Business context and reporting period
INOVIO Pharmaceuticals, Inc. is a clinical-stage biotechnology company developing DNA medicines and its CELLECTRA delivery devices, with programs focused on HPV-related disease, cancer and infectious diseases. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2023. The company had no approved products and generated no product-sales revenue.
Financial results and liquidity
| Metric | Q3 2023 | Nine months 2023 |
|---|---|---|
| Revenue | $0.4 million | $0.7 million |
| Research and development expense | $15.5 million | $69.4 million |
| General and administrative expense | $9.9 million | $37.3 million |
| Goodwill impairment | $10.5 million | $10.5 million |
| Net loss | $33.9 million | $110.1 million |
| Basic and diluted loss per share | $0.13 | $0.42 |
| Net cash used in operating activities | Not separately presented | $98.1 million |
Revenue was entirely from collaborations and contracts. Gross margin is not a meaningful disclosed measure for this pre-commercial company. At September 30, cash and cash equivalents were $18.8 million and short-term investments were $148.7 million, totaling $167.5 million; working capital was $131.1 million. Cash, cash equivalents and short-term investments were down from $253.0 million at December 31, 2022. Total assets were $193.1 million and stockholders’ equity was $138.2 million.
Convertible senior notes had a net carrying amount of $16.5 million and mature March 1, 2024; management expected to repay the approximately $16.4 million obligation from existing cash. The company also reported $13.3 million in operating lease liabilities and approximately $2.9 million in minimum drug-substance purchase obligations.
Changes versus prior comparable periods
- Q3 revenue fell from $9.2 million to $0.4 million; nine-month revenue declined from $10.1 million to $0.7 million. The main reason was that all performance obligations under the DoD device procurement contract had been completed in 2022.
- R&D expense declined 53% in Q3 and 52% for the nine-month period, mainly reflecting lower INO-4800 and other COVID-19 program costs, reduced staffing and lower VGX-3100 spending. INO-3107 spending increased.
- Net loss narrowed from $37.8 million to $33.9 million in Q3 and from $225.4 million to $110.1 million for the first nine months. The nine-month comparison also reflects lower operating expenses and more favorable investment valuation changes.
- Q3 included a $10.5 million non-cash goodwill impairment, after a sustained decline in the company’s share price and market capitalization. Goodwill was fully impaired. A separate $2.0 million intangible-asset impairment was recorded in Q2.
- Operating cash use was $98.1 million versus $179.9 million in the first nine months of 2022. Investing activities provided $67.4 million, principally reflecting investment maturities and sales; financing activities provided $3.2 million, compared with $75.2 million in 2022.
Outlook, management commentary and key risks
Management stated that existing cash and short-term investments were sufficient for planned operations for at least 12 months from issuance of the financial statements, and estimated cash runway into Q2 2025 without further capital raises. The estimate incorporates cost reductions and changes to the INO-3107 development plan. Management also said additional capital will be needed to complete development and commercialization; financing may be unavailable or dilutive, and programs could be delayed, reduced or paused if funds are insufficient.
On October 10, 2023, after quarter-end, INOVIO reported FDA feedback that the completed Phase 1/2 INO-3107 data could support a BLA submission for accelerated approval and that the previously planned Phase 3 randomized trial would not be required. The FDA indicated that a confirmatory trial must begin before BLA submission, and other filing requirements remain. Approval is not assured. INOVIO also reported that it ceased U.S. development of VGX-3100 for cervical HSIL; ApolloBio continues a Phase 3 trial in China. INOVIO discontinued internally funded INO-4800 development in 2022, while Advaccine may continue development at its own expense.
In Q3, the company reorganized and reduced its workforce by 58 employees, approximately 30% of full-time staff, recording a one-time $2.1 million charge. The company continues to report substantial recurring losses, dependence on external funding and partners, no approved products, and clinical, regulatory, manufacturing and intellectual-property risks. Ongoing litigation with VGXI and GeneOne remained unresolved, with no trial dates set. A shareholder derivative settlement received final court approval after quarter-end and was expected to become effective November 13, 2023.
INOVIO’s shares transferred to the Nasdaq Capital Market effective November 2, 2023 after failure to meet the minimum bid-price requirement on the Global Select Market. Nasdaq granted an extension through April 29, 2024 to regain compliance; delisting remains a risk. The company also disclosed interest-rate exposure, including $5.9 million of unrealized losses on its investment portfolio, which it attributed primarily to rate changes rather than credit losses.
Important facts for investors to verify
- Progress, confirmatory-trial design and timing, and any BLA requirements or decisions for INO-3107.
- Whether the stated cash runway remains achievable, and the timing, terms and dilution of any additional financing.
- Repayment or conversion of the notes due March 2024 and ongoing ATM share sales; post-quarter sales generated $1.6 million net proceeds through the financial-statement issuance date.
- Clinical and regulatory progress by collaborators, including Advaccine’s INO-4800 program and ApolloBio’s VGX-3100 program.
- Outcomes and potential costs of VGXI and GeneOne litigation, and completion of the derivative settlement.
- Nasdaq bid-price compliance before April 29, 2024, including whether a reverse stock split is considered or implemented.