Results & Analyst Call Summary

Inovio Pharmaceuticals

Conference date: August 10, 2015 @ 5:30 AM Pacific Time
for quarter ending: June 30, 2015 (Q2, second quarter 2015)

Forward-looking statements

Overview: Announced major agreement with MedImmune to develop Inovio's human papillomavirus (HPV) cancer vaccine. Inovio is a clinical-stage company with no approved commercial product revenue yet.

Basic data (GAAP):

Revenue was $5.3 million, up sequentially from $5.2 million, and up from $3.8 million in the year-earlier quarter.

Net income was negative $6.2 million, up sequentially from negative $10.6 million, and up from negative $10.7 million year-earlier.

EPS (earnings per share, diluted) was negative $0.09, up sequentially from negative $0.18, and up from negative $0.18 year-earlier.



Quarter Highlights:

AstraZeneca's MedImmune division agreed to acquire exclusive rights to INO-3112. MedImmune plans to study INO-3112 in combination with molecules in its own pipeline. Inovio will receive an upfront payment of $27.5 million and potential future milestones totaling up to $700 million. All development costs will be funded by MedImmune. If the therapy is approved by the FDA and reaches the commercial phase Inovio will receive royalties on sales, which are tiered and can to up into double digit percentage rates. INO-3112 generated strong T cell responses in a Phase 1 study of patients with HPV-associated head and neck cancers. A Phase 1 study of INO-3112 for cervical cancer is ongoing.

INO-3112 is closely related to VGX-3100 (it adds INO-9012), which has been shown to be effective against HPV (human papillomavirus) induced pre-cancers and cancers [See Inovio Gets Positive HPV Therapy Results, July 23, 2014]. A top peer-reviewed medical journal will be publishing results from the Phase II VGX-3100 study of patients with cervical dysplasia. A pivotal Phase III study of VGX-3100 is planned for 2016 by Inovio.

MedImmune and Inovio will also be in a broader collaboration to develop up to two novel DNA vaccines with cancer targets. These could also generate milestone payments and royalties, but those are included in the $700 million total.

Revenue included $4.3 million collaboration revenue, $0.2 million from collaboration with an affiliated entity, and $0.8 million in grants.

While it is too early to make an announcement of specifics, Inovio is testing its immunotherapies in possible combinations with complementary therapies [WPM: CPMs, see Q&A below]. It also continues to evaluate which therapies to advance with partners and which to do alone.

INO-5150 for prostate cancer began a Phase 1 trial after the quarter ended in men with biochemically relapsed prostate cancer, evaluating the safety, tolerability, and immunogenicity of INO-5150 alone or with INO-9012, a DNA-based IL-12 immune activator.

A Phase 1 study of INO-4212 for Ebola will begin this quarter in a collaboration funded by DARPA. The overall grant is $45 million, and includes a dMAb component.

Ongoing studies include INO-1400 in breast, lung and pancreatic cancer and INO-8000 for hepatitis C. A Phase 1 trial for INO-1800 for Hepatitis B is currently recruiting patients, in partnership with Roche.

The Pennvax-G Phase 1 trial for HIV has stopped recruiting patients but is ongoing.

Inovio is developing a set of DNA-based vaccines that allow cells to create monoclonal antibodies (dMAb technology). After the quarter ended Inovio announced it has positive pre-clinical results from a dMAb vaccine for Dengue fever.

Inovio also has a variety of other vaccines in clinical or preclinical study. See the Inovio Pipeline for an overview.

"We already have, and expect to soon show, many further accomplishments and advancements."

R&D expense was $16.7 million. General and administrative expense was $4.7 million. Gain on sale of assets was $1.0 million. Total operating expenses were $20.4 million. Inovio reported a a negative $15.1 million operating profit. Other income was 9.0 million, mainly from a gain on investment in an affiliated entity.

Cash and equivalents balance (including short-term investments) ended at $154.6 million, up sequentially from $81.0 million. This is the largest cash position Inovio has had in its history. Liability in common stock warrants $1.7 million. On May 5 the company raised $82.1 million by selling common stock. The milestone payment from MedImmune and the covering of R&D costs by partners should add to cash in Q3 and result in a low burn rate, so cash should last through the end of 2018.


3112 milestone payment color? About half the $700 million is for clinical development milestones, the other half relates to commercialization and sales-based milestones. We get a fair share of royalties from the sale of the product.

3112 progress milestones, will you be able to announce them? These are important events for our shareholders, we will announce milestone achievements.

Will Inovio continue to manage the current Phase 1/2 trials of 3112? As of today MedImmune is the driver for INO-3112 studies. Inovio will wrap up the current studies.

3100 end of Phase 2 meeting with FDA, will you need to do any new studies? The meeting should take place in 2015, with much preparation going into it, including commercial level production and device manufacturing. We expect to get FDA concurrence for our plans.

2018 cash vs. plans for Phase 3 cervical dysplasia trial? We expect the phase 3 trial to run about $80 million. That is figured into the 2018 cash figure.

Background on MedImmune's current cancer vaccine program? We are not their only partner. They have fantastic checkpoint inhibitor molecules in late development. The combination with 3112 might provide the best 1- 2 punch in the field. This is just the first of many potential commercial developments we could see in coming years, based on our deep pre-clinical platform and pipeline.

What differentiates our products from CAR-T technology is that our products are off the shelf, not developed for each patient. We aim to bring benefits to a broad patient population.

The 3100 and 3112 dividing line between the MedImmune deal and what we retain is between cancer and pre-cancer. Inovio retains the pre-cancer areas like dysplasia as well as HPV infection. MedImmune has the right to treat cancers.

IL-12, is that the real attraction for MedImmune? IL-12 is a key component of our cancer product development strategy. We own our IL-12 IP and other potent cytokine gene products.

What titers can you achieve with dMAb, is antibody production durable, can you multi-dose? We can multi-dose, as we have shown with animals over many months. These are fully humanized monoclonals. We showed that a single dose in one day can protect animals from dengue fever lethal challenge. We expect to see dozens of papers published in the coming years. dMAbs have a better pharmacology profile than other MAbs. Production tends to last about 4 weeks. Our dMAb development is already over-delivering on my highest expectations.

How long before dMAb in a human trial?

Ebola competition? The competitor's data from the field is exciting and impressive. We expect to have some data from our study by year end. The world can have more than one vaccine product for such a deadly disease. We have a strong case for safety, tolerability, and perhaps even efficacy. Our program is fully funded by DARPA. We will have a dMAb candidate for Ebola that could be in human trials within a year and a half.

Our cash burn is increasing as we scale up for Phase 3. Also, since some of our R&D is reimbursed, the costs fluctuate quarter to quarter.

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Copyright 2015 William P. Meyers