Inovio Pharmaceuticals first-quarter net loss attributable to common stockholders decreases to $2.3M

Inovio Pharmaceuticals, Inc.May 18 2010

Inovio Pharmaceuticals, Inc. (NYSE AMEX: INO) today reported financial results for the quarter ended March 31, 2010.

Total revenue for the quarter ended March 31, 2010, was $1.4 million, compared with $369,000 for the same period in 2009. Total operating expenses for the quarter ended March 31, 2010, were $5.8 million, compared with $3.9 million for the same period in 2009. The net loss attributable to common stockholders for the quarter ended March 31, 2010, was $2.3 million, or $(0.02) per share, compared with a net loss attributable to common stockholders of $3.5 million, or $(0.08) per share for the same period in 2009.

Revenue

The increase in revenue was due to an increase in grant and miscellaneous revenue for the quarter ended March 31, 2010, to $1.3 million, compared to $102,000 for the same period in 2009. The increase was primarily due to revenues recognized from our contract with the National Institute of Allergy and Infectious Diseases ("NIAID") and the PATH Malaria Vaccine Initiative ("MVI") of $835,000 and $239,000, respectively, and from the Department of Defense ("U.S. Army") grant of $200,000. The NIAID contract provides for a total potential value of $23.5 million to fund research and development for HIV DNA-based vaccines delivered via our proprietary electroporation system ($21.3 million over five years starting September 2008, with two one-year options valued at $1.2 million and $1.1 million). PATH is an international nonprofit organization funded by private donors. We have a research program and agreement with the PATH MVI to evaluate in a preclinical feasibility study our SynCon^TM DNA vaccine development platform to target antigens from malaria-causing Plasmodium species. The agreement with MVI was for $685,000 and ran through February 2010. The U.S. Army grant of $933,000, running through May 2010, is funding research and development of DNA-based vaccines, delivered via our proprietary electroporation system, against bio-warfare and bioterror attacks.

The revenue increase was somewhat offset by a decline in license fees and milestone revenue for the quarter to $74,000, compared to $213,000 for the same period in 2009. This decrease was mainly due to no revenues recognized under the Wyeth collaboration and licensing agreement as a result of the cancellation of the agreement in July 2009.

Operating Expenses

Research and development expenses for the quarter ended March 31, 2010 were $2.7 million, compared to $964,000 for the same period in 2009. The increase was primarily due to higher costs related to work performed for the NIAID and MVI contracts, other outside services and contract labor expenses related to research and development projects, outside engineering professional services related to CELLECTRA® development, clinical trials and a greater employee headcount.

General and administrative expenses, including business development expenses, were $3.1 million for the quarter ended March 31, 2010, compared to $3.0 million for the same period in 2009. The increase was primarily due to higher amortization expense as a result of the intangible assets acquired from VGX, greater employee headcount and a higher consultant stock option expense resulting from stock options acquired from VGX.

Net Loss Attributable to Common Stockholders

The $1.2 million decrease in net loss attributable to common stockholders for the quarter ended March 31, 2010, as compared to the same period in 2009, resulted primarily from the increase in grant and miscellaneous revenue recognized, an increase in other income from the revaluation of registered common stock warrants and the gain from the change in fair market value of our investment in VGX International as of March 31, 2010. This decrease was somewhat offset by an increase in general and administrative as well as research and development expenses.

Capital Resources

We ended the first quarter of 2010 with cash and cash equivalents plus short term investments in certificates of deposit of $25.7 million, as compared to $30.3 million in cash and cash equivalents as of December 31, 2009. This change primarily resulted from the use of cash for research and development as well as general and administrative expenses. Based on management's projections and analysis, we believe that our cash, cash equivalents and short-term investments are sufficient to meet our planned working capital requirements through the second half of 2011.

Corporate Update

Corporate Development

In January 2010, Mark L. Bagarazzi, M.D., was appointed chief medical officer to lead clinical development and regulatory activities for Inovio's next-generation vaccines for the treatment and prevention of influenza, HIV, other infectious diseases and cancers. Dr. Bagarazzi joined Inovio from Merck & Co., where he was director of worldwide regulatory affairs for vaccines and biologics.

Also in January 2010, Inovio expanded its existing license agreement with the University of Pennsylvania, adding exclusive worldwide licenses for technology and intellectual property for novel DNA vaccines against pandemic influenza, Chikungunya, and foot-and-mouth disease. The amendment also encompasses new chemokine and cytokine molecular adjuvant technologies. The technology was developed in the University of Pennsylvania laboratory of Professor David B. Weiner, a pioneer in the field of DNA vaccines, and chairman of Inovio's scientific advisory board.

In March 2010, Inovio entered into a Collaboration and License Agreement with VGX International. Under the Agreement, Inovio granted VGX International an exclusive license to Inovio's SynCon^TM universal influenza vaccine delivered with electroporation to be developed in certain countries in Asia. As consideration for the license granted to VGX International, the Company will receive a payment of $3 million as a research and development initiation fee which is reflected in the Company's accounts receivable from affiliated entity at March 31, 2010.

Clinical Development

In February 2010, we reported immune responses from the second, intermediate dose group of our therapeutic cervical cancer vaccine (VGX-3100) phase I clinical study. The antigen-specific antibody and T-cell immune responses from this dose group significantly exceeded levels reported in the first dose group, suggesting a dose response. Subsequent to quarter end, we announced completion of enrollment of this study. We expect to report the third and final dose group in late Q3 or Q4, 2010.

In March 2010, our affiliate, VGX International, obtained Korean approval to initiate a phase I clinical study of Inovio's H5N1 influenza vaccine candidate in Korea. Inovio expects to obtain FDA approval to initiate a US phase I clinical trial in Q2 2010. These studies will focus on safety and immunogenicity (levels of vaccine-induced immune responses). In previously reported animal studies, this vaccine provided 100% protection of non-human primates against the H5N1 avian influenza virus, including multiple unmatched avian influenza strains.

In April 2010, Inovio and its collaborators from Drexel University, Cheyney University, and the University of Pennsylvania received a $2.8 million grant to develop a DNA vaccine to treat hepatitis C virus (HCV). The grant will fund pre-clinical studies to test the safety and effect on the immune system of Inovio's novel vaccines designed to treat persons who are chronically infected with hepatitis C virus and have not responded to currently available therapies. Persons with chronic HCV infection face an increased risk of developing hepatocellular cancer, a difficult-to-treat cancer with a poor prognosis.