On March 12, 2019 Inovio Pharmaceuticals, Inc. (NASDAQ:INO), a late-stage biotechnology company focused on the development and commercialization of DNA immunotherapies targeted against cancers and infectious diseases, reported financial results for the fourth quarter and year ended December 31, 2018 (Press release, Inovio, MAR 12, 2019, View Source [SID1234534260]). Inovio’s management will host a live conference call and webcast at 4:30 p.m. Eastern Time today to discuss financial results and provide a general business update.

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Inovio Pharmaceuticals. (PRNewsFoto/Inovio Pharmaceuticals, Inc.)
Inovio Highlights

MEDI0457 (formerly INO-3112, licensed to AstraZeneca)
Between October 2018 and January 2019, Inovio announced two patients with human papilloma virus (HPV)-related head and neck cancer that were treated with INO-3112 (now called MEDI0457) in a Phase 1 trial achieved a sustained complete response (full remission) following subsequent treatment with a PD-1 checkpoint inhibitor. Both patients who achieved full cancer remission were treated with four doses of synthetic DNA vaccine as part of a Phase 1 monotherapy trial of 22 patients with HPV-related head and neck squamous cell carcinoma in which 91% of patients (20/22) showed T cell activity in the blood or tissue. The administration of synthetic DNA vaccine in the trial generated robust HPV16/18 specific CD8+ T cell responses in peripheral blood and increased CD8+ T cell infiltration in resected tumor tissue samples. Complete response in 2 out of 4 (50%) progressors is encouraging, as to Inovio’s knowledge, the best complete response rate by PD-1 inhibitors as a monotherapy in metastatic head and neck cancer is approximately 4% (8/192 with KEYTRUDA alone and 6/240 with OPDIVO alone).

Additionally, in December 2018, Inovio announced a second Phase 2 study in collaboration with AstraZeneca and the MD Anderson Cancer Center to evaluate MEDI0457 in combination with durvalumab targeting a broad array of cancers associated with HPV. The treatment of the first patient with cervical cancer in this trial resulted in a milestone payment from AstraZeneca to Inovio.
VGX-3100 – HPV-related Pre-cancers
VGX-3100, which is a sibling product candidate to MEDI0457, continues to be evaluated in the double-blind global Phase 3 study for the treatment of cervical dysplasia (CIN). The enrollment for primary study, REVEAL 1, is nearing completion; while the confirmatory study, REVEAL 2, is now open and recruiting. The company maintains the target objective on a BLA submission for VGX-3100 in 2021. In addition to VGX-3100 for the treatment of CIN, the company anticipates interim efficacy later this year from our 2 separate Phase 2 studies that are evaluating the efficacy of VGX-3100 in patients with precancerous lesions of the vulva, or vulvar dysplasia, as well as for anal dysplasia.
INO-5401 – Cancer Combination Trials
Inovio’s Phase 1/2 immuno-oncology trial evaluating INO-5401 plus INO-9012, in combination with Regeneron Pharmaceuticals’ cemiplimab (REGN2810) in patients with newly diagnosed glioblastoma currently has 20 sites open within the United States with the enrollment of 52 patients nearly completed. In Inovio’s other Phase 1/2a study of INO-5401 plus INO-9012, in combination with Genentech/Roche’s atezolizumab, for the treatment of advanced or metastatic bladder cancer, the company recently opened sites in Europe to further accelerate enrollment along with its 13 active sites in the United States. The company expects interim efficacy results from both programs in 2019.
Infectious Diseases
Inovio and its partner GeneOne Life Science, with a full funding from the International Vaccine Institute, are conducting a Phase 1/2a MERS vaccine study in South Korea, with data report expected in 2019. Inovio also plans to initiate a Phase 2 MERS vaccine field trial in the Middle East with full CEPI funding in 2H 2019.
Inovio received IND approval for another CEPI funded vaccine for combatting Lassa fever, which will advance into the first human trial in the second quarter.
All patient samples have been collected for Inovio’s Zika vaccine trial in Puerto Rico. Inovio’s partner GeneOne is analyzing all samples blindly and will report safety, immune responses and infection rate data from this study in 2019.
Inovio expects to have clinical data from several Phase 1 vaccine programs published multiple publications in 2019: Ebola vaccine; MERS vaccine; HIV; and ZIka vaccine study in Puerto Rico.
DNA-Encoded Monoclonal Antibody (dMAb)
In February 2019, the company dosed the first subject in the first-ever human study of Inovio’s DNA-encoded monoclonal antibody (dMAb) technology evaluating the dMAb’s (INO-A002) ability to prevent or treat Zika virus infection. This study is being fully funded by The Bill and Melinda Gates Foundation. While the trial’s focus is on evaluating the dMAb for Zika infection, the clinical results are intended to help advance Inovio’s dMAb programs in infectious diseases and cancer.
Geneos Therapeutics, Inc.
In February 2019, Inovio’s subsidiary Geneos, secured a Series A financing round with potential proceeds of up $10.5 million. This funding has launched Geneos’ operations as a standalone entity to develop the next generation of neoantigen-targeting cancer immunotherapies. Geneos has an exclusive license to Inovio’s DNA-based immunotherapy platform for personalized cancer immunotherapy; Inovio will continue to develop and potentially commercialize all global population-based (non-personalized) cancer immunotherapies and infectious disease vaccines based on its proprietary SynCon design.
Cash Position
As of December 31, 2018, cash and cash equivalents and short-term investments were $81.2 million compared to $85.5 million as of September 30, 2018. In February and March 2019, the Company completed a private placement of $78.5 million aggregate principal amount of 6.50% convertible senior notes due 2024, or the Notes. The Notes were sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Net proceeds from the offering were approximately $75.8 million, after deducting the initial purchasers’ discount and estimated offering expenses payable by the Company.
Dr. J. Joseph Kim, Inovio’s President & CEO said, "Our Phase 3 program for VGX-3100 is advancing with REVEAL 1 nearing complete enrollment and the opening of sites for REVEAL 2. Moreover, Inovio continues to generate impressive efficacy data for HPV-related head and neck cancers, further validating our objective to be the global leader in treating HPV-related diseases. The announcement of the second patient achieving full cancer remission in January provides additional corroboration for Inovio’s overall cancer combination strategy using a T cell activator combined with a checkpoint inhibitor against an array of cancers with big pharma partners providing various checkpoint inhibitors. With interim efficacy data expected later this year from our INO-5401 programs, we believe Inovio is well-positioned to continue to build upon its synthetic DNA immunotherapy approach, while continuing to leverage our current partnerships and seeking to form new ones."

Fourth Quarter 2018 Financial Results

Total revenue was $2.5 million and $30.5 million for the quarter and year ended December 31, 2018, respectively, compared to $8.8 million and $42.2 million for the same periods in 2017. Total operating expenses were $32.0 million and $124.6 million for the quarter and year ended December 31, 2018, respectively, compared to $31.7 million and $125.9 million for the same periods in 2017, respectively.

As a result of the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, beginning on January 1, 2018, all contributions received from current grant agreements have been recorded as a contra-expense as opposed to revenue on the consolidated statement of operations. For the quarter and year ended December 31, 2018, $2.8 million and $9.5 million, respectively, was recorded as contra-research and development expense, which would have been classified as grant revenue in the prior year. Had this change in presentation not occurred, total revenue would have been $5.3 million and $40.0 million for the quarter and year ended December 31, 2018, respectively, compared to $8.8 million and $42.2 million for the same periods in 2017. Total operating expenses would have been $34.8 million and $134.1 million for the quarter and year ended December 31, 2018, respectively, compared to $31.7 million and $125.9 million for the same periods in 2017.

Inovio’s net loss for the quarter and year ended December 31, 2018 was $33.0 million, or $0.34 per basic and diluted share, and $97.0 million, or $1.05 per basic and diluted share, respectively, as compared to $21.5 million, or $0.24 per basic and diluted share, and $88.2 million, or $1.08 per basic and $1.09 per diluted share, for the same periods in 2017.

Revenue

The year over year decrease in comparable revenue and grant agreement recognition was primarily due to $15.4 million in lower revenues recognized under Inovio’s collaborative research and development agreement with AstraZeneca, as previously deferred revenue was recognized in June 2017 upon AstraZeneca’s selection of the first cancer research collaboration product candidate. There was also a decrease in grant funding recognized from Inovio’s DARPA Ebola grant of $8.8 million as well as no revenue recognized in 2018 from Roche compared to $6.1 million for 2017 due to the termination of the agreement in 2017. These decreases were partially offset by the recognition of the gross up-front payment from ApolloBio of $23.0 million during the year (approximately $19.4 million after payment of required taxes), as well as an increase in grant funding from the CEPI grant of $4.3 million, among other variances.

Operating Expenses

Research and development (R&D) expenses for the quarter and year ended December 31, 2018 were $26.4 million and $95.3 million, respectively, compared to $24.6 million and $98.6 million for the same periods in 2017. The year over year decrease in R&D expenses was primarily due to the $9.5 million contra-research and development expense recorded from grant agreements as discussed above, as well as a decrease in expenses related to Inovio’s DARPA Ebola grant. These decreases were offset by an increase in expenses for drug manufacturing related to Inovio’s collaboration with AstraZeneca, employee headcount to support clinical trials and partnerships, and expenses related to clinical trials, among other variances.

General and administrative expenses were $5.6 million and $29.3 million, respectively, for the quarter and year ended December 31, 2018 versus $8.0 million and $28.3 million, respectively, for the same periods in 2017.

Capital Resources

As of December 31, 2018, cash and cash equivalents and short-term investments were $81.2 million compared to $85.5 million as of September 30, 2018. As of December 31, 2018, the Company had 97.2 million common shares outstanding and 107.7 million common shares outstanding on a fully diluted basis, after giving effect to outstanding options, restricted stock units and convertible preferred stock.

During the year ended December 31, 2018, the Company sold 5,669,025 shares of common stock under its current and prior "at-the-market" (ATM) common stock sales agreements for aggregate net proceeds of $29.2 million.

During the year ended December 31, 2018, stock options and warrants to purchase an aggregate of 756,853 shares of common stock were exercised for aggregate net proceeds of $2.4 million.

In February and March 2019, the Company completed a private placement of $78.5 million aggregate principal amount of 6.50% convertible senior notes due 2024, or the Notes. The Notes were sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Net proceeds from the offering were approximately $75.8 million, after deducting the initial purchasers’ discount and estimated offering expenses payable by the Company.