ImmunityBio

Moat: 2/5

Understandability: 4/5

Balance Sheet Health: 2/5

A clinical-stage biotechnology company developing next-generation therapies for cancer and infectious diseases by stimulating the patient’s immune system.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview:

ImmunityBio (IBRX) is a biotechnology firm focused on developing novel immunotherapies and cell therapies to combat cancer and infectious diseases. Their core strategy is to engineer the body’s own immune system to fight diseases. This strategy includes leveraging targeted cytokines, CAR T-cell therapies and other platforms. While many biotechnology companies are focused on one therapy, IBRX is actively exploring multiple approaches, including vaccines, and thus has more options to create more value.

  • Revenue Streams: IBRX, being a clinical-stage company, is primarily pre-revenue. Its revenue has largely depended on milestone payments associated with partnerships and collaborations. In recent years, the company has earned minimal revenue, but that is expected to change if and when the company can obtain regulatory approvals and ultimately commercialize its product candidates. In their latest 10-Q report, IBRX revenue was $2.3 million for three months ended March 31, 2023, as compared to $70,000 for three months ended March 31, 2022. For six months ended June 30, 2023 revenue was $4.6 million (unconsolidated).
  • IBRX has minimal revenues from product sales, instead they are dependent on collaboration, licensing and sales of their technologies. As the company grows, this situation will change.
  • Industry Trends: The pharmaceutical and biotechnology industries are undergoing major innovations, particularly in immunotherapy and personalized medicine. The focus is shifting towards treatments that are more targeted to a specific patient, that is what makes IBRX’s work relevant.
  • Margins: As a pre-revenue stage biotechnology company, IBRX does not have profit margins to report. This metric will become more relevant only after commercialization of product candidates occurs.
  • Competitive Landscape: The competitive landscape in IBRX’s space is intensely competitive. It primarily includes pharmaceutical firms, biotech companies, medical device companies and research institutes, and all are involved with research and development to gain an edge. IBRX claims their “proprietary platforms” and technology as their competitive advantage.
  • What Makes IBRX Different: While most biotechnology companies will focus on one technology, IBRX’s approach of combining multiple technologies is unique. They are combining immune-oncology therapies, such as oncolytic viruses, cytokine fusion proteins, NK cells and T cell therapies, as a single therapeutic agent. These novel combinations may be the key to their future. In addition, they are doing the manufacturing in-house, unlike other firms, giving them more control of their technology and potentially helping on the margin front by cutting external costs.

Moat Analysis: 2/5

  • Economic Moat: IBRX is currently not showing its economic moat as such, the company’s strategy has been a focus on obtaining FDA approvals and partnerships. If their products are eventually proven to be successful at curing diseases, then that would be an effective barrier. The biggest positive is their manufacturing infrastructure, which very few companies have and this should provide a cost advantage in addition to helping control their product quality. The company is developing treatments based on multiple platforms which does give them more options compared to other companies that are focused on one type of therapy. That being said, their moat is very narrow or weak since they are not yet in the commercialization stage and are competing with several other research and biotech firms, many of them with more proven therapies.
  • Rating Justification: While IBRX has some promising technology and a unique business, it is ultimately a pre-revenue stage and is still not clear if its products will be successful in clinical trials and approved. For now, IBRX’s moat is at best considered to be “narrow” and only until they demonstrate consistent profitability can it be said to be “wide.”

Risks and Business Resilience:

  • Clinical Trial Risks: As a clinical stage company, IBRX depends on its future success and approval of its product candidates, if these trials fail the company will suffer considerably.
  • Regulatory Risks: The regulatory approvals for pharmaceutical products are always challenging. As such, IBRX needs to adhere to all those regulations and if there is some issue with the approval, the company’s stock price will suffer.
  • Financing Risks: As IBRX does not yet generate sufficient revenues to fund all of its operations, it will need to continuously raise additional capital, which will dilute existing shareholders.
  • Competition Risks: The competitive landscape is constantly changing. There is no guarantee that competitors won’t develop similar products that are better or cheaper. Furthermore, there could be disruptive technology that could make existing treatments obsolete or redundant.
  • Limited Commercial Track Record: IBRX currently has no FDA approved commercial products and no marketing infrastructure in place for the same.
  • Resilience: They are developing treatments against some of the most dangerous diseases like cancer, which has created massive demand for such therapies. They also have a manufacturing facilities and thus are not reliant on external suppliers and therefore can easily change direction in case of issues.

Financial Analysis

  • Cash Position: While IBRX has minimal revenues, it is still cash rich, it has $438.8 million in cash, cash equivalents, and short-term investments. This gives them breathing room to conduct the research.
  • Debt: IBRX has almost no debt, with $72.3 million in long-term debt (related party debt) and no short-term debt. This is a good thing since it allows the company more financial flexibility, and gives them freedom from repayment issues.
  • R&D Spending: The company spends heavily on R&D, in the six months ended June 30, 2023 they spent $224.7 million on research and development. They need to continue with these spending, even in times of bad economy, and this creates a high risk of failure.
  • Net Loss: Despite the promising technologies, IBRX has a history of massive losses, with a net loss of $417.3 million for the six months ended June 30, 2023 and total net loss of $644.4 million for the year ended December 31, 2022. It would appear that the company may continue to bleed money, without a product, for some time into the future. This creates risk and uncertainty.
  • The lack of products and continued expenses has resulted in major accumulated losses. In the last six months they lost $417.3 million while only making $4.6 million in revenues.
  • Shareholder Equity: The total shareholder equity has significantly declined to $823.7 million on June 30, 2023, from a level of $1.28 Billion at the start of 2022. The decrease is attributed to their losses over the time and the dilution to raise cash.
  • Recent Controversy: There was a whistleblower case against IBRX by a former employee and chief scientist. The person alleges that they have experienced fraudulent practices of clinical data, and their work at IBRX included manipulation of scientific information. Although this is an ongoing matter that may not be accurate, this kind of scandal does damage to the company. Management has replied, saying “these claims are baseless” and is taking legal action against those persons.
  • Although there is a possibility that the claims are not accurate, IBRX needs to take it seriously as such controversy hurts the stock and the investors.

Understandability Rating: 4/5

  • IBRX’s business can be hard to understand for an average investor. It is a clinical-stage biotechnology company that focuses on a unique approach to medicine: using the body’s own system to combat diseases, mostly cancers. There are multiple approaches they are experimenting with. It would require an above-average grasp of technology to fully understand IBRX’s work. The general concepts, however, such as clinical trials and regulatory requirements are easier to understand.

Balance Sheet Health: 2/5

  • IBRX’s balance sheet is not very strong, since it has minimal revenue. It does have good cash reserves and minimal debt which give it a temporary benefit, but is losing money every year and they don’t have any products in the market. It is easy to say that, due to this, the company has weak balance sheet health which has a long way to improve.