INOVIO Pharmaceuticals, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. INOVIO is a clinical-stage biotechnology company developing DNA vaccines, immunotherapies and DNA-encoded antibodies, delivered using its CELLECTRA device. No candidate is approved for sale, and the company reported no product-sale revenue.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0.8 million | $0.3 million | $1.0 million | $0.6 million |
| Research and development expense | $56.5 million | $70.8 million | $112.4 million | $109.9 million |
| General and administrative expense | $48.5 million | $12.7 million | $64.4 million | $26.5 million |
| Net loss | $108.5 million | $82.1 million | $187.6 million | $136.5 million |
| Net loss per share | $0.46 | $0.39 | $0.83 | $0.66 |
| Net cash used in operations | Not stated for the quarter | Not stated for the quarter | $112.4 million | $131.3 million |
- Revenue remained very small and principally reflected DoD device-contract revenue and collaborative arrangements; it was not product revenue. No gross margin was reported, and operating margins are not meaningful given the minimal revenue base and development-stage operations.
- At June 30, cash and cash equivalents were $41.1 million and short-term investments were $307.0 million, totaling $348.1 million. Working capital was $285.1 million; accumulated deficit was $1.4 billion.
- Total liabilities were $161.7 million and stockholders’ equity was $297.7 million. Convertible senior notes had a $16.5 million carrying value and mature in 2024; the notes carry 6.5% interest. Operating lease liabilities totaled $16.8 million.
- Cash and cash equivalents declined by $30.0 million during the first half. Operating cash use was partly offset by $11.0 million of net investing cash inflow and $71.4 million of financing cash inflow. Financing included $72.5 million net proceeds from ATM share sales.
Material changes versus the prior comparable period
- Q2 revenue increased by about $0.5 million year over year; first-half revenue increased by about $0.3 million, from a low base.
- Q2 R&D expense declined 20% year over year, mainly because 2021 manufacturing-equipment and device-automation costs did not recur, partly offset by COVID-19 program costs and reduced grant offsets. First-half R&D expense increased about 2%.
- G&A expense rose sharply, primarily reflecting the $44.0 million class-action settlement accrual, litigation costs and former CEO separation costs. The settlement includes $30.0 million cash, which insurers committed to fund, and $14.0 million of company shares, subject to court approval.
- Net loss widened about 32% for Q2 and 37% for the first half. First-half results also included an $8.8 million unrealized loss on available-for-sale equity securities.
- Common shares issued and outstanding increased from 217.4 million at December 31, 2021 to 247.5 million at June 30, 2022. The company sold 28.95 million shares through its ATM program during the first half.
Outlook, management commentary and risks
- Management said cash and short-term investments at June 30 were sufficient for planned operations for at least 12 months from issuance of the statements. The company expects continued losses and will need additional capital; future financing could dilute shareholders or be unavailable on acceptable terms.
- After quarter-end, INOVIO announced a reorganization affecting about 55 employees (18% of full-time staff) and terminating approximately 86% of contractor agreements. Management expects operating expenses to fall about 30% over 18 months and cash runway to extend into Q3 2024, excluding future fundraising. It expects a one-time $1.6 million charge in Q3 2022.
- COVID-19 vaccine strategy shifted from the INNOVATE trial to evaluating INO-4800 as a heterologous booster. The company said the regulatory path and potential authorization remain uncertain. The DoD had previously discontinued funding for the U.S. Phase 3 segment while continuing support for the Phase 2 segment.
- For VGX-3100, the FDA indicated that a biomarker-selected revision to the REVEAL 2 study would be exploratory and unlikely to support a marketing application on its own; additional well-controlled trials may be needed. INOVIO plans to complete the modified study and assess next steps afterward.
- Key risks include clinical and regulatory uncertainty, dependence on external funding and grants, manufacturing capacity and supply-chain constraints, competition, reliance on collaborators, and ongoing VGXI and GeneOne disputes. Securities litigation settlement remains subject to court approval.
- Higher U.S. interest rates contributed to an $8.8 million decline in the investment portfolio’s market value during the first half. Management reported no material inflation impact during that period. Disclosure controls were considered effective at June 30, 2022.
Important facts for investors to verify
- Progress, enrollment, results and regulatory plans for INO-4800 booster studies and other key clinical programs, especially VGX-3100 and INO-3107.
- Whether the proposed securities-litigation settlement receives court approval and how the share issuance and insurance recovery are ultimately recorded.
- Whether the announced restructuring achieves expected expense reductions and the stated Q3 2024 runway, including the effects of subsequent financing and program spending.
- Future ATM share issuance, remaining offering capacity, dilution and cash burn relative to available liquidity.
- Resolution and potential financial impact of the VGXI and GeneOne litigation, and the company’s ability to secure manufacturing supply and grant funding.