But yes, Colleen, this is an annual event that must be done.

Peter Lawson, Analyst

Thank you very much. Can you tell me if manufacturing has returned to normal levels? Was there an issue in Q4 related to this as well? Is this the same issue that has carried over into Q1 or is it something different?

Fred Vogt, Interim CEO

I'm not really sure, Peter, what you're asking. The important point is we didn't discuss that in the last quarter at all. What we did mention back then is that there would be a shutdown, and we were in the process of actually implementing it. But no, we don't.

Igor Bilinsky, Chief Operating Officer

There was no issue with the manufacturing success rate in Q4. In fact, Q4 was a good quarter.

Fred Vogt, Interim CEO

The important thing to remember here, Peter, is rebounded already. Again, we think it has to do with individual activities in some of the ATCs and how they procure tumor as well as some things that we can learn from throughout the entire process and how we can improve those things. And it looks like it's already rebounded pretty well, and we're back in the zone where we think we were during the first part of the launch.

Operator, Operator

Thank you. Our next question comes from Reni Benjamin with Citizens. Your line is open.

Reni Benjamin, Analyst

Thank you for taking my questions. Igor, you mentioned that the different ATCs are approaching things in various ways. I'm interested in understanding the strategies you are currently using to align these ATCs and enhance manufacturing processes overall. Additionally, regarding the revised guidance, we were surprised by it when you first provided guidance for this year last year. Why did you decide to set guidance for 2025 back in 2024, especially considering a current focus on being conservative?

Fred Vogt, Interim CEO

So the first part, perhaps Dan can answer.

Dan Kirby, Chief Commercial Officer

Sure. I can also throw over to Brian for that. One of the things we're seeing for the tumor tissue procurement that's happening at the centers and replicating the successes that we're seeing with the surgeons that are doing it better than others. We actually have our field teams out there now to really focus and actually on the medical affairs side. So, I'll hand to Brian. But Brian, can you talk about how your field teams are addressing that at the centers to replicate success?

Brian Gastman, EVP of Medical Affairs

Yes, we're seeing that these centers continue to expand and attract new members. We're implementing a high-touch service approach where we support newer surgeons through a comprehensive program that guides them from start to finish in the surgical process. Our aim is to ensure that every case is as successful as possible. The feedback has been positive, especially from new centers and surgeons, and we're looking to accelerate the learning curve for our newest advanced training candidates by allowing them to learn from the experiences of our seasoned advanced training candidates.

Fred Vogt, Interim CEO

I guess I can get the second part of your question, Reni. Back in August, we were trying to give investors our best line of sight to what we thought was going to happen. At that point, we were very well aware of the high demand for the product, and we were ramping up our manufacturing as fast as we could. So, we built our model on the back of how many manufacturing slots we would make available maximum ramp. Now, as we've gone, we've learned a lot about the launch, especially recently as we watch some of the dynamics with the ATCs, we looked at our experience with growth trajectories there. We look at the timelines it takes for new ATCs to come on board and begin treating their first patients and how they work through their processes. We're onboarding these large community practices, which takes some time, and we're doing the community referral process, which takes a lot of time, too. And as we looked at that, we just decided that it was better and more accurate for us to forecast guidance that we gave today to show you that we can still make this product grow very, very substantially. But now what we're going to do is we're just going to limit some of our manufacturing slots. It ends up being essentially almost a neutral with respect to how we use our cash, and we'll roll forward and we'll continue to succeed on the launch. But we think we'll do it on terms that are, I think, a little bit more in line with what we actually see at the ATCs.

Operator, Operator

Thank you. Our next question comes from Asthika Goonewardene with Truist. Your line is open.

Unidentified Analyst, Analyst

Hi, this is Corrina for Asthika. Thanks for taking the questions. What percentage of the product is currently being manufactured at the ICTC versus contract manufacturer? And then also, again, on lower manufacturing success rate, some of the clinicians they noted that there's a need for a larger amount of tissue to improve success rate. Can you comment on that? Thanks.

Fred Vogt, Interim CEO

So I'll take the first part. ICTC, our internal manufacturing facility is responsible for most of the manufacturing volume and has significantly higher capacity than our contract manufacturer. And then the second part, perhaps I'll turn it over to Brian.

Brian Gastman, EVP of Medical Affairs

Yes, we've made several updates regarding best practices for surgical procedures. This includes everything from the volume of tumors to their handling and preparation before they are sent to us. To be honest, we don't always require all the tumors that are sent, but our guidance is generally tailored to what I would consider the average tumor collection and average surgeon, as top surgeons likely don't need much direction while those who are less experienced may require more support. Overall, we do request as much tumor as can reasonably fit into the vial we provide.

Unidentified Analyst, Analyst

All right. Thank you.

Operator, Operator

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Fred Vogt, Interim President and CEO, for closing remarks.

Fred Vogt, Interim CEO

Thank you again for joining the Iovance Biotherapeutics first quarter 2025 financial results and corporate update conference call. We look forward to providing future updates on our growing commercial and clinical portfolio, including our data presentation and investor event at the upcoming ASCO Annual Meeting in Chicago. We are motivated by the stories we continue to hear about the patients who benefit from Iovance TIL cell therapies in our clinical trials in the commercial setting. I'm confident that Iovance will remain the global leader in innovating, developing, and delivering current and future generations of TIL cell therapies for patients with cancer. As always, we are thankful to the patients, health care, and advocacy communities, our partners, and our exceptional Iovance team. I would also like to thank our shareholders and covering analysts for their support. Thank you.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.