INOVIO Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. The unaudited results are for a clinical-stage biotechnology company with no approved products and no product sales; revenue came primarily from collaboration arrangements and grants. Dollar amounts below are rounded.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0.292 million | $0.236 million | $0.936 million | $1.831 million |
| Research and development expense | $47.1 million | $26.5 million | $156.9 million | $67.9 million |
| General and administrative expense | $13.2 million | $10.1 million | $39.7 million | $28.6 million |
| Net income (loss) | $(60.2) million | $19.2 million | $(196.7) million | $(143.1) million |
| Net loss per share | $(0.29) | Net income per share: $0.12 basic; $0.11 diluted | $(0.95) | $(0.96) |
| Cash used in operating activities | Not presented quarterly | Not presented quarterly | $177.8 million | $126.8 million |
At September 30, 2021, cash and cash equivalents were $67.9 million and short-term investments were $327.0 million, totaling $394.9 million. Working capital was $436.0 million; accumulated deficit was $1.103 billion. Management said available cash, cash equivalents and short-term investments were sufficient for at least 12 months from issuance of the financial statements, but additional capital will be needed to fund future research and development. No product gross margin is reported because the company had no product sales.
Investing activities used $168.9 million in the first nine months, largely reflecting investment purchases net of maturities and sales. Financing activities provided $163.9 million, including $162.1 million net proceeds from a January 2021 public offering. The company reported no off-balance-sheet arrangements.
Debt included $14.5 million carrying value of 6.50% convertible senior notes due 2024. The December 2019 convertible bonds were fully converted to common stock in March 2021; no August 2019 bonds remained outstanding. Operating lease liabilities totaled $18.7 million.
Changes versus the prior comparable periods
- Nine-month revenue declined 49%, primarily because less milestone revenue was recognized from affiliated entity Plumbline Life Sciences.
- Nine-month R&D expense more than doubled, mainly due to INO-4800 manufacturing scale-up and clinical activities, manufacturing equipment, and CELLECTRA 3PSP device development. Grant contributions recorded as contra-R&D expense were $41.4 million, up from $26.9 million; reported R&D expense is after these offsets.
- Nine-month net loss widened to $196.7 million from $143.1 million. The 2020 comparative period included substantial nonrecurring gains from changes in derivative and affiliated-investment fair values, which partly offset operating losses.
- Operating cash use increased by $51.1 million year over year. Cash and short-term investments together were $394.9 million, versus $411.6 million at year-end 2020.
- Weighted-average shares for the nine-month period rose to 207.5 million from 148.7 million, reflecting prior and current equity issuances and conversions.
Outlook, developments, risks and unusual items
- Management expects significant expenses and operating losses to continue and says the company may never become profitable. It expects to rely on external financing, collaborations, licensing and grants; financing may be unavailable or dilutive, and programs could be delayed or reduced if funds are inadequate.
- INO-4800 remains investigational. The company reported trial authorizations in several countries for the global Phase 3 segment of its INNOVATE trial and selection for a WHO-sponsored global trial. The FDA’s partial clinical hold was lifted in November 2021, after quarter-end, permitting the U.S. Phase 3 segment to proceed. The DoD had notified the company in April 2021 that it would stop funding that U.S. Phase 3 segment while continuing support for the ongoing Phase 2 segment.
- COVID-19 has disrupted trial recruitment and data collection and caused supply shortages, delays and higher sourcing costs. Competition from already-authorized vaccines, evolving viral variants, regulatory uncertainty and the possibility that an EUA pathway may no longer be available are material risks.
- After quarter-end, AstraZeneca gave notice on October 28, 2021, terminating the MEDI0457/INO-3112 development program and agreement. On November 9, 2021, INOVIO entered a new at-the-market agreement permitting up to $300 million of common-stock sales; actual sales and proceeds were not stated in the filing. It had terminated its prior ATM agreement on November 8.
- Material litigation includes a securities class action, stayed shareholder derivative litigation, and disputes with VGXI and GeneOne. Outcomes and potential losses are uncertain; the filing does not provide a clear quantified exposure.
- Other key risks include dependence on a limited number of partners and government funding, manufacturing and clinical execution, regulatory approval, intellectual-property disputes, and the need for substantial additional capital. Management reported disclosure controls were effective at the reasonable-assurance level as of September 30, 2021.
Important facts for investors to verify
- Current cash runway and cash burn, especially after the September 30 balance-sheet date, and whether the new ATM is used and on what terms.
- INO-4800 Phase 3 trial status, funding sources, enrollment and timelines, regulatory pathway, and prospects for authorization or licensure.
- Whether manufacturing capacity and supply-chain availability can support clinical development at expected cost and scale.
- Progress and funding under government grants and contracts, and any changes to partner commitments or collaboration economics.
- Developments and potential financial exposure in the securities, VGXI and GeneOne litigation, and the effects of AstraZeneca’s program termination.
- Future share issuance and dilution, including shares sold under the ATM and the impact of outstanding equity awards and convertible notes.