Inovio Pharmaceuticals, Inc. is a late-stage biotechnology company, which engages in the discovery, development, and commercialization of DNA-based immunotherapies and vaccines. Its drug candidates include SynCon immunotherapies which helps break the immune system's tolerance of cancerous cells; and CELLECTRA delivery system which facilitates optimized cellular uptake of the SynCon immunotherapies. The company was founded by David B. Weiner on June 29, 1983 and is headquartered in Plymouth Meeting, PA.
We have limited sources of revenue and our success is dependent on our ability to develop our vaccine and immunotherapies and other product candidates and electroporation equipment.
None of our human vaccine and immunotherapy product candidates have been approved for sale, and we may not develop commercially successful vaccine products.
Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations.
The conditional conversion features of the Notes, if triggered, may adversely affect our financial condition, operating results, or liquidity.
Conversion of the Notes and/or the Korean Bonds will dilute the ownership interest of existing stockholders, including holders who had previously converted their Notes or Korean Bonds, or may otherwise depress the price of our common stock.
We depend upon key personnel who may terminate their employment with us at any time and we may need to hire additional qualified personnel in order to obtain financing, pursue collaborations or develop or market our product candidates.
We face intense and increasing competition and many of our competitors have significantly greater resources and experience.
If we lose or are unable to secure collaborators or partners, or if our collaborators or partners do not apply adequate resources to their relationships with us, our product development and potential for profitability will suffer.
A small number of licensing partners and government contracts account for a substantial portion of our revenue.
We have agreements with government agencies, which are subject to termination and uncertain future funding.
Our quarterly operating results may fluctuate significantly.
If we are unable to obtain FDA approval of our products, we will not be able to commercialize them in the United States.
Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
Delays in the commencement or completion of clinical testing could result in increased costs to us and delay or limit our ability to generate revenues.
We and our collaborators rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we and our collaborators may not be able to obtain regulatory approval for or commercialize our product candidates.
Even if our products receive regulatory approval, they may still face future development and regulatory difficulties.
Even if our products receive regulatory approval in the United States, we may never receive approval or commercialize our products outside of the United States.
We face potential product liability exposure and, if successful claims are brought against us, we may incur substantial liability.
We currently have no marketing and sales organization. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate product revenues.
If any of our products for which we receive regulatory approval does not achieve broad market acceptance, the revenues that we generate from their sales will be limited.
We are subject to uncertainty relating to coverage and reimbursement policies which, if not favorable to our product candidates, could hinder or prevent our products' commercial success.
Healthcare reform measures could hinder or prevent our products' commercial success.
If we fail to comply with applicable healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
If we and the contract manufacturers upon whom we rely fail to produce our systems and product candidates in the volumes that we require on a timely basis, or fail to comply with stringent regulations, we may face delays in the development and commercialization of our electroporation equipment and product candidates.
Our failure to successfully acquire, develop and market additional product candidates or approved products would impair our ability to grow.
Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.
We may be subject to stockholder litigation, which would harm our business and financial condition.
Our results of operations and liquidity needs could be materially affected by market fluctuations and general economic conditions.
Changes in funding for the FDA and other government agencies could hinder our ability to hire and retain key leadership and other personnel, or otherwise prevent new products from being developed or commercialized in a timely manner, which could negatively impact our business.
It is difficult and costly to generate and protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection.
If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.
The price of our common stock may be volatile, and an investment in our common stock could decline substantially in value.
Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price of our common stock.
We have never paid cash dividends on our common stock and we do not anticipate paying dividends in the foreseeable future.
Revenue. We had total revenue of $136,000 and $3.0 million for the three and six months ended June 30, 2019, respectively, as compared to $24.4 million and $26.0 million for the three and six months ended June 30, 2018, respectively. Revenue primarily consisted of revenues under collaborative research and development arrangements, including arrangements with affiliated entities, for each of the three and six months ended June 30, 2019 and 2018. The year over year decreases were primarily due to the recognition of a one-time up-front payment of $23.0 million from our collaborator ApolloBio during the second quarter of 2018.
Research and development expenses. Research and development expenses for the three and six months ended June 30, 2019 were $22.5 million and $46.9 million, respectively, as compared to $22.5 million and $47.0 million for the three and six months ended June 30, 2018, respectively. Total research and development expenses were consistent between the three months ended June 30, 2018 and 2019; however, fluctuations included a decrease in employee compensation expense of $1.8 million and a decrease in research and development pre-clinical expenses of $736,000, offset by an increase in employee and consultant stock-based compensation of $1.0 million, an increase in clinical trial related expenses of $836,000 and an increase in allocated expenses, including facilities, information technology (IT) and depreciation expense of $362,000, among other variances. Fluctuations between the six months ended June 30, 2018 and 2019 included a $2.4 million increase in contra-research and development expense recorded from grant agreements, as well as no sub-license fee expense in 2019 as compared to $1.9 million recorded in 2018 related to the ApolloBio collaboration and lower employee compensation expense of $804,000, offset by an increase in clinical trial related expenses of $3.0 million, higher stock-based compensation expense of $951,000 and an increase in allocated expenses of $819,000, among other variances.
Contributions received from current grant agreements and recorded as contra-research and development expense were $2.6 million and $6.5 million for the three and six months ended June 30, 2019, respectively, as compared to $1.9 million and $4.1 million for the three and six months ended June 30, 2018, respectively. The increase for the three-month period year over year was primarily due to an increase of $698,000 earned from the Bill & Melinda Gates Foundation grant related to our dMAb technology and an increase of $635,000 under our CEPI grant, which increase was offset in part by a decrease of $496,000