INOVIO Pharmaceuticals, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The company is a clinical-stage biotechnology business developing DNA vaccines, immunotherapies, and DNA-encoded antibodies using its SynCon and CELLECTRA platforms. It reported no product sales; all candidates remain in research and development.
Financial results and position
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Total revenue | $0.2 million | $0.4 million |
| Research and development expense | $56.0 million | $39.0 million |
| General and administrative expense | $16.0 million | $13.9 million |
| Operating loss | $71.7 million | $52.6 million |
| Net loss | $79.1 million | $54.4 million |
| Basic and diluted loss per share | $0.36 | $0.27 |
| Net cash used in operating activities | $61.9 million | $52.9 million |
| Cash and cash equivalents plus short-term investments | $360.4 million at March 31, 2022 | $401.3 million at December 31, 2021 |
| Working capital | $340.5 million at March 31, 2022 | $382.7 million at December 31, 2021 |
| Convertible senior notes, net carrying amount | $16.2 million | $15.0 million at December 31, 2021 |
Revenue was immaterial relative to operating costs; the filing does not present a meaningful gross margin. R&D expense rose primarily with INO-4800 manufacturing and clinical work, COVID-19 variant studies, and an RRP study, partly offset by lower device engineering costs and stock compensation. Lower grant reimbursements also contributed to higher net R&D expense. The net loss included a $4.8 million unrealized loss on available-for-sale equity securities and a $2.2 million share of Geneos losses.
Investing activities provided $21.3 million, mainly reflecting investment maturities and sales net of purchases; financing activities provided $28.4 million, principally from at-the-market stock sales. The company sold 8.48 million shares under its ATM program for $29.4 million net proceeds during the quarter, with $221.8 million of capacity remaining at March 31. It sold a further 2.50 million shares for $8.7 million net proceeds through April 21. The company stated that available cash and short-term investments were sufficient for planned operations for at least 12 months from issuance of the statements, but it expects to need additional capital.
Operating lease liabilities totaled $17.4 million. The notes are senior unsecured, bear 6.5% interest, and mature March 1, 2024; contractual payments, including interest, were estimated at $18.5 million. The company reported an accumulated deficit of $1.3 billion and said it may never achieve profitability.
Material changes and outlook
- INO-4800: INOVIO decided to discontinue the INNOVATE Phase 3 COVID-19 trial. It cited reduced neutralizing activity against Omicron and a lower-than-expected projected severe-disease case rate, making the revised primary endpoint unlikely to be met. It is evaluating development as a heterologous booster, including possible non-inferiority and dose-finding studies; regulatory pathway and success remain uncertain.
- VGX-3100: FDA feedback indicated that a biomarker-selected REVEAL 2 trial would be exploratory and that REVEAL 1 and REVEAL 2 alone would likely not support marketing authorization. INOVIO plans to modify and complete REVEAL 2, with top-line results expected in Q4 2022 or Q1 2023, then assess next steps. The FDA also raised a potential benefit-risk concern regarding cervical carcinoma incidence in the REVEAL 1 treatment group.
- Following discontinuation of INNOVATE, management expected R&D expense to decline in future periods. However, INOVIO had a $44.6 million minimum purchase obligation under INO-4800 supply agreements as of March 31, 2022.
- The company said it had experienced COVID-related supply delays and higher costs, with some components still in limited supply and uncertain delivery dates. It also cited clinical, regulatory, manufacturing, funding, competition, and collaborator risks.
- CEO J. Joseph Kim announced his resignation effective upon filing; the board appointed COO Jacqueline Shea as CEO following the filing. Disclosure controls were reported effective as of March 31, 2022, with no material change in internal control over financial reporting during the quarter.
Contingencies and unusual items
INOVIO is involved in securities and shareholder derivative litigation, a supply-agreement dispute with VGXI and GeneOne, and a separate GeneOne dispute over a CELLECTRA device license. The filing does not provide a clear estimate of potential losses; the company said it intends to defend the matters. The quarter also included adoption of convertible-debt accounting guidance, which increased the notes’ carrying amount and changed equity balances.
Most important facts for investors to verify
- Whether the proposed INO-4800 booster strategy has a viable clinical and regulatory path, and what it means for spending and the $44.6 million supply commitment.
- REVEAL 2 protocol changes, Q4 2022/Q1 2023 data timing, and the implications of FDA feedback for VGX-3100.
- Cash burn, remaining ATM capacity, subsequent share issuance, dilution, and the timing and terms of any further financing.
- Progress and potential financial exposure in the securities, VGXI, and GeneOne litigation.
- Execution of the CEO transition, manufacturing supply availability, and continued grant or partner funding.