Inovio Pharmaceuticals, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; balance-sheet amounts are as of March 31, 2019. Inovio is a clinical-stage biotechnology company developing DNA-based immunotherapies, vaccines, and delivery devices. It reported no product sales; revenue came primarily from collaborations.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Revenue | $2.83 million | $1.53 million |
| Research and development expense | $24.39 million | $24.58 million |
| General and administrative expense | $6.98 million | $9.70 million |
| Loss from operations | $28.54 million | $32.75 million |
| Net loss attributable to Inovio | $29.22 million | $32.35 million |
| Net loss per share, basic and diluted | $0.30 | $0.36 |
| Net cash used in operating activities | $32.45 million | $12.58 million |
Gross profit and gross margin are not presented; the company had no product sales. At March 31, cash and cash equivalents were $20.8 million, short-term investments $107.2 million, and working capital $107.5 million. The filing also reports $8.7 million of long-term investments. Total assets were $191.2 million and total liabilities $110.2 million. Accumulated deficit was $649.6 million.
Changes versus the prior comparable period
- Revenue rose by $1.30 million, primarily because AstraZeneca recognized a milestone following initiation of a Phase 2 portion of an ongoing trial; lower manufacturing-service revenue partly offset the increase.
- R&D expense was broadly unchanged. Lower ApolloBio-related sublicense-fee expense and lower hepatitis B program costs were partly offset by higher VGX-3100 Phase 3 trial costs and increased headcount.
- G&A expense declined, mainly because Q1 2018 included taxes and advisory fees associated with the ApolloBio upfront payment.
- Operating cash use increased to $32.5 million from $12.6 million. The company cited changes in operating assets and liabilities, including deferred revenue, as contributing to the comparison.
- In February and March 2019, Inovio issued $78.5 million principal amount of 6.50% convertible senior notes due 2024, receiving approximately $75.7 million net proceeds. The notes had a $60.6 million net carrying amount at quarter-end; their effective interest rate is 13.2%.
Outlook, commentary, and risks
- Management said cash, cash equivalents, and short-term investments were sufficient to support operations for at least 12 months from issuance of the financial statements. It also said additional capital will be needed to fund future R&D, and funding may be unavailable or dilutive. Up to $71.1 million remained available under the at-the-market equity offering, subject to its terms.
- Inovio expects significant expenses and operating losses for the foreseeable future, has no approved human-use products, and does not expect product-sale revenue for at least several years. The filing gives no specific revenue, earnings, or cash-flow guidance.
- Key risks include clinical and regulatory uncertainty, manufacturing and trial delays, dependence on collaborators and grant funding, competition, and the need for additional financing. Note conversions could require cash settlement or dilute existing shareholders, depending on circumstances.
- Geneos Therapeutics completed an outside-led preferred-stock financing and spin-out; Inovio retained a majority ownership interest and committed to possible additional investments subject to specified events. A non-controlling interest is reflected in the financial statements.
- Adoption of lease accounting in January 2019 added operating lease assets and liabilities; quarter-end operating lease liabilities were $23.9 million. The company reported no material litigation and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether AstraZeneca and other collaborators achieve further development milestones and sustain or expand funding and research activity.
- Clinical progress, enrollment, safety, and efficacy results for the VGX-3100 Phase 3 program and other principal candidates.
- Cash burn and investment balances relative to management’s stated 12-month funding horizon, including financing needs and potential ATM issuance.
- The notes’ conversion, cash-settlement, interest, and dilution implications, alongside the remaining equity-plan awards and potential share issuance.
- Geneos’s financing milestones, Inovio’s additional investment commitments, and the effect of future financings on Inovio’s ownership.