WASHINGTON, D.C. 20549
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
The aggregate market value of the voting and non-voting common equity (which consists solely of shares of Common Stock) held by non-affiliates of the Registrant as of June 30, 20172021 was approximately $608,649,117$1.9 billion based on $7.84,$9.27 per share, the closing price on that date of the Registrant’s Common Stock on the Nasdaq Global Select Market.
The number of shares outstanding of the Registrant’s Common Stock, $0.001 par value, was 90,403,853217,403,287 as of March 8, 2018.
TABLE OF CONTENTS
Unless stated to the contrary, or unless the context otherwise requires, references to “Inovio,“INOVIO,” “the company,” “our company,” “our,” or “we” in this report include Inovio Pharmaceuticals, Inc. and its subsidiaries.
PART I
ITEM 1. BUSINESS
This Annual Report on Form 10-K (including the following section regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations), or this Annual Report, contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Annual Report. Additionally, statements concerning future matters, including statements regarding our business, our financial position, the research and development of our products and other statements regarding matters that are not historical are forward-looking statements.
Although forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading “Risk Factors” below, as well as those discussed elsewhere in this Annual Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
OverviewThis Annual Report includes trademarks and registered trademarks of INOVIO Pharmaceuticals, Inc. Products or service names of other companies mentioned in this Annual Report may be trademarks or registered trademarks of their respective owners. References herein to “we,” “our,” “us,” “INOVIO” or the “Company” refer to INOVIO Pharmaceuticals, Inc. and its subsidiaries. References herein to “DNA medicines” refers to INOVIO’s product candidates for precancerous conditions, cancer and infectious diseases in development.
InovioSummary Risk Factors
Our business is developing active SynCon®subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. These risks are discussed more fully in Part I, Item 1A., "Risk Factors" herein. These risk factors include, but are not limited to, the following:
•We have incurred significant losses in recent years, expect to incur significant net losses in the foreseeable future and may never become profitable.
•We have limited sources of revenue and our success is dependent on our ability to develop our DNA vaccines, DNA immunotherapies, dMAbs and electroporation equipment.
•We will need substantial additional capital to develop our DNA vaccines, DNA immunotherapies and vaccinesdMAb programs and electroporation delivery technology.
•None of our human vaccine candidates, including INO-4800, or our immunotherapy and DNA encoded monoclonal antibody product candidates have been approved for sale, and we may never develop commercially successful vaccine, immunotherapy or DNA encoded monoclonal antibody products.
•The Omicron SARS-CoV-2 variant and newly emerging SARS-CoV-2 variants will likely require us to modify our COVID-19 vaccine strategy, which will result in new and added risks, including whether there will continue to be a need for a COVID-19 vaccine.
•There can be no assurance that any of the products we are developing for COVID-19 would be granted an Emergency Use Authorization by the FDA or similar authorization by regulatory authorities outside of the United States if we were to decide to apply for such an authorization. The option of seeking an Emergency Use Authorization may no longer exist for our primary vaccine candidates, and if we cannot obtain such authorization or, if granted, it is terminated, we will be unable to sell our product in the near future and instead will be required to pursue the biologic licensure process in order to sell our product, which is lengthy and expensive.
•If we and the contract manufacturers upon whom we rely fail to produce our electroporation devices and product candidates in the volumes that we require on a timely basis, or at all, or fail to comply with their obligations to us or with stringent regulations, we may face delays in the development and commercialization of our electroporation equipment and product candidates.
•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.
•We have agreements with government agencies, which are subject to termination and uncertain future funding.
•Our participation in the WHO Solidarity Trial Vaccines (STV) could result in adverse consequences. We do not have any control over clinical data, progress, and decisions regarding INO-4800's participation in STV, and as such, decisions regarding the clinical pathway for INO-4800 between the WHO and the Company may not always align.
•We are currently subject to litigation and may become subject to additional litigation, which could harm our business, financial condition and reputation.
•We face intense and increasing competition and steps taken by of our competitors, such as the introduction of a new, disruptive technology, may impede our ability to successfully commercialize our DNA medicines.
•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.
Company Overview
We are a biotechnology company focused on treatingbringing to market precisely designed DNA medicines and preventing cancersvaccines to help protect people from infectious diseases, including COVID-19, and infectious diseases. SynCon® immunotherapies,to help treat people with cancer, and conditions associated with human papillomavirus ("HPV"). We have shown in combination withclinical trials that our DNA vaccine candidates can be delivered into cells in the body via a proprietary CELLECTRA® delivery devices, are intendedsmart device allowing the nucleic-acid delivered gene products to generate optimal antigen production in vivo, in particularactivate functional CD8+ killer T cell and antibody responses against targeted pathogens and cancers.
Our DNA medicines pipeline is comprised of three types of product candidates: prophylactic DNA vaccines, therapeutic DNA immunotherapies, and DNA encoded monoclonal and bispecific antibodies ("dMAbs" and “dBTAs”), all of which utilize the two components of our integrated platform, SynCon® and CELLECTRA®.
Our proprietary SynCon® technology creates optimized plasmids, which are circular strands of DNA that instruct a cell to fight target diseases. We seekproduce proteins or antigens to becomehelp the “go-to” immunotherapeutic solution provider for all diseases caused by human papillomavirus,person’s immune system respond with antibodies and immune cells which recognize and then help block viruses and destroy cancerous or HPV, including for pre-cancer diseases like cervical intra-epithelial neoplasia, or CIN, vulvar intraepithelial neoplasia, or VIN, and anal intraepithelial neoplasia, or AIN, as well as cancers caused by HPV, such as head and neck cancer and cervical cancer. We believe that we arepre-cancerous cells.
Our patented CELLECTRA® smart delivery devices facilitate uptake of our DNA medicines into the cell, which has been a leader in T cell-generating immunotherapy with our product candidate INO-3112, also known as MEDI0457, being developed in collaboration with MedImmune as a combination therapy with MedImmune’s PD-1/PDL-1 checkpoint inhibitor candidate for the potential treatmentkey limitation of multiple cancers and an innovator in vaccine development for rapidly combating emerging infectious diseases.
In September 2015, proof of concept data was published in the medical journal The Lancet from a controlled Phase 2bhistorical DNA-based technology approaches. Human clinical trial in which we generated significant, functional antigen-specific T cells that correlated to clinically relevant efficacy against HPV-associated cervical dysplasia (precancer). In June 2017, we began a Phase 3 clinical trial of our product candidate VGX-3100 for the treatment of cervical dysplasia.
Our novel SynCon® immunotherapy design can help break the immune system’s tolerance of cancerous cells and is also intended to facilitate cross-strain protection against known and new unmatched strains of pathogens, such as influenza. Given the recognized role of CD8+ killer T cells in eliminating cancerous or infected cellsdata from the body and the published results from our Phase 2b clinical trial, we believe that our active immunotherapies may play an important role in helping fight multiple cancers and infectious diseases. Human datamore than 15,000 CELLECTRA® smart device administrations across more than 5,000 participants to date have shown a favorabletolerable safety profile of our DNA immunotherapies delivered using electroporation.
We or our collaborators are currently conducting or planning clinical studies of our proprietary SynCon® immunotherapies for CIN, VIN and AIN; head and neck and cervical cancer caused by HPV; prostate cancer; bladder cancer; glioblastoma, or GBM; breast, lung and pancreatic cancers; hepatitis C virus, or HCV; hepatitis B virus, or HBV; human immunodeficiency virus, or HIV; Ebola virus; Middle East Respiratory Syndrome, or MERS; and Zika virus.profile.
Our corporate strategy is to develop, seek regulatory approval for, and commercialize our novel DNA medicines to address unmet global health needs. We continue to advance and protect our differentiated immunotherapy platform and use its unique capabilities to design and developclinically validate an array of cancerDNA medicine candidates that target infectious diseases, such as COVID-19, as well as HPV-associated diseases and infectious disease immunotherapy and vaccine products.cancer. We aim to advance productsour product candidates through to commercialization. We continue to leveragecommercialization and, where applicable, with third-party resources through collaborations and partnerships, including product license agreements.
Our partners and collaborators include MedImmune, LLC,ApolloBio Corporation, AstraZeneca, Advaccine Biopharmaceuticals Suzhou Co, The WistarBill & Melinda Gates Foundation (Gates), Coalition for Epidemic Preparedness Innovations ("CEPI"), Defense Advanced Research Projects Agency ("DARPA"), The U.S. Department of Defense ("DoD"), HIV Vaccines Trial Network, the U.S. Defense Threat Reduction Agency’s Medical CBRN Defense Consortium ("MCDC"), International Vaccine Institute University("IVI"), Kaneka Eurogentec, National Cancer Institute, National Institutes of Pennsylvania, GeneOne Life Science, Inc., Regeneron Pharmaceuticals, Inc., Genentech, Inc., Plumbline Life Sciences, Inc., the Parker Institute for Cancer Immunotherapy, Drexel University, National Microbiology Laboratory of the Public Health, Agency of Canada, National Institute of Allergy and Infectious Diseases, (“NIAID”), United States Military HIV Research Program (“USMHRP”), U.S.Ology Bioservices, the Parker Institute for Cancer Immunotherapy, Plumbline Life Sciences, Regeneron Pharmaceuticals, Richter-Helm BioLogics, Thermo Fisher Scientific, the University of Pennsylvania, the Walter Reed Army Medical Research Institute of Infectious DiseasesResearch, and The Wistar Institute.
We or our collaborators are currently evaluating the feasibility of, conducting or planning clinical studies of our DNA medicines for COVID-19, which includes both homologous and heterologous boosting approaches; Middle East Respiratory Syndrome, or MERS; Lassa fever; Ebola; as well as HPV-associated precancers, including cervical, vulvar, and anal dysplasia; HPV-associated cancers, including head & neck, cervical, anal, penile, vulvar, and vaginal; other HPV-associated disorders, such as recurrent respiratory papillomatosis, or RRP; glioblastoma multiforme, or GBM; and prostate cancer.
(“USAMRIID”), National Institutes of Health ("NIH"), HIV Vaccines Trial Network (“HVTN”) and Defense Advanced Research Projects Agency (“DARPA”).
Inovio’s Differentiated ImmunotherapyOur DNA Medicines Platform
Overview of Our Platform
Our proprietary design and optimization process for our DNA plasmids is called SynCon®. These plasmids are delivered into cells intramuscularly or intradermally via our proprietary CELLECTRA® smart devices, which use brief electrical pulses to reversibly open small pores in the cell, enabling DNA plasmids to enter. Once inside the cell, the plasmids instruct the body’s cellular machinery to produce the target antigen or monoclonal antibody. We believe our DNA medicines platform offers
versatile capabilities, both in terms of addressing several disease targets as well as providing us with several product development opportunities.
The characteristics and core components of our DNA medicines platform include:
1. SynCon Design Process: SynCon uses a proprietary computer algorithm that stimulatinghas been designed to identify and optimize the DNA sequence of the target antigen, whether it is from a virus or a tumor.
2. CELLECTRA Smart Device: Once our DNA medicines are injected, the DNA medicines instruct the cell to produce the target antigen, monoclonal antibody, or therapeutic protein. The antigens are then processed naturally in the cell and induce the immune system to preventgenerate antibodies and T cells that perform preventive or treat infectionstherapeutic functions. Similarly, dMAbs® or dBTAs generated in this manner can also trigger desired immune system functions.
3. Our DNA medicines have generated in vivo (within the body) immune responses: With our core platform technology, we have developed a pipeline of clinical-stage product candidates that have generated in vivo immune responses, in particular CD4+ and cancersCD8+ T cells that may be responsible for eliminating cancerous or infected cells.
4. Our DNA medicines work naturally with the immune system: Compared to some other technologies, our DNA medicines are designed to work with the immune system with reduced risk of unwanted inflammatory responses.
The mechanism of action for our DNA medicines and the process for administration of our DNA medicines are summarized in the following graphic:
Nucleic Acid Vaccines: Similarities and Differences between DNA and mRNA-based Approaches
The use of nucleic acid-based vaccines (DNA or mRNA) as an alternative to traditional immunization is a compelling conceptstrategy that has been under development for many years. We believe that the U.S. Food and Drug Administration's (FDA) approval for emergency use authorization (EUA) of two messenger RNA (mRNA)-based vaccines for COVID-19 in 2020, as well as an EUA by Indian regulators for a DNA vaccine in 2021, suggests the benefit of using nucleic acids as vaccines.
Over the past decade, the scientific community and the vaccine industry have been asked to respond urgently to various epidemics, including but not limited to: H1N1 influenza, Ebola, Zika virus and, most recently, SARS-CoV-2, the virus that todaycauses COVID-19. Today, multiple platforms have been used or are under development in the opportunityfight against COVID-19. Among those are DNA- and mRNA-based platforms, along with those developing viral vector and recombinant-subunit vaccines.
Our efforts to develop a DNA vaccine candidate for immune activating technologies withCOVID-19 is based on the potentialsuitability and scalability of our DNA medicines platform, as well as our track record of generating clinical candidates to combat pandemic threats such as Ebola, Zika
virus, and Lassa Fever. We were the first company to advance a vaccine against MERS-CoV, a related coronavirus, into clinical evaluation in humans.
Our DNA Medicines’ Differentiation from mRNA
While DNA and mRNA both use fragments of genetic materials that, once injected, instruct the body to fight cancerspathogens, which cause cancer and infectious diseases is promising, especiallydisease, there are key differentiating features of DNA vaccines. mRNA vaccines require colder storage temperature for transportation, necessitate complex LNP formulations for scaling, and are on average more expensive when considering manufacturing and distribution. We believe that our DNA vaccines offer several key potential advantages:
a.Tolerability: Our DNA vaccines appear to be well-tolerated when evaluated against multiple disease targets.
b.Stability of Product: Our DNA vaccines are stable for more than a year at room temperature or for more than a month at 37º C, have a five-year projected shelf life at normal refrigeration temperature and do not require frozen cold storage or shipping.
c.Rapid Design and Manufacture: Similar to mRNA vaccines, our DNA vaccines can be rapidly designed and scaled, which are critical aspects in lightaddressing global pandemics like COVID-19.
d.T Cell Responses: Our DNA vaccines have demonstrated the ability to generate high levels of notable technology advancements suchT cell (CD4+ and CD8+) responses along with antibody responses. The CD8+ T cell responses, in particular, are regarded to be very important in their propensity to clear tumor cells in the body as checkpoint inhibitors leadingwell as to fight off infections. In the way in oncology. Despite promising resultscontext of SARS-CoV-2 infection, CD8+ T cells generated by our vaccine resemble those that the scientific and medical community have profiled and associated with mild COVID illness as opposed to severe illness, as well as convalescence. Furthermore, cellular responses have been preserved across different variants of SARS-CoV-2, suggesting that INO-4800 can elicit a cross-reactive immune profile.
e.Ability to Readminister: Our DNA vaccines have been used in clinical trials there remains a significant need and opportunityto boost our vaccines’ immunity profile via repeat administration, suggesting that our DNA vaccines could be readministered if immunity wanes, offering the possibility for further advancements.seasonal boosting usage without any concerns of generating an anti-vector response.
Our ASPIRE™ (Antigen SPecific Immune REsponses) immunotherapy platform comprising our DNA-based immunotherapy and CELLECTRA® delivery technologies has an important fundamental capability with a number of possible disease targets and product opportunities. DNA Medicines Platform in Detail
The basic goal of our DNA medicines platform is to generate and deliver safe and effective therapeutics and preventive vaccines. Our technologies allow us to enable in vivo (in the body) generation of usefulfunctional immune responses to achieve desired therapeutic and preventive outcomes. WeHistorically, we have historically beenfocused primarily focused onin vivogeneration production of disease-specific antigens in the body in order to stimulate prophylactic or therapeutic immune responses. More recently, we have embarked onexplored an additional new application for the platform:in vivo generation of monoclonal antibodies to achieve preventive and therapeutic outcomes complementary to our antigen-generating immunotherapies.
There are two components to our DNA medicines platform. The essence of our platformfirst is thata biological component (SynCon), by which we encode aproteins (antigens, monoclonal antibodies, antibody fragments, and cytokines such as IL-12) into closed-circular DNA plasmid (circular string of DNA) for an engineered and optimal genetic sequence of an antigen or monoclonal antibody specific to a targeted disease. We can combine multiple such plasmids that are translated into a “product,” inject the plasmids into tissue of the body, use CELLECTRA® devices to apply transient electrical energy to facilitate significant cellular uptake of the plasmids, and then enhance the ability of the intracellular machineryproteins that usually produces useful proteins for the functioning of the body to temporarily produce the target antigen or monoclonal antibody. An antigen produced in this manner will then induce the immune systemare expressed to generate polyclonal antibodies or T cells with the ability to perform their preventive or therapeutic functions. Similarly, DNA encoded monoclonal antibodies (dMAbs™) generated in this manner can then also trigger desired immune system functions.
With our core technologies, we have developed a pipeline of pre-clinical and clinical-stage product candidates that have generated best-in-class in vivo immune responses, in particular CD8+ T cells that are fundamental in eliminating cancerous or infected cells. Our lead immunotherapy product candidate, VGX-3100, met its primary and secondary endpoints in a controlled Phase 2b clinical trial of patients HPV-associated precancer, achieving statistically significant and clinically relevant efficacy in association with robust T cell activation. This data was published in The Lancet in a paper entitled, “Safety, efficacy, and immunogenicity of VGX-3100, a therapeutic synthetic DNA vaccine targeting human papillomavirus 16 and 18 E6 and E7 proteins for cervical intraepithelial neoplasia 2/3: a randomized, double-blind, placebo-controlled Phase 2b trial.” These results were achieved without serious adverse events. The most common adverse event was temporary injection site pain and redness.
Our immunotherapies are non-live and non-replicating, and therefore do not cause the underlying disease. Compared to other technologies, our immunotherapies work more naturally with the immune system and within its controls to reduce or minimize the risk of unwanted inflammatory responses.
The results of our Phase 2b clinical trial of VGX-3100 suggest that our platform can be used to design and develop a number of cancer and infectious disease product candidates.
The Next Generation of Cancer and Infectious Disease Treatment: Inovio's SynCon® Immunotherapies
Our SynCon® immunotherapies are designed to treat an existing disease (therapeutic) or prevent a disease (prophylactic) by activating and magnifying an immune response to one or more disease-specific antigens (proteins associated with a cancer or infectious disease that the body will recognize as foreign or not normal). Without the quality control and manufacturing challenges and costs of medicines involving ex vivo processes, such as T cells with chimeric antigen receptors, or CAR-Ts,response. The second component is our product candidates are able to direct the patient’s immune system to fight specific organisms or cells in a highly targeted and robust fashion. We do this by introducing the genetic code for a target antigen into the cells of the body that will serve as a temporary antigen production facility.
Our immunotherapies consist of one or more DNA plasmids encoding one or more selected antigens. Our approach enables dramatic uptakeproprietary CELLECTRA smart devices technology, which facilitates delivery of the DNA plasmids by cells in localized tissue (typically muscle in the arm for immunotherapies or in the skin for vaccines). After theplasmids.
The resulting immune responses from DNA code for the targeted antigen(s) is introducedmedicine administration are designed to cells, the cells’ natural machinery for producing proteins necessary for the body’s many functions temporarily produce the selected antigen(s) encoded by the DNA sequences. The antigenic proteins manufactured through this process are then presented to the immune system and trigger one or both of two arms of the immune system:
the production of preventive antibodies, known as a humoral immune response; and/or
•the activation of therapeutic CD8+ T-cells, known as a cellular or cell-mediated immune response.
These responses then neutralize or eliminate infectious agents, such as viruses, bacteria, and other microorganisms, or abnormal cells, such as malignant tumortumors or infected cells. T cells can be immediately “trafficked” to parts of the body where cells are displaying the target antigen. Memory cells are also created for durable effects.
SynCon® DNA Medicines Design
Our SynCon® DNA immunotherapiesmedicines are designed to generate antigen-specific antibody and T cell responses. FirstBased on extensive due diligence and pre-clinical and clinical data that we have evaluated, we first identify one or more antigens that we believe are the best targets, to directfor directing the immune system toward a particular cancer or infectious disease. We then apply our SynCon® design process, which uses the genetic make-up of the selected antigens from multiple variants of a cancer or strains of a virus.
For each antigen, we synthetically create a new genetic sequence that represents a nucleotide consensus of the slightly different DNA from multiple variants or strainssequence of the targeted antigen.antigen from multiple virus variants or strains. We can synthetically create a differentiated SynCon® variant sequence to help the immune system better recognize a cancer self-antigen (a(from a cancerous cell and antigen grown in the body) and “break the tolerance” of those cancer cells inwithin the body. In human clinical trials, weWe have generated immune responses with SynCon® immunotherapies that were not matched to DNA medicines against different strains of ancertain infectious disease, such as influenza or HIV, indicating that such immunotherapies may have more universal protective capabilities against unmatched strains of a circulating virus. As a result, thesediseases in human clinical trials. Because the engineered SynCon® constructs may provide a solution to broadly cover the genetic “shift” and “drift” that is typical of many infectious diseases. This new synthetically engineered sequence is sequences are substantially similar to the originatingoriginal sequences, but does not match any. It does not exist in nature andwithout matching them exactly we believe they are patentable.
Once a SynCon sequence is patentable.
The SynCon® sequenceengineered, it is then inserted into a circular DNA plasmid with its own promoter. The plasmid is optimized at the DNA level for codon usage and improved stability of mRNA stability, and provided with enhanced and proprietary leader sequences for ribosome loading; itloading. It is optimized at the genetic level to enable high expression in human cells. We believe these design capabilities allow us to better target appropriate immune system mechanisms and produce a higher level of the coded antigen compared to enhancetraditional approaches, potentially enhancing the overall ability of the immunotherapy to induce the desired immune response.
The plasmids are then manufactured in a bacterial fermentation process using scalable manufacturing technology. These DNA-based immunotherapies canUltimately, the manufactured DNA medicines are designed to be stable under normal environmental conditions for extended periods of time.
Inovio’s immunotherapies are injected in a local area of selected tissue (muscle or skin) and then electroporated to facilitate significant cellular uptake of the plasmid and expression (production) of the encoded DNA. The resulting immune response to the produced antigens results in significant production of antibodies or T cells.
Our product developmentDNA medicines platform also allows for rapid design, pre-clinical testing, cGMP manufacturing at scale, and clinical development of both our DNA vaccine and DNA immunotherapy products.product candidates. Speed is an important feature, particularly as it relates to developing a response to globally emerging infectious diseases. In 2016,diseases such as COVID-19. Responses to emerging infectious diseases that we were the first entity able to advance a Zika vaccine into human clinical trials, just 4.5 months after World Health Organization, or WHO, declared the emerging Zika infections to be a Pandemic Health Emergency of International Concern. Previously, we led the development of the first MERS vaccine to enter into human clinical trials. We believe that our development platform is well positioned to support global health agencieshave explored are described in order to develop preparedness countermeasures against bioterrorism and/or emerging pandemic agents.more detail below.
Published human data from three different SynConCELLECTRA® DNA immunotherapies--two for treating HPV-caused pre-cancers and cancers as well as one for treating HIV infection--have generated best-in-class T cell responses in terms of magnitude, durability, and/or killing effect, providing evidence of their potential to provide preventive and therapeutic capabilities against cancers and infectious diseases. This best-in-class T cell generation has also been correlated to efficacy.
CELLECTRA® Electroporation Delivery Technology
Despite how compelling the idea of deliveringOur DNA encoding an antigen has been, delivering the DNA or nucleic acids directly into a cell through the cell’s protective membrane has been a significant challenge in the broad field of DNA and RNA vaccines. Our immunotherapiesmedicines are delivered directly into cells of the body intramuscularly (IM) or intradermally (ID) in a small, locallocalized area of tissue using our proprietary CELLECTRA®in vivo electroporation DNA delivery technology. smart devices. CELLECTRA® uses smart devices use brief locally applied electric fieldselectrical pulses to create temporary and reversible permeability, orreversibly open small pores in the cell, membrane. Usingenabling DNA plasmids to enter. Through this method increasesprocess, the cellular uptake of the DNA plasmids increases by more than one thousand times when1,000-fold compared to delivering “naked DNA” alone.the injection of a DNA plasmid alone without this delivery mechanism. This improved cellular uptake has enabled the best-in-class immune responses that we have observed in our clinical trials along with the efficacy results generated by these immune responses.
Our CELLECTRA portfolio consists of three devices. CELLECTRA 2000 is our clinical device that can perform both IM and ID injections. CELLECTRA 2000 has been used in almost all clinical trials to date. CELLECTRA 5PSP is our new IM device utilizing a prefilled drug CELLECTRA 5PSP is used in our Phase 3 (REVEAL1/REVEAL2) trials for cervical high squamous epithelial lesions (HSIL). Finally, CELLECTRA 3PSP is our next generation ID delivery device.
Alternative delivery approaches basedwhich typically involve or rely on the use of viruses,virus-based vectors, bacteria, nanoparticles and lipids aremay be complex and expensive and, have created concerns regarding safety. Because the vector itself possesses manyin some cases, may raise safety concerns. For example, because alternative delivery vectors themselves may possess additional antigens specific to the vector, itthey can attract unwanted immune responses against itself (believed tothat could compromise suchthe vectors’ ability to deliver their DNAgenetic “payload” and provide protection).produce the desired immune response. In contrast, a DNA plasmid vectors possessvector possesses no antigens of their own:its own, as the plasmid results in production of only the target antigen.
We have published preclinical data in which we observed improved immune responses generated by our SynCon® immunotherapiesSynCon® DNA medicines delivered using our CELLECTRA® electroporation technology were improved as smart devices compared to a leading viral vectorvector-based approach (Adenovirus type 5) based. The delivery of DNA medicines using CELLECTRA smart devices to date has shown a favorable tolerability and safety profile in clinical trials. Our CELLECTRA-based approach is designed to be tolerable without the need for an anesthetic.
There are several configurations in the CELLECTRA smart device family. The first configuration covers intramuscular (IM) delivery, while the second covers intradermal/subcutaneous (ID) delivery. Smart devices with these configurations have been validated, manufactured under Current Good Manufacturing Practices (cGMP) and are being used in human clinical trials. We have filed device master files with the FDA covering the use of the CELLECTRA smart devices in human clinical trials.
approach. Our CELLECTRA smart devices combine the functionality of our current generation of ID and IM devices in clinical testing with enhanced form, design and portability. All components of the pulse generator and applicator are integrated into a cordless, rechargeable device. The rechargeable battery can enable immunization of several hundred participants, making the device useful for mass vaccinations. The devices are designed to accommodate different electrode arrays to meet the requirements of the particular DNA medicine and targeted tissue for delivery.
Next-Generation Smart Device Development
We are not awarealso advancing a new generation of any published data indicatingsmall, portable, battery-powered ID delivery devices called CELLECTRA®-3PSP. Currently used ID devices penetrate no more than 3 mm into the capabilitytarget tissue, compared to IM devices that go deeper.
The medical arm of alternative technologies focused on using genetic codethe U.S. Defense Threat Reduction Agency (DTRA) agreed to generate preventive or therapeutic antigensfund the further development of our CELLECTRA-3PSP device. DTRA provided $8.14 million of grant funding to exceedsupport the development of CELLECTRA-3PSP, to be used in the administration of our immune response data obtainedvaccines and therapies, including DTRA-developed products.
In June 2020 we were awarded funding expected to date, norbe approximately $65.2 million from the U.S. Department of Defense (DoD) to matchsupport the efficacy and immune response data generated in our controlled Phase 2b study based on in vivolarge-scale manufacture of the CELLECTRA-3PSP smart device, the production of such immune responses.
We believe electroporation provides a relatively straightforward, cost effective method for delivering DNA and RNA into cells with high efficiency, minimal complicationsdoses and the abilityprocurement of CELLECTRA 2000 devices. The DoD contract, from the JPEO-CRBND-EB through funding provided by the
Defense Health Program, builds upon two separate prior $5 million grants from the Bill & Melinda Gates Foundation and CEPI, to enable what we believe to be clinically relevant levelsaccelerate the testing of gene expression, immune responsesCELLECTRA-3PSP.
Background on DNA Medicines and efficacy.Immuno-Oncology
Inovio’s Immunotherapy Products and Product Development
Our primary focus is to advance the products developed from our integrated ASPIRE™ platform. Using this platform, we are currently developing a number of DNA-based immunotherapies for the prevention or treatment of cancer and chronic infectious diseases. The table below summarizes the status of our product development programs.
Active SynCon® Immunotherapy Development Programs
|
| | | | | | | | | | | | |
| | | | Development Status | |
Product Area | | Product and
Indication(s)
| | Pre-Clinical | | Phase 1 | | Phase 2 | | Phase 3 | | Partner/Funding/Sponsor |
Cancer | | Cervical dysplasia (cervical HSIL)
(VGX-3100)
| | X | | X | | X | | IP | | Inovio |
| | Vulvar dysplasia (vulvar HSIL) (VGX-3100) | | X | | X | | IP | | | | Inovio |
| | Head and neck cancer (MEDI0457) | | X | | X | | IP | | | | MedImmune/AstraZeneca |
�� | | Bladder cancer (INO-5401 + atezolizumab) | | X | | X | | IP | | | | Genentech/Roche |
| | Glioblastoma (INO-5401 + cemiplimab) | | X | | X | | IP | | | | Regeneron |
| | Prostate cancer
(INO-5150 + INO-9012)
| | X | | X | | SP | | | | Inovio |
| | hTERT expressing cancers (breast, lung, pancreatic)
(INO-1400 + INO-9012)
| | X | | IP | | | | | | Inovio |
| | | | | | | | | | | | |
Infectious Disease | | Hepatitis B Virus
(INO-1800)
| | X | | IP | | SP | | | | Inovio |
| | Zika
(GLS-5700)
| | X | | IP | | | | | | GeneOne Life Sciences |
| | Ebola
(INO-4212)
| | X | | IP | | | | | | GeneOne Life Sciences/DARPA |
| | MERS
(GLS-5300)
| | X | | IP | | | | | | GeneOne Life Sciences/IVI |
| | HIV (preventive & therapeutic)
(PENNVAX®-GP)
| | X | | IP | | SP | | | | NIH/NIAID |
|
| |
X | = Completed |
IP | = In Progress |
SP | = Seeking Partner |
Cancer Vaccines/Immunotherapies
Background
In recent years there have been multipleMultiple technology advancements and product approvals that have highlighteddemonstrated the potentialability of immunotherapies to ushertreat cancer. Monoclonal antibodies such as Herceptin® (anti-HER2) and its analogs have demonstrated therapeutic benefit in clinical trials and have been approved for use in a new eravariety of cancer therapeutics. Monoclonal antibodies (mAbs) such as Herceptin® and dendritic cell therapy Provenge® for prostate cancer have had their varying degrees of success.cancers. While a significant step forward, suitable monoclonal antibodies with desiredideal clinical characteristics have been difficult to design or identify and are expensive to produce, and the technology does not lend itself to designing mAbs for many diseases. Dendritic, or other cell-based therapy is
atherapies such as chimeric antigen receptor (CAR) T-cell therapies, are highly personalized medicinemedicines involving removing cells from the patient, modifying, them,manipulating and multiplying them, and then returning them to the body. Besides the high costbody, which can be complex and complex processes to manufacture the product, one of the glaring weaknesses of this approach is that it has not been shown to generate high levels of cancer-specific T cells.costly.
Progress in the field of immune checkpoint inhibitors (CIs) created significant(ICIs) has resulted in optimism regarding the potential for new immunotherapies against a spectrum of cancers.cancers, specifically solid tumors, where cell-based therapies have not previously succeeded. The immune system relies on a safeguard system of checkpoint mechanisms to prevent excessive or incorrectly directed immune responses. Many cancer cells have the ability tocan “hijack” these checkpoints and neutralize T cells sent by the immune system to eliminate them. Checkpoint inhibitorsICIs prevent cancer cells’ ability to interferecells from interfering with these checkpointssafeguards and enable T cells (especially CD8+ killer T cells) to complete their appropriate and intended killing function against cancer cells. Clinical trials of checkpoint inhibitorsICIs have shown notable therapeutic impact against melanomamany cancers and other cancers, but with response rates in the 15-20% range (and only in the case of melanoma going uphave led to the 40% range), there remains an important and valuable opportunity to improve these results. Observations suggest CIsseveral approvals. However, ICIs may be less effective if there is not a high enough pre-existing level of antigen-specific CD8+ T cells in the tumor micro-environment, meaning that the tumor is “cold” rather than “hot” (with a significant level of CD8+T cells). More recently, scientists have recognized that a strong T cell generatingcell-generating “active” immunotherapyimmunotherapies may be able to transform a "cold" tumor into a "hot" tumor and in combination with a checkpoint inhibitorICIs may possess significant therapeutic potential to fight cancers.
More recently, a new category of immunotherapies called adoptive cell transfer, for example CAR-T technology, has provided further evidence of the merit of providing an enhanced T cell presence to fight cancer. CAR-T therapies have achieved dramatic results, most notably in B cell cancers. Unfortunately, they have also been associated with significant side effects. When this technology has been applied to solid tumors, it has generated significant cytokine storms that have resulted in severe side effects, including deaths. Moreover, adoptive cell transfer such as CAR-T, like dendritic cell therapy, involves removing T cells from a patient, modifying them to better target a cancer cell, multiplying the T cells, then returning them to the patient. TheseAdditionally, these complex therapeutic products need to be manufactured and released for each patient, leading to expensive and timely manufacturing, andas well as increased supply chain complexity.
Even thoughWhile there have been promising technology advancementssignificant clinical advances in recent years that better harness or activate capable killer T cells, we believe there is still significant untapped potential to develop “ideal”additional immunotherapies to fight cancers and infectious diseases.
What is an “ideal” active immunotherapy? We want products that are effective, efficient, and safe. Specifically we want immunotherapiesseek to advance product candidates that:
target•Target disease-specific antigens or proteins unique to a cancer or infectious disease;
do•Do not depend on complex manufacturing processes such as removal of dendritic cells or T-cells from the patient that are then modified in the laboratory, amplified and then re-introduced in the patient as autologous or allogeneic cell based therapies;processes;
•activateActivate functionalkiller T cells with the necessary killing tools, such as granzyme and perforin;cells;
generate•Generate robust T cell responses or a significant number of T cells that are persistent and durable over time (memory response;response);
•do not induce unwanted immune responses;
•doDo not induce toxic inflammatory responses; and
•areAre capable of “breaking tolerance” of cancer cells grown in the body.
Our
Data from our Phase 2b data (discussed below) show we are achieving these ideal characteristics withand REVEAL1 Phase 3 trial of VGX-3100, discussed below, suggest that our active immunotherapy approach to activating significant antigen-targeted T cells andmay achieve these characteristics. Accordingly, we are advancing a growing pipeline of pre-clinical and clinical immunotherapy products.product candidates.
Our HPV Immunotherapy-VGX-3100DNA Medicines in Development
The chart below summarizes the status of our active DNA medicines development programs, each of which is described in more detail following the chart.
VGX-3100 for the Treatment of Cervical High Grade Squamous IntraepithelialHPV-Associated Precancerous Lesions (HSIL)
Overview and Background
Human papillomavirus, or HPV,papilloma virus (HPV) is a causative agent responsible forsexually-transmitted, persistent viral infection with one or more high-risk (HR) genotypes that can lead to pre-cancers and cancers, such as cervical, pre-cancers (cervical dysplasia), cervical cancer, other anogenital cancers,head and head & neck, cancer, whichanal and vulvar dysplasia and cancer. It is oneestimated that approximately 43% of the most rapidly growing cancers in men. At any given time, approximately 11% of the world’sU.S. adult population is infected with HPV.
HPV, and about 25% of adult men and 20% of adult women in the U.S. have a genital infection with one or more HR-HPV genotypes such as HPV-16 and HPV-18. HPV is the most common viral infection of the reproductive tract and isHPV-16 and HPV-18 infections specifically are the major causecauses of cervical cancers.cancers globally. Almost 300 million women globally are estimated to be infected with HPV, with another 30 million additional cases that have progressed to the pre-cancerous stage. Every year over 500,000 new cases of cervical cancer are diagnosed world-wide and approximately half of these women die. Virtually all cases are linked with persistent infection with HPV. Challenges with acceptance, accessibility, and compliance of preventive vaccines have resulted in only 40% of young women being vaccinated in the United States, and even less in other countries around the world.
While roughly 90% ofmost genital HPV infections are cleared naturally by the body's own immune system, persistent HPVcervical infection with one or more HR-HPV genotypes can eventually lead to high grade cervical high-grade dysplasia (CIN 2/3)(HSIL) and if untreated, eventually invasiveto cervical cancer. Researchers have estimated the global prevalence of clinically pre-cancerous HPV infectionscervical HSILs at between 28 and 40 million. HPV 16
Current management options for cervical HSIL are limited and 18 are associated with potential unwanted side effects. The “watch-and-wait” process associated with low-grade squamous intraepithelial lesions (LSIL, formerly called low-grade dysplasia or CIN 1) and in some young women with higher grade lesions (though only for the two most prevalent high-risk types of HPV worldwide, causing the significant majority of HPV-related cancers. HPV 16/18 are found in 52% of all high grade pre-cancerous cervical lesions and 70%CIN 2 level of cervical cancers.HSIL) can be a stressful approach. The only available current treatment option for cervical HSIL is surgery, which involves ablating or cutting into a women’s cervix to remove the pre-cancerous or cancerous lesions. These treatments may lead to short-term adverse effects including cervical scarring, excess bleeding, and infection, or to longer-term reproductive risks such as pre-term birth, miscarriage, and perhaps infertility. More importantly, because surgery does not clear the underlying systemic HPV infection, there is a chance of high-grade pre-cancer lesion recurrence after surgery as a result of persistent HPV infection and/or incomplete removal of the lesion.
ThereWhile there is an annual incidence ratecurrently a vaccine available to prevent HPV infection, challenges with acceptance, accessibility and compliance of lower-grade cervical dysplasia (CIN 1) caused byvaccines to prevent HPV types 16infection and 18 of 1.4 million personstheir resulting pre-cancers and cancers have resulted in many vaccine-eligible people remaining unvaccinated and at risk; it is estimated that even in the United States, and 1.3 million persons inonly 60% of the top 5 European countries. There is an annual incidence rate of CIN 2/3 caused by HPV types 16 and 18 of 195,000 persons in the United States and 233,000 persons in Europe. These represent a significant market opportunity. CIN 1eligible population has no treatment. CIN 2/3 can only be treated by an invasive surgical procedure.
There are currently two FDA approvedbeen vaccinated against HPV. In addition, preventive vaccines, Gardasil® and Cervarix®, that protect against HPV types 16 and 18, as well as types 6 and 11 (Gardasil®). Preventive HPV vaccines cannot treat or protect those already infected with the same HPV genotypes, which is a large population. In addition, not all girls and women eligible to be vaccinated are receiving these vaccines. In 2013, a U.S. national survey found that 57% of girls aged 13-17 years had received at least one dose of the HPV vaccine series, but only 38% had received all three doses in the series. In 2014, only 40% had received the full regimen. Currently there is no viable immunotherapy or drug available to fight establishedincident, prevalent, or persistent HPV infection or to treat cervical dysplasia and/or cancer caused by HPV.
Current treatment options for cervical dysplasia are unappealing. The “watch-and-wait” process associated with low grade dysplasia (CIN 1) is a stressful approach. The only available treatment option for high grade cervical dysplasia (CIN 2/3) is surgery, which involves ablating or cutting a women’s cervix to remove the pre-cancerous lesions. While surgical procedures are generally effective in removing lesions, they can lead to cervical scarring and longer-term reproductive risks such as pre-term birth, miscarriage, and infertility. Current CIN excisional and ablative procedures increase risk of pre-term births from 5.6% to 10.7% according to Kyrgiou et al in a meta-analysis published June 2016 in the British Medical Journal. Anticipation of these procedures produces significant anxiety for patients, despite their doctor’s reassurances, and full recovery from surgery can take up to several weeks. Because surgery does not clear the underlying HPV infection,HSIL. We therefore believe that there is a 10-16% chance of pre-cancer lesion recurrence as a result of persistent infection or incomplete removal of the lesion during surgery.
Oursignificant market opportunity for our therapeutic product candidate VGX-3100.
VGX-3100 is designed to significantly increase T cell immune responses against the E6 and E7 antigensoncogenic proteins of high-risk HPV types 16 and 18 that arecan be present in both pre-cancerousprecancerous and cancerous cells transformed by these HPV types. E6 and E7 are oncogenes that play an integral role in transforming HPV-infected cells into pre-cancerousprecancerous and cancerous cells.cells, thus making them appealing targets for T cell directed immunotherapy. The goal of the immunotherapyVGX-3100 is to stimulate the body's immune system to mount
generate a killer T cell response strong enough to causekill the killing of cells producing the E6/E7 protein. The potential of such an immunotherapy would be to treat pre-cancerous dysplasiasHSIL caused by these HPV types.
Phase 2bStudy ResultsVGX-3100 for the Treatment of Cervical HSIL
Based on the positive results from a Phase 1 clinical trial, in March 2011 we initiated aWe have completed randomized, blinded, placebo-controlled double-blind Phase 2b studyand Phase 3 clinical trials of VGX-3100 delivered using our CELLECTRA® intramuscular electroporation devicecompared to placebo, in women with HPV type 16 or 18HPV-16 and diagnosed with, but not yet treated for, high gradeHPV-18 cervical intraepithelial neoplasia (CIN 2/3). The women inHSIL. Data from the study received either 6 mg of VGX-3100, the highest dose usedPhase 2b trial supported our Phase 3 development program; in the Phase 1 clinical2b trial, or a placebo. VGX-3100 and placebo were administered using the CELLECTRA®in vivo electroporation device at months 0, 1, and 3. The study assessed efficacy by measuring regression of cervical lesions from CIN 2/3 to CIN 1 or normal in the treated versus control subjects. Immunological responses were also measured in this clinical study to assess the ability of this therapy to generate strong T cell responses in a larger, controlled study. Safety was also assessed.
The primary endpoint of the trial, histologic regression, was evaluated 36 weeks after the first treatment. In the per protocol analysis of this three-immunization regimen, CIN2/3 resolved to CIN1 or no disease in 53 of 107 (49.5%) women treated with VGX-3100 comparedwere more likely to 11 of 36 (30.6%) who received placebo. This difference was statistically significant (p=0.017). Intent to treat results were also similar and statistically significant.
There was also a high level of complete clearance of CIN 2/3. In a post-hoc analysis, CIN 2/3 resolved to no disease in 43 of 107 (40.2%) women treated with VGX-3100, compared to 6 of 36 (16.7%) who received placebo (p=0.006).
A secondary endpoint of the trial was virological clearance of HPV 16 or 18 from the cervix in conjunction with histopathological regressiondemonstrate resolution of cervical dysplasia to CIN1 or no disease. This endpoint was achieved in 43 of 107 (40.2%) VGX-3100 recipients, compared to 5 of 35 (14.3%) placebo recipients (p=0.001). We believe this is an important outcome, as persistence of theHSIL and HPV virus is associated with recurrence ofclearance from cervical dysplasia.
All Phase 2b patients were monitored for an additional 52 weeks for a safety follow up. No significant safety issues were observed through week 88 following treatment.
lesions than those women receiving placebo. In September 2015, this data was published in The Lancet in a paper entitled, “Safety, efficacy, and immunogenicity of VGX-3100, a therapeutic synthetic DNA vaccine targeting human papillomavirus 16 and 18 E6 and E7 proteins for cervical intraepithelial neoplasia 2/3: a randomized, double-blind, placebo-controlled Phase 2b trial.”
This paper reported further details regarding the characteristics of T cells generated and their association with efficacy outcomes. Analyses of patient immune responses showed that overalladdition, antigen-specific T cell levels in women treated with VGX-3100 were greater than those treated by placebo at all observation periods. At week 14, levels of CD8 T cells specificwith placebo. All women were monitored for an additional 52 weeks following the primary endpoint to the E6assess for safety; VGX-3100 was considered to be well-tolerated and E7 HPV antigens inthere were no safety concerns observed. Immune endpoints were also assessed and women treated with VGX-3100 were ten times greater than those in the placebo group. This response increased with each of the three immunizations, then declined modestly to a sustained and durable level of T cells (memory T cells) measured through 36 weeks (24 weeks post-treatment).
Patients whose lesions regressed also had higher frequencies of HPV-specific CD8+CD8+T cells which co-expressed key molecules important in the T cell killing cascade and directly correlated with clinical efficacy. Specifically, higher levels of CD8+ killer T cells co-expressing checkpoint molecule CD137 on their surface, as well as the cytolytic protein perforin, were observed to be a predictive tool for efficacy. As a strong activation marker for CD8+ T cells, stimulation through CD137 has been shown in some systems to confer resistance of CD8+ T cells to the suppressive activity of regulatory T cells, indicating that its presence can identify tumor reactive T cells. Perforin is a pore-forming protein deployed by killer T cells to bore holes into the target cell's plasma membrane and destroy the cell. The difference in frequencies of CD8+ cells expressing CD137 and perforinTo our knowledge, this Phase 2b trial was greatest in patients who had both regressed their lesions and cleared HPV as compared to patients who did not.
This is the first publication to our knowledge that demonstrates thestudy from which data was published indicating a direct correlation ofbetween antigen-specific CD8+ T cells generated in vivo directly to and clinical efficacy. We have identified several key biomarkers of killer T cells that we believe can be used to predict the clinical efficacy of VGX-3100, as well as other immunotherapies, which we will seek to confirm in future clinical trials.
Our Phase 2b clinical trial of VGX-3100 highlights the ability of a DNA-based immunotherapy to be locally administered in tissue distant from the diseased tissue target, generate robust functional CD8+ killer T cells, traffic those T cells to the diseased tissue, infiltrate diseased cells displaying the target antigen, and facilitate the elimination of these cells both in “healthy” tissue and in diseased tissue (a lesion) with a statistically significant, clinically relevant outcome. We believe these results have significant implications in displaying the broad therapeutic and preventive potential of our existing and future cancer and infectious disease products.
Preparation and launch of VGX-3100 registration Phase 3 studyTrials (REVEAL1 and REVEAL2)
In preparation for pivotal Phase 3 development and potential commercialization, we completed a manufacturing technology-transfer to a commercial manufacturing facility and scaled up manufacturing of VGX-3100.
We also designed and manufactured a new electroporationsmart delivery device, for commercial use, our CELLECTRA® 5PSP device,-5PSP, which is fully automated, smaller and more user-friendly compared to our device previouslybeing used in our global Phase 13 clinical trial of VGX-3100. This smart device uses a cordless applicator and Phase 2 clinical trials.
We have conducted additional market research with physicians and patientscharges cordlessly in an improved base station that have further characterized the unmet medical needs relating to the treatmenthas been optimized for ease of high grade cervical dysplasia (CIN 2/3). These include a preference for a non-invasive, non-surgical procedure for removing cervical lesions; a treatment that can clear HPV, the cause of the pre-cancer, throughout the body and not justuse in the limited area of the lesion; and a treatment that has no risk of causing pre-term births or infertility. We believe that CIN 2/3 represents a unique market opportunity for a novel therapy capable of providing a first-line alternative to surgery. This market research will help guide our communication and interaction with the physician, patient, and support communities.clinic.
Phase 3 program for VGX-3100 (REVEAL)
Our Phase 3 program, named REVEAL, (Randomized Evaluation of VGX-3100 and Electroporation for the Treatment of Cervical HSIL), consists of a primary study (REVEAL 1)trial (REVEAL1; HPV-301) and confirmatory study (REVEAL 2)trial (REVEAL2; HPV-303), in accordance with the FDA's general guidance for Phase 3 programs, to bebeing conducted in parallel. The studies will each enroll 198 patients in more than 100 study centers globally. Mark Einstein, MD, MS, FACS, FACOG, Professor and Chair Department of Obstetrics, Gynecology and Women’s Health Assistant Dean, Clinical Research Unit, Rutgers New Jersey Medical School, is Principal Investigator for the studies.
The REVEAL studiestrials are prospective, randomized (2:1), double-blind, placebo-controlled trials evaluating adult women with HPV 16/18 positive biopsy-proven cervical HSIL (also known as CIN 2 or (CIN 2/3). The primary endpoint is regression of cervical HSIL ANDand virologic clearance of HPV-16 and/or HPV-18 in the cervix. The studies will evaluatecervix, which was a secondary endpoint that was achieved in our Phase 2b trial. Overall, the Phase 3 trials are evaluating cervical tissue changes at approximately 9 months after beginning a three-dose regimen of VGX-3100 administered at months 0, 1 and 3. Secondary
In March 2021, we announced the result of the REVEAL1 trial of VGX-3100. The trial protocol-defined intention to treat (ITT) population (N=201) includes all randomized participants regardless of availability of endpoint data and defines those without endpoint data as non-responders. There were eight such participants (seven in the treatment group, one in the placebo group) in the ITT population. Including participants with missing endpoint data, the percentage of participants meeting the primary endpoint was 22.5% (31/138) in the treatment group, versus 11.1% (7/63) in the placebo group (p=0.029; 95%CI: -0.4,21.2), which was not statistically significant. All secondary endpoints include safety; tolerability;were achieved except for regression of CIN 2/3 to CIN 1 or normal;cervical HSIL alone (95%CI: -0.6,24.5).
For the protocol-defined mITT population (N=193) which includes all participants with endpoint data, we announced that VGX-3100 had achieved the primary and secondary endpoints among all evaluable participants. For the primary endpoint of histopathological regression of HSIL and virologic clearance of HPV;HPV-16 and/or HPV-18 at week 36, the percentage of responders was 23.7% (31/131) in the treatment group, versus 11.3% (7/62) in the placebo group (p=0.022; 95%CI: 0.4,22.5), thus achieving statistical significance. All secondary efficacy measuredendpoints were achieved in this population. These endpoints were: a) regression of cervical HSIL to normal tissue combined with HPV16/18 viral clearance, b) regression of cervical HSIL alone, c) regression of cervical HSIL to normal tissue, and d) HPV 16/18 viral clearance alone. There were no treatment-related serious adverse events (SAEs) and most adverse events (AEs) were self-resolving and were considered to be mild to moderate, consistent with earlier clinical trials. These data were presented at the 2021 American Society for Colposcopy and Cervical (ASCCP) annual scientific meeting, and at the 34th International Papillomavirus Conference (IPVC) in November 2021.
We completed the 52-week safety follow-up of participants in REVEAL1 and showed that VGX-3100 remained well-tolerated through Week 88. In addition, participants treated with VGX-3100 who met the primary endpoint at Week 36 remained clear of HPV-16 and/or HPV-18 at Week 88.
REVEAL2 is the second of two Phase 3 trials and the confirmatory trial agreed upon by non-progressionINOVIO and FDA. Endpoints for REVEAL2 are identical to cancer;those for REVEAL1; participants will be followed for up to 40 weeks. Enrollment of REVEAL2 was completed in the fourth quarter of 2021. Top-line efficacy and clearancesafety data are expected to be available in the second half of HPV from non-cervical anatomic locations.
2022.
VGX-3100 for the Treatment of Vulvar High Grade Squamous Intraepithelial Lesion (HSIL)HSIL
In April 2017, we commenced a Phase 2 trial to evaluate the efficacy of VGX-3100 in patients with pre-cancerousHPV-16 and HPV-18 can cause precancerous and cancerous lesions of the vulva,vulva. These precancerous lesions, or vulvar intraepithelial neoplasia (VIN). VIN hasHSIL, have less than a 5% rate of spontaneous or natural regression and there are no FDA approvedFDA-approved non-surgical treatments. Surgery, the most common treatment, is associated with high rates of disease recurrence and can cause disfigurement, long-term
pain, and psychological distress for the women who undergo the procedure. VINVulvar HSIL recurs in approximately oneone-half of every two patients who undergo surgical treatment.
We have also completed a Phase 2 trial (HPV-201) to evaluate the efficacy of VGX-3100 in participants with vulvar HSIL. This randomized, open-label Phase 2 clinical trial will assessassessed the efficacy of VGX-3100 in 3633 women with high-grade HPV-related vulvar lesions. The immunotherapy will beHSIL. VGX-3100 was administered with our CELLECTRA® intramuscular delivery -5PSP smart device. The primary endpoint of the study istrial was histologic clearance of high-grade lesions and virologic clearance of the HPV virus in vulvar tissue samples. The study willtrial also evaluateevaluated the safety and tolerability of VGX-3100. In January 2021, we announced positive efficacy results from this trial. A 25% or more reduction in HPV-16/18-associated vulvar HSIL was observed for 63% of trial participants (12 of 19) treated with VGX-3100 at six months post-treatment. Three of the 20 participants with histology data (15%) resolved their vulvar HSIL and had no HPV-16/18 virus detectable in the healed area. VGX-3100 was well-tolerated in the Phase 2 trial.
We also plan to expandare evaluating future clinical steps for the clinical developmentvulvar HSIL program, for VGX-3100 to includeincluding the potential for applying for U.S. FDA Orphan Drug Designation (ODD) for this indication. ODD is intended to encourage drug development for rare diseases by providing tax credits for qualified clinical trials, an exemption from user fees related to the New Drug Application or Biological License Application, and a potential of up to seven years of market exclusivity after approval. The FDA grants orphan drug status to medicines intended for the prevention, diagnosis, and treatment of rare diseases or conditions, as defined as a disease or condition with a prevalence of less than 200,000 patients in the United States annually.
VGX-3100 for the Treatment of Anal or Perianal HSIL
HPV-16 and HPV-18 can also cause precancerous lesions of the anus (anal HSIL). Left untreated, anal intraepithelial neoplasias,HSIL may progress to cancer. Spontaneous regression of anal HSIL is observed in approximately 20% of patients. Persistent infection with one or AIN,more high-risk HPV genotypes is responsible for a large portion of anal cancer. In the United States, about 55% to 80% of anal HSIL cases are associated with HPV-16/18, and worldwide about 80% of anal HSIL cases are associated with HPV-16/18. In the intentUnited States, over 90% of anal cancer is attributable to launchHPV, and about 87% of those HPV anal cancers are attributable to HPV-16/18 specifically.
There are no validated screening tests or a general screening recommendation consensus for anal HSIL. Treatment usually consists of repeated ablation, most commonly radiofrequency ablation (RFA), resections or laser therapy. However, recurrence rates are high, up to 49% one year after treatment, resulting in an unmet medical need.
We have completed a Phase 2 studyclinical trial (HPV-203) to evaluate VGX-3100 in 2018.
Further Analysisparticipants who are HIV-negative with histologically confirmed anal or perianal HSIL, or anal intraepithelial neoplasia (AIN), associated with HPV-16 and/or HPV-18. This open-label trial enrolled 24 participants who received three doses of VGX-3100 delivered by our CELLECTRA®-5PSP device. The primary endpoint of the trial was histologic clearance of the high-grade lesions and virologic clearance of the HPV-16/18 virus in anal/perianal tissue samples. In December 2020, we announced positive Phase 2b Data Reveals2 efficacy results from this trial. One-half of participants treated with VGX-3100 (11/22) showed resolution of HPV-16/18-associated anal HSIL at six months following the start of treatment. VGX-3100 was well-tolerated in the trial. We plan to pursue a registrational Phase 3 clinical trial for HPV-16-/18-associated anal HSIL as well as to apply for ODD from the U.S. FDA.
In addition to the Phase 2 anal HSIL trial sponsored by us, a separate ongoing Phase 2 trial sponsored by the AIDS Malignancy Consortium (AMC-103) is evaluating VGX-3100 in participants with histologically confirmed anal or perianal HSIL associated with HPV-16 and/or HPV-18 who are HIV-positive. This open-label single-arm trial plans to enroll approximately 75 participants who will receive up to four doses of VGX-3100 delivered by CELLECTRA®-5PSP smart device. The primary endpoint of the trial is histological regression of high-grade anal lesions to low-grade SIL or normal histology.
VGX-3100 Immune Correlates and Biomarker Signatures
We are pursuing a biomarker signature for our VGX-3100 program. In November 2017,May 2019, we entered into a collaboration with QIAGEN N.V. to co-develop a liquid biopsy-based diagnostic for this biomarker signature to identify women with HPV-16/18 cervical HSIL most likely to respond to VGX-3100. In February 2021, we announced an extension of our partnership with QIAGEN with a new master collaboration agreement to develop liquid biopsy-based companion diagnostic products based on next-generation sequencing technology to complement our therapies. QIAGEN is utilizing the Illumina NextSeq™ 550Dx platform for this biomarker, the first development based on a partnership QIAGEN and Illumina signed in October 2019.
In December 2021, we announced that a post-hoc analysis of data generated from our Phase 2b trial of VGX-3100we and QIAGEN have identified immune correlates andcandidate biomarker signatures that were predictivefor VGX-3100 with the intent of selecting a final signature of a pre-treatment in vitro diagnostic to meet the specific characteristics desired to identify women with HPV-16/18 cervical HSIL most likely to respond to VGX-3100. This biomarker, if validated, may have the potential to identify those women who are more likely to have a favorable treatment success. Detailsoutcome, specifically the regression of the new biomarkercervical HSIL and immunologic data are highlighted in the peer-reviewed journal Clinical Cancer Research in the article, “Clinical and Immunologic Biomarkers for Histologic Regressionclearance of High-grade Cervical Dysplasia and Clearance of HPV-16 and HPV-18 after Immunotherapy,” by Inovio and its academic collaborators.virus.
ApolloBio CommercialCollaboration Agreement for VGX-3100 within Greater China
In December 2017, we entered into an amended agreement providing ApolloBio Corporation with the exclusive right to develop and commercialize VGX-3100 within Greater China (China,(defined as China, Hong Kong, Macao and Taiwan). Additional details on the
ApolloBio Agreement are provided below under "Business-License,"License, Collaboration and Supply Agreements"Agreements." In December 2021, ApolloBio dosed its first participant in a separate Phase 3 trial in China (HPV-303CHN).
Our HPV Immunotherapy-MEDI0457 (VGX-3100 +DNA-Based IL-12 Cytokine INO-9012)INO-3107 for the Treatment of Head & Neck CancerRecurrent Respiratory Papillomatosis (RRP)
Overview and Background
HPVRRP is also associated with some head and neck cancers, especially those in the oropharynx and perhaps to some extent the larynx and oral cavity. The incidence of HPV-caused oropharyngeal cancer has increased significantly within the last 30 years, including a 225% increase from 1988 to 2004, and is the fastest-rising cancer among young white menrare disease (estimated at about 7,000 active prevalent cases in the United States.States in 2018, including both juvenile and adult cases) that is characterized by the growth of tumors in the respiratory tract primarily caused by HPV-6 and/or HPV-11 genotypes. Although mostly benign, such papillomas can cause severe, sometimes life-threatening airway obstruction and respiratory complications. A distinguishing aspect of this disease is the tendency for the papilloma to recur after surgical procedures to remove them. If RRP develops in the lungs, affected individuals can potentially experience recurrent pneumonia, chronic lung disease (bronchiectasis) and, ultimately, progressive pulmonary failure. In extremely rare cases (less than 1%), RRP can develop into squamous cell carcinoma. Additional symptoms of RRP can include hoarse voice, difficulty in sleeping and swallowing, and chronic coughing. RRP symptoms are usually more severe in children than in adults. In children, the United States, approximately 12,000disorder is most often diagnosed at or around the age of four years. In adults, the disorder occurs most often in the third or fourth decade, though evidence exists for some incidence of new cases of HPV-caused oropharyngeal cancer are diagnosed annuallydiagnoses in men and women combined. The estimated U.S. prevalence of HPV-caused oral cavity and pharynx cancer was approximately 104,000 cases in 2014.
By 2020, scientists estimate that HPV will cause more cases of oropharyngeal cancer than cervical cancer and by 2025 HPV will be the causative factor of 90% of all head & neck cancers, up from 63% currently. Greater than 70% of cancers of the oropharynx are linked to HPV, with HPV16 being the most prevalent serotype of those HPV-caused cancers.
Improvements in primary treatment modalities (surgery and radiation) have produced significant improvements in morbidity, but intensive radiation has a profound long-term impact on mortality and quality of life. Based on these factors, we believe there is a significant opportunity for an effective immunotherapy.
Clinical Developmentsixth decade.
In June 2014,February 2020, we initiated a Phase 1 clinical trial assessing the immunogenicity and safety of our product candidate INO-3112 (consisting of VGX-3100 in combination with a DNA-based IL-12 cytokine (INO-9012)) in head & neck cancer patients. We added our DNA-based IL-12 immune activator to VGX-3100 for this cancer study because our prior HIV vaccine clinical study had indicated that the addition of IL-12 to our DNA immunotherapy could enhance the activation of CD8 T cells.
We enrolled 22 adults with HPV16 and/or HPV18-positive head & neck squamous cell carcinoma (HNSCC) in thiscommenced an open-label, Phase 1 trial. Patients were treated with INO-3112 and then followed for safety, immune and clinical responses. In one part of the study, 6 patients were treated with INO-3112 before and after resection of their tumor. In the second part of the study, 16 patients were treated with INO-3112 after completion of chemotherapy and radiation therapy. Each INO-3112 treatment was administered using our CELLECTRA® delivery system.
In November 2015, we reported interim data showing that INO-3112 had generated robust HPV16/18 specific CD8+ T cell responses and antibodies against HPV16/18 in all 10 tested patients for whom data analyses were complete at that time. The treatment was well tolerated in all evaluable patients.
In November 2016, at the Annual Meeting of the Society for Immunotherapy of Cancer (SITC), we reported interim immunology results showing that in the group of six patients treated before resection (one dose averaging 14 days and ranging 7 to 28 days prior to definitive surgery) and post-surgery (three additional doses), INO-3112 generated robust HPV16/18 specific CD8+ T cell responses in peripheral blood in four of five subjects who also showed increased T cell activation in resected tumor tissue samples. One subject withdrew consent after surgery, leaving five evaluable subjects in this group. These four subjects remained disease-free in continuing follow-up that ranged from nine to 24 months at the time of analysis. One subject with minimal increases in T cell immune responses developed progressive disease at 11 months after treatment.
CD8+ and FoxP3 T cell expression were evaluated in tumor samples obtained before and after surgery. In addition, ELISpot analysis was performed to determine the number of T cells capable of secreting IFN-ã in response to HPV antigen stimulation. Four of five subjects had robust T cell response as measured by blood ELISpot assay, and the same four subjects also showed an average increase of 60% of CD8+ to FoxP3 ratio measured by immunohistochemistry post vaccination, demonstrating increased infiltration of CD8+ T cells as well as reduction of regulatory T cells measured by FoxP3 expression in tumor tissue.
The second treatment group enrolled 16 subjects who received four doses of INO-3112 after at least two months following completion of definitive chemoradiation or surgery and adjuvant chemoradiation therapy.
Collaboration with MedImmune
In August 2015, we formed a strategic collaboration with MedImmune, LLC, the global biologics research and development arm of AstraZeneca, focused on cancer immunotherapies. Under this agreement MedImmune licensed INO-3112 (renamed MEDI0457), to be studied in combination with selected immunotherapy molecules within its pipeline in HPV-driven cancers. See “Business- License, Collaboration and Supply Agreements” for additional information about the collaboration agreement. Emerging evidence suggests that the benefits from immuno-oncology molecules, such as those in MedImmune's portfolio, can be enhanced when they are used in combination with cancer vaccines that generate tumor-specific T-cells.
In May 2017, we announced that MedImmune will conduct amulticenter Phase 1/2 clinical trial investigating the combination of MEDI0457 and durvalumab, a PD-L1 checkpoint inhibitor. The combination trial will enroll patients with metastatic HPV-associated SCCHN with persistent or recurrent disease after chemotherapy treatment.
The open-label clinical trial is designed to evaluate the safety and efficacy of the combination therapy in approximately 50 subjects at multiple U.S. sites. Subjects will receive multiple doses of MEDI0457 and durvalumab. The primary endpoints of the trial are safety and objective response rate. The trial will also evaluate immunological impact, progression-free survival and overall survival.
Under our collaboration agreement, MedImmune will fund all of the costs of this trial.
Our Prostate Cancer Immunotherapy-INO-5150
The development of a new treatment for prostate cancer would be a significant medical advance given that present treatment options (surgery, radiation and hormone deprivation), while somewhat effective, all carry deleterious side effects and often do not confer long-term cure. Across the United States, there were 238,000 new cases of prostate cancer and more than 29,000 deaths in 2013.
In July 2015, we initiated a Phase 1 trial to evaluate our DNA immunotherapy for prostate cancer, INO-5150, in men with biochemically relapsed prostate cancer. This study is evaluating the efficacy, safety, tolerability and immunogenicity of INO-5150 alone INO-3107, a DNA medicine candidate similar to INO-3106, but targeting HPV-6 and HPV-11 associated RRP and including INO-9112, encoding IL-12, in participants with HPV-6 and/or in combination with INO-9012, Our DNA-based IL-12 immune activator.HPV-11-associated RRP. For this trial, adult participants will first undergo surgical removal of their papilloma(s) and then receive up to four doses of INO-3107, once every three weeks. The multi-centered studyprimary endpoint of this trial is safety and tolerability. The trial is also evaluating changes in prostate specific antigen, or PSA, levels, an important biomarker in prostate cancer. We have fully enrolled 62 patientsassessing efficacy as a function of the number of treatments required to treat RRP relative to the number of treatments required to control disease prior to enrollment in the trial across 4 dose cohorts.
An interim data analysis presentedtrial. We began enrollment in September 2017 at the European Society of Medical Oncology (ESMO) meeting in Madrid, Spain showed that INO-5150 had generated antigen-specific CD8+ killer T cell responses measured in peripheral blood from subjects with biochemically recurrent prostate cancer. Treatment with INO-5150 as a monotherapy generated PSANovember 2020, and prostate specific membrane antigen, or PSMA, specific T cell responses in peripheral blood in 60% (35/58)completed enrollment of the subjects. Patients with specific CD8+ T cell responses experienced dampeningfirst 32 participants in December 2021. All 32 adult participants first underwent surgical removal of their papilloma(s) and then received four doses of INO-3107, one every three weeks. We expect preliminary efficacy data from a portion of participants from this Phase 1/2 trial in the risesecond half of PSA2022.
In July 2020, we announced that the U.S. FDA granted ODD for INO-3107.
INO-5401 for the Treatment of Glioblastoma Multiforme (GBM)
Glioblastoma multiforme (GBM) is the most common and significant increases in PSA Doubling Times (PSADT).
We are seeking strategic collaborators in order to continue the developmentaggressive type of INO-5150.
Our hTERT Immunotherapy-INO-1400
Human telomerase reverse transcriptase (hTERT) is a significant cancer immunotherapy target. High levels of hTERT have been detected in more than 85% of all human cancers, including breast, lung, and pancreatic cancers, while normal cells showed undetectable levels of telomerase expression. Immunological analysis indicated that hTERT is a widely applicable target recognized by T-cells and can be potentially used as a universal cancer immunotherapy.brain cancer. In 2017, over 530,000 new cases of breast, lung, or pancreatic cancers were reported in the United States, the median age at diagnosis is 65 years, and the incidence rate increases thereafter. Prognosis is extremely poor, and a limited number of new therapies have been approved over 240,000 people died from these
cancers. Despite available treatments, mortality rates remain unacceptably high in these tumor types. In addition, many existing treatment modalities are associated with significant adverse events.
In December 2014, we initiated a Phase 1 clinical trialthe last 10 years; median overall survival for U.S. patients receiving standard of INO-1400 alone or in combination with INO-9012 in adults with breast, lung or pancreatic cancer at high riskcare therapy was approximately eight months and the five-year survival was 6.8% for all ages combined. The annual incidence of relapse after surgeryGBM is estimated to be approximately 12,000 cases per year and other cancer treatments. This open label, dose escalation study is evaluating the safety, tolerability, and immunogenicity of INO-1400, as well as another hTERT construct called INO-1401. To date, we have treated 90 patients with nine different types of solid tumors. All patients received treatment using our CELLECTRA® delivery device.
In November 2017, in poster presentations at the SITC Annual Meeting, we reported additional results from the ongoing Phase 1 trial in which that INO-1400 generated hTERT-specific IFN-gamma secreting T cells, suggesting an ability to break immune tolerance.
INO-1400 is also part of our product candidate INO-5401, an immunotherapy comprising hTERT and two other tumor-associated antigens for which we intend to initiate a clinical study in combination with a checkpoint inhibitor.increasing.
Our Cancer Immunotherapy-INO-5401
Our immunotherapy product candidate INO-5401 is comprisedan immunotherapy consisting of three synthetic DNA plasmids encoding for three tumor-associated antigens: human telomerase (hTERT), Wilms tumor gene-1 (WT1) and PSMA. The National Cancer Institute previously highlighted WT1, hTERT and PSMA among a list of important cancer antigens, designating them as high priorities for cancer immunotherapy development, as these three tumor-associated antigens Wilms' tumor gene, or WT1, as well as hTERT and PSMA.are commonly expressed in human cancers.
In February 2017, we reported data indicating that our SynCon® WT1 cancer antigen was capable of breaking immune tolerance, - a major challenge to researchers striving to develop potent cancer therapies -- and induced neo-antigen-like T cell responses to cause tumor regression in pre-clinical studies. The results were published in the scientific journal Molecular Therapy in an article entitled, “A novel DNA vaccine platform enhances neo-antigen-like T-cell responses against WT1 to break tolerance and induce anti-tumor immunity.”Therapy.
While mice in athe preclinical study did not mount an immune response to native mouse WT1 antigens, mice immunized with our SynCon® WT1 antigen broke tolerance and generated robust neo-antigen-like T cells. The immunized mice also exhibited smaller tumors and prolonged survival in a tumor challenge study. SynCon® WT1 DNA vaccination also broke tolerance and generated neo-antigen-like T cell immune responses in Rhesus monkeys, a species whose immune system closely resembles that of humans. The ability to overcome the immune system’s usual tolerance of WT1 antigen suggests the potential of our SynCon® WT1 antigen to tackle anyaddress multiple WT1-expressing cancer in humans, including pancreatic, brain, lung, thyroid, breast, testicular, ovarian, and melanoma.
humans. We previously reported similar results for our SynCon® hTERT and PSMA cancer antigens.
The National Cancer Institute previously highlighted WT1, hTERT and PSMA among a list of attractive cancer antigens, designating them as high priorities for cancer immunotherapy development. WT1 was at the top of the list. The hTERT antigen relates to 85% of cancers and WT1 and PSMA antigens are also widely prevalent in many cancers.
These attributes of breaking tolerance and having broader prevalence across different cancers create the potential for INO-5401 to be an effective universal cancer immunotherapy in combination with different checkpoint inhibitors.
INO-5401 for Metastatic Bladder Cancer Treatment
Nearly 430,000 new cases of urinary bladder cancer are diagnosed each year worldwide; it accounts for about 165,000 deaths worldwide annually. Advanced unresectable or metastatic urothelial carcinoma, or UC, the most common type of bladder cancer, remains a high unmet medical need, as survival remains poor for most patients who experience disease progression or intolerance to treatment during or after platinum-containing chemotherapy. The approval of several checkpoint inhibitors for advanced unresectable or metastatic UC has improved response and survival rates for some patients; however, the majority of patients do not experience meaningful clinical responses to checkpoint inhibitor monotherapy.
In October 2017, we announced an initiation ofWe have completed a Phase 1b/1/2 immuno-oncology trial to evaluate Genentech/Roche’s atezolizumab (TECENTRIQ®) in combination withof INO-5401 and INO-9012. We will manage the multi-center, open-label efficacy trial, and Genentech will supply atezolizumab. The trial will evaluate the safety, immune response and clinical efficacy of the combination therapyINO-9012 (IL-12 plasmid) in approximately 80 patients with advanced bladder cancer, specifically advanced unresectable or metastatic UC. The majority of the patients to be enrolled in the trial will have previously received and failed to demonstrate meaningful response to an anti-PD-1 or PD-L1 checkpoint inhibitor alone. The study will evaluate the potential benefit of a checkpoint inhibitor combined with a DNA-based immunotherapeutic and T cell activator within a bladder cancer patient population with very limited treatment options and poor outcomes. The immunologic analyses accompanying the study will provide further insight into mechanisms of checkpoint inhibition and T cell activation in bladder cancer.
In November 2017, we announced the results of preclinical studies in which researchers observed a synergistic effect in combining our TERT (telomerase reverse transcriptase) cancer immunotherapy with a checkpoint inhibitor. In a mouse model, the combination resulted in robust anti-tumor effects and significant improvement in survival compared to either therapy alone. These results were detailed in a paper published in Molecular Therapy entitled, “Synergy of Immune Checkpoint
Blockade with a Novel Synthetic Consensus DNA Vaccine Targeting TERT”. This published paper highlights the potential benefits of DNA immunotherapy/immune checkpoint blockade combinations using PD-1 or CTLA4 checkpoint inhibitors in patients that respond poorly to immune checkpoint blockade alone, allowing for improved rational design of potential combination therapies. These preclinical results also suggest that the synergistic anti-tumor effect is due to the effect of immune checkpoint blockade on expanding effector T cells generated from the TERT therapy in the tumor microenvironment rather than boosting vaccine responses in the periphery.
INO-5401 for Glioblastoma Multiforme (GBM) Treatment
GBM is a devastating disease for both patients and caregivers. It is the most aggressive brain cancer and its prognosis is extremely poor, despite a limited number of new therapies approved over the last 10 years. The median overall survival for patients receiving standard of care therapy is approximately 15 months and the average five-year survival rate is less than three percent.
In November 2017, we initiated a Phase 1b/2a immuno-oncology trial in patientsparticipants with newly diagnosed GBM, designed to evaluatein combination with cemiplimab (also known as REGN2810)(Libtayo®), a PD-1 inhibitor developed jointly by Regeneron Pharmaceuticals and Sanofi. This open-label trial began in 2018 and enrolled 52 newly diagnosed GBM participants. The primary endpoint was safety and tolerability, and the trial also evaluated immunogenicity and efficacy (overall survival). Data from the trial has been presented at several medical conferences. In November 2019, we provided interim results showing that 80% (16 of 20) of MGMT gene promoter methylated participants and 75% (24 of 32) of unmethylated participants, the more difficult to treat group, were progression-free at six months (PFS6) measured from the time of their first dose, exceeding historical standard-of-care data. This immunotherapy combination with a PD-1 checkpoint inhibitor also exhibited supportive safety, tolerability, and immunogenicity data and suggested a safety profile consistent with that of Libtayo as well as our other
product candidates. Most participants assessed had a T cell immune response to one or more tumor-associated antigens encoded by INO-5401, and INO-9012.immune responses to all three tumor-associated antigens were also observed in this trial.
In May 2020, we updated these results, showing that 85% (44 out of 52) of the participants in this trial were alive for at least 12 months following treatment. The open-labelupdated results showed that 84.4% percent (27 of 32) of participants with MGMT promoter unmethylated tumors, and 85% (17 of 20) of participants with MGMT promoter methylated tumors, were alive at 12 months. Activated killer T cells directed towards one, two or all three cancer antigens in INO-5401 were detected in almost all participants tested.
In November 2020, additional data from the trial were presented at the Society for Neuro-Oncology (SNO) Annual Meeting. Survival data at 18 months showed that 70% (14/20) of 50 patients will be conductedMGMT promoter methylated GBM participants were alive, and 50% (16/32) of MGMT promoter unmethylated participants were alive after 18 months. Median overall survival in the unmethylated GBM participants was 17.9 months, which compares favorably to historical controls. An update on immunology data showed that in the MGMT promoter unmethylated cohort, 19 of 22 (86%) participants had an IFN-gamma T cell response that increased over baseline to one or more of the antigens encoded by INO-5401. In the MGMT promoter methylated cohort, 16 of 17 (94%) participants had an IFN-gamma response that increased over baseline to one or more of the antigens encoded by INO-5401.
In November 2021, updated data was presented at approximately 30 U.S. sites,the Society for Immunotherapy of Cancer pre-conference workshop from the GBM-001 Phase 2 trial. Overall survival at 24 months was 22% (7/32) for the MGMT unmethylated cohort and 55% (11/20) for the primary endpointsMGMT methylated cohort. The trial showed that INO-5401+INO-9012 with cemiplimab and radiation/TMZ have an acceptable safety profile, are safetyimmunogenic, and tolerability. The study will also evaluate immunological impact, progression-freemay improve survival in newly diagnosed GBM.
INO-5151 (INO-5150 + INO-9012) for the Treatment of Prostate Cancer
We are developing INO-5151, which consists of DNA plasmids targeting Prostate Specific Antigen (PSA) and overall survival.
Infectious Disease Vaccines/Immunotherapies
Our Hepatitis B Virus-INO-1800
Although an effective preventive vaccine against hepatitis B virus, or HBV, infection has existedProstate Specific Membrane Antigen (PSMA), combined with INO-9112, the IL-12 plasmid, for over three decades, HBV remains a major epidemic, especially among peoplethe treatment of Asian and African descent. The World Health Organization estimates that 2 billion people globally have been infected with HBV, with over 257 million people chronically infected with the virus and at risk of developing cirrhosis or liverprostate cancer. It is estimated that over two million people inIn the United States are infected with the virus. Currently, the only therapies available for chronically infected individuals are interferon-alpha and nucleoside analog treatments, which function by controlling viral replication, but they do not clear infection. Interferon can prevent viral replication in only 30% of patients and does so with undesirable side effects.
Liver cancer is the second most common cause of death from cancer worldwide, killing most patients within five years of diagnosis. About 782,0002022, there will be an estimated 268,490 new cases arise each year. One of the major causesprostate cancer and risk factors for liver cancer is infection by hepatitis B. Chronically infected individuals may develop a permanent scarring of the liver, a condition called cirrhosis. Liver cirrhosis can evolve into hepatocellular carcinoma, which claims 746,000 lives annually.
INO-1800 is encoded for the HBcAg antigen and represents a consensus of the unique HBcAg DNA sequences of all major HBV genotypes (A through E). When delivered by electroporation, in a preclinical study, INO-1800 elicited strong HBcAg-specific T cell and antibody responses in the periphery (outside of the liver) as measured by ELISpot, ICS and cell proliferation assays. Researchers observed that the immunization could also induce antigen-specific CD8 and CD4 T cells that produced both IFN-y and TNF-a in the liver, indicating that a strong immunotherapy-induced T cell response was also present in the liver.
In the preclinical study, the antigen-specific T cells exhibited a killing function and were ableabout 34,500 deaths due to migrate to and stay in the liver and cause clearance of target cells without any evidence of liver injury. This was the first study to provide evidence that intramuscular immunization could induce killer T cells that can migrate to the liver and eliminate target cells.
In April 2015, we initiatedthis cancer. We previously completed a Phase 1 trial of INO-5150, DNA plasmids targeting PSA and PSMA. Data from this trial have been presented at several annual meetings, most recently at the 2018 European Society for Medical Oncology (ESMO) congress and have suggested that men treated with INO-5150 on the trial experienced a slowing of PSA doubling time, an important indicator of potential clinical benefit. Data presented at these conferences also showed immunogenicity and tolerability of INO-5150.
In 2019, we announced a clinical collaboration with Parker Institute for Cancer Immunotherapy (PICI) and the Cancer Research Institute (CRI) as part of which INO-5151 is being combined with an immune modulator (CDX-301, FLT3 ligand, a dendritic cell mobilizer) and a PD-1 immune checkpoint inhibitor (nivolumab) in participants with metastatic castration-resistant prostate cancer (mCRPC), in a PICI-sponsored platform trial (PORTER). This combination trial is an open-label, non-randomized, exploratory platform trial designed to assess the safety and antitumor activity of multiple immunotherapy-based combinations in participants with mCRPC who have received prior secondary androgen inhibition. This trial will evaluate biomarkers of immune activity and clinical outcomes using a multi-omic, multi-parameter approach. Our immunotherapy is one arm of this PICI-supported trial, and recruitment is ongoing. Under the agreement, PICI will design and conduct the clinical trial, working in collaboration with its established network of clinical academic and industry cancer centers, with funding support from CRI. We will provide financial contributions based on the actual costs of the trial, if INO-5151 reaches the initiation of a Phase 3 trial.
Infectious Disease Product Candidates
Our product development platform also allows for rapid design, pre-clinical testing, manufacturing and clinical development of our vaccine and immunotherapy product candidates. In 2016, we were the first entity able to advance a Zika virus vaccine into human clinical trials, 4.5 months after the World Health Organization, or WHO, declared the emerging Zika virus infections to be a Pandemic Health Emergency of International Concern. Previously, we led the development of the first MERS vaccine in human clinical trials. More recently, our DNA medicines platform and SynCon® capabilities allowed us to rapidly respond to the SARS-CoV-2 coronavirus outbreak in early 2020. We believe that our development platform is well positioned to support global health agencies to develop preparedness countermeasures against bioterrorism and/or emerging pandemic agents.
INO-4800 for COVID-19
Background
A novel strain of coronavirus emerged in the human population in Wuhan City, China in late 2019. The new virus is a member of the genus of Coronaviruses, which is comprised of seven known viruses that can infect and make humans ill, including Middle East Respiratory Syndrome Coronavirus (MERS-CoV) and Severe Acute Respiratory Syndrome Coronavirus
(SARS-CoV), as well as four other lower risk coronaviruses which can cause the common cold. The disease caused by the SARS-CoV-2 novel coronavirus was subsequently named COVID-19.
The virus quickly spread throughout China, Asia, and worldwide. As of February 2021, almost every country on earth had reported confirmed cases. As of January 2022, a total of nearly 320 million confirmed cases had been reported worldwide, with a total of more than 5,510,000 reported deaths directly due to this disease. Both the numbers of reported and estimated actual cases began to rise significantly in 2022 with the emergence of the Omicron variant of concern of the SARS-CoV-2 virus.
Presently, several major variants of concern (VOCs) of SARS-CoV-2 have evolved and spread significantly from several portions of the globe and quickly to many countries. These VOCs have the characteristics of at least having a significantly increased transmission rate compared to the original/main SARS-CoV-2 strain. Currently authorized vaccines may not be as effective at preventing disease due to these variants.
Phase 1 Clinical Trial
In December 2020, we announced the publication of peer-reviewed Phase 1 clinical data from the first cohort of 40 participants receiving INO-4800. In this trial, INO-4800 was immunogenic in all vaccinated participants, generating an immune response of humoral (including neutralizing antibodies) and/or cellular responses (both CD4+ and CD8+ T cells).
Additionally, Phase 1 clinical data found INO-4800 to have a favorable safety and tolerability profile with no serious adverse events reported. Six Grade 1 adverse events (AEs) were observed, primarily minor injection site reactions. These only occurred on the day of the first or second dosing, and the AEs did not increase in frequency with the second administration.
Phase 2/3 Clinical Trial – INNOVATE
In December 2020, we announced the dosing of the first participant in our Phase 2 clinical trial evaluating INO-4800, as part of our Phase 2/3 clinical trial, called INNOVATE (INOVIO INO-4800 Vaccine Trial for Efficacy). The Phase 2 segment of the trial has enrolled approximately 400 participants who are 18 years or older at 17 U.S. sites to evaluate INO-1800safety and immunogenicity in order to confirm the dose(s) for the subsequent efficacy evaluation as part of the Phase 3 segment of the trial.
The Phase 2 segment of the trial, funded by the DoD, evaluated safety, tolerability and immunogenicity of INO-4800 in a two-dose regimen (1.0 mg or 2.0 mg), in a three-to-one randomization to receive either INO-4800 or placebo to confirm the more appropriate dosing level(s) for each of three age groups (18-50 years, 51-64 years and 65 years and older) at high risk of SARS-CoV-2 exposure for the subsequent Phase 3 efficacy evaluation. Results from the Phase 2 segment provided us with the information to select the dose level for the Phase 3 segment.
The global Phase 3 segment of INNOVATE is a randomized, blinded, placebo-controlled clinical trial to evaluate the safety and efficacy of INO-4800 in a two-dose regimen (2.0 mg per dose), administered one month apart, in a 2-to-1 randomization in men and non-pregnant women 18 years of age and older. The primary endpoint of this case-driven Phase 3 trial is virologically confirmed symptomatic COVID-19. The Phase 3 segment has received authorization to proceed in seven countries: Mexico, Brazil, Colombia, Thailand, India, Philippines, and the United States.
We conducted an in vitro assessment of the cross-reactivity of INO-4800 vaccine-induced immune responses against the Omicron variant of SARS-CoV-2. Testing was observed to provide full maintenance of T cell responses against the Omicron variant in clinical samples from participants who has received INO-4800, including CD8+ responses, in line with results observed with the vaccines of other developers, significantly decreased levels of both neutralizing and binding antibodies against Omicron. The maintenance and preservation of T cell responses continue to remain a consistent observation for INO-4800 against the ancestral COVID-19 virus and across all variants of concern (VOCs) tested to date, including Omicron. We believe this is a critical observation as T cell responses are thought to play an important role in protection against severe disease and death and may be central to the durability of vaccine protection.
In response to the dominance of the Omicron variant globally and the persistence of cross-reactive T cell responses generated by INO-4800, including CD8+, across all variants of concern to date, we plan to seek regulatory approval to amend the primary endpoint of INNOVATE from prevention of virologically confirmed COVID-19 disease to prevention of severe disease due to COVID-19. We believe INO-4800's ability to generate T cell responses could be critical in meeting the proposed amended primary endpoint.
In addition, to reflect the potential impact of the Omicron variant on INNOVATE, the Data Safety Monitoring Board (DSMB) recommended that we pause enrollment of new patients chronically infectedin the global Phase 3 clinical trial of INO-4800 in order to update the Informed Consent Form and Investigator Brochure. As a result of the DSMB’s recommendation, as well as our plans to seek approval to amend the trial’s primary endpoint, we have paused enrollment of new patients in INNOVATE. Interim efficacy data from INNOVATE will therefore not be available in the first half of 2022 as previously expected.
We are also evaluating the feasibility of an additional ex-US heterologous boost (vaccination with HBV. Thisa different vaccine from the previous administration) trial with our COVID-19 DNA vaccine candidate, INO-4800, as a booster in a non-inferiority
clinical trial compared to approved viral vector and inactivated COVID-19 vaccines. Viral vector and inactivated COVID-19 vaccines have been the vaccine of choice, particularly in low-to-middle income countries where thermostability of a vaccine can be critical. Moreover, global demand for heterologous boosters may not be met with currently licensed vaccines (EUA or full authorization) or those not currently licensed but with Phase 3 efficacy data. While a clear regulatory pathway for a heterologous boost trial has not been defined, regulatory agencies in some countries have expressed consideration towards the use of heterologous boost vaccines in clinical trials, given the logistical challenges as well as vaccine hesitancy associated with some approved vaccines. We believe that second generation vaccines are needed to address issues such as vaccine equity and logistical challenges that are still left to be solved. At the same time, we recognize that there are regulatory hurdles to be cleared. Key features of our DNA vaccine technology which make it a potentially favorable booster candidate include generating T-cell responses against multiple variants of concern, lack of anti-vector immunity, tolerability of re-administration, thermostability for transport, storage, and distribution.
Phase 2/3 Clinical Trial – SOLIDARITY TRIAL VACCINES (STV)
INO-4800 is one of two initial COVID-19 vaccine candidates included in the WHO's Solidarity Trial Vaccines, which is designed to "rapidly evaluate the efficacy and safety of promising new candidate vaccines selected by an independent vaccine prioritization advisory group composed of leading scientists and experts." Recruitment for the trial has begun in Colombia, Mali and the Philippines; enrollment is expected at more than 40 sites across the three countries. According to the WHO, the trial "has the additional potential to uncover second-generation vaccines with greater efficacy, conferring greater protection against variants of concern offering longer duration of protection, and/or using needle-free routes of administration.” The trial is sponsored by the WHO.
INO-4800 in China
In December 2020, we announced the dosing of the first participant in our Phase 2 clinical trial of INO-4800 in China. The Phase 2 clinical trial being conducted in China is independent of the INNOVATE Phase 2/3 clinical trial of INO-4800 and will enroll approximately 640 participants who are 18 years or older. Our collaborator Advaccine is conducting and funding the Phase 2 trial in China.
The Phase 2 clinical trial of INO-4800 in China has enrolled both 18-59 years old adults and older adults (60 years and older) with the primary endpoints of evaluating safety and immunogenicity within the Chinese population. The dosing regimen involves two vaccinations at 0 and 28 days with either 1.0 mg or 2.0 mg dosing levels and is similar to the Phase 2 segment of the INNOVATE trial.
Our partner Advaccine has completed enrollment of its 200-participant homologous and 267-participant heterologous boost trials in China. The trials are designed to evaluate safety, tolerability, and immunogenicity of INO-4800 as a homologous boost where INO-4800 was administered as the primary vaccine and as heterologous boost where an inactivated vaccine was administered as the primary vaccine.
COVID-19 dMAb®
In December 2020, we announced that we along with a team of scientists from The Wistar Institute, AstraZeneca, the University of Pennsylvania, and Indiana University received a $37.6 million grant from the U.S. Defense Advanced Research Projects Agency (DARPA), a research and development agency of the DoD and the JPEO-CBRND, to use our dMAb technology to develop anti-SARS-CoV-2-specific dMAbs that function as both a therapeutic and preventive treatment for COVID-19. See “Synthetic DNA-based Monoclonal Antibodies Program” below for more information about our dMAb technology.
As part of DARPA's two-year grant, our and Wistar's teams have constructed COVID-19 dMAb candidates mirroring AstraZeneca's traditional recombinant monoclonal antibody candidates currently being tested in clinical trials to treat COVID-19. These dMAb candidates can be quickly developed and produced in vivo, offering a cost-effective and scalable therapeutic and preventive option for treatment of SARS-CoV-2 virus infection. The dMAb® candidates will then be advanced into preclinical studies and then potentially into human clinical trials.
Global Manufacturing Consortium for INO-4800
In March 2020, we received a $5 million grant from the Bill & Melinda Gates Foundation to accelerate the testing and scale up of CELLECTRA® 3PSP proprietary smart devices for the intradermal delivery of INO-4800.
In April 2020, we announced an agreement to expand our manufacturing partnership with the German contract manufacturer Richter-Helm BioLogics GmbH & Co. KG, to support large-scale manufacturing of INO-4800.
In September 2020, we announced that Thermo Fisher Scientific signed a letter of intent to manufacture INO-4800. Thermo Fisher plans to manufacture INO-4800 drug substance as well as perform fill and finish of INO-4800 drug product at its commercial facilities in the United States.
In December 2020, we announced the execution of an agreement with Kaneka Eurogentec S.A., an affiliate of Kaneka Corporation, for Eurogentec to manufacture INO-4800 at their GMP plasmid production site in Belgium.
COVID-19 Variants of Concern (VOC)
We have been closely monitoring the development and evolution of SARS-CoV-2, with a particular focus on the Alpha (aka B.1.1.7 or “UK”), Beta (aka B.1.351 or original “South African”), Gamma (aka B.1.1.28.1 or “Brazilian”), Delta (aka B.1.617.2 or “Indian”), and Omicron (aka B.1.1.529 or newer “South African”) variants of concern (VOCs) of the SARS-CoV-2 virus. We have been and are continuing to evaluate the impact of newly circulating strains of the SARS-CoV-2 virus on the immune profile of INO-4800 through an assessment of binding antibodies, neutralizing antibodies in both live and pseudo-type neutralization assays as well as assessing the impact of the INO-4800-generated T cell responses on these variants.
We are also developing next-generation, pan-COVID vaccine candidates, that could be tailored to the known and potentially the unknown SARS-CoV-2 variants. Using our SynCon® gene optimization algorithm to analyze the available sequence data from all existing circulating variants, we are seeking to create a synthetic SAR-CoV-2 spike protein gene design intended to protect against the known VOC as well the future unknown strains. Our DNA vaccines generate a balanced immune response, including T cell responses, which we believe could make our pan-COVID vaccine candidates less susceptible to changes in the genetic sequence of the virus. DNA vaccines can also be used for multiple boosts without being impacted by anti-vector immunity or an increase in reactogenicity. Moreover, pre-clinical studies and clinical trials have shown that DNA vaccines could also be used to boost the initial immune responses generated by multiple other vaccine platforms.
INO-4700 for Middle East Respiratory Syndrome (MERS)
Background on MERS
The Middle East Respiratory Syndrome or MERS is a viral respiratory illness first reported in Saudi Arabia in 2012. MERS appears to have been transmitted from an animal reservoir to humans but human to human transmission has been confirmed. The virus for this disease belongs to the Coronaviradea family (or a coronavirus – MERS-CoV), and was not shown to be a communicable virus spreading in a sustained way in communities, but rather via rapid spread in the nosocomial setting, such as emergency rooms and/or hospitals without adherence to state-of-the-art infection control practices, which can result in outbreaks with many cases, including super-spreading events. Like the severe acute respiratory syndrome (SARS) outbreak in 2003 linked to another coronavirus (SARS-CoV-1), which made approximately 8,000 people ill and was fatal in nearly 10% of those cases, MERS-CoV appears to cause severe lung infections. However, the case-fatality rate (death rate) of MERS has typically been between 30% and 40%, which is significantly higher than that of SARS. While the SARS epidemic in 2003 killed 10% of those who became ill from the SARS virus, MERS has killed approximately 34% of people who people who became ill from the MERS virus from 2012 to October 2021. MERS differs in that it also causes rapid kidney failure. Its high death rate has caused serious concern among global health officials.
Despite the continuing threat of MERS outbreaks, there are no approved vaccines or treatments for MERS.
Clinical Development – MERS
In April 2018, we announced a collaboration with CEPI under which we are developing vaccine candidates against MERS. CEPI will fund up to $56 million of costs to support our pre-clinical and clinical advancement through Phase 2 of our vaccine candidate INO-4700. The goal of the collaboration is for our MERS vaccine to be available as soon as possible for emergency use.
In April 2020, we announced interim data through week 16 from a Phase 1/2a trial of DNA vaccine INO-4700. Vaccine recipients had strong antibody and T cell immune responses after 2 or 3 doses with 0.6 mg, delivered intradermally with our CELLECTRA® device. The vaccination regimen was well-tolerated with no vaccine-associated SAEs. The researchers at the Wistar Institute, Seoul National University Hospital, and the International Vaccine Institute (IVI) collaborated on this trial.
For those receiving 0.6 mg of INO-4700, 88% seroconverted after a two-dose regimen at 0 and 8 weeks, while for those receiving a three-dose regimen given at 0, 4 and 12 weeks, 84% seroconverted after 2 doses and 100% after 3 doses, as measured by a binding antibody assay against the full-length S protein (ELISA). Additionally, 92% of the vaccine recipients in both groups displayed the ability to neutralize the virus using a pseudotype-based neutralization assay. Robust T cell responses were observed in 60% of vaccine recipients after the two-dose regimen and 84% of those in the three-dose group (ELISpot assay). A single dose of 0.6 mg of INO-4700 intradermal vaccination resulted in 74% binding antibody response rate and 48% neutralization antibody response rate.
We have dosed and completed enrollment for the first part (dose finding stage) of the Phase 2 trial (192 participants) of INO-4700. The multi-center Phase 2 trial is a randomized, open-label, active-controlled, dose escalation study wasdouble-blinded, placebo-controlled trial designed to evaluate the safety, tolerability, and immunogenicity of INO-1800 alone orINO-4700 administered with CELLECTRA 2000 in combination with INO-9012. This international study enrolled patientsapproximately 500 healthy adult participants. The trial, which is sponsored by INOVIO and fully funded by CEPI, is being conducted at sites in the United StatesJordan, Lebanon, and Asia Pacific region with a primary endpoint of safety and tolerability of the therapy. Secondary endpoints are evaluating the cellular and humoral immune response to INO-1800 and its effect on several viral and antiviral parameters. All trial subjects are also medicated with standard-of-care antiviral therapies.
We expect to report interim data from this Phase 1 clinical trial in the first quarter of 2018.
Our Vaccines for Emerging Infectious Diseases
Recognizing the impact of epidemic outbreaks of infectious diseases and the potential of DNA-based technology to play a vital role in rapidly and effectively addressing such diseases, weKenya where MERS cases have been proactively advancing specific product development initiatives with an array of academic, government, non-government, and private collaborators in areas including Zika, Ebola, and MERS.reported.
First identified in the late 1940s in Uganda, Zika virus subsequently spread to equatorial Asia in 1969 and then rapidly spread through the Pacific, and still later, in the 2014-2016 period, to and through South America, Central America and the Caribbean. In the end of that period, Zika virus emerged in two portions of the continental United States (extreme Southeastern Florida and extreme South Texas). Zika virus is a flavivirus, a family of viruses including yellow fever, dengue, and West Nile virus, which are introduced to people through mosquito bites. Because the Aedes species of mosquitoes that spread Zika virus are found in much of the world, there is concern that the virus will spread to new countries and cause additional outbreaks. There is also concern that Zika spreads sexually in humans, at least by males to females, as has been reportedINO-4201 for some returning travelers and documented in multiple studies. In February 2016, the WHO stated that 39 countries had reported locally acquired circulation of the Zika virus since January 2007. Geographical distribution of the virus has expanded, and currently the WHO lists at least 93 countries as having risk of Zika virus infection. No vaccine or therapy currently exists for the Zika virus.
The most common symptoms of Zika virus are fever, rash, joint pain, and conjunctivitis. More seriously, health authorities have observed neurological and autoimmune complications potentially associated with Zika virus, including microcephaly in newborn children and Guillain-Barre syndrome. Microcephaly is a rare condition marked by an abnormally small head and incomplete brain development. There may also be a link with Guillain-Barré syndrome, a disease in which the body's immune system mistakenly attacks peripheral nerves. Symptoms start with muscle weakness. In severe cases the person is almost totally paralyzed and the disorder can be life threatening.
In January 2016, we and GeneOne announced a joint research collaboration with academic collaborators of a SynCon® Zika virus vaccine known as GLS-5700.
Preclinical Studies- Zika Virus
In February 2016, we announced that our Zika vaccine administered using our CELLECTRA® electroporation delivery device resulted in seroconversion, or the development of detectable specific antibodies in the blood, in all vaccinated mice. The vaccinations also generated robust and broad T cell responses as analyzed by the standardized T cell ELISPOT assay. In data reported in May 2016, two doses of the Zika DNA vaccine delivered either intramuscularly or intradermally resulted in seroconversion, in all vaccinated non-human primates and broad T cell responses as analyzed by the standardized T cell ELISPOT assay.
These results were later published in Nature Partner Journals (npj) Vaccines in November 2016. Additional data indicated that in the study GLS-5700 protected animals from infection, brain damage and death. All GLS-5700 vaccinated animals were protected from Zika infection after exposure to the virus. In addition, vaccinated mice were protected from degeneration in the cerebral cortex and hippocampal areas of the brain while unvaccinated mice showed significant degeneration of the brain after Zika infection.
Prior preclinical studies have tested potential Zika vaccine candidates in animal models involving normal mice and non-human primates that are naturally resistant to Zika. While providing useful immunology data, they cannot provide relevant evidence of an effective means of controlling the spread or medical impacts of this disease by vaccination. In addition to reporting immunogenicity in such Zika-resistant species, this paper represents the first published research to also analyze a Zika vaccine using the special transgenic murine strain A129 lacking interferon alpha and beta receptors (IFNAR-/-), making them highly susceptible to Zika infection and disease. Taking this extra step provided stronger data on how vaccine-generated immune responses could protect against a lethal viral challenge and demonstrates the benefit a Zika vaccine might provide in people.
In another preclinical study, the results of which were published in June 2017, GLS-5700 was observed to have protected against Zika virus-induced damage to testes and sperm, and prevented persistence of the virus in the reproductive tract of all vaccinated male mice challenged with a high dose of the Zika virus. This preclinical study data was published in Nature Communications in an article entitled, “DNA Vaccination Protects Mice Against Zika Virus-Induced Damage to the Testes”.
Phase 1- 40 Patient Zika Study in U.S. & Canada
In June 2016, we were the first to commence a human Zika trial in healthy adult volunteers, with sites in the U.S. and Canada, with the first subject dosed in July. This Phase 1, open-label, dose-ranging study of 40 healthy adult volunteers was designed to evaluate the safety, tolerability and immunogenicity of GLS-5700 administered with CELLECTRA®-3P, our intradermal DNA delivery device.
In this Phase 1 trial, a total of 40 participants (20 in each of two groups) received GLS-5700 in a 1 mg or 2 mg dose. The vaccine was administered in 0.1 ml intradermal injections. In October 2017, we announced positive safety and immune response results from the Phase 1 trial. The GLS-5700 Zika vaccine induced binding antibodies in 100% of the participants after a three-dose vaccination regimen and in 95% after two doses of vaccine. In addition, neutralizing antibodies were observed in more than 95% of the serum samples that were assayed on neuronal-cell targets. Serum samples from vaccinated subjects when subsequently transferred to mice were found to be protective from death and illness in more than 90% of
animals after they were challenged with a lethal dose of the Zika virus. These results appeared in the New England Journal of Medicine in the article, “Safety and Immunogenicity of an Anti-Zika Virus DNA Vaccine.”
Phase 1- 160 Patient Zika Study in Puerto Rico
In August 2017, we and GeneOne initiated a second clinical trial of GLS-5700. In this second trial, we have enrolled 160 subjects in Puerto Rico, where the Zika virus outbreak has been declared a public health emergency. In this placebo-controlled, double-blind trial involving healthy adult volunteers, 80 subjects have received GLS-5700 and 80 subjects have received placebo. The study will evaluate the safety, tolerability and immunogenicity of GLS-5700 administered with our CELLECTRA®-3P device. We will also assess differences in Zika infection rates in participants given either placebo or vaccine as part of an exploratory endpoint. We expect to report data from this trial in the second half of 2018.
Zika dMAb®
In December 2016, we received a $6.1 million sub-grant through The Wistar Institute (total grant value of $8.8 million) to develop a DNA-based monoclonal antibody designed to provide a fast-acting treatment against Zika infection and its debilitating effects. The goal of this program, which was funded by the Bill & Melinda Gates Foundation, is for the researchers to develop a Zika dMAb® therapy ready for human clinical trials in less than two years. See the section below entitled "Synthetic DNA-based Monoclonal Antibodies" for further information on our DNA-based monoclonal antibody program.
Ebola Virus OverviewDisease
Background on Ebola
The Ebola virus has been described ascauses one of the most virulent viral diseases, with lethalitycase fatality rates averaging 50% but approaching up to 90%. in past outbreaks in areas with no or under-developed health care. Ebola can spread through human-to-human transmission by direct contact with the blood, secretions, organs or bodily fluids of an infected individual and with surfaces or materials that contain the contaminated fluids of an infected person, such as bedding and clothing. It is capable of causing death within two to twenty-one days of exposure. ThereIn November 2019, the first conditional approval was issued for a preventive vaccine against Ebola virus. This approval was from the European Medicines Agency (EMA) for the vaccine ERVEBO®. That same month, the WHO pre-qualified that vaccine for use in high-risk countries. In the next month, the FDA approved that vaccine. However, there are no approved preventive vaccines orproven effective therapeutic treatments for Ebola. In addition, various experimental approaches have already been associated with undesirable side effects and limited ability to scale manufacturing.
According toIn 2018, two Ebola outbreaks occurred, both in the CDC,Democratic Republic of Congo (DRC). The second Ebola outbreak of 2018 in the 2014DRC became the second largest Ebola epidemic was the largestoutbreak in history, resulting in 28,603 suspected and confirmed cases and 11,301 deathsworld history. This particular outbreak had a 66% case-fatality ratio (aka case-fatality rate) as of January 31, 2016.February 2020. On June 1, 2020 an additional Ebola outbreak was declared in the DRC, before the outbreak was declared over on November 18, 2020. More recently, Ebola outbreaks have occurred in Guinea (February to June, 2021) and in the DRC (October 2021 and still ongoing).
Preclinical and Clinical Development --- Ebola
In 2014, we entered into a collaboration with GeneOne to advance a DNA immunotherapy for Ebola intoMarch 2019, Phase 1 clinical development. The decision to advancedata of our Ebola immunotherapy was based on positive results observed in preclinical studies, in which 100% of immunized guinea pigs and mice were protected from death after being exposed to the Ebola virus. Unlike the non-immunized animals, immunized animals were also protected from weight loss, a measure of morbidity. Researchers found significant increases in neutralizing antibody titers and strong and broad levels of immunotherapy-induced T-cells, including "killer" T-cells, suggesting that this product could provide both preventive and treatment benefits. This datavaccine candidate INO-4201 was published in 2013The Journal of Infectious Diseases. We believe that this trial, which is being fully funded by DARPA, further supports the advancement of the intradermal delivery platform for emerging infectious diseases. Significantly, intradermal (skin) administration with our CELLECTRA® smart delivery device resulted in 100% of evaluable participants in the peer-reviewed journal Molecular Therapytrial generating antigen-specific antibody responses that persisted for more than one year in a paper titled, "Induction of Broad Cytotoxicmost participants and generated T Cells by Protective DNA Vaccination Against Marburgcell responses equivalent to or better than the group that received intramuscular delivery. We believe these published data further validate the tolerability, potency, and Ebola."
In April 2015, we received a $44.2 million contract from the Defense Advanced Research Projects Agency (DARPA) to lead a consortium to develop multiple treatment and prevention approaches against Ebola. Other collaborators are MedImmune, the global biologics research and development arm of AstraZeneca; GeneOne Life Sciences and its manufacturing subsidiary, VGXI, Inc.; and David B. Weiner, Ph.D., a directorproduct stability advantages of our company, who also serves as executive vice president at the Wistar Institutevaccine and retired professor of Pathology and Laboratory Medicine at The Perelman School of Medicine at the University of Pennsylvania, Emory University and Vanderbilt University. The previous collaboration agreement with GeneOne for Ebola was incorporated into this consortium funded by DARPA.
We are taking a multi-faceted approach to develop products to prevent and treat Ebola infection. These programs include development and early clinical testing of:
a therapeutic DNA-based monoclonal antibody product against the Ebola virus infection, which we believe has properties that best fit a response to the outbreak in that they could be designed and manufactured expediently on a large scale using common fermentation technology, are thermal-stable, and may provide more rapid therapeutic benefit;
a highly potent conventional protein-based therapeutic monoclonal antibody (mAb) product against Ebola virus infection; and
a DNA-based vaccine against Ebola.
Pathogen specific mAbs have emerged as a viable approach for immunoprophylaxis against Ebola and other pathogens where anti-viral drugs or vaccinations are not currently available. mAbs can be administered either just before or just after exposure to the pathogen and serve to combat the immediate effects of the pathogen. Unlike vaccines, immunoprophylaxis by
mAbs does not develop long-term immune memory. Therefore, an ideal approach would include the administration of a mAb for immediate protection and a vaccine to train the immune system for longer-term protection.
Previous Ebola research studies have shown that monoclonal antibodies, such as ZMapp, could be useful in treating patients who have been infected with Ebola virus by selectively binding and neutralizing the virus in the body.immunotherapy platform.
Our contract with DARPA covers the pre-clinical development costs for the dMAb products and protein mAb candidates, as well as GMP manufacturing costs and the Phase 1 clinical trial costs for the three product candidates described above. Our academic collaborators are leading Ebola research and medical centers. We have completed the vaccine development milestones contemplated by the DARPA grant and are on track to complete the protein Mab and the dMAb milestonescandidate was evaluated in 2018.
In May 2015, we and our collaborators initiated a Phase 1 clinical trialfive groups of INO-4212, an Ebola DNA vaccine to evaluate safety, tolerability and immune responses in 75 healthy subjects divided into five study arms. INO-4212 consists of two optimized SynCon® DNA plasmids coding for the Ebola glycoprotein antigen from circulating Ebola strains from 1975-2014. The study was designed to evaluate INO-4212 and its components INO-4201 and INO-4202, alone or in combination with INO-9012, delivered into muscle or skin using our proprietary DNA delivery technology.
In March 2016, we reported initial results from the trial.participants. Of 6970 evaluated subjects, 64 (92.8%participants, 67 (96%) seroconverted and mounted a strong antibody response to the Ebola glycoprotein antigen following the three dose immunization regimen; 48 subjects (69.6%52 participants (74%) seroconverted after only two doses.
In the studytrial arm using intradermal (skin) administration, 13 of 13 evaluable subjectsparticipants (100%) generated antigen-specific antibody responses after only two doses and all remained seropositive after three immunizations. Similarly,
In December 2021, we announced complete enrollment of a 46-participant Phase 1b trial in the study arm receiving the vaccinewhich INO-4201 will be assessed as a heterologous booster in healthy volunteers previously vaccinated with intramuscular administration in combination with plasmid IL-12, 13 of 13 evaluable subjects (100%rVSV-ZEBOV (Ervebo®) produced strong antibody responses after three immunizations,, an FDA- and 12 of 13 (92.3%) achieved strong antibody responses after only two immunizations.
TheEMA- approved viral vector-based Ebola glycoprotein specific geometric mean antibody titers measured in the five cohorts ranged from over 2,000 to greater than 46,000. Significantly, a majority of vaccinated subjects in each of the five cohorts produced strong Ebola antigen specific T-cell responses as measured by interferon gamma ELISpot analysis.
INO-4212 was well tolerated, with novaccine. To date INO-4201 has been well-tolerated and has not demonstrated systemic serious adverse effects observed. Side effects,SAEs, such as fever, joint pain, and low white blood cell counts, that have previously been reported following treatmentin association with some viral vector basedvector-based Ebola vaccines currently in development. Moreover, unlike
INO-4500 for Lassa Fever
Background on Lassa Fever
Lassa fever, also known as Lassa hemorrhagic fever, is an acute viral disease which occurs mostly in West Africa. The disease can cause a range of outcomes including fever, vomiting, diarrhea, cough, swelling of the viral vectored vaccines which must be kept frozen, the INO-4212 formulation usedface, pain in the trial was kept in a solution which was refrigerated at 2-8 degrees Celsius.
Detailed immunogenicitymuscles, chest, back and safety data is being prepared for peer-reviewed publication.
In August 2016, we announced that enrollmentabdomen, bleeding of this study was being expanded to up to 200 subjects to further characterize and identify in humans the most optimal immunization regimen using intradermal (skin) deliveryvarious parts of the Ebola DNA vaccine.
In April 2017, we reported preliminary results frombody including the expanded Phase 1 trial. Across both stageseyes and nose, vagina, and gastrointestinal tract, and death. Of the survivors of the trial, including both intramuscular and intradermal delivery, 95% (170/179) of evaluable subjects generated an Ebola-specific antibody immune response,Lassa fever, about one-third have sudden-onset hearing loss, with the mean antibody titer comparable or superior to those reported from viral vector-based Ebola vaccines. Our Ebola vaccine was also well tolerated in the second stages of the trial, with a favorable safety profile compared to viral vector-based Ebola vaccines, some of which have been associated with serious adverse events including myalgia, arthralgia, fever, and rash.
We expect to report additional data from our Ebola virus development programs in 2018.
Middle East Respiratory Syndrome (MERS) Overview
MERS is a viral respiratory illness first reported in Saudi Arabia in 2012. MERS appears to have been transmitted from an animal reservoir to humans but human to human transmission has been confirmed. This communicable virus has not been shown to spread in a sustained way in communities, but rapid spread in the nosocomial setting, such as emergency rooms and/or hospitals without state-of-the-art infection control practices, can result in outbreaks with many cases, including superspreading events. Like the severe acute respiratory syndrome (SARS) outbreak in 2003, which made approximately 8,000 people ill and was fatal in nearly 10%more than half of those cases MERSresulting in permanent hearing loss. This infection is caused by a coronavirusspread through contact with infected rodents. Person to person transmission is also possible, via bodily fluids, albeit less common. Lassa virus infection in West Africa is estimated to affect 100,000 to 300,000 people annually, resulting in approximately 5,000 deaths, as disease and appearsinfection surveillance has been poor. Because of difficulties in diagnosing Lassa fever and the remoteness of many areas in which the disease occurs, the numbers of cases and deaths are likely significantly under-reported. Though the majority (about 80%) of Lassa virus-infected persons are asymptomatic or have mild symptoms, the infection can be quite serious to cause a severe lung infection. However, the case-fatality rate (death rate) of MERS has typically been between 30% and 40%, which is significantly higher than that of SARS. While the SARS epidemicfatal in 2003 killed 10% of those who became ill from the SARS virus, MERS has killed approximately 36% of people who people who became ill from the MERS virus from 2012 to December 2017. MERS differs in that it also causes rapid kidney failure. Its high death rate has caused serious concern among global health officials.
Despite the continuing threat of MERS outbreaks, thereothers. There are no licensedapproved vaccines or treatments specifically for MERS. SinceLassa. The case-fatality ratio (aka case-fatality rate) (CFR) among patients hospitalized for Lassa fever is about 15% to 20%, and in some epidemics the virus was first identifiedCFR has reached 50% in Saudi Arabia in 2012, the World Health Organization reports 2,127 laboratory-confirmed cases of MERS
and 757 deaths from MERS worldwidehospitalized patients, such as of December 2017. Twenty seven countries have reported cases, including Korea where an outbreak in the summer2015-2016 Nigeria portion of 2015 resultedthe West Africa outbreak. In lab confirmed cases in 186 casesNigeria from 2019 through 2020, the CFR was 21%. The CFR among pregnant women is particularly high, and 38 deaths.in pregnant women infected with Lassa virus the fetal death rate due to spontaneous abortion rate is estimated to be about 95%.
Preclinical and Clinical Development - MERSTrials
In November 2013,May 2019, we announced that preclinical testing ofdosed our SynCon® MERS vaccinefirst participant in our Phase 1, first-in-human clinical trial to evaluate INO-4500, a DNA candidate GLS-5300, had induced robust and durable immune responses in mice, demonstrating the potential for such a vaccine to prevent infection from the Lassa virus. In 2019, we fully enrolled 60 volunteers in this placebo controlled, blinded, dose escalation trial evaluating INO-4500 for safety, tolerability and treat this deadly virus. DNA vaccine constructs targeting multiple MERS antigens were designed using our SynCon® vaccine platform with the goal to universally protect against multiple strains of MERS, which has been shown to have diverse genetic variants. These SynCon® constructs were administered via our CELLECTRA® electroporation-based delivery technology.
A consensus MERS "spike" protein vaccine construct was created based on multiple strains of the MERS virus. Our MERS DNA vaccine was immunogenic in mice and seroconversion was observed in all animals. The antibodies generated by the vaccine in 100% of mice (20 of 20) were able to neutralize or completely block actual infection of MERS virus in the cells, demonstrating the protective potential of this vaccine. In contrast, none of the 10 unvaccinated mice in the control group generated neutralizing antibodies.
The vaccinations were also highly T-cell immunogenic, generating robust and broad T cell responses as extensively analyzed by the standardized T cell ELISPOT assay. The vaccine produced robust CD8+ and CD4+ T cell responses against multiple epitopes of the MERS spike protein. This increased diversity and magnitude of cellular responses may be critical for effectively mitigating MERS infection.
We believe these preclinical findings are vital given the importance of neutralizing antibodies in preventing infection and the role T cells play in clearing infection by killing cells that harbor the virus.
In August 2015, we announced that our MERS vaccine had induced 100% protection from a live virus challenge in a preclinical study in mice, camels and monkeys, or non-human primates. In all three species, the vaccine induced robust immune responses capable of preventing the virus from infecting cells. We believe the data from camels is an important finding because camels represent not only a host reservoir of the disease, but also act as a mode of transmission to humans. In monkeys, all vaccinated animals in the study were protected from symptoms of MERS disease when challenged with a live MERS virus.
The preclinical results appeared in the peer-reviewed journal Science Translational Medicine in an article entitled, "A synthetic consensus anti-spike protein DNA vaccine induces protective immunity against Middle East Respiratory Syndrome Coronavirus in non-human primates."
In February 2016, we and our collaborator GeneOne commenced a Phase 1 clinical trial of GLS-5300 in 75 healthy volunteers at the Walter Reed Army Institute of Research (WRAIR) in Maryland. The primary and secondary goals of this first-in-man Phase 1 trial are to obtain safety and immunogenicity data.responses. This trial represents the first MERSLassa candidate vaccine to be testedenter the clinic. Our sponsored trial, as well as our INO-4500 program, is fully funded through the global partnership with CEPI that we entered into in humans for this disease that has no approved vaccines or treatments.April 2018.
In December 2016,October 2021, we announced that the International Vaccine Institute (IVI) will provide new funding and support to further advance the clinical development of GLS-5300. IVI will add technical, laboratory and financial support for GLS-5300 clinical trials in Korea with the goal to advance clinical testing toward emergency use authorization by the Korean government as well as authorities of other countries. This collaborative funding is partwe have completed enrollment of a grant from220 participant Phase 1b trial in Accra, Ghana, which is the Samsung Foundation to IVI to support the development of a MERSfirst vaccine for emergency use in Korea and internationally.
In February 2017, we reported results from the Phase 1 clinical trial of GLS-5300, in which high levels of binding antibodies were measured in 92% (57 of 62) of evaluated subjects after three vaccinations (84% after two doses; 44% after one dose). The vaccine was well tolerated, with no significant safety concerns observed to date.
HIV Preventive and Therapeutic Immune Therapies-PENNVAX®-GP
Since its discovery in 1981, HIV, the virus which causes AIDS, has killed more than 36 million people. In 2011, there were roughly 2.5 million new cases of HIV diagnosed. In 2012, approximately 35 million people were living with HIV worldwide. Each year in the United States, about 50,000 people become newly infected with HIV. At the end of 2010, 1.1 million people in the United States were living with HIV.
Effective vaccines have been actively pursued for over 30 years, without significant success. HIV represents one of the most confounding targets in medicine. The virus's high mutagenicity (ability to mutate) has made effective vaccine development very challenging. Its outer envelope, swathed in sugar molecules, is difficult to attack, and HIV strikes the very cells that the immune system launches to thwart such an infection. Although several drugs (anti-retrovirals) are available to treat the patients once they are infected, vaccines and immunotherapies are necessary to stop the spread of disease and perhaps reduce the need for anti-retroviral treatment.
Noting that many long-term survivors have high counts of killer CD8 T cells, the HIV vaccine and immunotherapy field has turned to stimulating the immune system to generate those cells. Recent HIV vaccine candidates used an adenovirus (a common human cold virus) genetically modified to contain code for HIV antigens to prevent viral replication. These vaccines have proven to not be effective. More recently, the RV-144 trial, which employed an ALVAC™ (canary pox) vaccine prime followed by a protein vaccine boost, demonstrated 30% efficacy in preventing acquisition of infection amongst the vaccinated population compared to the control group. Although the efficacy was relatively modest, the finding for the first time showed that an immunotherapy may be able to combat spread of HIV and has spurred the development of newer immunotherapy candidates. We believe, however, that a different approach is needed to develop an effective vaccine or immunotherapy for HIV.
PENNVAX®-GP is a developmental vaccine to prevent and treat HIV strains present in Africa, Asia, Europe, and North America. Using our ASPIRE™ technology, it has been optimized to target two env antigens, as well as gag and pol antigens. This comprehensive targeting gives PENNVAX®-GP the potential to provide global coverage against HIV-1 subtypes. PENNVAX®-GP is delivered intramuscularly using the CELLECTRA® delivery device. The development of the PENNVAX®-GP program was funded by a seven-year $25 million NIAID contract to us and our collaborators.
In September 2015, the first patient was dosed in a Phase 1 trial to evaluate the safety and tolerability of PENNVAX®-GP. This trial wasLassa Fever conducted in collaborationWest Africa, where the viral illness is endemic. The dosing regimen involved two intradermal vaccinations at 0 and 28 days with the HIV Vaccine Trials Network (HVTN). The trial measured immune responses following administration of the vaccine in four groups of healthy subjects receiving the vaccine with and without an immune activator (IL-12) and delivered into muscleeither 1.0 mg or skin using our CELLECTRA® delivery technology.
In May 2017, we announced results from the trial, in which PENNVAX®-GP produced among the highest overall levels of immune response rates (cellular and humoral) ever observed in a human clinical trial by an HIV vaccine.
Overall, 71 of 76 (93%) evaluable vaccinated participants showed a CD4+ or CD8+ cellular immune response to at least one of the four vaccine antigens. Similarly, 62 of 66 (94%) evaluated participants demonstrated an env specific antibody response. None of the placebo recipients (0 of 9; 0%) had either a cellular or an antibody response in the study. Notably, amongst the participants receiving PENNVAX®-GP vaccine and IL-12 with intradermal immunization, 27 of 28 (96%) participants achieved a cellular response and 27 of 28 (96%) achieved an HIV env specific antibody response.
Amongst the evaluated participants receiving PENNVAX®-GP and IL-12 via intramuscular vaccination, 27 of 27 (100%) achieved a cellular response and 19 of 21 (90%) achieved an env specific antibody response. Similar immune responses and response rates were achieved via both intradermal and intramuscular administration of the vaccine, even though participants vaccinated via intradermal administration received 1/5th of the dose of vaccine compared to those vaccinated via intramuscular administration.
2.0 mg doses. In addition to our NIAID contract that funded ourproviding insights on the INO-4500 safety and immunogenicity profile, this trial will inform dose selection for subsequent Phase 1 clinical trial of PENNVAX®-GP,2 trials in 2015, we and our collaborators were awarded an additional $16 million Integrated Preclinical/Clinical AIDS Vaccine Development (IPCAVD) grant fromWest Africa. If the NIAID. We will use this additional grant to design and test new PENNVAX® envelope constructs with our DNA-based immune activator encoding novel cytokine genes in a prime-boost strategy with recombinant HIV envelope proteins. Our collaborators will assess different combinations in preclinical models with the goal of generating high levels of neutralizing antibodies mirroring the robust CD8+ T cell responses generated by our PENNVAX®-B DNA vaccine in previously published clinical studies. The overall goalresult of this projecttrial is positive, we expect to further build upon this important HIVadvance INO-4500 into a Phase 2 trial. If satisfactory Phase 2 data are achieved, CEPI, in cooperation with local regulatory authorities and the WHO, could elect to stockpile the vaccine approach as well as to gain fundamental insight into new technologies to improve vaccination outcomes.
In March 2017, Inovio and its collaborators received an additional multi-year $7.0 million grant from NIAID to develop a single or combination therapy using PENNVAX®-GP, withfor future use throughout the goal of attaining long-term HIV remission in the absence of antiviral drugs. This is a two-step clinical study in HIV-positive subjects to assess PENNVAX®-GP with INO-9012 alone and with the addition of a PD-1 checkpoint inhibitor. All trials will be randomized, double-blind, placebo-controlled assessments of PENNVAX®-GP and will be conducted at the University of California in San Francisco and Los Angeles.
HIV dMAb®
In July 2016, we announced that our DNA-based monoclonal antibody technology will be deployed to develop products which could be used alone and in combination with other immunotherapies in the pursuit of new ways to treat and potentially cure infection from HIV. See the section below titled "Synthetic DNA-based Monoclonal Antibodies" for more details on this technology.
Universal Influenza Immunotherapy
Conventional vaccines are strain-specific and have limited ability to protect against genetic shifts in the influenza strains they target. They are therefore modified annually in anticipation of the next flu season’s new strain(s). If a significantly different, unanticipated new strain emerges, such as the 2009 swine-origin pandemic strain, then the current vaccines provide little or no protective capability. In contrast, we believe that our design approach to characterize a broad consensus of antigens across variant strains of each influenza sub-type creates the ability to protect against new strains that have common genetic
roots, even though they are not perfectly matched. By formulating a single immunotherapy with some or all of the key sub-types, protection may be achieved against seasonal as well as pandemic strains such as swine flu or pandemic-potential strains, such as avian influenza. We are focused on developing DNA-based influenza immunotherapies able to provide broad protection against known as well as newly emerging, unknown seasonal and pandemic influenza strains.
Instead of targeting a specific strain or strains, we have developed a universal vaccine strategy to deal with ever-changing flu threats. Using our SynCon® process, our scientists have designed immunotherapies targeting an optimal consensus of HA, NA, and NP proteins derived from multiple strains of each of the Type A sub-types H1N1, H2N2, H3N2 (these three influenza sub-types having been responsible for the majority of seasonal and pandemic influenza outbreaks in humans during the last century), as well as H5N1. In theory, consensus HA vaccine constructs from each sub-type, delivered using our electroporation device, could potentially protect immunized subjects from 90-95% of all human seasonal and pandemic influenza concerns. Additionally, we have also developed an optimal consensus of HA sequences derived from influenza Type B strains. Type B is one of three components of current seasonal influenza vaccinations. Using our SynCon® constructs, we have now developed immunotherapy elements that can target both pandemic-risk (H5N1, H7N9, H1N1) as well as seasonal influenza strains (H3N2, H1N1, influenza B).
Moreover, using our approach the immunotherapies might not have to be administered annually after the first few priming sessions. Rather, the same combination could be used to boost the immune system every few years.
In January 2018, we announced results from a preclinical study in which our synthetic vaccine approach, using a collection of synthetic DNA antigens, generated broad protective antibody responses against all major deadly strains of H1 influenza viruses from the last 100 years, including the virus that caused “Spanish Flu” in 1918 in multiple animal models, including mice, guinea pigs and non-human primates. The vaccine also protected 100% of immunized ferrets from a lethal virus challenge. The preclinical results were detailed in a paper published in the journal Vaccine entitled, “Broad cross-protective anti-hemagglutination responses elicited by influenza microconsensus DNA vaccine."
We are seeking additional grant and/or collaboration funding to further advance this program.
Immunotherapies for Biodefense and Biosecurity
A number of infectious agents that are relatively rare today are poised for an upsurge in incidence by either “natural” or terrorism-related means. For example, natural threats are posed by the influenza strains H5N1 and H7N9. At the same time, an engineered influenza virus for intentional release would pose a significant human threat.
Since 2001, the United States government has spent or allocated over a billion dollars in funding to address the threat of biological weapons. United States funding for bioweapons-related activities focuses primarily on research for and acquisition of medicines for defense. Biodefense funding also goes toward stockpiling protective equipment, increased surveillance and detection of biological agents, and improving state and hospital preparedness. The increase in this type of funding is mainly due to the Project BioShield Act adopted in 2004.
There are opportunities to secure development funding and for proof-of principle immunotherapy studies for bio-warfare pathogens. We have secured funding from the U.S. government for these projects.
We continue to actively pursue grant and contract funding from the NIH, Department of Defense and other government funding agencies as an important source of non-dilutive funding to support development of specific technologies that are broadly applicable across multiple product development programs in the areas of cancer, infectious diseases and biodefense. Based on various initiatives and with the support of NIH funding we are an active collaborator with the Department of Defense (U.S. Army) and continue research and development of DNA-based immunotherapies delivered via our proprietary electroporation system. Specifically, our projects are focused on identifying immunotherapy candidates with the potential to provide rapid, robust immunity to protect against bio-warfare and bioterror attacks as well as development of our electroporation devices.
In October 2014, we announced that DARPA had awarded $12.2 million to our scientists and those from the Perelman School of Medicine at the University of Pennsylvania and MedImmune to develop and assess dMAb products for influenza and antibiotic resistant bacteria in preclinical studies. This collaboration aims to demonstrate that DNA plasmids can activate sufficient quantities of disease-specific monoclonal antibodies in the body to be protective against a pathogen challenge. See the section below titled "Synthetic DNA-based Monoclonal Antibodies" for more details on our dMAb programs.
Ebola grant
In January 2016, we received a $500,000 grant from the U.S. Army’s SBIR program to further advance the development of our next-generation delivery device capable of simultaneously administering multiple vaccines via a skin-surface, needle-free electroporation delivery. The primary goal of this effort is to further advance and commercialize a needle and pain-free electroporation device to deliver products from our portfolio of biodefense and commercial infectious disease vaccines including those for MERS, Ebola, HIV, influenza, and RSV, particularly for prophylactic vaccination. Such a device could facilitate rapid vaccination of U.S. troops stationed around the world against multiple infectious diseases and protect civilian
populations from pandemic threats. Initial testing of a prototype design has already yielded excellent antigen expression and immunogenicity from the dermal tissue being accessed using this novel non-invasive electroporation delivery concept.
region.
Synthetic DNA-based Monoclonal Antibody Programs
Background on recombinant Monoclonal Antibodies Program(mAbs)
Monoclonal antibodies (mAbs)Recombinant mAbs have become one of the most valuable therapeutic technologies of recent years. In 2012,2020, global sales of mAbs exceeded $50 billion. Among the top 10 best-selling drugs in 2012, six were monoclonal antibodies, each with annual sales exceeding $5$100 billion.
mAbs are designed to enhance the immune system's ability to regulate cell functions. They are designed to bind to a very specific epitope (area) of an antigen or cell surface target and can bind to almost any selected target. They have the ability to alert the immune system to attack and kill specific cancer cells (as in the case of Yervoy®Yervoy®) or block certain biochemical pathways (such as those leading to rheumatoid arthritis, as in the case of Humira®). However, mAb technology has limitations. As a passive immunotherapy, meaning theymAbs are manufactured outside the body mAbsand require costly large-scale laboratory development and production. Additional limitations include high cost to develop and manufacture, their limited duration of in vivo potency, and a pharmacokinetic profile that can result in toxicity. We have created DNA basedencoded monoclonal antibodies that we believe may overcome many of the limitations associated with conventional mAb technology.
Using our core platform technology, we encodeinsert the DNA sequence for a specific monoclonal antibody in a DNA plasmid. We deliver the plasmid directly into cells of the body using electroporation,our CELLECTRA smart delivery system, enabling thesethe electroporated cells to manufacture thethose mAbs in vivo,, - unlike conventional mAb technology that requires manufacture outside of the body. We believe this approach provides potentially significant advantages in terms of design simplicity, rapidity of execution and lower production costs, as well as the ability to target a pharmacokinetic profile that provides control in terms of dosing regimen, peak responses, duration of responses, and toxicity.costs.
We expect to design dMAb® product candidates not only for new disease targets not currently addressable with conventional recombinant mAbs, but also targets of existing, commercially available mAb products. We have already designed and produced dMAb product candidates targeting cancer mechanisms including checkpoint inhibition, anti-cancer pathways and anti-Tregs, as well as prophylactic and therapeutic dMAb product candidates for infectious diseases including COVID-19, Ebola, influenza, antibiotic resistant bacteria, dengue and Chikungunya. When
In February 2019, we announced that in collaboration with The Wistar Institute and the mAb binds to an infectious disease receptor,University of Pennsylvania, the immune system then generates natural killer cellsfirst participant was dosed as part of the first-ever human trial of our dMAb technology. Funded fully by the Bill & Melinda Gates Foundation, this trial's focus is on the safety and macrophages to clear the virus or bacteria-bound mAbs.
Prooftolerability of Concept
Our first published research on a DNA-based on monoclonal antibody was presented in October 2013 in Human Vaccines & Immunotherapeutics in a paper entitled, “Optimized and enhanced DNA plasmid vector based in vivo construction of a neutralizing anti-HIV-1 envelope glycoprotein Fab.” In a preclinical study, a single administration in mice of a highly optimized dMAb® HIV immunotherapy generated antibody molecules in the bloodstream that possessed desirable functional activity, including high antigen-binding and HIV-neutralization capabilities, against diverse strains of HIV viruses. In the study, this delivery strategy resulted in an increase in Fab levels in as little as 48 hours, when compared with protein-based immunization.
A second paper was published in July 2015 in Scientific Reports, a Nature Publishing Group journal, in the paper, "Protection against dengue disease by synthetic nucleic acid antibody prophylaxis/immunotherapy." In this study, a single intramuscular injection of a DNA plasmid encoding for a monoclonal antibody targeting dengue protected mice subsequently exposed to the dengue virus. The protection conferred by the monoclonal antibodies expressed by these dMAb product candidates was very rapid, with 100% survival in mice challenged with lethal enhanced dengue disease less than a week after dMAb administration. While conventional vaccine and monoclonal antibody technologies have shown limited ability to provide an effective solution to dengue to date, the unique attributes and data generated by dMAb immunotherapies show their potential to provide a needed solution. Furthermore, this short time frame to achieve full protection is significantly more rapid than vaccine-driven protection, which can take weeks to months to reach peak efficacy levels.
A paper published in March 2016 in The Journal of Infectious Diseases entitled, “Rapid and long-term immunity elicited by DNA encoded antibody prophylaxis and DNA vaccination against Chikungunya virus,” discussed the results of our preclinical study in which animals transfected with our DNA-based mAb targeting Chikungunya virus (CHIKV) exhibited the specific ability to bind to the CHIKV envelope antigen, and this serum possessed CHIKV-neutralizing activity. CHIKVhuman anti-Zika antibody. This open-label trial is a serious mosquito-borne alpha-virus responsiblesingle center, dose escalation trial that enrolled 24 healthy volunteers who received from one to four doses of INO-A002, our DNA plasmid encoding for several recent epidemicsa human anti-Zika antibody. Doses ranging from 0.5 mg to 4 mg of plasmids were injected per participant, independent of their body weight.
As described above, in tropical AfricaDecember 2020, we and Asia. In mid-2015, the CDC reported that suspected or confirmed casesa team of Chikungunya had reached 1.74 million in 45 countries or territories in the Americas. There is currently no vaccine or therapeutic against this virus. In the study, the treatment of the animals with anti-CHIKV mAb plasmids protected 100% of the treated animalsscientists from a lethal injection of CHIKV virus while 100% of the control animals died. The treated animals were also spared virus-related morbidity, as measured by dramatic weight loss and lethargy.
Next Steps
In October 2014, we announced that the DARPA had awarded a $12.2 million grant to our scientists and those from the Perelman School of Medicine atWistar Institute, AstraZeneca, the University of Pennsylvania, and MedImmune in order to develop and assess dMAb product candidates in preclinical studies.
This collaboration aims to demonstrate that DNA plasmids can activate sufficient quantities of disease-specific monoclonal antibodies in the body to be protective againstIndiana University received a pathogen challenge. Using the capabilities and advantages of DNA plasmids delivered using electroporation, the team is constructing and evaluating multiple dMAb product candidates focused on influenza virus and antibiotic resistant bacteria, such as Pseudomonas aeruginosa and Staphylococcus aureus.
In 2016, we expanded the collaboration to include The Wistar Institute after the collaborating investigator, Dr. David Weiner, a member of our board of directors, moved to the Institute.
Depending on the outcome of the preclinical studies, we and our collaborators may seek to advance a dMAb product candidate into clinical trials, if we are able to obtain additional governmental or non-governmental funding to do so.
As described above, in April 2015, we received a$37.6 million grant from DARPA to lead a consortiumuse our DNA-encoded monoclonal antibody (dMAb) technology to develop multiple treatment and prevention approaches against Ebola. The aim of the research funded by this grant is to compare combinations of a DNA vaccine with conventional or DNA-based monoclonal antibodies.
In July 2016, we announced that our DNA-based monoclonal antibody technology will be deployed to develop product candidatesanti-SARS-CoV-2-specific dMAbs which could be used alone and in combination with other immunotherapies in the pursuit of new waysoffer versatile capabilities to treat and potentially cure infection from HIV. Funding for this research is part of a $23 million grant from the National Institutes of Health to our collaborator, The Wistar Institute.
As described above, we have also received a sub-grant through The Wistar Institute to develop a DNA-based monoclonal antibody designed to provide a fast-acting treatment against Zika infection and its debilitating effects.
Electroporation Delivery Technology
The essence of our platform is to design and inject a DNA plasmid encoded for a target antigen or monoclonal antibody into tissue of the body and most pertinently, into cells, to enable the intracellular machinery that normally produces useful proteins for the functioning of the body to temporarily produce the target antigen or monoclonal antibody. An antigen will then induce the immune system to produce polyclonal antibodies or T cells with the ability to perform their preventive or therapeutic functions. Monoclonal antibodies generated in this manner can bind to targeted cells and enable the immune system to clear these cells. Fundamental to this mechanism functioning well and providing clinical utility is that there be significant cellular uptake of the DNA plasmids.
Electroporation uses controlled, millisecond electrical pulses to create temporary pores in the cell membrane and allow significant cellular uptake of a synthetic DNA immunotherapy previously injected into muscle or skin. This uptake can be up to a thousand times greater than the injection of a DNA plasmid alone without other delivery mechanisms. The cellular machinery then uses the DNA’s instructions to produce the encoded antigen or monoclonal antibody.
We are a leader in refining the methods and conditions for using in vivo electroporation to enable cellular transfection and significant uptake of a locally injected biologic material. In multiple clinical trials, our electroporation technology has shown the ability to effectively deliver DNA-based immunotherapies to achieve best-in-class immune responses. The delivery of our synthetic DNA immunotherapies using our electroporation devices has to date shown a favorable safety profile, without serious adverse events and only mild local injection-related side effects suchfunction as redness and swelling. Electroporation is tolerable without anesthetic, and because it does not induce unwanted immune responses, it can be repeatedly administered for booster vaccinations.
Choice of Tissue for DNA Delivery
Skeletal muscle has been a core focus for delivery of DNA-based immunotherapies via electroporation because it is mainly composed of large elongated cells with multiple nuclei. Muscle cells are non-dividing, hence longer-term expression can be obtained without integration of the gene of interest into the genome. Muscle cells have been shown to have a capacity for secretion of proteins into the blood stream. Secreted therapeutic proteins may therefore act systemically and produce therapeutic effects in distant tissues of the body. In this respect, the muscle functions as a factory for the production of the biopharmaceutical needed by the body. In our Phase 2 clinical trial of VGX-3100 for HPV-related cervical dysplasia, intramuscular delivery by electroporation of DNA-encoded antigens induced both humoral (antibody) and cellular (T cell) immune responses. We envision that delivery of DNA by electroporation to muscle cells will circumvent the costly and complicated production procedures of viral gene delivery vectors, bacterial gene delivery vectors, protein-based drugs, conventional vaccines and monoclonal antibodies. This approach may provide long-term stable expression of a therapeutic protein or monoclonal antibody at a sustained level.
While we have generated pre-clinical and clinical evidence that intramuscular electroporation-based DNA delivery will be effectivepreventive treatment for a number of immunotherapies, electroporation of the skin may also be a relevant route of administration. Skin
or intradermal administration is important and is becoming an attractive site for immunization given its high density of antigen presenting cells (APCs). Unlike muscle, skin is the first line of defense against most pathogens and is therefore very rich in immune cells and molecules. Skin specifically contains certain cells that are known to help in generating a robust immune response. With intradermal administration of electroporation, we may be able to demonstrate a comparable immune response to muscle delivery. Drug delivery into skin, or dermal tissue, is attractive given that the skin is the largest, most accessible, and most easily monitored organ of the human body, and it is highly immuno-competent (able to recognize antigens and mount an immune response to them).
Our CELLECTRA® Delivery Systems
There are several configurations in the CELLECTRA® device family. The first configuration covers intramuscular (IM) delivery of DNA; the second covers intradermal/subcutaneous delivery (ID) of DNA. Devices with these configurations have been validated, manufactured under Current Good Manufacturing Practices (cGMP) and are being used in human clinical trials. We have filed a device master file (MAF) with the FDA covering the use of the CELLECTRA® devices in human clinical trials. These devices are intended to be used in combination with a DNA plasmid-based immunotherapy.
Our CELLECTRA®-SP devices combine the functionality of our current generation of skin and intramuscular electroporation devices in clinical testing with enhanced form, design and portability. All components of the pulse generator and applicator are integrated into a cordless, rechargeable device. The rechargeable battery can enable immunization of several hundred subjects, making the device useful for mass vaccinations. The devices are designed to accommodate different electrode arrays to meet the requirements of the particular immunotherapy and targeted tissue for delivery.
In preparation for our Phase 3 clinical trial of VGX-3100 and anticipated commercial use, we designed and manufactured a new electroporation device, CELLECTRA® 5PSP, a fully automated, smaller and user-friendly device. The new CELLECTRA®-5PSP device is being used in our ongoing VGX-3100 Phase 3 trial, which started in June 2017.
Next Generation Electroporation Research and Devices
We are developing new delivery systems and technologies designed to optimally deliver our DNA-based immunotherapies and vaccines. All of our current delivery systems described above can increase levels of gene expression, or production of the immune-stimulating protein that the immunotherapy was coded to produce, of DNA immunotherapies by more than one thousand times compared to delivery of DNA immunotherapies via conventional injection alone. Our SynCon® immunotherapies delivered into muscle or skin tissue with our electroporation systems have generated robust immune responses in humans using different SynCon® immunotherapy products for HPV-related precancers (also generating statistically significant efficacy in a controlled Phase 2b study) and cancers, Zika, Ebola, influenza (H5N1 and H1N1) and HIV, as well as against other diseases in animal models.
While our current intramuscular (IM) delivery technologies are well tolerated, we are also advancing next generation, minimally invasive intradermal electroporation delivery devices. One intradermal (ID) device penetrates no more than 3 mm into the target tissue, compared to intramuscular devices that go deeper. The positive immunological effects in preclinical animal models of the optimized electroporation parameters of this minimally invasive ID EP delivery device were highlighted in September 2012 in Human Gene Therapy in a paper entitled, “Intradermal DNA vaccination enhanced by low-current electroporation improves antigen expression and induces robust cellular and humoral immune responses.” The optimized conditions decreased required immunotherapy dose levels, increased tolerability of the vaccination, and increased the breadth of viable vaccine targets. This research was funded in part by a $25 million HIV vaccine development contract from the NIAID and a $3.1 million National Institutes of Health Director's Transformative Research Award for universal flu vaccine development.
In March 2011, we received a U.S. Department of Defense Small Business Innovation Research Grant to test the feasibility of delivering unique DNA vaccines by intradermal electroporation simultaneously to two or more spatially distinct sites on the body. Results from this research revealed that this device could allow for the delivery of multi-plasmid formulations without the risk of interference of immune responses from combination vaccines that are formulated together. This could be useful for combination immunotherapies that are rapidly formulated such as in response to emerging infectious disease threats or pandemics and could overcome the issue of limited dosing often associated with intradermal delivery. Results from this study were published in Human Vaccines Immunotherapeutics in a paper titled, “A multi-head intradermal electroporation device allows for tailored and increased dose DNA immunotherapy delivery to the skin.”
A second ID approach is surface electroporation (SEP) using a device that sits on the skin and uses a virtually undetectable scratch to facilitate electroporation and intracellular delivery of the immunotherapy.
In October 2010, research on this minimally-invasive DNA vaccine delivery device was published in Gene Therapy in the paper, "Prototype development and preclinical immunogenicity analysis of a novel minimally invasive electroporation device." Using voltages averaging roughly seven times less than our current devices, this very low voltage device, which does not penetrate the skin, further enhances the previously established tolerability of our electroporation devices. DNA vaccines
delivered using this device produced strong antibody and T-cell immune responses and achieved protection from lethal challenge in multiple animal models including non-human primates.
In April 2012, we received a grant from the U.S. Army’s Small Business Innovation Research (SBIR) to advance the development of a low-cost, non-invasive surface electroporation delivery device and test its utility in combination with our novel synthetic DNA vaccines against viruses with bioterrorism potential, including hanta, puumala, arenavirus and pandemic influenza. This project was a continuation of the DOD grant awarded in 201l. The objective was to further advance and validate this device and the resulting immune responses in appropriate animal models. The research also investigated the development and manufacture of low-cost sterile disposables for the device and the possibility of integrating dermal injection capabilities into a combined inject/EP device platform.
In January 2016, we received a $500,000 SBIR grant to further advance the development of a device capable of simultaneously administering multiple vaccines via skin-surface, needle-free electroporation delivery.
We have also been researching other avenues for needle-free, contactless electroporation technology for immunotherapy delivery. In February 2011, Human Vaccines published our paper entitled, “Piezoelectric permeabilization of mammalian dermal tissue for in vivo DNA delivery leads to enhanced protein expression and increased immunogenicity.” This innovative electroporation method is based on the generation of an electric field or electric potential by certain materials in response to applied mechanical stress.
With the advancement of these devices our aim is to make electroporation delivery amenable to mass prophylactic vaccination by decreasing dose levels, increasing tolerability of the vaccination, increasing the breadth of viable immunotherapy targets, and enhancing portability. Based on our data from studies of influenza, HIV, malaria, and smallpox antigens, we believe that DNA delivery with this newer generation of ID delivery including SEP devices yields levels of immunogenicity in terms of both antibody and T cell responses and/or efficacy against a virus challenge that are comparable to intramuscular electroporation devices currently in the clinic.
In March 2016, we acquired needle-free jet injection technology, devices and intellectual property from Bioject Medical Technologies Inc. We are developing an integrated non-invasive delivery device combining Bioject’s jet injection technology with our needle-free, skin-surface electroporation technology. Bioject’s needle-free devices, which use high pressure gas or springs to propel liquid medicine into skin, have been observed to have desirable utility, safety, and tolerability attributes in preclinical studies and clinical trials. Under a prior research agreement, we assessed the Bioject technology with our new EP delivery system and generated compelling antigen expression and immune responses in animal studies.COVID-19.
License, Collaboration, Supply and SupplyOther Agreements
We have entered into various arrangements with corporate, academic, and government collaborators, licensors, licensees and others. TheseThe most material of these arrangements are summarized below.
MedImmuneAdvaccine
In August 2015,On December 31, 2020, we entered into a strategic cancer vaccine collaborationCollaboration and license agreementLicense Agreement with MedImmune, the global biologics research and development arm of AstraZeneca. Under the agreement, MedImmune acquired exclusive rights to our immunotherapy candidate INO-3112 (renamed MEDI0457)Advaccine Biopharmaceuticals Suzhou Co., Ltd. (“Advaccine”), which targets cancers caused by human papillomavirus (HPV) types 16was amended and 18.
restated on June 7, 2021 (as amended and restated, the “Advaccine Agreement”). Under the terms of the Advaccine Agreement, we granted to Advaccine the exclusive right to develop, manufacture and commercialize our vaccine candidate INO-4800 within the territories of China, Taiwan, Hong Kong and Macau (referred to collectively as “Greater China”) and 33 additional countries in Asia. Advaccine does not have the right to grant sublicenses, other than to affiliated entities, without our express prior written consent. As part of the collaboration,
Advaccine also granted to us a non-exclusive license to certain DNA vaccine manufacturing processes.
The June 2021 amendment relates to our collaboration with Advaccine to jointly conduct the global Phase 3 segment of our ongoing Phase 2/3 trial of INO-4800 and expand the existing collaboration to include the global Phase 3 trial. We will jointly participate in the trial and will equally share the global development costs for the trial, including our manufacturing costs to supply INO-4800. In certain instances, we will have the right to convert the exclusive license to a non-exclusive license in the licensed territories, other than Greater China, unless Advaccine agrees to pay us its full share of development costs in excess of a specified maximum. Notwithstanding the foregoing, Advaccine will be fully responsible for conducting the trial in Greater China, including its costs and expenses incurred in conducting the trial in Greater China. We will be fully responsible for our costs and expenses, if any, incurred solely as a result of our activities in connection with the performance of the trial in the United States. The parties may continue to conduct clinical trials of INO-4800 outside of the territories covered by the Advaccine Agreement.
In the event that a global purchasing entity desires to enter into a purchase agreement MedImmunefor INO-4800 in both parties’ territories, the parties will enter into good faith negotiations for an arrangement to supply INO-4800 to such entity. In addition, we are permitted to enter into an agreement with a global purchasing entity to authorize the entity to conduct a portion of the global Phase 3 trial in the licensed territory outside of Greater China.
Under the Agreement, Advaccine made an upfront payment of $27.5 million to us of $3.0 million in January 2021. In addition to the third quarter of 2015. MedImmune will fund all development costs. The agreement also calls for potential future payments totaling up to $700 million upon reaching specified development and commercial milestones. Weupfront payment, we are entitled to receive up to double-digit tiered royaltiesan aggregate of $206.0 million, payable upon the achievement of specified milestones related to the development, regulatory approval and commercialization of INO-4800, including the achievement of specified net sales thresholds for INO-4800 in Greater China and the additional covered territories, if approved. In December 2020 we earned a $2.0 million milestone payment based on MEDI0457 product sales.
MedImmune is studying MEDI0457the enrollment of the first participant in combination with its PD-L1 checkpoint inhibitor, durvalumab, in athe Phase 1/2 clinical trial for the product in patients with recurrentthe Advaccine territory. We are also entitled to receive a royalty equal to a high single-digit percentage of annual net sales in each region within the licensed territory, subject to reduction in the event of competition from biosimilar products in a particular region and in other specified circumstances. Advaccine’s obligation to pay royalties will continue, on a licensed product-by-licensed product basis and region-by-region basis, for ten years after the first commercial sale in a particular region within Greater China or, metastatic head and neck squamous cancer associated with HPV. On December 28, 2017, we received a $7.0 million milestone payment from MedImmune, which was triggered byif later, until the initiationexpiration of the Phase 2 portionlast-to-expire patent covering a given licensed product in a given region.
Beginning in the first calendar year following the first commercial sale of this ongoing clinical trial.
WithinINO-4800 in the broader collaboration, we and MedImmune may co-develop up to two new, additional DNA-based cancer vaccine products not included in our current product pipeline,licensed territory outside of Greater China, Advaccine will pay us an annual maintenance fee of $1.5 million for a period of five years, which MedImmune will have the exclusive rights to develop and commercialize those candidates. We will receive development, regulatory and commercialization milestone payments andfee will be eligiblecreditable against any royalties payable by Advaccine with respect to receive royalties on worldwide net sales outside of Greater China.
Under the Advaccine Agreement, we will supply Advaccine’s clinical requirements of INO-4800 and devices, although Advaccine may manufacture INO-4800 for these additional cancer vaccine products.
GeneOne
In September 2014, weits clinical use and GeneOne announced a collaboration in whichmay procure alternate suppliers. Advaccine is responsible for the companies will co-develop our DNA-based Ebola vaccinemanufacture and supply of INO-4800 itself or through a Phase 1contract manufacturer for commercial use. Upon Advaccine’s reasonable request, the parties may negotiate a separate clinical trial. In April 2015,and/or commercial supply agreement.
The Advaccine Agreement will continue in force on a region-by-region basis until Advaccine has no remaining royalty obligations in such region. Either party may terminate the collaborators received an award from DARPA to further advanceAdvaccine Agreement (i) in the Ebola project. The previous collaboration agreement with GeneOneevent the other party shall have materially breached its obligations thereunder and such default shall have continued for Ebola vaccine was incorporated
into this consortium funded by DARPA. In May 2015, a Phase 1 studyspecified period after written notice thereof or (ii) upon the bankruptcy or insolvency of the DNA vaccine partother party. In addition, we may terminate the agreement, upon prior written notice, if Advaccine (i) ceases all development or commercialization activities for at least nine months, subject to certain exceptions, or (ii) challenges the validity, enforceability or scope of any of the project was initiated. Enrollmentpatents licensed by us to Advaccine under the Advaccine Agreement, subject to certain conditions. Advaccine may terminate the Advaccine Agreement at any time for convenience upon nine months’ written notice to us, if such notice is provided before the first commercial sale of this study has been completed. Details of this project areINO-4800 in the licensed territory, or 18 months’ written notice thereafter; provided under "Ebola" above.
In May 2015, we announced that we will advance a DNA vaccine for MERS into a Phase 1 clinical trial in healthy volunteers in a collaboration with GeneOne. Undermay accelerate the termseffectiveness of such termination to the agreement, GeneOne will be responsible for funding all preclinical and clinical studies through Phase 1. In return, GeneOne will receive up to a 35% milestone-based ownership interest in the MERS immunotherapy upon achievement of the last milestone event of completion of the Phase 1 safety and immunogenicity study. In January 2016, the collaborators announced the initiation of recruitment for the Phase 1 study in partnership with the Walter Reed Army Institute of Research (WRAIR) in Maryland, where the trial is being conducted.
In January 2016, we and GeneOne expanded the collaboration agreement to test and advance our DNA-based vaccine for preventing and treating Zika virus.extent permitted by law.
ApolloBio
In December 2017, we entered into an Amended and Restated License and Collaboration Agreement with Beijing Apollo Saturn Biological Technology Limited, a corporation organized under the laws of China, or ApolloBio. Under the terms of this License and Collaboration Agreement, which became effective in March 2018, we granted to ApolloBio the exclusive right to develop and commercialize VGX-3100, our DNA immunotherapy product candidate designed to treat pre-cancers caused by HPV, within the territories of China, Hong Kong, Macao and Taiwan. The territory may be expanded to include Korea in the event that no patent covering VGX-3100 issues in China within the three years following the Effective Date (as defined below).
As part of the License and Collaboration Agreement, we have granted to ApolloBio an option to negotiate an exclusive license to research, develop and commercialize MEDI0457 in the event of termination of our current collaboration with MedImmune for the development of MEDI0457 in the territory covered by the License and Collaboration Agreement.agreed upon territories. As part of the collaboration, ApolloBio will fund all clinical development costs within the licensed territory, and the parties will discuss in good faith the inclusion of clinical trial sites in China as part of our ongoing Phase 3 clinical development program for VGX-3100.
Under the License and Collaboration Agreement, ApolloBio will pay us an upfront payment of $23.0 million, such payment to be made within three business days following the date of approval of the License and Collaboration Agreement by the board of directors and shareholders of ApolloBio and other regulatory approvals, or the “Effective Date”, which Effective Date is expected to occur in the first quarter of 2018. The payment is subject to Chinese regulatory approval as well. In the event that such upfront payment is not made on or before April 7, 2018, we have the right to terminate the License and Collaboration Agreement in its entirety.territory.
In addition to the upfront payment that we received in 2018, we are entitled to receive up to an aggregate of $20.0 million, less required income, withholding or other taxes, upon the achievement of specified milestones related to the regulatory approval of VGX-3100 in accordance with the United States, ChinaAmended and Korea.Restated License and Collaboration Agreement. In the event that VGX-3100 is approved for marketing in these territories, we will be entitled to receive royalty payments based on a tiered percentage of annual net sales, with such percentage being in the low- to mid-teens, subject to reduction in the event of generic
competition in a particular territory. ApolloBio’s obligation to pay royalties will continue for 10 years after the first commercial sale in a particular territory or, if later, until the expiration of the last-to-expire patent covering the licensed products in the specified territory. The License and Collaboration Agreement, once effective, will continue in force until ApolloBio has no remaining royalty obligations.
Agreements Focused on Advancing Immuno-Oncology
In May 2017, we entered into a supply agreement with Genentech, a member of the Roche Group, for Genentech to provide TECENTRIQ® (atezolizumab) for use in our clinical trials evaluating INO-5401, a T cell activating immunotherapy encoding multiple antigens, and INO-9012, an immune activator encoding IL-12, in combination with TECENTRIQ® in approximately 80 patients with advanced bladder cancer. We will manage and fund the costs of the multi-center, open-label trial.
In May 2017, we entered into a clinical study and supply agreement with Regeneron to provide its PD-1 inhibitor, REGN2810, for use in our clinical trials evaluating INO-5401 and INO-9012, in combination with REGN2810 in patients with newly diagnosed glioblastoma multiforme (GBM). Under the terms of the agreement, we will conduct and fund the trial based upon a mutually agreed upon study design.
In January 2018, we entered into a Clinical Collaboration Agreement with the Parker Institute for Cancer Immunotherapy to undertake clinical evaluation of novel combination regimens within the field of immuno-oncology. We expect to benefit from the Parker Institute’s innovative research model, which brings together leading academic cancer institutions and companies to share resources, data and technology, accelerate research through unifying and managing clinical trial design, and conduct multi-center clinical trials. The goal of our collaboration is to design studies that have the potential to address cancers with high unmet need. The initial trial under consideration would address muscle-invasive bladder cancer with INO-5401 in combination with other immunotherapies.
Under the agreement, the Parker Institute will have responsibility for clinical study execution, working in collaboration with its established network of clinical academic and industry cancer centers. We will provide financial contributions if the product candidate studied under the collaboration reaches the initiation of a Phase 3 clinical trial.
In August 2016, we incorporated a subsidiary, GENEOS Therapeutics, Inc., to develop and commercialize neoantigen based personalized cancer therapies. We currently own 100% of the outstanding equity of GENEOS, although GENEOS plans to raise capital from the issuance of equity to third parties, which would reduce our ownership percentage. While we leverage our SynCon® immunotherapy and CELLECTRA® electroporation technologies to break tolerance and create cancer products targeting shared tumor specific antigens, GENEOS will focus exclusively on leveraging our immunotherapy technology platform to advance the field of patient-specific neoantigen therapies for cancer. We believe that our clinically validated DNA-based platform is well suited for advancing individualized therapies due to its rapid product design and manufacturing benefits, ability to combine multiple neoantigens into formulations, and generation of potent killer T cell responses that are needed to drive clinical efficacy. We have exclusively licensed our SynCon® immunotherapy and CELLECTRA® electroporation technology platform to GENEOS to be used in the field of personalized, neoantigen based therapy for cancer.
Core DNA Immunotherapy Technology and Product License
In March 2016, we entered into a collaborative research agreement with the Wistar Institute for preventive and therapeutic DNA-based immunotherapy applications and products for cancers and infectious diseases developed by David B. Weiner, Ph.D., and his Wistar laboratory. We will have the exclusive right to in-license new intellectual property developed in this collaboration.
We also have license agreements for intellectual property relating to DNA-based immunotherapy technology and multiple products developed at the University of Pennsylvania, or UPenn. Under the terms of the license agreement with UPenn, we have obtained exclusive worldwide rights to develop multiple DNA plasmids and constructs with the potential to treat and/or prevent cancer therapeutic vaccines targeting WT1, prostate cancer, other undisclosed cancer antigen targets, HPV, HBV, HCV, HIV, influenza, RSV (respiratory syncytial virus), cytomegalovirus, Chikungunya, dengue fever, malaria, herpes viruses, MERS, Ebola and the family of Filovirus such as Marburg, tuberculosis, foot-and-mouth disease, intestinal infections including Clostridium difficile, and MRSA (methicillin-resistant staphylococcus aureus). In addition, the amended agreement provides us with global rights to DNA-based monoclonal antibodies and new chemokine and cytokine molecular adjuvant technologies.
This agreement, as amended to date, provides for royalty payments, based on future sales of licensed products, to UPenn.
The Wistar Institute Collaboration for Programs against Tuberculosis and Malaria
In early 2018, we announced that we will collaborate with The Wistar Institute to advance two novel SynCon® vaccine programs against tuberculosis (TB) and malaria, fully funded by more than $4.6 million in total grants from the Bill & Melinda Gates Foundation and the National Institutes of Health (NIH). Grants from the Gates Foundation (for malaria) and from the National Institute of Allergy & Infectious Diseases (for TB) will support our efforts to develop new DNA vaccines employing our ASPIRE platform.
Competition
As we develop and seek to ultimately commercialize our product candidates, we face and will continue to encounter competition with an array of existing or development-stage drug and immunotherapy approaches targeting diseases we are pursuing. We are aware of various established enterprises, including major pharmaceutical companies, broadly engaged in vaccine/immunotherapy research and development. These include Janssen Pharmaceuticals (part of J&J), Sanofi-Aventis, GlaxoSmithKline plc, (following its acquisition of Novartis Vaccines), Merck, Pfizer, and our collaborator MedImmune.AstraZeneca. There are also various development-stage biotechnology companies involved in different vaccine and immunotherapy technologies including Aduro Biotech,but not limited to Advaxis, BioNTech, Curevac,Bavarian Nordic, CureVac, Dynavax, Kite (recently acquired by Gilead), Juno, Moderna,Hookipa, Iovance, Nektar, Translate Bio, Zydus, and Novavax.Vir Biotechnology. If these companies are successful in developing their technologies, it could materially and adversely affect our business and our future growth prospects.
Specifically, Bavarian Nordic, Merck and GlaxoSmithKline have commercialized preventive vaccines against HPV to protect against cervical cancer. Some companies are seeking to treat early HPV infections or lowlow- grade cervical dysplasias.dysplasia. Loop Electrosurgical Excision Procedure, commonly known as LEEP, is a surgical procedure and is the current standard of care for treating high gradehigh-grade cervical dysplasia. Advaxis and KiteGilead Sciences have therapeutic cervical cancer product candidates under development. Many companies are pursuing different approaches to GBM, prostate, breast, lung and other cancers we are targeting.
A large number of companies are actively advancing COVID-19 vaccines through the clinic. Pfizer and BioNtech, Moderna Therapeutics, Janssen (J&J), Novavax, Zydus, and AstraZeneca have received conditional or complete approval for their COVID-19 vaccines from either the U.S., WHO, or European regulatory authorities. Additionally, several companies such as CanSino Biologics and Bharat Biotech are currently developing vaccine candidates in Phase 2 or Phase 3 clinical trials.
We also compete more specifically with companies seeking to utilize antigen-encoding DNA delivered with electroporation or other DNA delivery technologies such as viral vectors or lipid vectors to induce in vivo generated antigen
production and immune responses to prevent or treat various diseases. These competitive technologies have shown promise, but they each also have their unique obstacles to overcome.
Viral DNAVaccine Delivery
This technology utilizes a virus as a carrier or vector to deliver genetic material into target cells. The method is efficient for delivering immunotherapy antigens and has the advantage of mimicking real viral infection so that the recipient will mount a broad immune response against the immunotherapy. The greatest limitation of the technology stems from problems with unwanted immune responses against the viral vector, limiting its use to patients who have not been previously exposed to the viral vector and making repeated administration difficult. In addition, complexity and safety concerns increase their cost and complicate regulatory approval.
Lipid DNADNA/RNA Delivery
A number of lipid formulations have been developed that increase the effect of DNA/RNA immunotherapies. These work by either increasing uptake of the DNA/RNA into cells or by acting as an adjuvant, alerting the immune system. While there has been significant progress in this field, including emergency use authorization of COVID-19 mRNA vaccines in 2020, lipid nanoparticle delivery tends to be less efficient than viral vectors and is hampered by concerns regarding toxicity and increased complexity.of mRNA has thermal stability issues as well as the potential of adverse events from the lipid nanoparticle formulations.
DNA Immunotherapy Delivery Withwith Electroporation
There are other companies with electroporation intellectual property and devices. We believe we have significant competitive advantages over other companies focused on electroporation for multiple reasons:
•We have an extensive history and experience in developing the methods and devices that optimize the use of electroporation in conjunction with DNA-based agents. This experience has been validated with multiple sets of interim data from multiple clinical studies assessing DNA-based immunotherapies and vaccines against cancers and infectious disease.
•We have a broad product line of electroporation instruments designed to enable DNA delivery in tumors, muscle, and skin.
•We have been proactive in filing for patents, as well as acquiring and licensing additional patents, to expand our global patent estate.
If any of our competitors develop products with efficacy or safety profiles significantly better than our product candidates, we may not be able to commercialize our products, and sales of any of our commercialized products could be harmed. Some of
our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we do. Competitors may develop products earlier, obtain FDA approvals for products more rapidly, or develop products that are more effective than those under development by us. We will seek to expand our technological capabilities to remain competitive; however, research and development by others may render our technologies or products obsolete or noncompetitive or result in treatments or cures superior to ours.
Our competitive position will be affected by the disease indications addressed by our product candidates and those of our competitors, the timing of market introduction for these products and the stage of development of other technologies to address these disease indications. For us and our competitors, proprietary technologies, the ability to complete clinical trials on a timely basis and with the desired results, and the ability to obtain timely regulatory approvals to market these product candidates are likely to be significant competitive factors. Other important competitive factors will include the efficacy, safety, ease of use, reliability, availability and price of products and the ability to fund operations during the period between technological conception and commercial sales.
The FDA and other regulatory agencies may expand current requirements for public disclosure of DNA-based product development data, which may harm our competitive position with foreign and United States companies developing DNA-based products for similar indications.
Government Regulation
DNA Vaccine Product Regulation
Any pharmaceutical products we develop will require regulatory clearances prior to clinical trials and additional regulatory approvals prior to commercialization. New gene-based products for vaccine or therapeutic applications are subject to extensive regulation by the FDA and comparable agencies in other countries. Our potential products will be regulated as biological products that are used to treat or prevent disease. In the United States, drugs are subject to regulation under the Federal Food, Drug and Cosmetic Act, or the FDC Act. Biological products, in addition to being subject to provisions of the FDC Act, are regulated in the United States under the Public Health Service Act. Both statutes and related regulations govern, among other things, testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising, and other promotional practices.
Obtaining FDA approval or comparable approval from similar agencies in other countries is a costly and time-consuming process. Generally, FDA approval requires that pre-clinical studies be conducted in the laboratory and in animal model systems to gain preliminary information on efficacy and to identify any major safety concerns. In the United States, the results of these studies are submitted as a part of an IND application which the FDA must review and allow before human clinical trials can start. The IND application includes a detailed description of the proposed clinical investigations.
A company must submit an IND application or equivalent application in other countries for each proposed product and must conduct clinical studies to demonstrate the safety and efficacy of the product necessary to obtain FDA approval or comparable approval from similar agencies in other countries. For example, in the United States, the FDA receives reports on the progress of each phase of clinical testing and may require the modification, suspension, or termination of clinical trials if an unwarranted risk is presented to patients.
To obtain FDA approval prior to marketing a pharmaceutical product in the United States typically requires several phases of clinical trials to demonstrate the safety and efficacy of the product candidate. Clinical trials are the means by which experimental treatments are tested in humans, and are conducted following pre-clinical testing. Clinical trials may be conducted within the United States or in foreign countries. If clinical trials are conducted in foreign countries, the products under development as well as the trials are subject to regulations of the FDA and/or its counterparts in the other countries. Upon successful completion of clinical trials, approval to market the treatment for a particular patient population may be requested from the FDA in the United States and/or its counterparts in other countries.
Clinical trials for therapeutic products are normally done in three phases. Phase 1 clinical trials are typically conducted with a small number of patients or healthy subjects to evaluate safety, determine a safe dosage range, identify side effects, and, if possible, gain early evidence of effectiveness. Phase 2 clinical trials are conducted with a larger group of patients to evaluate effectiveness of an investigational product for a defined patient population, and to determine common short-term side effects and risks associated with the drug. Phase 3 clinical trials involve large scale, multi-center, comparative trials that are conducted to evaluate the overall benefit-risk relationship of the investigational product and to provide an adequate basis for product labeling. In some special cases where the efficacy testing of a product may present a special challenge to testing in humans, such as in the case of a vaccine to protect healthy humans from a life-threatening disease that is not a naturally occurring threat, effectiveness testing may be required only in animals.
After completion of clinical trials of a new product, FDA marketing approval must be obtained or equivalent approval in comparable agencies in other countries. For the FDA, if the product is regulated as a biologic, a Biologics License Application, or BLA, is required. The BLA must include results of product development activities, pre-clinical studies, and clinical trials in addition to detailed chemistry, manufacturing and control information.
Applications submitted to the FDA are subject to an unpredictable and potentially prolonged approval process. Despite good-faith communication and collaboration between the applicant and the FDA during the development process, the FDA may ultimately decide, upon final review of the data, that the application does not satisfy its criteria for approval or requires additional product development or further pre-clinical or clinical studies. Even if FDA regulatory clearances are obtained, a marketed product is subject to continual review, and later discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions.
Before marketing clearance for a product can be secured, the facility in which the product is manufactured must be inspected by the FDA and must comply with cGMP regulations. In addition, after marketing clearance is secured, the manufacturing facility must be inspected periodically for cGMP compliance by FDA inspectors.
In addition to the FDA requirements, the NIH has established guidelines for research involving human genetic materials, including recombinant DNA molecules. The FDA cooperates in the enforcement of these guidelines, which apply to all recombinant DNA research that is conducted at facilities supported by the NIH, including proposals to conduct clinical research involving gene therapies. The NIH review of clinical trial proposals and safety information is a public process and often involves review and approval by the Recombinant DNA Advisory Committee, of the NIH.
Sponsors of clinical trials are required to register and report results for all controlled clinical investigations, other than Phase 1 investigations, of a product subject to FDA regulation. Trial registration may require public disclosure of confidential commercial development data resulting in the loss of competitive secrets, which could be commercially detrimental.
Medical Device Manufacturing Regulation
In addition, we are subject to regulation as a medical device manufacturer. We must comply with a variety of manufacturing, product development and quality regulations in order to be able to distribute our electroporation devices commercially around the world. In Europe, we must comply with the Medical Device Directives. We have a Quality System certified by its international Notified Body to be in compliance with the international Quality System Standard, ISO13485, and
meeting the Annex II Quality System requirements of the MDD. We completed Annex II Conformity Assessment procedures to allow for the CE Mark of our electroporation devices.
In the United States, we are required to maintain facilities, equipment, processes and procedures that are in compliance with quality systems regulations. Our systems have been constructed to be in compliance with these regulations and our ongoing operations are conducted within these systems. Commercially distributed devices within the United States must be developed under formal design controls and be submitted to the FDA for clearance or approval. All development activity is performed according to formal procedures to ensure compliance with all design control regulations.
We employ modern manufacturing methods and controls to optimize performance and control costs. Internal capabilities and core competencies are strategically determined to optimize our manufacturing efficiency. We utilize contract manufacturers for key operations, such as clean room assembly and sterilization, which are not economically conducted in-house. We outsource significant sub-assemblies, such as populated printed circuit boards, for which capital requirements or manufacturing volumes do not justify vertical integration.
Other Regulations
We also are subject to various federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research. The extent of government regulation that might result from any future legislation or administrative action cannot be accurately predicted.
Commercialization and Manufacturing
Because of the broad potential applications of our technologies, we intend to develop and commercialize products both on our own and through our collaborators and licensees. We intend to develop and commercialize products in well-defined specialty markets, such as infectious diseases and cancer. Where appropriate, we intend to rely on strategic marketing and distribution alliances.
We believe our plasmids can be produced in commercial quantities through uniform methods of fermentation and processing that are applicable to all plasmids. We believe we will be able to obtain sufficient supplies of plasmids for all foreseeable clinical investigations.
Relationship with GeneOne
We acquired an equity interest in GeneOne in 2005. As of December 31, 2017, we owned 7.8% of the outstanding capital stock of GeneOne and GeneOne owned 73,590 shares of our common stock. To our knowledge, none of our current officers, directors, or key employees beneficially owns, directly or indirectly, any securities of GeneOne.
In 2008, we sold our manufacturing operations (including patent rights to certain manufacturing technology) to VGXI, Inc., a wholly-owned United States subsidiary of GeneOne. In connection with this transfer we entered into a Supply Agreement pursuant to which VGXI, Inc., a cGMP contract manufacturer, produces and supplies the DNA plasmids for all of our research and early clinical trials. The price of the plasmids we purchase from VGXI, Inc. is determined by us and GeneOne at the time of order placement or, with respect to product supplied in connection with a grant contract, based on the contracted bid provided by the applicable agency. We agreed to treat GeneOne and its subsidiary as our most favored supplier for DNA plasmids and GeneOne and its subsidiary agreed to treat us as their most favored customer. Before we can manufacture DNA plasmids on our own behalf or engage a third party other than GeneOne or its subsidiary to manufacture DNA plasmids for us, we must first offer such manufacturing work to GeneOne or its subsidiary.
In 2014, we entered into a Collaborative Development Agreement with GeneOne to co-develop an Ebola vaccine through Phase 1 clinical trials. In 2015, we amended the agreement to provide that we would have control over the development program, in return for the payment of certain development fees.
In 2015, we entered into a Collaborative Development Agreement with GeneOne to co-develop a DNA vaccine for MERS through Phase 1 clinical trials. Under the terms of the agreement, GeneOne will be responsible for funding all preclinical and clinical studies through Phase 1. In return, GeneOne will receive up to 35% milestone-based ownership interest in the MERS immunotherapy upon achievement of the last milestone event of completion of the Phase 1 safety and immunogenicity study. The collaborative research program will terminate upon the completion of activities under the development plan, unless sooner terminated.
In January 2016, we and GeneOne expanded the collaboration agreement to test and advance our DNA-based vaccine for preventing and treating Zika virus. GeneOne will be responsible for funding all preclinical and clinical studies through Phase 1. In return, GeneOne will receive up to a 35% milestone-based ownership interest in the Zika immunotherapy upon achievement of the last milestone event of the completion of the Phase 1 safety and immunogenicity study.
In December 2017, we completed the sale of certain assets related to our compound VGX-1027 to GeneOne for $1.0 million.
Revenue recognized from GeneOne consists of licensing and other fees from the influenza and Zika collaborations. For the years ended December 31, 2017 and 2016, we recognized revenue from GeneOne of $0.6 million and $1.2 million, respectively. Operating expenses recorded from transactions with GeneOne relate primarily to biologics manufacturing. These operating expenses for the years ended December 31, 2017 and 2016 were $2.3 million and $2.8 million, respectively. At December 31, 2017 and 2016, we had an accounts receivable balance of $0 and $441,000, respectively, and an accounts payable and accrued liability balance of $107,000 and $379,000, respectively, related to GeneOne and its subsidiaries. At December 31, 2017 and 2016, $331,000 and $571,000, respectively, of prepayments made to GeneOne were classified as long-term other assets on the consolidated balance sheet.
Intellectual Property
Patents and other proprietary rights are essential to our business. We file patent applications to protect our technologies, inventions and improvements to our inventions that we consider important to the development of our business. We file for patent registration extensively in the United States and in key foreign markets. Although our patent filings include claims covering various features of our products and product candidates, including composition, methods of manufacture and use, our patents do not provide us with complete protection, or guarantee, against the development of competing products. In addition, some of our know-how and technology are not patentable. We thus also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We also require employees, consultants, advisors and collaborators to enter into confidentiality agreements, but such agreements may provide limited protection for our trade secrets, know-how or other proprietary information.
Our intellectual property portfolio covers our proprietary technologies, including electroporation CELLECTRA® delivery systems as well as immunotherapy and vaccine construct related technologies. As of December 31, 2017,2021, our patent portfolio included over 13999 issued United States patents and 525over 651 issued foreign counterpart patents.
Key vaccine related technology patents and published We also have a number of patent applications includepending in the following:
US Pat. No. 6,733,994, entitled, “Highly expressible genes” including claims directed to IgE signal leaders;
US Pat. No. 8,133,723, entitled, “Novel Vaccines Against Multiple Subtypes Of Influenza”;
US Pat. No. 8,168,769, entitled, “Improved VaccinesUnited States and Methods for Using the Same,” with claims directed to HPV vaccine products;
US Pat. No. 8,178,660, entitled, "Vaccines And Immunotherapeutics Using Codon Optimized IL-15 And Methods For Using The Same";
US Pat. No. 8,535,687, entitled, "Smallpox DNA Vaccine And The Antigens Therein That Elicit An Immune Response";
US Pat. Nos. 8,697,084, and 9,376,471, entitled, "HIV Consensus Envelop Sequences And Methods For Using The Same";
US Pat. No. 8,835,620, entitled, “Novel Vaccines Against Multiple Subtypes Of Influenza Virus”;
US Pat. No. 8,852,609, entitled, “Consensus Sequences of Chikungunya Viral Proteins, Nucleic Acid Molecules Encoding the Same and Compositions and Methods for Using the Same”;
US Pat. Nos. 8,927,692 and 9,399,056, entitled, “Consensus Prostate Antigens, Nucleic Acid Molecule Encoding The Same And Vaccine And Uses Comprising The Same";
US Pat. No. 8,961,994, entitled, “DNA Constructs Eliciting Immune Response Against Flavivirus and Effective Adjuvants”;
US Pat. No. 9,034,313, entitled, “Nucleic Acid Molecules Encoding Rantes, and Compositions and Methods of Using The Same”;
US Pat. Nos. 9,050,287 and 8,389,706, entitled, “Vaccines for Human Papilloma Virus and Methods for Using the Same”;
US Pat. Nos. 9,156,891, 9,156,890, 8,921,536, and 8,829,174, entitled, "Improved HCV Vaccines And Methods For Using The Same";
US Pat. Nos. 9,192,660 and 8,298,820, entitled, “Influenza Nucleic Acid Molecules and Vaccines Made Therefrom”;
US Pat. Nos. 9,238,679 and 9,403,879, entitled, “Nucleic acid molecule encoding hepatitis B virus core protein and vaccine comprising the same”;
US Pat. No. 9,243,041, entitled, “Nucleic acid molecule encoding novel herpes antigens, vaccine comprising the same, and methods of use thereof”;
US Pat. No. 9,272,024 entitled, “Compositions, comprising improved IL-12 genetic constructs and vaccines, immunotherapeutics and methods of using the same”;
US Pat. No. 9,290,546 entitled, “hTERT sequences and methods for using the same”;
US Pat. No. 9,446,112 entitled, “Clostridium difficile DNA vaccine”; and
US Pat. No. 9,446,114 entitled, “Cross-protective arenavirus vaccines and their method of use.”
Key electroporation related patents covering range of field strengths and novel processes include the following:
US Pat. No. 6,110,161, entitled, “Method for introducing pharmaceutical drugs and nucleic acids into skeletal muscle”;
US Pat. No. 6,261,281, entitled, “Method for genetic immunization and introduction of molecules into skeletal muscle and immune cells”;
•US Pat. No. 6,697,669, entitled, “Skin and muscle-targeted gene therapy by pulsed electrical field”;
US Pat. No. 6,752,780, entitled, “Intradermal injection system for injecting DNA-based injectables into humans”;
•US Pat. No. 6,752,781, entitled, “Durable hypodermic jet injector apparatus and method”;
•US Pat. No. 6,939,862, entitled, “Method for transferring nucleic acid into striated muscles”;
•US Pat. No. 6,958,060, entitled, “Method for muscle delivery of drugs, nucleic acids and other compounds”;
•US Pat. No. 7,245,963, entitled, “Electrode assembly for constant-current electroporation and use”;
US Pat. No. 7,328,064, entitled, “Electroporation device and injection apparatus,” with claims directed to methods of delivering an agent plus electroporation;
•US Pat. No. 7,442,182, entitled, “Spring powered needle-free injection system”;
•US Pat. No. 7,547,293, entitled, “Triggering mechanism for needle-free injector”;
•US Pat. No. 7,664,545, entitled, “Electrode assembly for constant-current electroporation and use”;
•US Pat. No. 7,717,874, entitled, “Needle-free injection system”;
US Pat. No. 7,922,709, entitled, “Enhanced delivery of naked DNA to skin by non-invasive in vivo electroporation”;
•US Pat. No. 7,942,845, entitled, “Needle-free injector and process for providing serial injections”;
•US Pat. No. 8,209,006, entitled, “Constant current electroporation device and methods of use”;
•US Pat. No. 8,617,099, entitled, “Injection device plunger auto-disable”; and
US Pat. No. 9,452,285, entitled, “Electroporation devices and methods of using same for electroporation of cells in mammals.”
various foreign jurisdictions.
If we fail to protect our intellectual property rights adequately our competitors might gain access to our technology and our business would thus be harmed. In addition, defending our intellectual property rights might entail significant expense. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation through the courts. In addition, our patents, or any other patents that may be issued to us in the future, may not provide us with any competitive advantages, or may be challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective patent, trademark, copyright and trade secret protection may not be available to us in each country where we operate. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and domestic and international mechanisms for enforcement of intellectual property rights in those countries may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property or
otherwise gaining access to our technology. We may be required to expend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any such litigation, whether or not it is ultimately resolved in our favor, would result in significant expense to us and divert the efforts of our technical and management personnel.
There may be rights we are not aware of, including applications that have been filed but not published that, when issued, could be asserted against us. These third-partiesthird parties could bring claims against us, and that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were
brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or biologic drug candidate that is the subject of the suit. As a result of patent infringement claims, or in order to avoid potential claims, we may choose or be required to seek a license from the third-party.third party. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be non-exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. All of the issues described above could also impact our collaborators, which would also impact the success of the collaboration and therefore us.
Important legal issues remain to be resolved as to the extent and scope of available patent protection for biologic products, including vaccines, and processes in the United States and other important markets outside the United States, such as Europe and Japan. Foreign markets may not provide the same level of patent protection as provided under the United States patent system. We recognize that litigation or administrative proceedings may be necessary to determine the validity and scope of certain of our and others’ proprietary rights. Any such litigation or proceeding may result in a significant commitment of resources in the future and could force us to interrupt our operations, redesign our products or processes, or negotiate a license agreement, all of which would adversely affect our revenue. Furthermore, changes in, or different interpretations of, patent laws in the United States and other countries may result in patent laws that allow others to use our discoveries or develop and commercialize our products.
We cannot guarantee that the patents we obtain or the unpatented technology we hold will afford us significant commercial protection.
Government Regulation
Government authorities in the United States at the federal, state and local level and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of biological products, or biologics, and medical devices, such as our product candidates. Generally, before a new biologic or medical device can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific to each regulatory authority, submitted for review and approved by the regulatory authority.
Review and Approval of Combination Products in the United States
Certain products may be comprised of components that would normally be regulated under different types of regulatory authorities, and frequently by different centers at the FDA. These products are known as combination products. Specifically, under regulations issued by the FDA, a combination product may be:
•A product comprised of two or more regulated components that are physically, chemically, or otherwise combined or mixed and produced as a single entity;
•Two or more separate products packaged together in a single package or as a unit and comprised of drug and device products;
•A drug, device, or biological product packaged separately that according to its investigational plan or proposed labeling is intended for use only with an approved individually specified drug, device or biological where both are required to achieve the intended use, indication, or effect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use, dosage form, strength, route of administration, or significant change in dose; or
•Any investigational drug, device, or biological packaged separately that according to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required to achieve the intended use, indication, or effect.
Our product candidates are combination products comprising an electroporation device for delivery of a biologic. Under the Federal Food, Drug, and Cosmetic Act, or FDCA, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for review of a combination product. That determination is based on the “primary mode of action” of the combination product, which means the mode of action expected to make the greatest contribution to the overall intended therapeutic effects. Thus, if the primary mode of action of a device-biologic combination product is attributable to the biologic product, that is, if it acts by means of a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product, the FDA center responsible for premarket review of the biologic product would have primary jurisdiction for the combination product. We believe that all of our product candidates will have a biologic primary mode of action, with the device component reviewed under a Device Master File.
U.S. Biological Product Development
In the United States, the FDA regulates biologics under FDCA, and the Public Health Service Act, or PHSA, and their implementing regulations. Biologics are also subject to other federal, state, and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
Our product candidates must be approved by the FDA through the Biologics License Application, or BLA, process before they may be legally marketed in the United States. The process required by the FDA before a biologic may be marketed in the United States generally involves the following:
•Completion of extensive nonclinical, sometimes referred to as pre-clinical laboratory tests, pre-clinical animal studies and formulation studies in accordance with applicable regulations, including the FDA’s Good Laboratory Practice, or GLP, regulations;
•Submission to the FDA of an IND, which must become effective before human clinical trials may begin;
•Performance of adequate and well-controlled human clinical trials in accordance with applicable IND and other clinical trial-related regulations, sometimes referred to as good clinical practices, or GCPs, to establish the safety and efficacy of the proposed product candidate for its proposed indication;
•Submission to the FDA of a BLA;
•Satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the product is produced to assess compliance with the FDA’s current good manufacturing practice, or cGMP, requirements to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality, purity and potency;
•Potential FDA audit of the pre-clinical and/or clinical trial sites that generated the data in support of the BLA; and
•FDA review and approval of the BLA prior to any commercial marketing or sale of the product in the United States.
The data required to support a BLA is generated in two distinct development stages: pre-clinical and clinical. The pre-clinical development stage generally involves laboratory evaluations of drug chemistry, formulation and stability, as well as studies to evaluate toxicity in animals, which support subsequent clinical testing. The conduct of the pre-clinical studies must comply with federal regulations, including GLPs. The sponsor must submit the results of the pre-clinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human trials. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical trials and places the IND on clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a product candidate at any time before or during clinical trials due to safety concerns or non-compliance. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that could cause the trial to be suspended or terminated.
The clinical stage of development involves the administration of the product candidate to healthy participants under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCPs, which include the requirement that all research participants provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, participant selection and exclusion criteria, and the parameters to be used to monitor participant safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial participant or his or her legal representative and must monitor the clinical trial until completed.
There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Sponsors of certain clinical trials of FDA-regulated products, including biologics, are required to register and disclose specified clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the
product, patient population, phase of investigation, trial sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion.
Clinical trials are generally conducted in three sequential phases that may overlap, known as Phase 1, Phase 2 and Phase 3 clinical trials. Phase 1 clinical trials generally involve a small number of healthy volunteers who are initially exposed to a product candidate. The primary purpose of these clinical trials is to assess the action, side effect tolerability and safety of the product candidate and, if possible, to gain early evidence on effectiveness. Phase 2 clinical trials typically involve studies in patients to determine the dose required to produce the desired benefits. At the same time, safety and preliminary evaluation of efficacy is assessed. Phase 3 clinical trials generally involve large numbers of patients at multiple sites, in multiple countries (from several hundred to several thousand participants) and are designed to provide the data necessary to demonstrate the efficacy of the product for its intended use, its safety in use, and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval. Phase 3 clinical trials may include comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing. Generally, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of a BLA.
Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, FDA may grant conditional approval of a BLA on the sponsor’s agreement to conduct additional clinical trials, such as these post-approval trials, to further assess the biologic’s safety and effectiveness after BLA approval.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse, findings from other studies suggesting a significant risk to humans exposed to the drug, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important rate increase of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research participants are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated intervals based on access to certain data from the trial. We may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate. Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
BLA and FDA Review Process
Following trial completion, trial data is analyzed to assess safety and efficacy. The results of pre-clinical studies and clinical trials are then submitted to the FDA as part of a BLA, along with proposed labeling for the product and information about the manufacturing process and facilities that will be used to ensure product quality, results of analytical testing conducted on the chemistry of the product candidate, and other relevant information. The BLA is a request for approval to market the biologic for one or more specified indications and must contain proof of safety, purity, potency and efficacy, which is demonstrated by extensive pre-clinical and clinical testing. The application includes positive findings from pre-clinical and clinical trials as well as ambiguous or negative results. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee, which is adjusted on an annual basis. PDUFA also imposes an annual program fee for approved products. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business.
Once a BLA has been accepted for filing, which occurs, if at all, sixty days after the BLA’s submission, the FDA’s goal is to review BLAs within ten months of the filing date for standard review or six months of the filing date for priority review, if the application is for a product intended for a serious or life-threatening condition and the product, if approved, would provide a significant improvement in safety or effectiveness. The review process is often significantly extended by FDA requests for additional information or clarification. If not accepted for filing, the sponsor must resubmit the BLA and begin the FDA’s
review process again, including the initial sixty-day review to determine if the application is sufficiently complete to permit substantive review.
After the BLA submission is accepted for filing, the FDA reviews the BLA to determine, among other things, whether the proposed product candidate is safe and effective for its intended use, and whether the product candidate is being manufactured in accordance with cGMP to assure and preserve the product candidate’s identity, strength, quality, purity and potency. The FDA may refer applications for novel drug product candidates or drug product candidates which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and us during the review process. The review and evaluation of a BLA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all.
Before approving a BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving a BLA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates the application, manufacturing process and manufacturing facilities, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the BLA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information is submitted, the FDA may ultimately decide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.
There is no assurance that the FDA will ultimately approve a product for marketing in the United States and we may encounter significant difficulties or costs during the review process. If a product receives marketing approval, the approval may be significantly limited to specific populations, severities of allergies, and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling or may condition the approval of the BLA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-market testing or clinical trials and surveillance to monitor the effects of approved products. For example, the FDA may require Phase 4 testing which involves clinical trials designed to further assess the product’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation and Mitigation Strategy, or REMS, to assure the safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve the BLA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.
Post-Marketing Requirements
Following approval of a new product, a manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved labeling, also known as off-label use, limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available drugs and biologics for off-label uses, manufacturers may not market or promote such off-label uses. Modifications or enhancements to the product or its labeling or changes of the site of manufacture are often subject to the approval of the FDA and other regulators, which may or may not be received or may result in a lengthy review process. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use.
In the United States, once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA. The FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP. Moreover, the constituent parts of a combination product retain their regulatory status, for example, as a biologic or device, and as such, we may be subject to additional requirements in the Quality System Regulation, or QSR, applicable to medical devices, such as design controls, purchasing controls, and corrective and preventive action. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulations require, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. These regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities. BLA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms. These firms and, where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested by them. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market.
The FDA also may require post-approval testing, sometimes referred to as Phase 4 testing, REMS and post-marketing surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.
Coverage and Reimbursement
Patients in the United States and elsewhere generally rely on third-party payors to reimburse part or all of the costs associated with their prescription drugs and vaccines. Accordingly, a pharmaceutical company’s ability to commercialize its products successfully depends in part on the extent to which private health insurers, other third-party payors, and governmental authorities, including Medicare and Medicaid, establish appropriate coverage and reimbursement levels for its product candidates and related treatments. As a threshold for coverage and reimbursement, third-party payors generally require that products be approved for marketing by the FDA.
Coverage decisions may not favor new products when more established or lower cost therapeutic alternatives are available. The process for obtaining coverage for a product or service is separate from the process to obtain the associated reimbursement. Reimbursement levels can affect the adoption of products and services by physicians and patients. Additionally, products used in connection with medical procedures may not be reimbursed separately, but their cost may instead be bundled as part of the payment received by the provider for the procedure only. Separate reimbursement for a product or the treatment or procedure in which the product is used may not be available.
Coverage and reimbursement policies for drug products and vaccines can differ significantly from payor to payor as there is no uniform policy of coverage and reimbursement for drug products among third-party payors in the United States. There may be significant delays in obtaining coverage and reimbursement as the process of determining coverage and reimbursement is often time consuming and costly which may require the provision of scientific and clinical support for the use of the product to each payor separately, with no assurance that coverage or adequate reimbursement will be obtained.
A significant trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular products and services. Third-party payors are increasingly challenging the effectiveness of and prices charged for medical products and services. Moreover, the U.S. government, state legislatures and foreign governmental entities have shown significant interest in implementing cost containment programs to limit the growth of government paid healthcare costs, including price controls, restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs.
Healthcare Reform
In both the United States and certain foreign jurisdictions there have been, and continue to be, a number of legislative and regulatory changes to the healthcare system that impact the ability to sell pharmaceutical products profitably. In the United States, the federal government enacted the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA. Among the ACA’s provisions of importance to the pharmaceutical industry are that it:
•Created an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs;
•Increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or AMP;
•Created new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics that are inhaled, infused, instilled, implanted or injected;
•Expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
•Expanded the entities eligible for discounts under the Public Health program;
•Created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
•Established a Center for Medicare & Medicaid Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending that began on January 1, 2011; and
•Created a licensure framework for follow on biologic products.
There remain judicial and Congressional challenges to certain aspects of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry qualifying health insurance coverage for all or part of a year. In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax, and, effective January 1, 2021, also eliminated the health insurer tax. On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the Affordable Care Act will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the ACA and our business. In addition, other legislative changes have been proposed and adopted since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute will remain in effect through 2031 with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Further there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24,
2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. As a result, the FDA released a final rule and guidance in September 2020 providing pathways for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until January 1, 2023. On November 20, 2020, CMS issued an interim final rule implementing the Trump administration’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries. As a result of litigation challenging the Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinded the Most Favored Nation model interim final rule. In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. No legislation or administrative actions have been finalized to implement these principles. In addition, Congress is considering drug pricing as part of other reform initiatives. Further, at the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. It is also possible that additional governmental action is taken in response to the COVID-19 pandemic.
Healthcare Laws
Certain federal, state, local and foreign healthcare laws and regulations pertaining to fraud and abuse, transparency, patients' rights, and privacy are applicable to the business of a pharmaceutical company. The laws that may affect a pharmaceutical company’s ability to operate include:
•The federal healthcare program Anti-Kickback Statute, which prohibits, among other things, people from soliciting, receiving or providing remuneration, directly or indirectly, to induce or reward either the referral of an individual, or the purchasing, ordering, or leasing of an item, good, facility or service, for which payment may be made by a federal healthcare program such as Medicare or Medicaid;
•Federal civil and criminal false claims laws, including the civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;
•The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain individuals and entities;
•the Physician Payments Sunshine Act, created under the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and other healthcare professionals (such as physicians assistants and nurse practitioners) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;
•The FDCA, which among other things, strictly regulates drug product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples;
•The U.S. Foreign Corrupt Practices Act, which, among other things, prohibits companies issuing stock in the U.S. from bribing foreign officials for government contracts and other business; and
•State law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state and local laws requiring the registration of pharmaceutical sales and medical representatives, and state laws governing the privacy
and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and
•Additional state and local laws such as laws in California and Massachusetts, which mandate implementation of compliance programs, compliance with industry ethics codes, and spending limits, and other state and local laws, such as laws in Vermont, Maine, and Minnesota which require reporting to state governments of gifts, compensation, and other remuneration to physicians.
A pharmaceutical company will need to spend substantial time and money to ensure that its business arrangements with third parties comply with applicable healthcare laws and regulations. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, which require strict compliance in order to offer protection, it is possible that governmental authorities may conclude that its business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable healthcare laws. If a pharmaceutical company’s operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to it, it may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, imprisonment, integrity and/or other oversight obligations, contractual damages, reputational harm and the curtailment or restructuring of operations.
Other Regulations
We also are subject to various federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research. The extent of government regulation that might result from any future legislation or administrative action cannot be accurately predicted.
Significant Customers and Research and Development
During the yearsyear ended December 31, 2017 and 2016,2021, we derived 53% and 4%43% of our revenue from MedImmune, 24% and 75% of our revenue from DARPA, and 14%the procurement contract with the DoD that we entered into in June 2020 and 14% of our revenue from Roche, respectively. our collaborator Plumbline Life Sciences, a company of which we are an approximately 19% stockholder. During the year ended December 31, 2020, we derived 68% of our revenue from Advaccine and 18% our our revenue from Plumbline Life Sciences. During the year ended December 31, 2019, we derived 78% of our revenue from AstraZeneca. Our collaboration agreement with AstraZeneca was terminated in 2021.
Since our inception, virtually all of our activities have consisted of research and development efforts related to developing our electroporation technologies and immunotherapies. Research and development expense consists of expenses incurred in performing research and development activities including salaries and benefits, facilities and other overhead expenses, clinical trials, contract services and other outside expenses. Our research and development expense was $98.6 million in 2017 and $88.7$249.2 million in 2016.2021, $94.2 million in 2020 and $88.0 million in 2019.
Geographic Information
All of our revenue for the years ended December 31, 2017, 20162021, 2020 and 20152019 was earned in the United States. All of our long-lived assets are located in the United States.
Corporate History and Headquarters
We have been a leader in advancing the capabilities of DNA-based immunotherapies to treat infectious diseases and cancers going back to the original incorporation of Viral Genomix, Inc. under the laws of Delaware on April 17, 2000. We were renamed VGX Pharmaceuticals, Inc. on May 31, 2006. On February 21, 2007, VGX Pharmaceuticals acquired Advisys, Inc., a company possessing DNA and electroporation technology, through an asset purchase agreement. On April 14, 2007, VGX Pharmaceuticals entered into an exclusive license agreement with the Trustees of the University of Pennsylvania related to therapeutic and prophylactic DNA vaccines developed by Professor David B. Weiner at the University of Pennsylvania School of Medicine.
Recognizing the value of electroporation delivery technology, devices, and patents in advancing DNA-based immunotherapy products, on June 1, 2009, VGX Pharmaceuticals completed a merger with Inovio Biomedical Corporation, a publicly listed company focused on electroporation delivery technology.
Inovio Biomedical Corporation started as Biotechnologies & Experimental Research, Inc. and was incorporated on June 29, 1983 in California to create products for the research marketplace. The company changed its corporate name to BTX, Inc.
on December 10, 1991, and to Genetronics, Inc. on February 8, 1994. On April 14, 1994, Genetronics, Inc. became a public company through a share exchange agreement with Consolidated United Safety Technologies, Inc., a company listed on the Vancouver Stock Exchange under the laws of British Columbia, Canada. The company changed its name to Genetronics Biomedical Ltd. on September 29, 1994. Genetronics, Inc. remained as a wholly owned operating subsidiary. On September 2, 1997, the company listed on the Toronto Stock Exchange. On December 8, 1998, the company listed on the American Stock Exchange (now NYSE MKT) and voluntarily de-listed from the Toronto Stock Exchange on January 17, 2003. On June 15, 2001, Genetronics Biomedical Ltd. completed a change in jurisdiction of incorporation from British Columbia, Canada, to the state of Delaware and became Genetronics Biomedical Corporation. On January 25, 2005, Genetronics Biomedical Corporation acquired Inovio AS, a gene delivery technology company located in Norway. On March 31, 2005, Genetronics Biomedical Corporation was renamed Inovio Biomedical Corporation.
The merger between VGX Pharmaceuticals and Inovio Biomedical Corporation was effected pursuant to the terms of an Amended and Restated Agreement and Plan of Merger dated December 5, 2008, as further amended on March 31, 2009. On May 14, 2010, the combined entity changed its corporate name to Inovio Pharmaceuticals, Inc. We conduct our business through our United States wholly-owned subsidiaries, VGX Pharmaceuticals, LLC and Genetronics, Inc.Information
Our corporate headquarters are located at 660 W. Germantown Pike, Suite 110, Plymouth Meeting, Pennsylvania 19462, and our main telephone number is (267) 440-4200.
Available Information
Our Internet website address is www.inovio.com. In addition to the information contained in this Annual Report, information about us can be found on our website. Our website and information included in or linked to our website are not part of this Annual Report.
We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, theThe SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
Information regarding our corporate governance, including the charters of our audit committee, our nomination and corporate governance committee and our compensation committee, our Code of Business Conduct and Ethics, our Corporate Governance Guidelines, our Corporate Governance Policy and information for contacting our board of directors is available on our website.
Our Code of Business Conduct and Ethics includes our Code of Ethics applicable to our Chief Executive Officer and Chief Financial Officer, who also serves as our principal accounting officer. Any amendments to or waivers of the Code of Ethics will be promptly posted on our website or in a report on Form 8-K, as required by applicable law.
Employees and Human Capital Resources
Employees
As of March 9, 2018,February 2022, we employed 278 peopleemployed 317 people on a full-time basis and 2 people under consulting and project employment agreements.basis. Of the combined total, 226total, 256 were in product research, which includes research and development, quality assurance, clinical, engineering and manufacturing, and 54 61 were in general and administrative functions, which includes corporate development, information technology, legal, commercial, investor relations, finance and corporate administration. About 50% of our workforce is comprised of women and approximately 50% is comprised of individuals with ethnically diverse backgrounds. In addition, three of the eight members of our board of directors are women. None of our employees are subject to collective bargaining agreements. We consider our relationship with our employees to be good.
We compete in the highly competitive biotechnology industry. Attracting, developing and retaining talented people in research, quality assurance, clinical, engineering, manufacturing and other positions is crucial to executing our strategy and our ability to compete effectively. Our ability to recruit and retain such talent depends on several factors, including compensation and benefits, talent development and career opportunities, and work environment. To that end, we invest in our employees to be an employer of choice.
Employee Engagement
As we work to make an impact on how healthcare is delivered, we believe it is critical that our employees are informed and engaged. We communicate frequently and transparently with our employees through a variety of communication methods, including video and written communications, town hall meetings, employee surveys and our company intranet, and acknowledge individual contributions to INOVIO through several rewards and recognition initiatives. We believe these engagement efforts keep employees informed about our strategy, culture and purpose and motivated to do their best work. As a result of the COVID-19 pandemic, we also further strengthened our digital communication platform. Our employee communications during the pandemic have kept our employees informed on critical priorities and important actions being taken by management in response to the pandemic.
Health, Safety and Wellness
The physical health, financial well-being, life balance and mental health of our employees is vital to our success. In 2021, we launched a company wide comprehensive wellness program inclusive of financial, physical, and mental well-being.
The environmental, health and safety team stays abreast of local, regional and global concerns and trends and ensures safety procedures are in place to mitigate workplace injuries and safety risks. Employees are required to complete training in various safety procedures for the laboratories and manufacturing facilities and specialized safety training based on particular job duties. Designated Safety Officers and response teams oversee safety-related initiatives and a safety committee provides input on safety procedures, practices, and policies. Employees are required to wear personal protective equipment relevant for their particular job duties. Occupational injuries at the workplace are extremely low and are always investigated to determine if any environmental or other changes need to be implemented.
Since the onset of the COVID-19 pandemic, strict safety protocols have been put in place for employees working on-site, including following federal and local guidelines and mandates to ensure the safety of the workforce. In addition to providing the necessary personal protective equipment, special engineering controls have been installed at the facilities to further protect workers. Regular communication and training about the virus and how individuals can protect themselves and others is ongoing with employees.
ITEM 1A. RISK FACTORS
You should carefully consider the following factors regarding information included in this Annual Report. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business, financial condition and operating results could be materially adversely affected.
Risks Related to Our BusinessFinancial Position and IndustryNeed for Additional Capital
We have incurred significant losses since inception,in recent years, expect to incur significant net losses in the foreseeable future and may never become profitable.
We have experienced significant operating losses to date.over the last several years. As of December 31, 20172021 our accumulated deficit was approximately $523.4 million.$1.2 billion. We have generated limited revenues, primarily consisting of milestonelicense revenue, grant funding and other payments under license and collaboration agreements, and revenue, from government grants.interest income. We expect to continue to incur substantial additional operating losses for at least the next several years as we advance our clinical trials and research and development activities. We may never successfully commercialize our DNA vaccine and DNA immunotherapy product candidates or electroporation-based synthetic vaccine delivery technology and thus may never have any significant future revenues or achieve and sustain profitability.
We have limited sources of revenue and our success is dependent on our ability to develop our vaccine andDNA vaccines, DNA immunotherapies, and other product candidatesdMAbs and electroporation equipment.
We do not sell any products and may not have any other products commercially available for several years, if at all. Our ability to generate future revenues depends heavily on our success in:
•developing and securing United States and/or foreign regulatory approvals for our product candidates, including securing regulatory approval for conducting clinical trials with product candidates;
•developing our electroporation-based DNA delivery technology; and
•commercializing any products for which we receive approval from the FDA and foreign regulatory authorities.
Our electroporation equipment and product candidates will require extensive additional clinical study and evaluation, regulatory approval in multiple jurisdictions, substantial investment and significant marketing efforts before we generate any revenues from product sales. We are not permitted to market or promote our electroporation equipment and product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities. If we do not receive regulatory approval for and successfully commercialize any products, we will not generate any revenues from sales of electroporation equipment and products, and we may not be able to continue our operations.
NoneA small number of licensing partners and government contracts currently account for a substantial portion of our human vaccinerevenue.
We currently derive, and immunotherapy product candidatesin the past we have been approved for sale,derived, a significant portion of our revenue from a limited number of licensing partners and government grants and contracts. Revenue can fluctuate significantly depending on the timing of upfront and event-based payments and work performed. If we fail to sign additional future contracts with major licensing partners and the government, if a contract is delayed or deferred, or if an existing contract expires or is canceled and we may not develop commercially successful vaccine products.
Our human vaccine and immunotherapy programs are in the early stages of research and development, and currently include vaccine product candidates in discovery, pre-clinical studies and Phase 1, 2 and 3 clinical trials. There are limited data regarding the efficiency of synthetic vaccine and immunotherapy candidates compared with conventional vaccines, and we must conduct a substantial amount of additional research and development before any regulatory authority will approve any of our vaccine product candidates. The success of our efforts to develop and commercialize our product candidates could fail for a number of reasons. For example, we could experience delays in product development and clinical trials. Our product candidates could be found to be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances. The products, if safe and effective, couldreplace the contract with new business, our revenue would be difficult to manufacture on a large scale or uneconomical to market, or our competitors could develop superior products more quickly and efficiently or more effectively market their competing products.
In addition, adverse events, or the perception of adverse events, relating to vaccine and immunotherapy candidates and delivery technologies may negatively impact our ability to develop commercially successful products. For example, pharmaceutical companies have been subject to claims that the use of some pediatric vaccines has caused personal injuries, including brain damage, central nervous system damage and autism. These and other claims may influence public perception of the use of vaccine and immunotherapy products and could result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approval of our potential products.
adversely affected.
We will need substantial additional capital to develop our synthetic vaccineDNA vaccines, DNA immunotherapies and immunotherapydMAb programs and electroporation delivery technology.
Conducting the costly and time consumingtime-consuming research, pre-clinical studies and clinical testing necessary to obtain regulatory approvals and bring our product candidates and delivery technology to market will require a commitment of substantial funds in excess of our current capital. Our future capital requirements will depend on many factors, including, among others:
•the progress of our current and new product development programs;
•the progress, scope and results of our pre-clinical and clinical testing;
•the time and cost involved in obtaining regulatory approvals;
•the cost of manufacturing our products and product candidates;
•the cost of prosecuting, enforcing and defending against patent infringement claims and other intellectual property rights;
•debt service obligations;
•competing technological and market developments; and
•our ability and the related costs to establish and maintain collaborative and other arrangements with third parties to assist in potentially bringing our products to market.
Additional financing may not be available on acceptable terms, or at all. Domestic and international capital markets have from time to time experienced heightened volatility, particularly in light of the COVID-19 pandemic and geopolitical turmoil, making it more difficult in many cases to raise capital through the issuance of equity securities. Volatility in the capital markets can also negatively impact the cost and availability of credit, creating illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases cease to provide, funding to borrowers. To the extent we are able to raise additional capital through the sale of equity securities, or we issue securities in connection with another transaction in the future, the ownership position of existing stockholders could be substantially diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock and may involve significant fees, interest expense, restrictive covenants and the granting of security interests in our assets. Fluctuating interest rates could also increase the costs of any debt financing we may obtain. Raising capital through a licensing or other transaction involving our intellectual property could require us to relinquish valuable intellectual property rights and thereby sacrifice long-term value for short-term liquidity.
Our failure to successfully address ongoing liquidity requirements would have a substantially negative impact on our business. If we are unable to obtain additional capital on acceptable terms when needed, we may need to take actions that adversely affect our business, our stock price and our ability to achieve cash flow in the future, including possibly surrendering our rights to some technologies or product opportunities, delaying our clinical trials or curtailing or ceasing operations.
We depend upon key personnel who may terminate their employment with us at any timeRisks Related to Product Development, Manufacturing and we may need to hire additional qualified personnel in order to obtain financing, pursue collaborations or develop or market our product candidates.Regulatory Approval
The success of our business strategy will depend to a significant degree upon the continued services of key management, technical and scientific personnel and our ability to attract and retain additional qualified personnel and managers, including personnel with expertise in clinical trials, government regulation, manufacturing, marketing and other areas. Competition for qualified personnel is intense among companies, academic institutions and other organizations. If we are unable to attractobtain FDA approval of our products, we will not be able to commercialize them in the United States.
We need FDA approval prior to marketing our electroporation equipment and retain key personnelproduct candidates in the United States. If we fail to obtain FDA approval to market our electroporation equipment and advisors, it may negatively affectproduct candidates, we will be unable to sell our products in the United States, which will significantly impair our ability to successfully develop, test, commercializegenerate any revenues.
This regulatory review and marketapproval process, which includes evaluation of preclinical studies and clinical trials of our products as well as the evaluation of our manufacturing processes and our third-party contract manufacturers' facilities, is lengthy, expensive and uncertain. To receive approval, we must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that our electroporation equipment and product candidates are both safe and effective for each indication for which approval is sought. To the extent that our product candidates are manufactured at multiple sites or using different processes, we will also need to demonstrate comparability across the manufacturing batches in order to obtain regulatory approval. Satisfaction of the approval requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the product. We do not know if or when we might receive regulatory approvals for our electroporation equipment and any of our product candidates currently under development. Moreover, any approvals that we obtain may not cover all of the clinical indications for which we are seeking approval, or could contain significant limitations in the form of narrow indications, warnings, precautions or contra-indications with respect to conditions of use. In such event, our ability to generate revenues from such products would be greatly reduced and our business would be harmed.
The FDA has substantial discretion in the approval process and may either refuse to consider our application for substantive review or may form the opinion after review of our data that our application is insufficient to allow approval of our electroporation equipment and product candidates.
We face intense If the FDA does not consider or approve our application, it may require that we conduct additional clinical, preclinical or manufacturing validation studies and increasing competitionsubmit that data before it will reconsider our application. Depending on the extent of these or any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and many ofcompleted, may not be successful or considered sufficient by the FDA for approval or even to make our competitors have significantly greater resources and experience.
applications approvable. If any of these outcomes occur, we may be forced to abandon one or more of our applications for approval, which might significantly harm our business and prospects.
It is possible that none of our products or any product we may seek to develop in the future will ever obtain the appropriate regulatory approvals necessary for us or our collaborators to commence product sales. Any delay in obtaining, or an inability to obtain, applicable regulatory approvals would prevent us from commercializing our products, generating revenues and achieving and sustaining profitability.
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.
Clinical testing is expensive and can take many years to complete, and its outcome is uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our products may not be predictive of the results of later-stage clinical trials. Results from one study may not be reflected or supported by the results of similar studies. Results of an animal study may not be indicative of results achievable in human studies. Human-use equipment and product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having
progressed through preclinical studies and initial clinical testing. The time required to obtain approval by the FDA and similar foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials, depending upon numerous factors. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change. We have not obtained regulatory approval for any human-use products.
Our products could fail to complete the clinical trial process for many reasons, including the following:
•we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our electroporation equipment or product candidate is safe and effective for any indication;
•the results of clinical trials may not meet the level of clinical or statistical significance required by the FDA or comparable foreign regulatory authorities for approval, for example, the results for the ITT population in the REVEAL 1 Phase 3 clinical trial were not statistically significant, which could result in the FDA requiring that we conduct another clinical trial before submitting a BLA for VGX-3100;
•the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
•we may not be successful in enrolling a sufficient number of participants in clinical trials;
•we may be unable to demonstrate that our electroporation equipment or product candidates' clinical and other benefits outweigh their safety risks;
•we may be unable to demonstrate that our electroporation equipment or product candidate presents an advantage over existing therapies, or over placebo in any indications for which the FDA requires a placebo-controlled trial;
•the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
•the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a new drug application or other submission or to obtain regulatory approval in the United States or elsewhere;
•the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of us or third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies; and
•the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Our product candidates are combination products regulated under both the biologic and device regulations of the Public Health Service Act and Federal Food, Drug, and Cosmetic Act. Third-party manufacturers may not be able to comply with cGMP regulations, regulations applicable to biologic/device combination products, including applicable provisions of the FDA’s drug cGMP regulations, device cGMP requirements embodied in the QSR or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates, operating restrictions and criminal prosecutions, any of which could significantly affect supplies of our product candidates.
Clinical trials may also be delayed as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA, the IRB overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site, or other regulatory authorities due to a number of factors, including:
•failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
•inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
•unforeseen safety issues; and
•lack of adequate funding to continue the clinical trial.
If we experience delays in completion of, or if we terminate, any of our clinical trials, the commercial prospects for our electroporation equipment and our product candidates may be harmed and our ability to generate product revenues will be delayed or eliminated altogether. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Further, delays in the commencement, conduct or completion of clinical trials may adversely affect the trading price of our common stock.
Delays in the commencement, conduct or completion of clinical testing could result in increased costs to us and delay or limit our ability to generate revenues.
Delays in the commencement, conduct or completion of clinical testing could significantly affect our product development costs. We do not know whether planned clinical trials will begin on time or be completed on schedule, if at all. In addition, ongoing clinical trials may not be completed on schedule, or at all, and could be placed on a hold by the regulators for
various reasons. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:
•obtaining regulatory approval to commence a clinical trial;
•adverse results from third party clinical trials involving gene-based therapies and the regulatory response thereto;
•reaching agreement on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
•future bans or stricter standards imposed on clinical trials of gene-based therapy;
•manufacturing sufficient quantities of our electroporation equipment and product candidates for use in clinical trials;
•obtaining institutional review board, or IRB, approval to conduct a clinical trial at a prospective site;
•slower than expected recruitment and enrollment of patients to participate in clinical trials for a variety of reasons, including competition from other clinical trial programs for similar indications or, with respect to our clinical trials for INO-4800, mass vaccination efforts;
•conducting clinical trials with sites internationally due to regulatory approvals and meeting international standards;
•retaining patients who have initiated a clinical trial but may be prone to withdraw due to side effects from the therapy, lack of efficacy or personal issues, or who are lost to further follow-up;
•collecting, reviewing and analyzing our clinical trial data; and
•global unrest including geopolitical risks emanating from countries such as Russia and China, global pathogen outbreaks or pandemics, terrorist activities, and economic and other external factors beyond our control.
Clinical trials may also be delayed as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA, the IRB overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site, or other regulatory authorities due to a number of factors, including:
•failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
•inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
•unforeseen safety issues; and
•lack of adequate funding to continue the clinical trial.
If we experience delays in completion of, or if we terminate, any of our clinical trials, the commercial prospects for our electroporation equipment and our product candidates may be harmed and our ability to generate product revenues will be delayed or eliminated altogether. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Further, delays in the commencement, conduct or completion of clinical trials may adversely affect the trading price of our common stock.
None of our human vaccine candidates, including INO-4800, or our immunotherapy and DNA encoded monoclonal antibody product candidates have been approved for sale, and we may never develop commercially successful vaccine, immunotherapy or DNA encoded monoclonal antibody products.
Our human vaccine programs, which includes our COVID-19 vaccine candidate INO-4800, our immunotherapy programs and our DNA encoded monoclonal antibodies program are in various stages of research and development, and currently include product candidates in discovery, preclinical studies and Phase 1, 2 and 3 clinical trials. There are limited data regarding the efficacy of synthetic vaccine candidates and immunotherapy candidates compared with conventional vaccines, and we must conduct a substantial amount of additional research and development before the FDA or any comparable foreign regulatory authority will approve any of our vaccine product candidates, including INO-4800. The success of our efforts to develop and commercialize our product candidates, including INO-4800, could be delayed or fail for a number of reasons. For example, we could experience delays in product development and clinical trials. Our product candidates could be found to be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances to proceed with further clinical development or to be approved for marketing. Our products, even if they are deemed to be safe and effective by regulatory authorities, could be difficult to manufacture on a large scale or uneconomical to market, or our competitors could develop superior products with efficacymore quickly and efficiently or safety profiles significantly better than our products,more effectively market their competing products. The ability to manufacture sufficient quantities of INO-4800 on a large scale is particularly challenging and will require substantial resources and the engagement of third parties, which we may not be able to obtain on a timely basis, or at all.
In addition, adverse events, or the perception of adverse events, relating to vaccine and immunotherapy candidates and delivery technologies may negatively impact our ability to develop commercially successful products. For example, pharmaceutical companies have been subject to claims that the use of some pediatric vaccines has caused personal injuries, including brain damage, central nervous system damage and autism. These and other claims may influence public perception of the use of vaccine and immunotherapy products and could result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approval of our potential products.
Our planned Phase 3 clinical trial of INO-4800 in the United States as a potential COVID-19 vaccine was previously placed on partial clinical hold by the U.S. FDA. Even though the hold has been lifted, we may experience delays in our ability to conduct clinical trials in the United States.
Our planned clinical development of INO-4800 in the United States as a potential COVID-19 vaccine was previously placed on partial clinical hold by the U.S. FDA until we satisfactorily resolved the FDA’s questions relating to our CELLECTRA 2000 device to be used in the trial. This clinical hold meant that we were not permitted to commence a Phase 3 clinical trial in the United States until the hold was lifted. The FDA notified us in November 2021 that the clinical hold had been lifted, allowing us to proceed with the Phase 3 segment of our INNOVATE trial. Although the partial clinical hold did not prevent us from starting our planned Phase 3 clinical trials outside of the United States, foreign regulatory authorities may impose similar requirements before we can commence or complete the portion of our Phase 3 clinical trial to be conducted in foreign countries.
Delays in completion of ongoing clinical testing for INO-4800, because of a clinical hold, our current pause on enrolling new patients for INNOVATE, our ability to obtain regulatory approval to amend the primary endpoint of INNOVATE or otherwise, could significantly affect our product development costs. We do not know whether our planned Phase 3 clinical trial will be completed on schedule, if at all. In addition, our ongoing clinical trials for INO-4800 may not be completed on schedule, or at all, and could be placed on additional holds by regulators either in the United States or in foreign jurisdictions for reasons unrelated to our current hold. If we experience delays in completion of, or if we terminate, any of our clinical trials relating to INO-4800, the commercial prospects for our product candidate may be harmed and our ability to generate product revenues will be delayed or eliminated altogether. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate.
The Omicron SARS-CoV-2 variant and newly emerging SARS-CoV-2 variants has required us to modify our COVID-19 vaccine strategy, which will result in new and added risks, including whether there will continue to be a need for a COVID-19 vaccine.
The emergence and current dominance of the Omicron SARS-CoV-2 variant may reduce the effectiveness of INO-4800 in preventing COVID-19. We conducted an in vitro assessment of the cross-reactivity of INO-4800 vaccine-induced immune responses against Omicron. Testing demonstrated a maintenance of T cell responses, including CD8+ responses, but significantly decreased levels of both neutralizing and binding antibodies against Omicron. As a consequence, we plan to seek regulatory approval to amend the protocol for the INNOVATE clinical trial by changing the primary endpoint from prevention of virologically confirmed COVID-19 disease to prevention of severe disease due to COVID-19. There can be no assurance that we will receive regulatory approval for such amendment and we do not know what other requirements and conditions may be imposed on the conduct of INNOVATE that may affect its timing, cost and outcome. If we are not able to obtain regulatory approval to amend the primary endpoint, INO-4800 may not achieve the primary endpoint of the INNOVATE trial, making marketing approvals less likely.
In addition, our COVID-19 vaccine strategy and prospects would be adversely affected if a weakened version of SARS-CoV-2 becomes the dominant variant, obviating the need for any vaccine.
As part of our modified COVID-19 vaccine strategy, we are also evaluating the feasibility of an additional ex-US heterologous boost (vaccination with a different vaccine from the primary series) trial with INO-4800. However, a clear regulatory pathway for a heterologous boost trial has not been defined and such a regulatory strategy may be difficult to navigate and ultimately may not be successful.
There can be no assurance that any of the products we are developing for COVID-19 would be granted an Emergency Use Authorization by the FDA or similar authorization by regulatory authorities outside of the United States if we were to decide to apply for such an authorization. The option of seeking an Emergency Use Authorization may no longer exist for our primary vaccine candidates, and if we cannot obtain such authorization or, if granted, it is terminated, we will be unable to sell our product in the near future and instead will be required to pursue the biologic licensure process in order to sell our product, which is lengthy and expensive.
We may seek an Emergency Use Authorization, or EUA, from the FDA or similar authorization from regulatory authorities outside of the United States, such as conditional marketing authorization from the EMA. If we apply for an EUA and it is granted, an EUA would authorize us to market and sell our COVID-19 vaccine under certain conditions of authorization as long as the public health emergency exists. The FDA expects that companies which receive an EUA for COVID-19 vaccines will proceed to licensure of their vaccine products under a full Biologics License Application. The FDA may issue an EUA during a Public Health Emergency if the agency determines that the potential benefits of a product outweigh the potential risks and if other regulatory criteria are met.
There is no guarantee that we will apply for an EUA or other similar authorization or, if we do apply, that we will be able to obtain such authorization. For example, we may no longer be able to obtain an EUA for INO-4800 as a primary vaccine, since several of our competitors’ COVID-19 vaccines have already obtained full approval. As a result, we may only be able to seek an EUA for INO-4800 as a heterologous booster vaccine candidate, which strategy may not be successful. We would need to seek full biologics licensure for INO-4800 as a primary vaccine, which is a lengthy and expensive process. Even if an EUA
or other authorization is ultimately granted, we will rely on the FDA or other applicable regulatory authority policies and guidance governing vaccines authorized in this manner in connection with the marketing and sale of our product. If these policies and guidance change unexpectedly and/or materially or if we misinterpret them, potential sales of our product could be adversely impacted. An EUA authorizing the marketing and sale of our product will terminate upon expiration of the Public Health Emergency, which is a determination made by the Secretary of Health and Human Services. The FDA may also terminate an EUA if safety issues or other concerns about our product arise or if we fail to comply with the conditions of authorization. If we apply for an EUA or similar authorization from regulatory authorities outside of the United States, the failure to obtain such authorization or the termination of such an authorization, if obtained, would adversely impact our ability to market and sell our COVID-19 vaccine, which could adversely impact our business, financial condition and results of operations.
If we and the contract manufacturers upon whom we rely fail to produce our electroporation devices and product candidates in the volumes that we require on a timely basis, or at all, or fail to comply with their obligations to us or with stringent regulations, we may face delays in the development and commercialization of our electroporation equipment and product candidates.
We manufacture some components of our electroporation devices and utilize the services of contract manufacturers to manufacture the remaining components of these devices. We also rely on third party contract manufacturers to produce our product candidates for use in our clinical trials and potentially for commercial distribution, if any product candidate is approved by regulatory authorities. The manufacture of these devices and our product candidates requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers often encounter difficulties in production, particularly in scaling up for commercial production. These problems include difficulties with production costs and yields, quality control, including stability of the equipment and product candidates and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations.
If we or our manufacturers were to encounter any of these difficulties or our manufacturers otherwise fail to comply with their obligations to us, our ability to provide our electroporation equipment to our partners and to supply product candidates for clinical trials or to commercially launch a product would be jeopardized. For example, we previously relied on VGXI to manufacture DNA plasmids for our product candidates, including INO-4800. In 2020, VGXI notified us that they would be unable to produce the necessary plasmids to meet this timeline due to a lack of manufacturing capacity. As a result, we have engaged several additional third-party contract manufacturers to support the planned large-scale manufacturing of INO-4800. However, there can be no assurance that we will be able to secure adequate additional manufacturing capacity on commercially reasonable terms. Our inability to secured sufficient manufacturing capacity, or our inability to transfer necessary manufacturing know-how to third parties, would adversely affect our commercialization plans and could also harm our reputation.
Furthermore, any delay or interruption in the supply of clinical trial supplies for INO-4800 or any of our other product candidates could delay the completion of our clinical trials, increase the costs associated with maintaining our clinical trial program and, depending upon the period of delay, require us to commence new trials at significant additional expense or terminate the trials completely.
In addition, all manufacturers of our products must comply with cGMP requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the generation and maintenance of records and documentation. Manufacturers of our products may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. We have little control over our manufacturers' compliance with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any product is compromised due to our or our manufacturers' failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products, and saleswe may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of our products, entail higher costs or result in our being unable to effectively commercialize our products. Furthermore, if our manufacturers fail to deliver the required commercial quantities on a timely basis, pursuant to provided specifications and at commercially reasonable prices, we may be unable to meet demand for our products and would lose potential revenues.
We are devoting significant resources to the scale-up, development and commercialization of our COVID-19 vaccine.
We continue to work toward the large-scale technical development, manufacturing scale-up and larger scale deployment of our COVID-19 vaccine candidates. The number of doses of these vaccines that we are able to produce and distribute is dependent on our ability, and the ability of our contract manufacturers, to successfully and rapidly scale up manufacturing capacity. To support the scale-up, we have expended and will need to continue to expend significant resources and capital. We may need to divert resources and capital from our other programs. We may also seek and secure significant additional funding
through contractual arrangements and collaborations with third parties. We may be unable to enter into such arrangements on favorable terms, or at all, which would adversely affect our ability to develop, manufacture and distribute the COVID-19 vaccine.
We are dependent on single-source suppliers for some of the components and materials used in, and the processes required to develop, our products, development candidates and investigational medicines.
We currently depend on single-source suppliers for some of the components and materials used in, and manufacturing processes required to develop and commercialize, our products, development candidates and investigational medicines. We cannot ensure that these suppliers or service providers will remain in business, have sufficient capacity or supply to meet our needs, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to work with us. Our use of single-source suppliers of raw materials, components, key processes, and finished goods exposes us to several risks, including disruptions in supply, price increases, or late deliveries. There are, in general, relatively few alternative sources of supply for substitute components. These vendors may be unable or unwilling to meet our future demands for our clinical trials or commercial sale. Establishing additional or replacement suppliers for these components, materials, and processes could take a substantial amount of time and it may be difficult to establish replacement suppliers who meet regulatory requirements. Any disruption in supply from any single-source supplier or service provider could lead to supply delays or interruptions which would damage our business, financial condition, results of operations, and prospects.
If we have to switch to a replacement supplier, the manufacture and delivery of our products, development candidates or investigational medicines could be interrupted for an extended period, which could adversely affect our business. Establishing additional or replacement suppliers for any of the components or processes used in our commercializedproducts or investigational medicines, if required, may not be accomplished quickly. If we are able to find a replacement supplier, the replacement supplier would need to be qualified and may require additional regulatory authority approval, which could result in further delay. While we seek to maintain adequate inventory of the single-source components and materials used in our products, any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to supply our investigational medicines.
Our reliance on these suppliers, service providers, and manufacturers subjects us to a number of risks that could harm our reputation, business, and financial condition, including, among other things:
•delays to the development timelines for our development candidates or investigational medicines;
•interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;
•delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component;
•a lack of long-term supply arrangements for key components with our suppliers;
•inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;
•difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;
•production delays related to the evaluation and testing of components from alternative suppliers, and corresponding regulatory qualifications;
•delay in delivery due to our suppliers’ prioritizing other customer orders over ours;
•damage to our reputation caused by defective components produced by our suppliers; and
•fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.
If any of these risks materialize, costs could significantly increase and our ability to meet demand for our products could be harmed. Someimpacted.
Even if our products receive regulatory approval, they may still face future development and regulatory difficulties.
Even if United States regulatory approval is obtained, the FDA may still impose significant restrictions on a product's indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. This governmental oversight may be particularly strict with respect to gene-based therapies. Our products will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, record keeping and submission of safety and other post-market information. For example, the FDA strictly regulates the promotional claims that may be made about medical products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. Physicians, on the other hand, may prescribe products for off-label uses. Although the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance has not been issued. However, companies may in certain circumstances share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and
other regulatory authorities for compliance with current good manufacturing practices, or cGMP, regulations. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates, or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:
•issue Warning Letters or untitled letters;
•impose civil or criminal penalties;
•suspend regulatory approvals;
•suspend any ongoing clinical trials;
•refuse to approve pending applications or supplements to applications filed by us;
•impose restrictions on operations, including costly new manufacturing requirements; or
•seize or detain products or require us to initiate a product recall.
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.
In order to market any electroporation equipment and product candidates outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval, and the regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. For example, in connection with our planned Phase 3 clinical trials of INO-4800 to be conducted outside of the United States, some regulatory authorities have indicated concerns with placebo-controlled efficacy trials of a COVID-19 vaccine, which means that we would not be able to open clinical trial sites in those countries. Furthermore, regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA approval in the United States. Such effects include the risks that our product candidates may not be approved for all indications requested, which could limit the uses of our competitorsproduct candidates and have an adverse effect on their commercial potential competitorsor require costly, post-marketing follow-up studies.
DNA medicines are a novel approach, and negative perception of the efficacy, safety, or tolerability of any investigational medicines that we develop could adversely affect our ability to conduct our business, advance our investigational medicines, or obtain regulatory approvals.
No DNA medicines have substantially greater product development capabilitiesbeen granted EUA or have been approved to date by the FDA. Adverse events in clinical trials of our investigational medicines or in clinical trials of others developing similar products and financial, scientific, marketing and human resources than we do. Competitors may develop products earlier, obtain FDA approvals for products more rapidly,the resulting publicity, as well as any other adverse events in the field of DNA medicine, or developother products that are more effective thanperceived to be similar to DNA medicines, such as those under development by us. We will seekrelated to expand our technological capabilities to remain competitive; however, research and development by others may render our technologiesgene therapy or products obsolete or noncompetitive, orgene editing, could result in treatmentsa decrease in the perceived benefit of one or cures superiormore of our programs, increased regulatory scrutiny, decreased confidence by patients and clinical trial collaborators in our investigational medicines, and less demand for any product that we may develop. Our large pipeline of development candidates and investigational medicines could result in a greater quantity of reportable adverse events, including suspected unexpected serious adverse reactions, other reportable negative clinical outcomes, manufacturing reportable events or material clinical events that could lead to ours.clinical delay or hold by the FDA or applicable regulatory authority or other clinical delays, any of which could negatively impact the perception of one or more of our programs, as well as our business as a whole. In addition, responses by U.S., state, or foreign governments to negative public perception may result in new legislation or regulations that could limit our ability to develop any investigational medicines or commercialize any approved products, obtain or maintain regulatory approval, or otherwise achieve profitability. More restrictive statutory regimes, government regulations, or negative public opinion would have an adverse effect on our business, financial condition, results of operations, and prospects and may delay or impair the development of our investigational medicines and commercialization of any approved products or demand for any products we may develop.
ManyBecause we are developing some of our development candidates or investigational medicines for the treatment of diseases in which there is little clinical experience and, in some cases, using new endpoints or methodologies, the FDA or other companiesregulatory authorities may not consider the endpoints of our clinical trials to provide clinically meaningful results.
There are pursuing other formsno pharmacologic therapies approved to treat the underlying causes of treatment or prevention formany diseases that we target.currently attempt to address or may address in the future. There has been limited clinical trial experience for the development of pharmaceuticals to treat these rare diseases in general, and we are not aware of a registrational trial that led to approval of a drug to treat these
diseases. There have been some historical trials with other agents which may have utilized clinical endpoints that are less applicable to our efforts that address the underlying defect. As a result, the design and conduct of clinical trials of investigational medicines for the treatment of these disorders and other disorders may take longer, be more costly, or be less effective as part of the novelty of development in these diseases.
Even if the FDA does find our success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre-specified endpoint to a degree of statistical significance in any pivotal or other clinical trials we or our strategic collaborators may conduct for our programs. Further, even if we do achieve the pre-specified criteria, our trials may produce results that are unpredictable or inconsistent with the results of the more traditional efficacy endpoints in the trial. The FDA also could give overriding weight to other efficacy endpoints over a primary endpoint, even if we achieve statistically significant results on that endpoint, if we do not do so on our secondary efficacy endpoints. The FDA also weighs the benefits of a product against its risks and the FDA may view the efficacy results in the context of safety as not being supportive of licensure. Other regulatory authorities in Europe and other countries may make similar findings with respect to these endpoints.
We have obtained Orphan Drug Designation for one of our product candidates. As part of our business strategy, we may continue to seek Orphan Drug Designation for additional product candidates, and we may be unsuccessful in obtaining new designations or may be unable to obtain or maintain the benefits associated with Orphan Drug Designation, including the potential for orphan drug exclusivity.
We have obtained Orphan Drug Designation from the FDA for INO-3107 for the treatment of recurrent respiratory papillomatosis. We have sought and may continue to seek Orphan Drug Designation for one or more of our other product candidates, including but not limited to VGX-3100 for the treatment of HPV-16-/18-associated anal dysplasia, although we may be unsuccessful in doing so. Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the United States, Orphan Drug Designation entitles a party to financial incentives such as tax advantages and user fee waivers. Opportunities for grant funding toward clinical trial costs may also be available for clinical trials of drugs for rare diseases, regardless of whether the drugs are designated for the orphan use. In addition, if a product that has Orphan Drug Designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same product for the same indication for seven years, except in limited circumstances.
Although we have obtained Orphan Drug Designation for INO-3107 for the treatment of recurrent respiratory papillomatosis, and even if we obtain Orphan Drug Designation for our other product candidates in specific indications, we may not be the first to obtain marketing approval of these product candidates for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. If a competitor with a product that is determined by the FDA to be the same as one of our product candidates obtains marketing approval before us for the same indication we are pursuing and obtains orphan drug exclusivity, our product candidate may not be approved until the period of exclusivity ends unless we are able to demonstrate that our product candidate is clinically superior. Even after obtaining approval, we may be limited in our ability to market our product. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different principal molecular structural features can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same drug with the same principal molecular structural features for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. Orphan Drug Designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we may seek Orphan Drug Designation for some of our product candidates, we may never receive such designations.
Tax reform legislation enacted in 2017 reduced the amount of the qualified clinical research costs for a designated orphan product that a sponsor may claim as a credit from 50% to 25%. This reduction could further limit the advantage of, and may impact our future business strategy with respect to, seeking the Orphan Drug Designation.
A breakthrough therapy designation or fast track designation by the FDA for a drug may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that the drug will receive marketing approval.
We may seek a breakthrough therapy designation for one or more of our investigational medicines. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial
improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the regulatory submission.
Designation as a breakthrough therapy is at the discretion of the FDA. Accordingly, even if we believe that one of our investigational medicines meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a drug may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. Even if we are successful in obtaining accelerated approval in the United States or under comparable pathways in other jurisdictions, we may face requirements and limitations that will adversely affect our prospects. For example, manywe may be approved only for a very limited indication, we may not successfully complete required post-approval trials, such trials may not confirm the clinical benefit of our competitors are workingdrug, or approval of the drug may be withdrawn. In addition, even if one or more of our investigational medicines qualify as breakthrough therapies, the FDA may later decide that the investigational medicine no longer meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened.
Risks Related to Reliance on developing and testing cancer vaccines and immunotherapies and several products such as the CAR-Ts developed by our competitors have been approved for human use. Our competitors and potential competitors include large pharmaceutical and more established biotechnology companies. These companies have significantly greater
financial and other resources and greater expertise than us in research and development, securing government contracts and grants to support research and development efforts, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and marketing. This may make it easier for them to respond more quickly than us to new or changing opportunities, technologies or market needs. Many of these competitors operate large, well-funded research and development programs and have significant products approved or in development. Small companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical companies or through acquisition or development of intellectual property rights. Our potential competitors also include academic institutions, governmental agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for product and clinical development and marketing. Research and development by others may seek to render our technologies or products obsolete or noncompetitive.Third Parties
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.
We have entered into, orand may continue to enter into, distribution, co-promotion, partnership, sponsored research and other arrangements for development, manufacturing, sales, marketing and other commercialization activities relating to our products. For example, in the past we have entered into license and collaboration agreements.agreements to develop, obtain regulatory approval for and commercialize our product candidates for specified indications, including in jurisdictions outside of the United States. The amount and timing of resources applied by our collaborators are largely outside of our control.
If any of our current or future collaborators breaches or terminates our agreements, or fails to conduct our collaborative activities in a timely manner, our commercialization of products could be diminished or blocked completely. We may not receive any event-based payments, milestone payments or royalty payments under our collaborative agreements if our collaborative partners fail to develop products in a timely manner or at all. It is possible that collaborators will change their strategic focus, pursue alternative technologies or develop alternative products, either on their own or in collaboration with others. Further, we may be forced to fund programs that were previously funded by our collaborators, and we may not have, or be able to access, the necessary funding. The effectiveness of our partners, if any, in marketing our products will also affect our revenues and earnings.
We desire to enter into new collaborative agreements. However, we may not be able to successfully negotiate any additional collaborative arrangements and, if established, these relationships may not be scientifically or commercially successful. Our success in the future depends in part on our ability to strategically enter into agreements with other highly-regarded organizations. This can be difficult due to internal and external constraints placed on these organizations. Some organizations may have insufficient administrative and related infrastructure to enable collaborations with many companies at once, which can extend the time it takes to develop, negotiate, implement and implementexecute a collaboration. Once news of discussions regarding possible collaborations are known in the medical community, regardless of whether the news is accurate, failure to announce a collaborative agreement or the entity's announcement of a collaboration with another entity may result in adverse speculation about us, resulting in harm to our reputation and our business.
Disputes could also arise between us and our existing or future collaborators, as to a variety of matters, including financial and intellectual property matters or other obligations under our agreements. These disputes could be both expensive and time-consuming and may result in delays in the development and commercialization of our products or could damage our relationship with a collaborator.
A small number of licensing partners and government contracts account for a substantial portion of our revenue.
We currently derive, and in the past we have derived, a significant portion of our revenue from a limited number of licensing partners and government grants and contracts. Revenue can fluctuate significantly depending on the timing of up-front and event-based payments and work performed. If we fail to sign additional future contracts with major licensing partners and the government, if a contract is delayed or deferred, or if an existing contract expires or is canceled and we fail to replace the contract with new business, our revenue would be adversely affected.
We have agreements with government agencies, which are subject to termination and uncertain future funding.
We have entered into agreements with government agencies, such as the NIAID, DARPA and DARPA,the DoD, and we intend to continue entering into these types of agreements in the future. Our business is partially dependent on the continued performance by these government agencies of their responsibilities under these agreements, including adequate continued funding of the agencies and their programs. We have no control over the resources and funding that government agencies may devote to these agreements, which may be subject to annual renewal and which generally may be terminated by the government agencies at any time. For example, in April 2021 we were notified by the DoD that they will discontinue funding for the Phase 3 segment of our INNOVATE trial.
Government agencies may fail to perform their responsibilities under these agreements, which may cause them to be terminated by the government agencies. In addition, we may fail to perform our responsibilities under these agreements. Many of our government agreements are subject to audits, which may occur several years after the period to which the audit relates. If
an audit identifies significant unallowable costs, we could incur a material charge to our earnings or reduction in our cash position. As a result, we may be unsuccessful entering, or ineligible to enter, into future government agreements.
Our quarterly operating results may fluctuate significantly.
We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
variations in the level of expenses related to our electroporation equipment, product candidates or future development programs;
expenses related to corporate transactions, including ones not fully completed;
addition or termination of clinical trials or funding support;
any intellectual property infringement lawsuit in which we may become involved;
any legal claims that may be asserted against us or any of our officers;
regulatory developments affecting our electroporation equipment and product candidates or those of our competitors;
our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements; and
if any of our products receives regulatory approval, the levels of underlying demand for our products.
If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
If we are unable to obtain FDA approval of our products, we will not be able to commercialize them in the United States.
We need FDA approval prior to marketing our electroporation equipment and products in the United States. If we fail to obtain FDA approval to market our electroporation equipment and product candidates, we will be unable to sell our products in the United States, which will significantly impair our ability to generate any revenues.
This regulatory review and approval process, which includes evaluation of pre-clinical studies and clinical trials of our products as well as the evaluation of our manufacturing processes and our third-party contract manufacturers' facilities, is lengthy, expensive and uncertain. To receive approval, we must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that our electroporation equipment and product candidates are both safe and effective for each indication for which approval is sought. Satisfaction of the approval requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the product. We do not know if or when we might receive regulatory approvals for our electroporation equipment and any of our product candidates currently under development. Moreover, any approvals that we obtain may not cover all of the clinical indications for which we are seeking approval, or could contain significant limitations in the form of narrow indications, warnings, precautions or contra-indications with respect to conditions of use. In such event, our ability to generate revenues from such products would be greatly reduced and our business would be harmed.
The FDA has substantial discretion in the approval process and may either refuse to consider our application for substantive review or may form the opinion after review of our data that our application is insufficient to allow approval of our electroporation equipment and product candidates. If the FDA does not consider or approve our application, it may require that we conduct additional clinical, pre-clinical or manufacturing validation studies and submit that data before it will reconsider our application. Depending on the extent of these or any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable. If any of these outcomes occur, we may be forced to abandon one or more of our applications for approval, which might significantly harm our business and prospects.
It is possible that none of our products or any product we may seek to develop in the future will ever obtain the appropriate regulatory approvals necessary for us or our collaborators to commence product sales. Any delay in obtaining, or an inability to obtain, applicable regulatory approvals would prevent us from commercializing our products, generating revenues and achieving and sustaining profitability.
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.
Clinical testing is expensive and can take many years to complete, and its outcome is uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials of our products may not be predictive of the results of later-stage clinical trials. Results from one study may not be reflected or supported by the results of similar studies. Results of an animal study may not be indicative of results achievable in human studies. Human-use equipment and product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical testing. The time required to obtain approval by the FDA and similar foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials, depending upon numerous factors. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change. We have not obtained regulatory approval for any human-use products.
Our products could fail to complete the clinical trial process for many reasons, including the following:
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our electroporation equipment and a product candidate are safe and effective for any indication;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
we may not be successful in enrolling a sufficient number of participants in clinical trials;
we may be unable to demonstrate that our electroporation equipment and a product candidate's clinical and other benefits outweigh its safety risks;
we may be unable to demonstrate that our electroporation equipment and a product candidate presents an advantage over existing therapies, or over placebo in any indications for which the FDA requires a placebo-controlled trial;
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from pre-clinical studies or clinical trials;
the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a new drug application or other submission or to obtain regulatory approval in the United States or elsewhere;
the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of us or third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies; and
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
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.
Delays in the commencement or completion of clinical testing could significantly affect our product development costs. We do not know whether planned clinical trials will begin on time or be completed on schedule, if at all. In addition, ongoing clinical trials may not be completed on schedule, or at all, and could be placed on a hold by the regulators for various reasons. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:
obtaining regulatory approval to commence a clinical trial;
adverse results from third party clinical trials involving gene based therapies and the regulatory response thereto;
reaching agreement on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
future bans or stricter standards imposed on gene based therapy clinical trials;
manufacturing sufficient quantities of our electroporation equipment and product candidates for use in clinical trials;
obtaining institutional review board, or IRB, approval to conduct a clinical trial at a prospective site;
slower than expected recruitment and enrollment of patients to participate in clinical trials for a variety of reasons, including competition from other clinical trial programs for similar indications;
conducting clinical trials with sites internationally due to regulatory approvals and meeting international standards;
retaining patients who have initiated a clinical trial but may be prone to withdraw due to side effects from the therapy, lack of efficacy or personal issues, or who are lost to further follow-up;
collecting, reviewing and analyzing our clinical trial data; and
global unrest, terrorist activities, and economic and other external factors.
Clinical trials may also be delayed as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA, the IRB overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site, or other regulatory authorities due to a number of factors, including:
failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
unforeseen safety issues; and
lack of adequate funding to continue the clinical trial.
If we experience delays in completion of, or if we terminate, any of our clinical trials, the commercial prospects for our electroporation equipment and our product candidates may be harmed and our ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Further, delays in the commencement or completion of clinical trials may adversely affect the trading price of our common stock.
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.
We and our collaborators have entered into agreements with CROs to provide monitors for and to manage data for our on-going clinical programs. We and the CROs conducting clinical trials for our electroporation equipment and product candidates are required to comply with current good clinical practices, or GCPs, regulations and guidelines enforced by the FDA for all of our products in clinical development. The FDA enforces GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or the CROs conducting clinical trials of our product candidates fail to comply with applicable GCPs, the clinical data generated in the clinical trials may be deemed unreliable and the FDA may require additional clinical trials before approving any marketing applications.
If any relationships with CROs terminate, we or our collaborators may not be able to enter into arrangements with alternative CROs. In addition, these third-party CROs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our on-going clinical programs or perform trials efficiently. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could harm our competitive position. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. Cost overruns by or disputes with our CROs may significantly increase our expenses.
Even ifWe enter into various contracts in the normal course of our products receive regulatory approval, they may still face future developmentbusiness in which weagree to indemnify the other party to the contract. In the event we have to perform under these indemnification provisions, it could have a material adverse effect on our business, financial condition and regulatory difficulties.results of operations.
Even if United States regulatory approval is obtained,In the FDA may still impose significant restrictions on a product's indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. This governmental oversight may be particularly strict withnormal course of business, we periodically enter into academic, commercial, service, collaboration, licensing, consulting and other agreements that contain indemnification provisions. With respect to gene based therapies. Our products will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, record keeping and submission of safetyour academic and other post-market information. In addition, manufacturersresearch agreements, we typically agree to indemnify the institution and related parties from losses arising from claims relating to the products, processes or services made, used, sold or performed pursuant to the agreements for which we have secured licenses, and from claims arising from our or our sub licensees’ exercise of drug products and their facilities are subjectrights under the agreement. With respect to continual review and periodic inspections byour commercial agreements, we have agreed to indemnify our vendors from any third-party product liability claims that could result from the FDA and other regulatory authorities for compliance with current good manufacturing practices,production, use or cGMP, regulations. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturer or us, including requiring withdrawalconsumption of the product, from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:
issue Warning Letters or untitled letters;
impose civil or criminal penalties;
suspend regulatory approval;
suspend any ongoing clinical trials;
refuse to approve pending applications or supplements to applications filed by us;
impose restrictions on operations, including costly new manufacturing requirements; or
seize or detain products or require us to initiate a product recall.
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.
In order to market any electroporation equipment and product candidates outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as for alleged infringements of any patent or other risks. Regulatory approval in one countryintellectual property right by a third party. With respect to consultants, we typically agree to indemnify them from claims arising from the good faith performance of their services.
Should our obligation under an indemnification provision exceed applicable insurance coverage or if we were denied insurance coverage or not covered by insurance, our business, financial condition and results of operations could be adversely affected. Similarly, if we are relying on a collaborator or other third party to indemnify us and the collaborator or other third party is denied insurance coverage or otherwise does not ensure regulatory approvalhave assets available to indemnify us, our business, financial condition and results of operations could be adversely affected.
Our participation in another, butthe WHO Solidarity Trial Vaccines (STV) could result in adverse consequences. We do not have any control over clinical data, progress, and decisions regarding INO-4800's participation in STV, and as such, decisions regarding the clinical pathway for INO-4800 between the WHO and the Company may not always align.
Our COVID-19 vaccine candidate INO-4800 is one of two vaccine candidates initially selected by the WHO for its randomized, global Phase 3 clinical trial, STV, being conducted initially in Columbia, Mali and the Philippines. We are supplying INO-4800 to WHO for the STV clinical trial. Because STV and our other ongoing Phase 2/3 global clinical trial of INO-4800, INNOVATE, have similar protocols and endpoints, we believe that the data generated by STV could support a failurepotential EUA or delay in obtaining regulatory approval in one country maylicensure application for INO-4800. STV is entirely independent of INNOVATE and is being conducted at different clinical trial sites with separate investigators, IRBs and DSMBs. We have a negative effectno influence on the regulatory processconduct of STV other than providing INO-4800 for the trial. As a result, we do not have any control over clinical data, clinical trial progress or decisions regarding INO-4800's inclusion in others. FailureSTV. All decisions regarding STV are and will be made by the WHO, which has the ability to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA approval in the United States. Such effects include the risks that our product candidates may not be approved for all indications requested, which could limit the uses of our product candidates and have an adverse effect on their commercial potential or require costly, post-marketing follow-up studies.
We face potential product liability exposure and, if successful claims are brought against us, we may incur substantial liability.
The use of our electroporation equipment and synthetic vaccine candidates in clinical trials and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers, pharmaceutical companies or others sellingterminate, pause or otherwise coming into contact withcontrol the conduct of STV without seeking our products. For example, pharmaceutical companies have been subjectconsent. If WHO does not modify the endpoints of STV, or modifies the endpoints in such a manner that results in INO-4800 not showing efficacy in STV, it could negatively affect the prospects of INO-4800 as a vaccine candidate.
Risks Related to claims that the useCommercialization of some pediatric vaccines has caused personal injuries, including brain damage, central nervous system damage and autism, and these companies have incurred material costs to defend these claims. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:Our Product Candidates
decreased demand for our product candidates;
impairment of our business reputation;
withdrawal of clinical trial participants;
costs of related litigation;
distraction of management's attention from our primary business;
substantial monetary awards to patients or other claimants;
loss of revenues; and
inability to commercialize our products.
We have obtained product liability insurance coverage for our clinical trials, but our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our business.
We currently have noa small marketing organization and no 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.
We currently do not have a small sales organization for the marketing, sales and distribution of our electroporation equipment and product candidates. In order to commercialize any products, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We contemplate establishing our own sales force or seeking third-party partners to sell our products. The establishment and development of our
own sales force to market any products we may develop will be expensive and time consuming and could delay any product launch, and we may not be able to successfully develop this capability. We will also have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. To the extent we rely on third parties to commercialize our approved products, if any, we will receive lower revenues than if we commercialized these products ourselves. In addition, we may have little or no control over the sales efforts of third parties involved in our commercialization efforts. In the event we are unable to develop our own marketing and sales force or collaborate with a third-party marketing and sales organization, we would not be able to commercialize our product candidates which would negatively impact our ability to generate product revenues.
If any of our products for which we receive regulatory approval doesdo not achieve broad market acceptance, the revenues that we generate from their sales will be limited.
The commercial success of our electroporation equipment and product candidates for which we obtain marketing approval from the FDA or other regulatory authorities will depend upon the acceptance of these products by both the medical community and patient population. Coverage and reimbursement of our product candidates by third-party payors, including government payors, generally is also necessary for optimal commercial success. The degree of market acceptance of any of our approved products will depend on a number of factors, including:
•our ability to provide acceptable evidence of safety and efficacy;
•our biomarker being developed to identify women with HPV 16/18 cervical HSIL, may not be validated by the FDA or other regulatory bodies, which could adversely affect the commercial viability ofVGX-3100;
•the relative convenience and ease of administration;administration, including the acceptance and usage of our electroporation equipment by the medical community;
•the prevalence and severity of any actual or perceived adverse side effects;
•limitations or warnings contained in a product's FDA-approved labeling, including, for example, potential “black box” warnings
•availability of alternative treatments;
•pricing and cost effectiveness;
•the effectiveness of our or any future collaborators' sales and marketing strategies;
•the public perception of new therapies and the reputational challenges that the vaccine industry is facing related to the growing momentum of the anti-vaccine movement, including with respect to COVID-19 vaccines;
•our ability to obtain sufficient third-party coverage orand adequate reimbursement; and
•the willingness of patients to pay out of pocket in the absence of third-party coverage.
If our electroporation equipment and product candidates are approved but do not achieve an adequate level of acceptance by physicians, health carehealthcare payors and patients, we may not generate sufficient revenue from these products, and we may not become or remain profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.
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.
OurPatients in the United States and elsewhere generally rely on third-party payors to reimburse part or all of the costs associated with their prescription drugs and medical treatments. Accordingly, our ability to commercialize our electroporation equipment and product candidates successfully will depend in part on the extent to which governmental authorities, including Medicare and Medicaid, private health insurers and other third-party payors establish appropriate coverage and reimbursement levels for our product candidates and related treatments. As a threshold for coverage and reimbursement, third-party payors in the United States generally require that drug products and vaccines have been approved for marketing by the FDA.
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. Coverage decisions may not favor new products when more established or lower cost therapeutic alternatives are already available. Even if we obtain coverage for a given product, the associated reimbursement rate may not be adequate to cover our costs, including research, development, intellectual property, manufacture, sale and distribution expenses,
or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless reimbursement is adequate to cover all or a significant portion of the cost of our drug products.
Additionally, some of our products, if approved, will be provided under the supervision of a physician. When used in connection with medical procedures, our product candidates may not be reimbursed separately but their cost may instead be bundled as part of the payment received by the provider for the procedure only. Separate reimbursement for the product itself or the treatment or procedure in which our product is used may not be available. A decision by a third-party payor not to cover or separately reimburse for our product candidates or procedures using our product candidates, could reduce physician utilization of our products once approved.
Coverage and reimbursement policies for products can differ significantly from payor to payor as there is no uniform policy of coverage and reimbursement for products among third-party payors in the United States. There may be significant delays in obtaining coverage and reimbursement as the process of determining coverage and reimbursement is often time consuming and costly which will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage or adequate reimbursement will be obtained. It is difficult to predict at this time what government authorities and third-party payors will decide with respect to coverage and reimbursement for our products.
A significant trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors alsohave attempted to control costs by limiting coverage and the amount of reimbursement for particular products and services. Third-party payors are increasingly challenging the effectiveness of and prices charged for medical products and services. Moreover, the U.S. government, state legislatures and foreign governmental entities have shown significant interest in implementing cost containment programs to limit the growth of government paid healthcare costs, including price controls, restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs. We may not be able to obtain third-party payor coverage or reimbursement for our products in whole or in part.
Healthcare reform measuresRisks Related to Managing Our Growth and Employee and Operational Matters
We are currently subject to litigation and may become subject to additional litigation, which could hinderharm our business, financial condition and reputation.
We may have actions brought against us by stockholders relating to past transactions, changes in our stock price or preventother matters. For example, during 2020, numerous purported shareholder class action complaints were filed against us, naming us and our products' commercial success.directors and executive officers as defendants, and alleging that we made materially false and misleading statements regarding the development of our INO-4800 vaccine candidate against COVID-19 in violation of certain federal securities laws. We may also become party to litigation with third parties as a result of our business activities. In 2020, we filed a lawsuit against one of our contract manufacturers, who then filed a counterclaim against us alleging that we had breached our contract with them, among other claims. These litigation matters, described in this report, are ongoing, and even though we intend to vigorously defend ourselves in these actions, there can be no assurance that we will ultimately prevail. These and any potential future actions against us could give rise to substantial damages, which could have a material adverse effect on our financial position, liquidity or results of operations. Even if an action is not resolved against us, the uncertainty and expense associated with litigation could harm our business, financial condition and reputation, as litigation is often costly, time-consuming and disruptive to business operations. The defense of our existing and potential future lawsuits could also result in diversion of our management's time and attention away from business operations, which could harm our business.
Our business could be adversely affected by the effects of health epidemics, including the global COVID-19 pandemic.
In bothresponse to the COVID-19 pandemic, in 2020 a number of governmental orders and other public health guidance measures were implemented across much of the United States, including in the locations of our offices, laboratories, clinical trial sites and certain foreignthird parties on whom we rely. As a result, our expected clinical development timelines could be negatively affected by COVID-19, which could then materially and adversely affect our business, financial condition and results of operations. Further, we have implemented a work from home policy allowing employees who can work from home to do so, while those needing to work in laboratory facilities work in shifts to reduce the number of people gathered together at one time. We have also implemented a mask-wearing mandate for all on-site activities. Non-essential business travel has been suspended and online and teleconference technology is used to meet virtually rather than in person. We have taken measures to secure our research and development project activities, while work in laboratories has been organized to reduce risk of COVID-19 transmission. Our increased reliance on personnel working from home may negatively impact our productivity, or could disrupt, delay or otherwise adversely impact our business. For example, with our personnel working from home, some of our research activities that require our personnel to be in our laboratories could be delayed.
In addition, as local jurisdictions there have been, and we anticipate there will continue to be, a number of legislative and regulatory changes to the healthcare system that could impactput restrictions in place or reinstitute restrictions they had previously lifted, our ability to sell any of our products profitably. In the United States, the Federal government enacted healthcare reform legislation, the Patient Protectioncontinue to conduct and Affordable Care Act, or the ACA. We believe there could be continuing trends towards expanding coverage to more individuals, containing health care costs and improving quality. At the same time, the rebates, discounts, taxes and other costs associated with the ACA are expected to be a significant cost to the pharmaceutical industry.
The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to make and implement healthcare reforms may adversely affect:
our ability to set a price we believe is fair for our products;
our ability to generate revenues and achieve or maintain profitability;
the availability of capital; and
our ability to obtain timely approval of our products.
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.
Certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients' rights may be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business, without limitation. The laws that may affect our ability to operate include:
the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, people from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;
federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;
the ACA expands the government's investigative and enforcement authority and increases the penalties for fraud and abuse, including amendments to both the False Claims Act and the Anti-Kickback Statute to make it easier to bring suit under those statutes;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;
the Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples;
the U.S. Foreign Corrupt Practices Act, which, among other things, prohibits companies issuing stock in the U.S. from bribing foreign officials for government contracts and other business; and
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Additionally, the compliance environment is changing, with more states, such as California and Massachusetts, mandating implementation of compliance programs, compliance with industry ethics codes, and spending limits, and other states, such as Vermont, Maine, and Minnesota requiring reporting to state governments of gifts, compensation, and other remuneration to physicians. Under the ACA, pharmaceutical companies are required to record any transfers of value made to doctors and teaching hospitals and to disclose such data to HHS. These laws all provide for penalties for non-compliance. The shifting regulatory environment, along with the requirement to comply with multiple jurisdictions with different compliance and/or reporting requirements, increases the possibility that a company may run afoul of one or more laws.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.
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.
We manufacture some components of our electroporation systems and utilize the services of contract manufacturers to manufacture the remaining components of these systems and our product supplies for clinical trials. The manufacture of our systems and product supplies requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers often encounter difficulties in production, particularly in scaling
up for commercial production. These problems include difficulties with production costs and yields, quality control, including stability of the equipment and product candidates and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. If we or our manufacturers were to encounter any of these difficulties or our manufacturers otherwise fail to comply with their obligations to us, our ability to provide our electroporation equipment to our partners and products toenroll patients in our clinical trials, manufacture our product candidates and pursue collaborations may also be limited. Such events may result in business and manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations. The COVID-19 pandemic has caused supply chain disruptions and supply shortages globally. As a result, we have experienced delays and disruptions in
obtaining clinical supplies, manufacturing supplies and components, and have had to secure new vendors for certain supplies and components at higher prices. Some manufacturing supplies and components remain in limited supply with uncertain delivery dates.
The spread of COVID-19, which has caused a broad impact globally, could also affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, it has resulted in significant disruption of global financial markets, which could reduce our ability to commercially launch a product would be jeopardized. Any delay or interruptionaccess capital. Although we have raised significant funds from the sale of our common stock in the supplypublic markets during the pandemic, there can be no guarantee that we will be able to continue to so, which could negative affect our future liquidity. In addition, if a global economic recession results following the spread of COVID-19, including newly emerging SARS-CoV-2 variants, its impact could materially affect our business and the value of our common stock.
The continued spread of COVID-19, including newly emerging SARS-CoV-2 variants globally, has affected and could continue to adversely affect our clinical trial suppliesoperations, including our ability to initiate and conduct our planned trials on their expected timelines and to recruit and retain participants and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. For example, COVID-19 adversely impacted the timeline for data collection for our VGX-3100 program. An increasing number of trial participants are either not able or do not feel safe going into healthcare facilities, which is necessary for the collection and completion of data samples for this trial. As a result, it is taking longer than anticipated to complete the data collection process. Further, the COVID-19 outbreak could delay the completion ofresult in delays in our clinical trials increasedue to prioritization of hospital resources toward the costs associated with maintaining our clinical trial program and, depending uponoutbreak, restrictions in travel, potential unwillingness of participants to enroll in trials, participants withdrawing from trials following enrollment as a result of contracting COVID-19 or other health conditions, or the periodinability of delay, require us to commence new trials at significant additional expense or terminate the trials completely.
In addition, all manufacturers of our products must comply with cGMP requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the generation and maintenance of records and documentation. Manufacturers of our products may be unableparticipants to comply with these cGMP requirementsclinical trial protocols as quarantines and withtravel restrictions impede participant movement or interrupt healthcare services. In addition, we rely on independent clinical investigators, contract research organizations and other FDA, statethird-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, and the outbreak may affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us. These restrictions may delay the conduct of multiple clinical trials including our Phase 1 through 3 clinical trials.
Additionally, COVID-19 may also result in delays in receiving approvals from local and foreign regulatory requirements. We have little control over our manufacturers' complianceauthorities, delays in necessary interactions with these regulationslocal and standards. A failure to comply with these requirements may result in finesforeign regulators, ethics committees and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any product is compromisedother important agencies and contractors due to limitations in employee resources or forced furloughs of government employees, and refusals to accept data from clinical trials conducted in these affected geographies.
The global outbreak of COVID-19 continues to evolve. The extent to which COVID-19 may impact our business, operations and clinical trials will depend on future developments, including travel restrictions to, from and within the United States and other countries, the effectiveness of actions taken in the United States and other countries to contain and treat the disease, including mass vaccination efforts, and whether the United States and additional countries are required to move to complete lock-down status. The ultimate long-term impact of COVID-19 is highly uncertain.
We face intense and increasing competition and steps taken by our competitors such as the introduction of a new, disruptive technology may impede our ability to successfully commercialize our DNA medicines.
If any of our competitors develop products with efficacy or safety profiles significantly better than our manufacturers' failure to adhere to applicable laws or for other reasons,products and introduce new, disruptive technology, we may not be able to obtain regulatory approval for or successfully commercialize our products, and sales of any of our commercialized products could be harmed. Some of our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we do. Competitors may be held liabledevelop products earlier, obtain FDA approvals for any injuries sustainedproducts more rapidly, or develop products that are more effective than those under development by us. We will seek to expand our technological capabilities to remain competitive; however, research and development by others may render our technologies or products obsolete or noncompetitive, or result in treatments or cures superior to ours.
Many other companies are pursuing other forms of treatment or prevention for diseases that we target. For example, many of our competitors are working on developing and testing COVID-19 vaccines, cancer vaccines and immunotherapies, and several products such as the CAR-Ts developed by our competitors have been approved for human use. Some of our competitors have already received regulatory approval for their COVID-19 vaccines and have mass vaccination efforts underway in our target markets. For example, multiple COVID-19 vaccines and boosters have been approved by regulators in the United States and Europe and in August 2021 the world's first DNA vaccine against COVID-19 was approved for emergency use by India's regulators. The earlier market entry of these other vaccines, and their actual or perceived efficacious or success relative to our own, has led to and may continue to lead to diversion of funding away from us, a result. Anydeclining market for COVID-19 vaccines, decreased demand for INO-4800, if approved, and difficulty in finding participants for our clinical trials. All of these factors could cause a delaysubstantially impact our ability to complete the development of, commercialize and generate revenues from INO-4800.
In addition, our competitors and potential competitors include large pharmaceutical and more established biotechnology companies. These companies have significantly greater financial and other resources and greater expertise than us in research and development, securing government contracts and grants to support research and development efforts, manufacturing, preclinical and clinical trials,testing, obtaining regulatory submissions, approvals and marketing. This may make it easier for them to respond more quickly than us to new or commercializationchanging opportunities, technologies or market needs. Many of these competitors operate large, well-funded research and development programs and have significant products approved or in development. Small companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical companies or through acquisition or development of intellectual property rights. Our potential competitors also include academic institutions, governmental agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for product and clinical development and marketing. Research and development by others may seek to render our technologies or products entail higher costsobsolete or result in our being unable to effectively commercialize our products. Furthermore, if our manufacturers fail to deliver the required commercial quantities on a timely basis, pursuant to provided specifications and at commercially reasonable prices, we may be unable to meet demand for our products and would lose potential revenues.noncompetitive.
Our failure to successfully acquire, develop and market additional product candidates or approved products would impair our ability to grow.
We may acquire, in-license, develop and/or market additional products and product candidates. The success of these actions depends partly upon our ability to identify, select and acquire promising product candidates and products.
The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for the license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms that we find acceptable, or at all.
In addition, future acquisitions may entail numerous operational and financial risks, including:
•exposure to unknown liabilities;
•disruption of our business and diversion of our management's time and attention to develop acquired products or technologies;
•incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions;
•higher than expected acquisition and integration costs;
•increased amortization expenses;
•difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
•impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and
•inability to retain key employees of any acquired businesses.
Further, any product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities.
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.
The success of our business strategy will depend to a significant degree upon the continued services of key management, technical and scientific personnel and our ability to attract and retain additional qualified personnel and managers, including personnel with expertise in clinical trials, government regulation, manufacturing, marketing and other areas. Competition for qualified personnel is intense among companies, academic institutions and other organizations. If we are unable to attract and retain key personnel and advisors, it may negatively affect our ability to successfully develop, test, commercialize and market our products and product candidates.
Changes in funding for the FDA and other government agencies could prevent new products from being developed or commercialized in a timely manner, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days from December 2018 to January 2019, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
We are dependent on information technology and our systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage.
We rely to a large extent upon sophisticated information technology systems to operate our businesses, some of which are managed, hosted provided and/or used for third-parties or their vendors. We collect, store and transmit large amounts of confidential information (including personal information and pseudonymized information), and we deploy and operate an array of technical and procedural controls to maintain the confidentiality and integrity of such confidential information. A significant breakdown, invasion, corruption, destruction, interruption, or unavailability of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact operations. Hardware, software, or applications we develop or obtain from third parties may contain defects in design or manufacture or other supply chain problems that could unexpectedly compromise our information and network security. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in our or our third-party providers' systems, portable media or storage devices. We could also experience a business interruption, theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks (including ransomware), which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Any such interruption or breach of our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs.
We face potential product liability exposure and, if successful claims are brought against us, we may incur substantial liability.
The use of our electroporation equipment and DNA vaccine, DNA immunotherapy and dMAb candidates in clinical trials and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. For example, pharmaceutical companies have been subject to claims that the use of some pediatric vaccines has caused personal injuries, including brain damage, central nervous system damage and autism, and these companies have incurred material costs to defend these claims. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:
•decreased demand for our product candidates;
•impairment of our business reputation;
•withdrawal of clinical trial participants;
•costs of related litigation;
•distraction of management's attention from our primary business;
•substantial monetary awards to patients or other claimants;
•loss of revenues; and
•inability to commercialize our products.
We have obtained product liability insurance coverage for our clinical trials, but our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our business.
Healthcare reform measures could hinder or prevent our products' commercial success.
In both the United States and certain foreign jurisdictions there have been, and we anticipate there will continue to be, a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell any of our products
profitably. In the United States, the federal government enacted healthcare reform legislation, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA. Among the ACA’s provisions of importance to the pharmaceutical industry are that it:
•imposed an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions, although the effective rate paid may be lower. However, the 2020 federal spending package permanently eliminated, effective January 1, 2020, this ACA-mandated medical device tax;
•created an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs;
•increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or AMP;
•created new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics that are inhaled, infused, instilled, implanted or injected;
•expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
•expanded the entities eligible for discounts under the Public Health program;
•created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
•established a Center for Medicare & Medicaid Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending that began on January 1, 2011; and
•created a licensure framework for follow on biologic products.
There have been executive, judicial, and Congressional challenges to certain aspects of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry qualifying health insurance coverage for all or part of a year. In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage, and, effective January 1, 2021, also eliminated the health insurer tax. On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges, and the healthcare reform measures of the Biden administration will impact the ACA and our business. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. Further, Congress is considering additional health reform measures as part of the budget reconciliation process.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute will remain in effect through 2030 with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Further there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing,
review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. As a result, the FDA released a final rule and guidance in September 2020, providing pathways for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed until January 1, 2023. On November 20, 2020, CMS issued an interim final rule implementing the Trump administration’s Most Favored Nation (MFN) executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021.As a result of litigation challenging the MFN model, on December 27, 2021, CMS published a final rule that rescinded the MFN model interim final rule. In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles. Further, at the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. It is also possible that additional governmental action is taken in response to the COVID-19 pandemic.
The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to make and implement healthcare reforms may adversely affect:
•our ability to set a price we believe is fair for our products;
•our ability to generate revenues and achieve or maintain profitability;
•the availability of capital; and
•our ability to obtain timely approval of our products.
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.
Certain federal, state, local and foreign healthcare laws and regulations pertaining to fraud and abuse, transparency, patients' rights, and privacy are applicable to our business. The laws that may affect our ability to operate include:
•the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, people from soliciting, receiving or providing remuneration, directly or indirectly, to induce or reward either the referral of an individual, or ordering, or leasing of an item, good, facility or service, for which payment may be made by a federal healthcare program such as Medicare or Medicaid. The intent standard under the federal healthcare program Anti-Kickback Statute was amended by the ACA to a stricter standard such that a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Further, the ACA codified case law that a claim including items or services resulting from a violation of the federal healthcare program Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
•federal civil and criminal false claims laws, including the civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;
•HIPAA, which prohibits, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal healthcare program Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and related regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain individuals and entities;
•the Physician Payments Sunshine Act, created under the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, to report annually to CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physicians assistants and nurse practitioners) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;
•the FDCA, which among other things, strictly regulates drug product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples;
•the U.S. Foreign Corrupt Practices Act, which, among other things, prohibits companies issuing stock in the U.S. from bribing foreign officials for government contracts and other business;
•state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state and local laws requiring the registration of pharmaceutical sales and medical representatives, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and
•additional state and local laws such as laws in California and Massachusetts, which mandate implementation of compliance programs, compliance with industry ethics codes, and spending limits, and other state and local laws, such as laws in Vermont, Maine, and Minnesota which require reporting to state governments of gifts, compensation, and other remuneration to physicians.
The shifting regulatory environment, along with the requirement to comply with multiple jurisdictions with different compliance and/or reporting requirements, increases the possibility that a company may run afoul of one or more laws.
We will be required to spend substantial time and money to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, which require strict compliance in order to offer protection, it is possible that governmental authorities may conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable healthcare laws. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, imprisonment, integrity and/or other oversight obligations, contractual damages, reputational harm, and the curtailment or restructuring of our operations. Any such penalties could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business.
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.
Our and our third-party manufacturers' activities involve the controlled storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds. We and our manufacturers are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In the event of an accident, state or federal authorities may curtail the use of these materials and interrupt our business operations. If we are subject to any liability as a result of our or our third-party manufacturers' activities involving hazardous materials, our business and financial condition may be adversely affected.
We may be subject to stockholder litigation, which would harm our businesshave entered into collaborations with Chinese companies and financial condition.
We may have actions brought against us by stockholders relating to past transactions, changesconduct certain research and development activities in our stock priceChina. Uncertainties regarding the interpretation and enforcement of Chinese laws, rules and regulations, a trade war, political unrest or other matters. Any such actionsunstable economic conditions in China could give rise to substantial damages, and thereby have a material adverse effect on our consolidated financial position, liquidity, or results of operations. Even if an action is not resolved against us, the uncertainty and expense associated with stockholder actions could harmmaterially adversely affect our business, financial condition and reputation. Litigation canresults of operations.
We conduct research and development activities in China through our collaboration with Advaccine, which is conducting and funding the Phase 2 trial of INO-4800 in China. In addition, we are party to a license and collaboration agreement with China-based company ApolloBio, pursuant to which ApolloBio has the exclusive right to develop and commercialize VGX-3100 in China, Hong Kong, Macao and Taiwan. The Chinese legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be costly, time-consumingcited for reference but have limited precedential value. In addition, the Chinese legal system is based in part on government policies and disruptiveinternal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Because Chinese administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be
more difficult to business operations. The defenseevaluate the outcome of lawsuitsadministrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, we are exposed to the possibility of disruption of our research and development activities in the event of changes in the policies of the United States or Chinese governments, political unrest or unstable economic conditions in China. For example, a trade war could lead to increased costs for clinical materials that are manufactured in China. These interruptions or failures could also result in diversionimpede commercialization of our management's timeproduct candidates and attention away fromimpair our competitive position. Further, we may be exposed to fluctuations in the value of the local currency in China. These uncertainties may impede our ability to enforce the contracts we have entered into and our ability to continue our research and development activities and could materially and adversely affect our business, operations, which could harm our business.financial condition and results of operations.
Our resultsemployees, principal investigators, and consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of operationsfraud or other misconduct by our employees, principal investigators, and liquidity needsconsultants. Misconduct by these parties could be materially affected by market fluctuationsinclude intentional failures to comply with FDA regulations or the regulations applicable in the EU and general economic conditions.
Our results of operations could be materially affected by economic conditions generally, bothother jurisdictions; provide accurate information to the FDA, the EMA, and other regulatory authorities; comply with healthcare fraud and abuse laws and regulations in the United States and elsewhere aroundabroad; or report financial information or data accurately or disclose unauthorized activities to us. Such misconduct also could involve the world. Concerns over inflation, energy costs, geopolitical issuesimproper use of information obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which could result in regulatory sanctions and cause serious harm to our reputation. Sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. We have adopted a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the availabilityprecautions we take to detect and cost of creditprevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have in the past and may continue to contribute to increased volatility and diminished expectations for the economy and the markets going forward. Market upheavals may have an adverse effecta significant impact on us. In the event of a market downturn, our business, financial condition, results of operations, and prospects, including the imposition of significant fines or other sanctions.
Employee litigation and unfavorable publicity could be adversely affected. negatively affect our future business.
Our future costemployees may, from time to time, bring lawsuits against us regarding injury, creating a hostile work place, discrimination, wage and hour disputes, sexual harassment, or other employment issues. In recent years there has been an increase in the number of equity or debt capitaldiscrimination and harassment claims generally. Coupled with the expansion of social media platforms and similar devices that allow individuals access to the capital markets could be adversely affected,a broad audience, these claims have had a significant negative impact on some businesses. Certain companies that have faced employment- or harassment-related lawsuits have had to terminate management or other key personnel, and our stock price could decline. There may be disruption in or delay in the performance of our third-party contractors and suppliers.have suffered reputational harm that has negatively impacted their business. If our contractors, suppliers and partners are unablewe were to satisfy their contractual commitments,face any employment-related claims, our business could suffer. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits, and we may experience losses on these deposits.
We are dependent on information technology and our systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage.
We rely to a large extent upon sophisticated information technology systems to operate our businesses, some of which are managed, hosted provided and/or used for third-parties or their vendors. We collect, store and transmit large amounts of confidential information, and we deploy and operate an array of technical and procedural controls to maintain the confidentiality and integrity of such confidential information. A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons couldbe negatively impact operations. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in our or our third-party providers' systems, portable media or storage devices. We could also experience a business interruption, theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Any such interruption or breach of our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us.
The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.
On December 22, 2017, President Trump signed into law new legislation that significantly revises the Internal Revenue Code of 1986, as amended, or the Code. The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35 percent to a flat rate of 21 percent, limitation of the tax deduction for interest expense to 30 percent of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80 percent of current-year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses
incurred in the testing of certain drugs for rare diseases or conditions). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law.
Risks Related to Our Intellectual Property
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.
Our commercial success will depend in part on obtaining and maintaining patent, trademark, trade secret, and other intellectual property protection relating to our electroporation equipment and product candidates, as well as successfully defending these intellectual property rights against third-party challenges.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. The laws and regulations regarding the breadth of claims allowed in biotechnology patents have evolved over recent years and continues to undergo review and revision, both in the United States and abroad. The biotechnology patent situation outside the United States can be even more uncertain depending on the country. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our licensed patents, our patents or in third-party patents, nor can we predict the likelihood of our patents surviving a patent validity challenge.
The degree of future protection for our intellectual property rights is uncertain, because legal decision-making can be unpredictable, thereby often times resulting in limited protection, which may not adequately protect our rights or permit us to gain or keep our competitive advantage, or resulting in an invalid or unenforceable patent. For example:
•we, or the parties from whom we have acquired or licensed patent rights, may not have been the first to file the underlying patent applications or the first to make the inventions covered by such patents;
•the named inventors or co-inventors of patents or patent applications that we have licensed or acquired may be incorrect, which may give rise to inventorship and ownership challenges;
•others may develop similar or alternative technologies, or duplicate any of our products or technologies that may not be covered by our patents, including design-arounds;
•pending patent applications may not result in issued patents;
•the issued patents covering our products and technologies may not provide us with any competitive advantages or have any commercial value;
•the issued patents may be challenged and invalidated, or rendered unenforceable;
•given the nature of the COVID-19 pandemic, governments in the United States or abroad may prevent us from enforcing patents on our vaccines, which could prevent us from excluding competitors from those markets;
•the issued patents may be subject to reexamination, which could result in a narrowing of the scope of claims or cancellation of claims found unpatentable;
•we may not develop or acquire additional proprietary technologies that are patentable;
•our trademarks may be invalid or subject to a third party's prior use; or
•our ability to enforce our patent rights will depend on our ability to detect infringement, and litigation to enforce patent rights may not be pursued due to significant financial costs, diversion of resources, and unpredictability of a favorable result or ruling.
We depend, in part, on our licensors and collaborators to protect a portion of our intellectual property rights. In such cases, our licensors and collaborators may be primarily or wholly responsible for the maintenance of patents and prosecution of patent applications relating to important areas of our business. If any of these parties fail to adequately protect these products with issued patents, our business and prospects would be harmed significantly.
We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our trade secrets to competitors. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.
If we or our licensors fail to obtain or maintain patent protection or trade secret protection for our product candidates or our technologies, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and attain profitability.
From time to time, U.S. and other policymakers have proposed reforming the patent laws and regulations of their countries. In September 2011 the America Invents Act (the Act) was signed into law. The Act changed the current “first-to-invent” system to a system that awards a patent to the “first-inventor-to-file” for an application for a patentable invention. The Act also created a procedure to challenge newly issued patents in the patent office via post-grant proceedings and new inter parties reexamination proceedings. These changes may make it easier for competitors to challenge our patents, which could result in increased competition and have a material adverse effect on our product sales, business and results of operations. The changes may also make it harder to challenge third-party patents and place greater importance on being the first inventor to file a patent application on an invention.
If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming,time-consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.
Other companies may have or may acquire intellectual property rights that could be enforced against us. If they do so, we may be required to alter our technologies, pay licensing fees or cease activities. If our products or technologies infringe the intellectual property rights of others, they could bring legal action against us or our licensors or collaborators claiming damages and seeking to enjoin any activities that they believe infringe their intellectual property rights.
Because patent applications can take many years to issue, and there is a period when the application remains undisclosed to the public, there may be currently pending applications unknown to us or reissue applications that may later result in issued patents upon which our products or technologies may infringe. There could also be existing patents of which we are unaware that our products or technologies may infringe. In addition, if third parties file patent applications or obtain patents claiming products or technologies also claimed by us in pending applications or issued patents, we may have to participate in interference or derivation proceedings in the United States Patent and Trademark Office to determine priority or derivation of the invention. If third parties file oppositions in foreign countries, we may also have to participate in opposition proceedings in foreign tribunals to defend the patentability of our filed foreign patent applications.
If a third party claims that we infringe its intellectual property rights, it could cause our business to suffer in a number of ways, including:
•we may become involved in time-consuming and expensive litigation, even if the claim is without merit, the third party's patent is invalid or we have not infringed;
•we may become liable for substantial damages for past infringement if a court decides that our technologies infringe upon a third party's patent;
•we may be enjoined by a court to stop making, selling or licensing our products or technologies without a license from a patent holder, which may not be available on commercially acceptable terms, if at all, or which may require us to pay substantial royalties or grant cross-licenses to our patents; and
•we may have to redesign our products so that they do not infringe upon others' patent rights, which may not be possible or could require substantial investment or time.
If any of these events occur, our business could suffer and the market price of our common stock may decline.
We have not yet registered our trademarks in all of our potential markets, and failure to secure those registrations could adversely affect our business.
Our trademark applications may not be allowed for registration, and our registered trademarks may not be maintained or enforced. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would.
Risks Related to an Investment in Our Common Stock
An active trading market for our common stock may not be sustained.
Although our common stock is listed on the Nasdaq Global Select Market, we cannot assure you that an active trading market for our shares will continue to be sustained. If an active market for our common stock is not sustained, it may be difficult for investors in our common stock to sell shares without depressing the market price for the shares or to sell the shares at all.
The price of our common stock has been and may continue to be volatile, and an investment in our common stock could decline substantially in value.
In light of our small size and limited resources, as well as the uncertainties and risks that can affect our business and industry, our stock price has been and may continue to be highly volatile and canhas been and may in the future be subject to substantial drops, with or even in the absence of news affecting our business. Period to period comparisons are not indicative of future performance. The following factors, which are not exhaustive, in addition to the other risk factors described in this annual report, and the potentially low volume of trades in our common stock, may have a significant impact on the market price of our common stock, some of which are beyond our control:
•developments concerning any research and development, clinical trials, manufacturing, and marketing efforts or collaborations;collaborations, particularly developments concerning the prospects of INO-4800 as a potential vaccine candidate against COVID-19;
•fluctuating public or scientific interest in the potential for influenza pandemic or other applications for our vaccinevaccines or other product candidates;candidates to address COVID-19 or other diseases;
•our announcement of significant acquisitions, strategic collaborations, joint ventures or capital commitments;
•fluctuations in our operating results;
•announcements of technological innovations;
•new products or services that we or our competitors offer;
•changes in the structure of healthcare payment systems;
•the initiation, conduct and/or outcome of intellectual property and/or litigation matters;
•changes in financial or other estimates by securities analysts or other reviewers or evaluators of our business;
•conditions or trends in bio-pharmaceutical or other healthcare industries;
•regulatory developments in the United States and other countries;
negative perception•perceptions of gene basedgene-based therapy;
•changes in the economic performance and/or market valuations of other biotechnology and medical device companies;
•additions or departures of key personnel;
•sales or other transactions involving our common stock;
•changes in our capital structure;
•sales or other transactions by executive officers or directors involving our common stock;
•changes in accounting principles;
•global unrest including geopolitical risks emanating from countries such as Russia and China, terrorist activities, and economic and other external factors; and
•catastrophic weather and/or global disease pandemics.pandemics, including COVID-19.
The stock market in general has recently experienced relatively large price and volume fluctuations.fluctuations, particularly in response to the COVID-19 pandemic. In particular, the market prices of securities of smaller biotechnology and medical device companies have experienced dramatic fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of theour common stock, which could cause a decline in the value of theour common stock. In addition, price volatility may increase if the trading volume of our common stock remains limited or declines.
We have broad discretion in the use of our cash, cash equivalents, and investments, and may not use them effectively.
Our management has broad discretion in the application of our cash, cash equivalents, and investments, and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. Furthermore, our operating expenses have significantly increased due to development and manufacturing activities for our COVID-19 vaccine program, and we may not deploy our expanded capital base effectively. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse impact on our business, cause the price of our common stock to decline, and delay the development of our investigational medicines. Pending their use, we may invest our cash, cash equivalents, and investments in a manner that does not produce income or that loses 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.
Our amended and restated certificate of incorporation contains provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:
•the authority of our board of directors to issue shares of undesignated preferred stock and to determine the rights, preferences and privileges of these shares, without stockholder approval;
•all stockholder actions must be effected at a duly called meeting of stockholders and not by written consent; and
•the elimination of cumulative voting.
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, including to delay or impede a merger, tender offer or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.
We have never paid cash dividends on our common stock and we do not anticipate paying dividends in the foreseeable future.
We have paid no cash dividends on our common stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt or credit facility may preclude or limit our ability to pay any dividends. As a result, capital appreciation, if any, of our common stock will be yourthe sole source of potential gain for the foreseeable future.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Risks RelatedUnder Sections 382 and 383 of the revised Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage point change (by value) in the ownership of its equity by certain significant shareholders over a rolling three year period), the corporation’s ability to use its pre-change net operating loss carryforwards and certain other pre-change tax attributes to offset its post-change income and taxes may be limited. We may have experienced such ownership changes in the past, and we may experience ownership changes in the future as a result of shifts in our share ownership, some of which would be outside our control. If our ability to use our net operating losses and other tax attributes is limited by ownership changes, we may be unable to utilize a material portion of our net operating losses and other tax attributes to offset our future taxable income. In addition, there is also a risk that due to changes
in laws and regulations, including changes proposed or implemented by the current U.S. presidential administration, such as alternative minimum taxes or suspensions on the use of net operating losses, or other unforeseen reasons, our existing net operating losses could expire or otherwise become unavailable to offset future income tax liabilities.
General Risk Factors
Our quarterly operating results may fluctuate significantly.
We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
•variations in the level of expenses related to our License and Collaboration Agreement with ApolloBioelectroporation equipment, product candidates or future development programs;
•expenses related to corporate transactions, including ones not fully completed;
•addition or termination of clinical trials or funding support;
Consummation of the ApolloBio License and Collaboration Agreement is contingent upon the satisfaction of several closing conditions•any intellectual property infringement lawsuit in which we may become involved;
•any legal claims that may be asserted against us or any of our officers;
•regulatory developments affecting our electroporation equipment and product candidates or those of our competitors;
•debt service obligations;
•changes in the fair value of our investments, including investments in affiliated entities;
•our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements; and
•if any of our products receives regulatory approval, the levels of underlying demand for our products.
If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not occur.necessarily meaningful and should not be relied upon as an indication of our future performance.
Our results of operations and liquidity needs could be materially affected by market fluctuations and general economic conditions.
Our results of operations could be materially affected by economic conditions generally, both in the United States and elsewhere around the world. Concerns over inflation, energy costs, geopolitical issues, global pathogen outbreaks or pandemics, including COVID-19, and the availability and cost of credit have in the past and may continue to contribute to increased volatility and diminished expectations for the economy and the markets going forward. Market upheavals may have an adverse effect on us. In the event of a market downturn, our results of operations could be adversely affected. Our future cost of equity or debt capital and access to the capital markets could be adversely affected, and our stock price could decline. There may be disruption or delay in the performance of our third-party contractors and suppliers. If our contractors, suppliers and partners are unable to satisfy their contractual commitments, our business could suffer. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits, and we may experience losses on these closing conditionsdeposits.
If equity research analysts do not occur, we would not be able to license these products in China, Hong Kong, Macau, Taiwanpublish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and Korea without a new licensing partnertrading volume could decline.
The trading market for our common stock is influenced by the research and reports that equity research analysts publish about us and our business, and we wouldhave limited research coverage by equity research analysts. Equity research analysts may elect not receiveto initiate or continue to provide research coverage of our common stock, and such lack of research coverage may adversely affect the proceeds and royalties expected from the agreements.
Satisfactionmarket price of the closing conditions for the ApolloBio License and Collaboration Agreement requires ApolloBio shareholder approval and currency and regulatory approvals in China. Although ApolloBio has submitted much of the required information to the relevant regulatory bodies, it has not yet received currency or regulatory approval, nor has it attained shareholder approval for the transactions. If ApolloBio is not able to secure such shareholder or currency and regulatory approvals, the transactions contemplated by the ApolloBio License and Collaboration Agreement will not be consummated, in which case,our common stock. Even if we have equity research analyst coverage, we will not be entitled to receivehave any control over the $23.0 million in upfront paymentsanalysts or the content and opinions included in their reports. The price of our stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.
The issuance of additional stock in connection with financings, acquisitions, investments, our stock incentive plans or otherwise will dilute all other stockholders.
Our certificate of incorporation authorizes us to issue up to $20.0 million600,000,000 shares of common stock and up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue our shares of common stock or securities convertible into our common stock from time to time in milestone payments underconnection with a financing, acquisition, investment, our stock incentive plans or otherwise.
Any such issuance could result in substantial dilution to our existing stockholders and cause the ApolloBio Licensetrading price of our common stock to decline.
We incur significant costs and Collaboration Agreement. The failuredemands upon management as a result of being a public company.
As a public company listed in the United States, we incur significant legal, accounting and other costs that could negatively affect our financial results. In addition, changing laws, regulations and standards relating to receive such payments could harmcorporate governance and public disclosure, including regulations implemented by the SEC and stock exchanges, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business prospects or requiremay be harmed.
Failure to comply with these rules might also make it more difficult for us to raiseobtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.
Changes in tax laws could adversely affect our business and financial condition.
The tax regimes to which we are subject or under which we operate are unsettled and may be subject to significant change. In December 2017, tax legislation commonly known as the Tax Cuts and Jobs Act was enacted, which significantly revised the Internal Revenue Code of 1986, as amended, or the Code. The Tax Cuts and Jobs Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35 percent to a flat rate of 21 percent, limitation of the tax deduction for interest expense to 30 percent of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80 percent of current-year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the federal tax law. The issuance of additional capital through other means. Additionally, ifregulatory or accounting guidance related to the closing conditions forTax Act, or changes proposed or implemented by the ApolloBio Licensecurrent U.S. presidential administration or otherwise, could materially affect our tax obligations and Collaboration Agreementeffective tax rate.
The increasing use of social media platforms presents new risks and challenges.
Social media is increasingly being used to communicate about our research, development candidates, investigational medicines, and the diseases our development candidates and investigational medicines are being developed to treat. Social media practices in the biopharmaceutical industry continue to evolve and regulations relating to such use are not satisfied,always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business, resulting in potential regulatory actions against us. For example, participants may use social media channels to comment on their experience in an ongoing blinded clinical trial or to report an alleged adverse event. When such disclosures occur, there is a risk that we fail to monitor and comply with applicable adverse event reporting obligations or we may not be able to defend our business or the public’s legitimate interests in the face of the political and market VGX-3100 in China, Hong Kong, Macau, Taiwanpressures generated by social media due to restrictions on what we may say about our development candidates and investigational medicines. There is also a risk of inappropriate disclosure of sensitive information or Korea without finding a new licensing partner, which may be costly and time-consuming.negative or inaccurate posts or comments about us on any social networking website. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face regulatory actions, or incur other harm to our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We own no real property and have no plans to acquire any real property in the future.
San Diego Leases
In April 2013, we entered into a lease, or the First San Diego Lease, for office space in San Diego, California. The term of the First San Diego Lease commenced on December 1, 2013. The initial term of the First San Diego Lease is ten years, with a rightan
option to terminate on December 1, 2019,extend the term by five years, subject to specified conditions. In June 2015, we amended the First San Diego Lease to increase the total leased space to 31,207 square feet and occupy the entire building. The commencement of the amended First San Diego Lease was in January 20162016. As of December 31, 2021, rent payments under the First San Diego Lease include base rent with an annual increase of approximately 3 percent, and increasedadditional monthly lease paymentsfees to range from free rentcover our share of certain facility expenses, including utilities, property taxes, insurance and maintenance. We had an option to $99,000.terminate the First San Diego Lease on December 1, 2019, which we did not exercise.
In October 2016, we entered into an office lease, or the newSecond San Diego Lease, for a second property in San Diego, California. The total space under the newSecond San Diego Lease is approximately 51,000 square feet. We are using the facility for office, manufacturing and research and development purposes. The term of the newSecond San Diego Lease commenced on June 1, 2017. The initial term of the newSecond San Diego Lease is ten years, with a right to terminate on November 30, 2023, subject to specified conditions.
The base rent adjusts periodically throughout the term of the newSecond San Diego Lease. As of December 31, 2021, rent payments under the Second San Diego Lease include base rent with an annual increase of approximately 3 percent, and additional monthly payments ranging from free rentfees to $95,000, with a portioncover our share of the rent abated for certain periods during the first two years of the initial term.facility expenses, including utilities, property taxes, insurance and maintenance. In addition, we are
obligated to reimburse the landlord for our share of its operating and other expenses, and have paid a security deposit of
$95,000.
$95,000.
Plymouth Meeting Lease and Sublease
In March 2014, we entered into a lease, or the Plymouth Meeting Lease, for our corporate headquarters in Plymouth Meeting, Pennsylvania. We occupied the space in June 2014. The initial term of the Plymouth Meeting Lease was 11.5 years, and wewith a right to extend the term by five years, subject to specified conditions. We use the space for office purposes.
The base rent adjusts periodically throughout the term of the Plymouth Meeting Lease. As of December 31, 2021, rent payments under the Plymouth Meeting Lease include base rent with an annual increase of approximately 2 percent, and additional monthly payments ranging from free rentfees to $58,000.cover our share of certain facility expenses, including utilities, property taxes, insurance and maintenance. In addition, we are obligated to reimburse the landlord for our share of its operating and other expenses and a property management fee, and have paid a security deposit of $49,000. In July 2015, we amended the Plymouth Meeting Lease to increase the total leased space to approximately 28,00027,583 square feet. The commencement of the amended Lease was in the first quarter of 2016 and increased monthly lease payments to range between free rent to $80,000.
In June 2017, we entered into a sublease, or the Sublease, for additional space in our current office in Plymouth Meeting, Pennsylvania. The total additional space subject to the Sublease is approximately 30,000 square feet, which we are using for office purposes. The Sublease commenced on October 1, 2017 and was scheduled to end on June 30, 2027. The base rent adjusts periodically throughout the term of the Sublease, with monthly payments ranging from $75,000 to $90,000. In addition, we are obligated to reimburse the sub-landlord for our share of its operating and other expenses. In December 2017, the Sublease was reassigned by the sub-landlord back to the landlord, with no change in the underlying terms of the Sublease.
In June 2017, we entered into a secondanother amendment to the Plymouth Meeting Lease to increase the total leased space to 57,361 square feet and extend the lease term and term of the Sublease through December 31, 2029. In connection with the secondthis amendment, we have paid the landlord an additional security deposit of $75,000. Total monthly rent payments for
In the additional term will rangefourth quarter of 2019, we entered into two agreements to sublease a total of approximately 13,500 square feet in our Plymouth Meeting headquarters through periods between $173,000December 31, 2022 and $179,000.March 31, 2025.
We believe our current and future planned facilities will be adequate to meet our operating needs for the foreseeable future. Should we need additional space, we believe we will be able to secure additional space at commercially reasonable rates.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are subject to litigationSecurities Litigation
On March 12, 2020, a purported shareholder class action complaint, McDermid v. Inovio Pharmaceuticals, Inc. and claims arisingJ. Joseph Kim, was filed in the ordinary courseUnited States District Court for the Eastern District of business. Pennsylvania, naming us and J. Joseph Kim, our Chief Executive Officer, as defendants. The lawsuit alleges that we made materially false and misleading statements regarding our development of a vaccine for COVID-19 in our public disclosures in violation of certain federal securities laws. The plaintiff seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including reasonable attorneys’ fees. On June 18, 2020, the court appointed Manuel Williams to serve as lead plaintiff. On August 3, 2020, Mr. Williams filed a consolidated complaint, naming us and three of our officers as defendants. On September 21, 2020, Mr. Williams and another purported stockholder, Andrew Zenoff filed a first amended complaint, naming us and three of our officers as defendants. Defendants filed a motion to dismiss plaintiff’s first amended complaint on November 5, 2020. On February 16, 2021, the court issued an order granting in part, and denying in part, Defendants’ motion to dismiss. The court granted Defendants’ motion to dismiss, and dismissed with prejudice, the claims premised on the April 30 and June 30, 2020 statements. The court denied Defendants’ motion to dismiss as to the remaining statements. On March 9, 2021, Defendants filed their answer to the complaint. The case is currently in discovery. On July 29, 2021, Plaintiffs moved to certify the class action. That motion is fully briefed and remains pending. On February 17, 2022, the court granted Plaintiffs’ motion for leave to amend their complaint, and further ordered that the amended complaint is deemed filed as of February 17. Defendants intend to move to dismiss the new allegations in the amended complaint.
On April 20, 2020, a purported shareholder derivative complaint, Behesti v. Kim, et al., was filed in the United States District Court for the Eastern District of Pennsylvania, naming eight current and former directors as defendants. The lawsuit asserts state and federal claims and is based on the same alleged misstatements as the shareholder class action complaint. The lawsuit accuses our board of directors of failing to exercise reasonable and prudent supervision over our management, policies,
practices, and internal controls. The plaintiff seeks unspecified monetary damages on behalf of us as well as governance reforms. On June 5, 2020, the court stayed the Beheshti action pending resolution of a forthcoming motion to dismiss the McDermid securities class action or until any party provides notice that they no longer consent to the stay. On June 12 and June 15, 2020, two additional shareholder derivative complaints were filed in the United States District Court for the Eastern District of Pennsylvania, captioned Isman v. Benito, et al. and Devarakonda et al. v Kim, et. al. The complaints assert substantially similar claims as the Beheshti action and name our current directors as defendants. The Devarakonda complaint also names one of our former directors as a defendant. On July 21, 2020, the court consolidated the three derivative cases under the caption In re Inovio Pharmaceuticals, Inc. Derivative Litigation. The consolidated action is stayed.
On July 7, 2020, a fourth shareholder derivative complaint, Fettig v. Kim et al., was filed in the United States District Court for the Eastern District of Pennsylvania, naming eight current and former directors as defendants. The complaint asserts substantially similar claims as those in the consolidated derivative action. On August 27, 2020, the Fettig action was consolidated with the other derivative cases, which remain stayed as explained above.
We are not currentlyintend to defend these actions vigorously.
VGXI Litigation
On June 3, 2020, we filed a partycomplaint in the Court of Common Pleas of Montgomery County, Pennsylvania against VGXI, Inc. and GeneOne Life Science, Inc., or GeneOne, and together with VGXI, Inc. collectively referred to any material legal proceedingsas VGXI, alleging that VGXI had materially breached our supply agreement with them. The complaint seeks declaratory judgments, specific performance of the agreement, injunctive relief, an accounting, damages, attorneys’ fees, interest, costs and other relief from VGXI. On June 3, 2020, we are not awarefiled a petition for preliminary injunction, which was denied on June 25, 2020. On June 26, 2020, we filed notice of any pending or threatened legal proceedingappeal of the denial of the petition with the Pennsylvania Superior Court.
On July 7, 2020, VGXI filed an answer, new matter and counterclaims against us, alleging that we believe could havehad breached the supply agreement, as well as misappropriation of trade secrets and unjust enrichment. The counterclaims seek injunctive relief, damages, attorneys’ fees, interest, costs and other relief from us. Also, on July 7, 2020, VGXI filed a material adverse effectthird-party complaint against Ology Bioservices, Inc., a contract manufacturing organization that we had engaged to provide services similar to those that were being provided by VGXI. On July 27, 2020, we filed an answer to VGXI’s counterclaims, disputing the allegations and the claims raised in VGXI’s filing. On October 1, 2020, we filed a notice of discontinuance of appeal with the Pennsylvania Superior Court. A trial date for the litigation has not been set.
We intend to aggressively prosecute the claims set forth in our complaint against VGXI and to vigorously defend ourselves against VGXI’s counterclaims.
GeneOne Litigation
On December 7, 2020, GeneOne filed a complaint in the Court of Common Pleas of Montgomery County, Pennsylvania against us, alleging that we had breached the CELLECTRA Device License Agreement, or the Agreement, between us and GeneOne. We terminated the Agreement on October 9, 2020. The complaint asserts claims for breach of contract, declaratory judgment, unfair competition, and unjust enrichment. The complaint seeks injunctive relief, an accounting, damages, disgorgement of profits, attorneys’ fees, interest, and other relief from us. On January 29, 2021, we filed preliminary objections to the complaint. On August 23, 2021, the Court overruled our business, operating results, cash flows or financial condition.preliminary objections to the complaint. On September 13, 2021, we filed an answer to the complaint, new matter, and counterclaims. The Company’s counterclaims allege that GeneOne breached the Agreement, and assert claims for breach of contract and declaratory judgment. The counterclaims seek damages, interest, expenses, attorney’s fees, and costs. On October 18, 2021, GeneOne filed its answer to our counterclaims and new matter. On November 8, 2021, we filed our answer to GeneOne’s new matter. A trial date for this litigation has not been set.
We intend to aggressively prosecute the claims set forth in our counterclaims against GeneOne and to vigorously defend ourselves against the claims in GeneOne’s complaint.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock, par value $0.001 per share, began trading on the Nasdaq Global Select Market on September 15, 2014 under the symbol "INO," having previously traded on the NYSE MKT exchange. The following table sets forth the quarterly high and low per share sale prices of our common stock for the two most recent fiscal years.
|
| | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 |
| Period: | High | | Low | | High | | Low |
| First Quarter | $ | 7.38 |
| | $ | 5.86 |
| | $ | 8.71 |
| | $ | 4.92 |
|
| Second Quarter | $ | 8.68 |
| | $ | 6.04 |
| | $ | 11.39 |
| | $ | 8.29 |
|
| Third Quarter | $ | 8.06 |
| | $ | 5.36 |
| | $ | 10.42 |
| | $ | 8.52 |
|
| Fourth Quarter | $ | 6.68 |
| | $ | 4.13 |
| | $ | 9.52 |
| | $ | 5.98 |
|
As of February 28, 2018,11, 2022, we had approximately 479100 common stockholders of record. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
The closing price per share of our common stock on March 12, 2018February 11, 2022 was $4.68,$3.32, as reported on the Nasdaq Global Select Market.
Dividends
The payment of any dividends on our common stock is within the discretion of our board of directors. We have never paid cash dividends on our common stock and the board of directors does not expect to declare cash dividends on the common stock in the foreseeable future.
Performance Graph
The graph below compares the performance of our common stock with the performance of the NYSE American Index, the S&P SuperCap Biotechnology index and the NASDAQNasdaq Composite Index for the five years ended December 31, 2017.2021. The graph assumes a $100 investment on December 31, 20122016 in our common stock and in each index, with the reinvestment of all dividends, if any.
*$100 invested on 12/31/16 in stock or index, including reinvestment of dividends.
Fiscal year ended December 31.
| | | | 12/12 | | 12/13 | | 12/14 | | 12/15 | | 12/16 | | 12/17 | | 12/16 | | 12/17 | | 12/18 | | 12/19 | | 12/20 | | 12/21 |
| Inovio Pharmaceuticals, Inc. | 100.00 |
| | 580.58 |
| | 459.46 |
| | 336.34 |
| | 347.35 |
| | 206.71 |
| Inovio Pharmaceuticals, Inc. | 100.00 | | | 59.51 | | | 57.64 | | | 47.55 | | | 127.52 | | | 71.90 | |
| NYSE American | 100.00 |
| | 104.47 |
| | 105.23 |
| | 75.69 |
| | 89.97 |
| | 91.27 |
| NYSE American | 100.00 | | | 101.61 | | | 86.60 | | | 97.92 | | | 95.85 | | | 127.23 | |
| NASDAQ Composite | 100.00 |
| | 141.63 |
| | 162.09 |
| | 173.33 |
| | 187.19 |
| | 242.29 |
| |
| S&P SuperCap Biotechnology | 100.00 |
| | 172.84 |
| | 228.98 |
| | 240.86 |
| | 206.64 |
| | 247.59 |
| |
| Nasdaq Composite | | Nasdaq Composite | 100.00 | | | 129.64 | | | 125.96 | | | 172.17 | | | 249.51 | | | 304.85 | |
| S&P SuperCap Biotechnology Index | | S&P SuperCap Biotechnology Index | 100.00 | | | 128.50 | | | 127.87 | | | 144.12 | | | 161.82 | | | 198.92 | |
The stock price performance included in this graph is not necessarily indicative of future stock price performance. The performance graph is furnished solely to accompany this Form 10-K annual report and shall not be deemed to be incorporated by reference by means of any general statement incorporating by reference this Form 10-K into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate such information by reference, and shall not otherwise be deemed filed under such acts.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Parties
None.
ITEM 6. SELECTED FINANCIAL DATARESERVED
The following selected consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this report. The selected consolidated balance sheet data at December 31, 2017 and 2016 and the selected consolidated statements of operations data for the years ended December 31, 2017, 2016 and 2015 have been derived from our audited consolidated financial statements that are included elsewhere in this report. The selected consolidated balance sheet data at December 31, 2015, 2014, and 2013 and the selected consolidated statements of operations data for the years ended December 31, 2014 and 2013 have been derived from our audited consolidated financial statements not included in this report. Historical results are not necessarily indicative of the results to be expected in the future.
|
| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31,
2017 | | Year Ended December 31,
2016 | | Year Ended December 31,
2015 | | Year Ended December 31,
2014 | | Year Ended December 31,
2013 |
| Statement of Operations Data: | | | | | | | | | |
| Revenue under collaborative research and development arrangements, including from affiliated entity | 29,173,216 |
| | $ | 7,891,341 |
| | $ | 27,655,700 |
| | $ | 7,896,032 |
| | $ | 9,664,547 |
|
| Grants and miscellaneous revenue, including from affiliated entity | 13,046,870 |
| | 27,477,020 |
| | 12,916,411 |
| | 2,560,734 |
| | 3,802,799 |
|
| Total revenues | 42,220,086 |
| | 35,368,361 |
| | 40,572,111 |
| | 10,456,766 |
| | 13,467,346 |
|
| Loss from operations | (83,642,901 | ) | | (76,235,937 | ) | | (34,283,702 | ) | | (39,495,961 | ) | | (19,544,332 | ) |
| Interest and other income, net | 1,612,974 |
| | 1,257,257 |
| | 305,071 |
| | 331,461 |
| | 132,214 |
|
| Change in fair value of common stock warrants | 806,819 |
| | 127,554 |
| | 177,561 |
| | 348,143 |
| | (45,632,669 | ) |
| Gain (Loss) on investment in affiliated entity | (6,982,664 | ) | | 1,110,787 |
| | 2,600,467 |
| | 2,676,224 |
| | (1,038,745 | ) |
| Income tax benefit | — |
| | — |
| | 2,097,766 |
| | — |
| | — |
|
| Net loss | (88,205,772 | ) | | (73,740,339 | ) | | (29,102,837 | ) | | (36,140,133 | ) | | (66,083,532 | ) |
| Net (income) loss attributable to non-controlling interest | — |
| | — |
| | (84,769 | ) | | 18,420 |
| | 55,084 |
|
| Net loss attributable to Inovio Pharmaceuticals, Inc. | $ | (88,205,772 | ) | | $ | (73,740,339 | ) | | $ | (29,187,606 | ) | | $ | (36,121,713 | ) | | $ | (66,028,448 | ) |
| Net loss per common share attributable to common stockholders | | | | | | | | | |
| Basic | $ | (1.08 | ) | | $ | (1.01 | ) | | $ | (0.43 | ) | | $ | (0.61 | ) | | $ | (1.43 | ) |
| Diluted | $ | (1.09 | ) | | $ | (1.01 | ) | | $ | (0.44 | ) | | $ | (0.64 | ) | | $ | (1.43 | ) |
| | | | | | | | | | |
| | Year Ended December 31,
2017 | | Year Ended December 31,
2016 | | Year Ended December 31,
2015 | | Year Ended December 31,
2014 | | Year Ended December 31,
2013 |
| Balance Sheet Data: | | | | | | | | | |
| Cash and cash equivalents | $ | 23,786,579 |
| | $ | 19,136,472 |
| | $ | 57,632,693 |
| | $ | 40,543,982 |
| | $ | 33,719,796 |
|
| Short-term investments | 103,638,844 |
| | 85,629,412 |
| | 105,357,277 |
| | 53,075,974 |
| | 18,905,608 |
|
| Total assets | 187,239,270 |
| | 173,707,166 |
| | 213,840,859 |
| | 131,785,097 |
| | 88,287,207 |
|
| Current liabilities | 35,405,426 |
| | 43,823,027 |
| | 31,466,406 |
| | 14,085,294 |
| | 28,966,456 |
|
| Noncurrent liabilities | 9,345,035 |
| | 6,505,719 |
| | 6,441,400 |
| | 6,162,209 |
| | 6,418,068 |
|
| Accumulated deficit | (523,356,317 | ) | | (434,838,235 | ) | | (361,097,896 | ) | | (331,910,290 | ) | | (295,788,577 | ) |
| Total stockholders’ equity | 142,488,809 |
| | 123,378,420 |
| | 175,933,053 |
| | 111,537,594 |
| | 52,902,683 |
|
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements.statements, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
Although we believe that the expectations reflected in the forward-looking statements are reasonable based on our current expectations and projections, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We are under no obligation to update any of the forward-looking statements after the filing of this Annual Report to conform such statements to actual results or to changes in our expectations.
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Annual Report. Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made in Item 1A of Part I of this Annual Report under the Caption “Risk Factors.”
Risk factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited to: our history of losses; our lack of products that have received regulatory approval; uncertainties inherent in clinical trials and product development programs, including but not limited to the fact that pre-clinical and clinical results may not be indicative of results achievable in other trials or for other indications, that the studies or trials may not be successful or achieve desired results, that preclinical studies and clinical trials may not commence, have sufficient enrollment or be completed in the time periods anticipated, that results from one study may not necessarily be reflected or supported by the results of other similar studies, that results from an animal study may not be indicative of results achievable in human studies, that clinical testing is expensive and can take many years to complete, that the outcome of any clinical trial is uncertain and failure can occur at any time during the clinical trial process, and that our electroporation technology and DNA vaccines may fail to show the desired safety and efficacy traits in clinical trials; the availability of funding; the ability to manufacture vaccine candidates; the availability or potential availability of alternative therapies or treatments for the conditions targeted by us or our collaborators, including alternatives that may be more efficacious or cost-effective than any therapy or treatment that we and our collaborators hope to develop; our ability to receive development, regulatory and commercialization event-based payments under our collaborative agreements; whether our proprietary rights are enforceable or defensible or infringe or allegedly infringe on rights of others or can withstand claims of invalidity; and the impact of recently enacted and proposedgovernment healthcare laws and regulations.proposals.
Overview
Inovio is developing active SynCon®We are a biotechnology company focused on bringing to market precisely designed DNA immunotherapiesmedicines and vaccines focused on treatingto help protect people from infectious diseases, including COVID-19, and preventing cancersto help treat people with cancer, and infectious diseases. SynCon® immunotherapies,conditions associated with human papillomavirus ("HPV"). We have shown in combination withclinical trials that our DNA vaccine candidates can be delivered into cells in the body via a proprietary CELLECTRA® delivery devices, are intendedsmart device allowing the nucleic-acid delivered gene products to generate optimal antigen production in vivo, in particularactivate functional CD8+ killer T cell and antibody responses against targeted pathogens and cancers.
Our DNA medicines pipeline is comprised of three types of product candidates: prophylactic DNA vaccines, therapeutic DNA immunotherapies, and DNA encoded monoclonal and bispecific antibodies ("dMAbs" and “dBTAs”), all of which utilize the two components of our integrated platform, SynCon® and CELLECTRA®.
Our proprietary SynCon® technology creates optimized plasmids, which are circular strands of DNA that instruct a cell to fight target diseases. We seekproduce proteins or antigens to becomehelp the “go-to” immunotherapeutic solution provider for all diseases caused by human papillomavirus,person’s immune system respond with antibodies and immune cells which recognize and then help block viruses and destroy cancerous or HPV, including for pre-cancer diseases like cervical intra-epithelial neoplasia, or CIN, vulvar intraepithelial neoplasia, or VIN, and anal intraepithelial neoplasia, or AIN, as well as cancers caused by HPV, such as head and neck cancer and cervical cancer. We believe that we arepre-cancerous cells.
Our patented CELLECTRA nucleic-acid delivered gene products smart delivery devices facilitate uptake of our DNA medicines into the cell, which has been a leader in T cell-generating immunotherapy with our product candidate INO-3112, also known as MEDI0457, being developed in collaboration with MedImmune as a combination therapy with MedImmune’s PD-1/PDL-1 checkpoint inhibitor candidate for the potential treatmentkey limitation of multiple cancers and an innovator in vaccine development for rapidly combating emerging infectious diseases.
In September 2015, proof of concept data was published in the medical journal The Lancet from a controlled Phase 2bhistorical DNA-based technology approaches. Human clinical trial in which we generated significant, functional antigen-specific T cells that correlated to clinically relevant efficacy against HPV-associated cervical dysplasia (precancer). In June 2017, we began a Phase 3 clinical trial of our product candidate VGX-3100 for the treatment of cervical dysplasia.
Our novel SynCon® immunotherapy design can help break the immune system’s tolerance of cancerous cells and is also intended to facilitate cross-strain protection against known and new unmatched strains of pathogens, such as influenza. Given the recognized role of CD8+ killer T cells in eliminating cancerous or infected cellsdata from the body and the published results from our Phase 2b clinical trial, we believe that our active immunotherapies may play an important role in helping fight multiple cancers and infectious diseases. Human datamore than 15,000 CELLECTRA® smart device administrations across more than 5,000 participants to date have shown a favorabletolerable safety profileprofile.
Our corporate strategy is to develop, seek regulatory approval for and commercialize our novel DNA medicines to address unmet global health needs. We continue to advance and clinically validate an array of our DNA immunotherapies delivered using electroporation.medicine candidates that target infectious diseases, such as COVID-19, as well as HPV-associated diseases and cancer.
Our partners and collaborators include ApolloBio Corporation, AstraZeneca, Advaccine Biopharmaceuticals Suzhou Co, The Bill & Melinda Gates Foundation (Gates), Coalition for Epidemic Preparedness Innovations ("CEPI"), Defense Advanced Research Projects Agency ("DARPA"), The U.S. Department of Defense ("DoD"), HIV Vaccines Trial Network, the U.S. Defense Threat Reduction Agency’s Medical CBRN Defense Consortium ("MCDC"), International Vaccine Institute ("IVI"), Kaneka Eurogentec, National Cancer Institute, National Institutes of Health, National Institute of Allergy and Infectious Diseases, Ology Bioservices, the Parker Institute for Cancer Immunotherapy, Plumbline Life Sciences, Regeneron Pharmaceuticals, Richter-Helm BioLogics, Thermo Fisher Scientific, the University of Pennsylvania, the Walter Reed Army Institute of Research, and The Wistar Institute.
We or our collaborators are currently evaluating the feasibility of, conducting or planning clinical studies of our proprietary SynCon® immunotherapiesDNA medicines for CIN, VINCOVID-19, which includes both homologous and AIN; head and neck and cervical cancer caused by HPV; prostate cancer; bladder cancer; glioblastoma, or GBM; breast, lung and pancreatic cancers; hepatitis C virus, or HCV;, hepatitis B virus, or HBV; human immunodeficiency virus, or HIV; Ebola virus;heterologous boosting approaches; Middle East Respiratory Syndrome, or MERS; Lassa fever; Ebola; as well as HPV-associated precancers, including cervical, vulvar, and Zika virus.
Our corporate strategy is to advanceanal dysplasia; HPV-associated cancers, including head & neck, cervical, anal, penile, vulvar, and protect our differentiated immunotherapy platformvaginal; other HPV-associated disorders, such as recurrent respiratory papillomatosis, or RRP; glioblastoma multiforme, or GBM; and use its unique capabilities to design and develop an array of cancer and infectious disease immunotherapy and vaccine products. We aim to advance products through to commercialization. We continue to leverage third-party resources through collaborations and partnerships, including product license agreements. Our partners and collaborators include MedImmune, LLC, The Wistar Institute, University of Pennsylvania, GeneOne Life Science Inc., Regeneron Pharmaceuticals, Inc., Genentech, Inc., Plumbline Life Sciences, Inc., the Parker Institute for Cancer Immunotherapy, Drexel University, National Microbiology Laboratory of the Public Health Agency of Canada, National Institute of Allergy and Infectious Diseases (“NIAID”), United States Military HIV Research Program (“USMHRP”), U.S. Army Medical Research Institute of Infectious Diseases (“USAMRIID”), National Institutes of Health ("NIH"), HIV Vaccines Trial Network (“HVTN”) and Defense Advanced Research Projects Agency (“DARPA”).prostate cancer.
All of our product candidates are in the research and development phase. We have not generated any revenues from the sale of any products, and we do not expect to generate any such revenues for at least the next several years. We earn revenue from license fees and milestone revenue and collaborative research and development agreements, grants and government contracts.agreements. Our product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All product candidates that we advance to clinical testing will require regulatory approval prior to commercial use, and will require significant costs for commercialization. We may not be successful in our research and development efforts, and we may never generate sufficient product revenue to be profitable.
Recent Developments
On December 29, 2017, we entered into an Amended and Restated License and Collaboration Agreement, or the ApolloBio Agreement,with ApolloBio Corporation, or ApolloBio. Under the terms of the ApolloBio Agreement, we have granted to ApolloBio the exclusive right to develop and commercialize VGX-3100, our DNA immunotherapy product designed to treat pre-cancers caused by HPV, within the territories of China, Hong Kong, Macao and Taiwan. The territory may be expanded to include Korea in the event that no patent covering VGX-3100 issues in China within the three years following the Effective Date of the ApolloBio Agreement, as defined below.
Under the ApolloBio Agreement, ApolloBio will pay us an upfront payment of $23.0 million, and such payment is to be made within three business days following the date of approval of the ApolloBio Agreement by ApolloBio’s board of directors and shareholders, or the Effective Date, which we expect to occur in the first quarter of 2018. In the event that such upfront payment is not made on or before April 7, 2018, we have the right to terminate the Agreement in its entirety.
In addition to the upfront payment, we are entitled to receive up to an aggregate of $20.0 million upon the achievement of specified milestones related to the regulatory approval of VGX-3100 in the United States, China and Korea. In the event that VGX-3100 is approved for marketing, we will be entitled to receive royalty payments based on a tiered percentage of annual net sales, with such percentage being in the low- to mid-teens, subject to reduction in the event of generic competition in a particular territory. ApolloBio’s obligation to pay royalties will continue for 10 years after the first commercial sale in a particular territory or, if later, until the expiration of the last-to-expire patent covering the licensed products in the specified territory.
As of December 31, 2017,2021, we had an accumulated deficit of $523.4 million.$1.2 billion. We expect to continue to incur substantial operating losses in the future due to our commitment to our research and development programs, the funding of preclinical studies, clinical trials and regulatory activities and the costs of general and administrative activities.
Impacts of COVID-19 on Our Business
Operationally, we have experienced some disruptions as a result of the COVID-19 pandemic. Our clinical trial operations have been adversely affected, including our ability to initiate and conduct our planned trials on our expected timelines and our ability to recruit and retain participants in our trials. Our data collection timelines have also been impacted, as an increasing number of trial participants are either not able or do not feel safe going into healthcare facilities, which is necessary for the collection and completion of data samples. As a result, it is taking longer than anticipated to complete the data collection process. The COVID-19 pandemic has caused supply chain disruptions and supply shortages globally. As a result, we have experienced delays and disruptions in obtaining clinical supplies, manufacturing supplies and components, and have had to secure new vendors for certain supplies and components at higher prices. Some manufacturing supplies and components remain in limited supply with uncertain delivery dates.
In 2020, a number of governmental orders and other public health guidance measures were implemented across much of the United States, including in the locations of our offices, laboratories, clinical trial sites and third parties on whom we rely. We have implemented a work from home policy allowing employees who can work from home to do so, while those needing to work in laboratory facilities work in shifts to reduce the number of people gathered together at one time. We have also implemented a mask-wearing mandate for all on-site activities. Non-essential business travel has been suspended, and online and teleconference technology is used to meet virtually rather than in person. We have taken measures to secure our research and development project activities, while work in laboratories has been organized to reduce risk of COVID-19 transmission.
Our liquidity has also not been negatively impacted to date by the pandemic. During the years ended December 31, 2021 and 2020, we raised $47.7 million and $454.5 million, respectively, in net proceeds from the sale of shares of our common stock through "at-the-market" equity offering programs and in January 2021 we closed an underwritten public offering with net proceeds to us of $162.1 million, which further enhanced our liquidity and capital resources. As of December 31, 2021, our cash and cash equivalents and short-term investments were $401.3 million, compared to $411.6 million as of December 31, 2020.
We are continuing to closely monitor the impact of the COVID-19 pandemic on our employees, collaborators and service providers. The extent to which the pandemic will impact our business and operations will depend on future developments, including travel restrictions to, from and within the United States and other countries, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, including mass vaccination efforts, that are highly uncertain. For additional information on the potential effects of the COVID-19 pandemic on our business, financial condition and results of operations, see the “Risk Factors” section above in Part I, Item 1A of this Form 10-K.
Critical Accounting Policies and Estimates
The SEC defines critical accounting policies as those that are, in management’s view, important to the portrayal of our financial condition and results of operations and require management’s judgment. Our discussion and analysis of our financial condition and results of operations are based on our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Our significant accounting policies are outlined in Note 2 to the Consolidated Financial Statements included in this Form 10-K.
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on experience and on various assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. Our criticalWe believe the following accounting policies include:to be critical to the judgements and estimates used in the preparation of our consolidated financial statements:
Collaboration Agreements and Revenue Recognition
We recognize revenues when all four of the following criteriaassess whether our collaboration agreements are met: (1) persuasive evidence of an arrangement exists; (2) delivery of the products and/or services has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. For additional informationsubject to Accounting Standards Codification ("ASC") Topic 808: Collaborative Arrangements (“Topic 808”) based on the new accounting standard for revenues from contracts with customers please read Note 2, Summary of Significant Accounting Policies: Recent Accounting Pronouncements, to our consolidated financial statements included in this report.
Grant revenue
We receive non-refundable grants under available government programs. Government grants towards current expenditures are recorded as revenue when there is reasonable assurance that we have complied with all conditions necessary to receive the grants, collectability is reasonably assured and the related expenditures are incurred.
License fee and milestone revenue
We have adopted a strategy of co-developing or licensing our gene delivery technology for specific genes or specific medical indications. Accordingly, we have entered into collaborative research and development agreements and have received third-party funding for pre-clinical research and clinical trials. Agreements that contain multiple elements are analyzed to determine whether the deliverables within the agreement can be separated or whether they must be accounted for as a single unit of accounting in accordance with the FASB's Accounting Standards Update, or ASU, No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. Analyzing the arrangement to identify deliverables requires the use of judgment,involve joint operating activities and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. The delivered item(s) were considered a separate unit of accounting if all of the following criteria were met: (1) the delivered item(s) has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of the undelivered item(s); and (3) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in our control. If these criteria were not met, the deliverable was combined with other deliverableswhether both parties have active participation in the arrangement and accounted forare exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of Topic 808 and we conclude that our collaboration partner is not a customer, we present such payments as a combined unitreduction of accounting.research and development expense. If payments from our collaboration partner to us represent consideration from a customer, then we account for those payments within the scope of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“Topic 606”).
Arrangement considerationWe enter into collaborative arrangements with partners that typically include payment of one or more of the following: (i) license fees; (ii) product supply services; (iii) milestone payments related to the achievement of developmental, regulatory, or commercial goals; and (iv) royalties on net sales of licensed products. At contract inception, we assess the goods or services agreed upon within each contract and assess whether each good or service is distinct and determine those that are performance obligations. We then recognize as revenue the amount of the transaction price that is allocated atto the inceptionrespective performance obligation when (or as) the performance obligation is satisfied.
As part of the agreementaccounting for these arrangements, we must develop estimates and assumptions that require judgment of management to all identified units of accounting based on their relative selling price. The relativedetermine the underlying stand-alone selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of sellingperformance obligation which determines how the transaction price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, we use our best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are fixed or determinable. The consideration received is allocated among the separate unitsperformance obligation. The standalone selling price may include items such as forecasted revenues, development timelines, discount rates and probabilities of accounting,technical and regulatory success. We evaluate each performance obligation to determine if it can be satisfied at a point in time or over time. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the applicable revenue recognition criteria are applied to each of the separate units. Changestransaction price. Differences in the allocation of the salestransaction price between delivered and undelivered elementsperformance obligations can impact the timing of revenue recognition but do not change the total revenue recognized under any agreement.
UpfrontFor collaboration arrangements that include license fee payments are recognized upon delivery offees, we recognize revenues from non-refundable, upfront fees allocated to the license if facts and circumstances dictate that the license has standalone value from the undelivered items, the relative selling price allocation ofwhen the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, the pricetransferred to the collaboratorlicensee and the licensee is fixedable to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or determinable,at a point in time and, collectabilityif over time, the appropriate method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
For collaboration arrangements that include milestone payments (variable consideration), we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is reasonably assured. Upfrontprobable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. This assessment is based on our past experience with our collaboration partner, market insight and partner communication. Milestone payments that are not within our or our collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each subsequent reporting period, we re-evaluate the probability of achieving such milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, feecollaboration or other revenues and earnings in the period of adjustment and could be material.
For collaboration arrangements that include sales-based royalties, including milestone payments are deferred if factsbased on the level of sales, and circumstances dictate thatfor which the license does not have standalone value. The determination ofis deemed to be the length ofpredominant item to which the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period.
We apply ASU No. 2010-17, Revenue Recognition (Topic 605): Milestone Method of Revenue Recognition, or the Milestone Method. Under the Milestone Method,royalties relate, we recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
1. The consideration is commensurate with either the entity's performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity's performance to achieve the milestone,
2. The consideration relates solely to past performance, and
3. The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.
A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity's performance or on the occurrence of a specific outcome resulting from the entity's performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to us.
Valuation of Intangible Assets and Goodwill
Intangible assets are amortized over their estimated useful lives ranging from 2 to 18 years. Acquired intangible assets are continuously being developed for the future economic viability contemplated at the time of acquisition. We are concurrently conducting preclinical studies and clinical trials using the acquired intangibles and have entered into licensing agreements for the use of these acquired intangibles.
Historically, we have recorded patents at cost and amortized these costs using the straight-line method over the expected useful lives of the patents or 17 years, whichever is less. Patent cost consists of the consideration paid for patents and related legal costs. Effective as of the acquisition of VGX in 2009, all new patent costs are expensed as incurred, with patent costs
capitalized as of that date continuing to be amortized over the expected life of the patent. License costs are recorded based on the fair value of consideration paid and are amortized using the straight-line method over the shorter of the expected useful life of the underlying patents or the term of the related license agreement to the extent the license has an alternative future use. As of December 31, 2017 and 2016, our intangible assets resulting from the acquisition of VGX, Inovio AS and Bioject, and additional intangibles including previously capitalized patent costs and license costs, net of accumulated amortization, totaled $6.0 million and $7.6 million, respectively.
The determination of the value of intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements. We assess potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Our judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of our acquired businesses, market conditions and other factors. If impairment is indicated, we will reduce the carrying value of the intangible asset to fair value. While current and historical operating and cash flow losses are potential indicators of impairment, we believe the future cash flows to be received from our intangible assets will exceed the intangible assets’ carrying value, and accordingly,sales occur. To date, we have not recognized any impairment losses through December 31, 2017.
Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired businesses. Goodwill is reviewed for impairment at least annually at November 30, or more frequently if an event occurs indicating the potential for impairment. During our goodwill impairment review, we may assess qualitative factors to determine whether it is more likely than not that the fair valueroyalty revenue resulting from any of our reporting unit is less than its carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of our reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, we will proceed to perform the two-step test for goodwill impairment. The first step involves comparing the estimated fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, we will perform the second step of the goodwill impairment test to determine the amount of loss, which involves comparing the implied fair value of the goodwill to the carrying value of the goodwill. We may also elect to bypass the qualitative assessment in a period and elect to proceed to perform the first step of the goodwill impairment test. We performed our annual assessment for goodwill impairment as of November 30, 2017, identifying no impairment.
Although there are inherent uncertainties in this assessment process, the estimates and assumptions we are using are consistent with our internal planning. If these estimates or their related assumptions change in the future, we may be required to record an impairment charge on all or a portion of its goodwill and intangible assets. Furthermore, we cannot predict the occurrence of future impairment triggering events nor the impact such events might have on its reported asset values. Future events could cause us to conclude that impairment indicators exist and that goodwill or other intangible assets associated with our acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on our results of operations. See Note 8 to our consolidated financial statements included in this annual report for further discussion of our goodwill and intangible assets.
collaborative arrangements.
Research and Development Expenses - Clinical Trial Accruals
Our activities have largely consisted of research and development efforts related to developing electroporation delivery technologies, andDNA vaccines, DNA immunotherapies and vaccines. Research and development expenses consist of expenses incurred in performing research and development activities including salaries and benefits, facilities and other overhead expenses, clinical trials, contract services and other outside expenses. Research and development expenses are charged to operations as they are incurred. These expenses result from our independent research and development efforts as well as efforts associated with collaborations and licensing arrangements. We review and accruedMABs. For clinical trial expense based on work performed, relyingexpenses, judgements used in estimating accruals rely on estimates of total costs incurred based on patientparticipant enrollment, completion of studies and other events. We follow this method since reasonably dependable estimates of the costs applicable to various stages of a research agreement or clinical trial can be made. Accrued clinical trial costs are subject to revisions as trials progress. Revisions are charged to expense in the period in which the facts that give rise to the revision become known. Historically, revisions have not resulted in material changes to research and development expense; however a modification in the protocol of a clinical trial or cancellation of a trial could result in a charge to our results of operations.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is contained in Note 2 to the Consolidated Financial Statements,consolidated financial statements, included elsewhere in this report.
Results of Operations
Comparison of Years Ended December 31, 2017 and 2016
The consolidated financial data for the years ended December 31, 20172021, 2020 and 20162019 is presented in the following table and the results of these two periods are used in the discussion thereafter.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Increase/(Decrease) 2021 vs. 2020 | | Increase/(Decrease) 2020 vs. 2019 |
| 2021 | | 2020 | | 2019 | | $ | | % | | $ | | % |
| Revenues: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Revenue under collaborative research and development arrangements, including from affiliated entities | $ | 1,147,570 | | | $ | 6,624,316 | | | $ | 3,872,594 | | | $ | (5,476,746) | | | (83) | % | | $ | 2,751,722 | | | 71 | % |
| Other revenue, including from affiliated entities | 627,188 | | | 786,904 | | | 239,336 | | | (159,716) | | | (20) | | | 547,568 | | | 229 | |
| Total revenues | 1,774,758 | | | 7,411,220 | | | 4,111,930 | | | (5,636,462) | | | (76) | | | 3,299,290 | | | 80 | |
| Operating expenses: | | | | | | | | | | | | | |
| Research and development | 249,240,324 | | | 94,245,436 | | | 88,017,319 | | | 154,994,888 | | | 164 | | | 6,228,117 | | | 7 | |
| General and administrative | 53,752,353 | | | 37,247,828 | | | 27,203,156 | | | 16,504,525 | | | 44 | | | 10,044,672 | | | 37 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total operating expenses | 302,992,677 | | | 131,493,264 | | | 115,220,475 | | | 171,499,413 | | | 130 | | | 16,272,789 | | | 14 | |
| Loss from operations | (301,217,919) | | | (124,082,044) | | | (111,108,545) | | | (177,135,875) | | | (143) | | | (12,973,499) | | | (12) | |
| Interest income | 3,363,080 | | | 3,311,846 | | | 2,605,981 | | | 51,234 | | | 2 | | | 705,865 | | | 27 | |
| Interest expense | (1,936,447) | | | (8,702,450) | | | (7,948,539) | | | 6,766,003 | | | (78) | | | (753,911) | | | 9 | |
| | | | | | | | | | | | | |
| Change in fair value of derivative liability | — | | | (75,670,977) | | | (1,763,652) | | | 75,670,977 | | | * | | (73,907,325) | | | * |
| Gain (loss) on investment in affiliated entity | (553,570) | | | 36,556,658 | | | (3,090,557) | | | (37,110,228) | | | * | | 39,647,215 | | | * |
| Net unrealized gain (loss) on available-for-sale equity securities | (3,222,838) | | | 1,695,497 | | | — | | | (4,918,335) | | | * | | 1,695,497 | | | * |
| Other income (expense), net | 343,371 | | | (704,896) | | | 496,200 | | | 1,048,267 | | | * | | (1,201,096) | | | * |
| Gain on deconsolidation of Geneos | — | | | 4,121,075 | | | — | | | (4,121,075) | | | * | | 4,121,075 | | | * |
| Loss on extinguishment of convertible bonds | — | | | (8,177,043) | | | — | | | 8,177,043 | | | * | | (8,177,043) | | | * |
| Gain on extinguishment of convertible senior notes | — | | | 8,762,030 | | | — | | | (8,762,030) | | | * | | 8,762,030 | | | * |
| Net loss before income tax benefit | (303,224,323) | | | (162,890,304) | | | (120,809,112) | | | (140,334,019) | | | (86) | | | (42,081,192) | | | (35) | |
| Income tax benefit | — | | | — | | | 257,335 | | | — | | | * | | (257,335) | | | * |
| Share in net loss of Geneos | (434,387) | | | (4,584,610) | | | — | | | 4,150,223 | | | * | | (4,584,610) | | | * |
| Net loss | (303,658,710) | | | (167,474,914) | | | (120,551,777) | | | (136,183,796) | | | 81 | | | (46,923,137) | | | 39 | |
| Net loss attributable to non-controlling interest | — | | | 1,063,757 | | | 1,192,558 | | | (1,063,757) | | | (100) | | | (128,801) | | | (11) | |
| Net loss attributed to Inovio Pharmaceuticals, Inc. | $ | (303,658,710) | | | $ | (166,411,157) | | | $ | (119,359,219) | | | $ | (137,247,553) | | | (82) | % | | $ | (47,051,938) | | | (39) | % |
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Increase/ (Decrease) $ | | Increase/ (Decrease) % |
| Revenues: | | | | | | | |
| Revenue under collaborative research and development arrangements, including from affiliated entity | $ | 29,173,216 |
| | $ | 7,891,341 |
| | $ | 21,281,875 |
| | 270 | % |
| Grants and miscellaneous revenue, including from affiliated entity | 13,046,870 |
| | 27,477,020 |
| | (14,430,150 | ) | | (53 | ) |
| Total revenues | 42,220,086 |
| | 35,368,361 |
| | 6,851,725 |
| | 19 |
|
| Operating expenses: | | | | | | | |
| Research and development | 98,572,618 |
| | 88,712,035 |
| | 9,860,583 |
| | 11 |
|
| General and administrative | 28,290,369 |
| | 23,892,263 |
| | 4,398,106 |
| | 18 |
|
| Gain on sale of assets | (1,000,000 | ) | | (1,000,000 | ) | | — |
| | — |
|
| Total operating expenses | 125,862,987 |
| | 111,604,298 |
| | 14,258,689 |
| | 13 |
|
| Loss from operations | (83,642,901 | ) | | (76,235,937 | ) | | (7,406,964 | ) | | (10 | ) |
| Interest and other income, net | 1,612,974 |
| | 1,257,257 |
| | 355,717 |
| | 28 |
|
| Change in fair value of common stock warrants | 806,819 |
| | 127,554 |
| | 679,265 |
| | 533 |
|
| Gain (loss) on investment in affiliated entity | (6,982,664 | ) | | 1,110,787 |
| | (8,093,451 | ) | | (729 | ) |
| Net loss attributable to Inovio Pharmaceuticals, Inc. | $ | (88,205,772 | ) | | $ | (73,740,339 | ) | | $ | (14,465,433 | ) | | (20 | )% |
Comparison of Years Ended December 31, 2021 and 2020
Revenue
Revenue primarily consistsconsisted of revenuerevenues under collaborative research and development arrangements, including arrangements with affiliated entities for the years ended December 31, 2021and grants and government contracts.2020. Our year over year total revenue increased $6.9decreased $5.6 million, or 19%76%. The decrease in revenue was primarily due to revenue earned from Advaccine in connection with upfront and milestone payments, and milestone revenue earned from our affiliated entity Plumbline Life Sciences, Inc. ("PLS"), for the year ended December 31, 2017 as compared to 2016.
The $21.3 million increase in revenue under collaborative research and development arrangements2020 that did not occur for the year ended December 31, 2017 as compared to 2016 was primarily due to an increase in revenue recognized from MedImmune, as the up-front payment received in September 2015 and other deferred amounts totaling $13.8 million were recognized in June 2017 upon MedImmune’s selection of the first cancer research collaboration product candidate, as well as a $7.0 milestone payment recognized in December 2017 for the initiation of the Phase 2 portion on an ongoing clinical trial. The increase was also due to an increase in revenue recognized from Roche of $1.2 million, as all remaining revenue was recognized upon termination of that collaboration agreement in 2017.
The $14.4 million decrease in grants and miscellaneous revenue for the year ended December 31, 2017 as compared to 2016 was primarily due to a decrease in revenue recognized from our nearly completed DARPA Ebola grant and completed DARPA sub-contract for the treatment of infectious diseases of $12.6 million and $4.1 million, respectively, partially offset by an increase in revenue recognized from our two sub-contracts with Wistar totaling $2.2 million. We expect that beginning in 2018, due to the nature of the grant agreements, contributions received will be recorded as a contra-expense as opposed to revenue on the consolidated statement of operations. For additional information on the new accounting standard for revenues from contracts with customers please read Note 2, Summary of Significant Accounting Policies: Recent Accounting Pronouncements, to our consolidated financial statements included in this report.2021.
Research and Development Expenses
The $9.9$155.0 million increase in research and development expenses for the year ended December 31, 20172021 as compared to 20162020 was primarily due to an increase of $9.1increases of:
•$39.5 million in employee headcountdrug manufacturing, outside services and clinical study expenses related to support clinical trials and partnerships and an increase of $1.0 million in non-cash stock-based compensation. These increases were offset by a decrease of $3.9INO-4800;
•$35.0 million in expenses related to manufacturing capacity access fees;
•$21.9 million related to the acquisition and installation of manufacturing equipment related to INO-4800;
•$13.6 million in engineering services and expensed equipment and inventory related to our DARPA EbolaCELLECTRA® 3PSP device array automation project;
•$12.8 million in expensed materials purchased in preparation for the manufacturing of INO-4800; and
•$12.1 million in employee and contractor compensation.
These increases were primarily offset by an increase in contra-research and development expense recorded from grant agreements of $6.2 million, among other variances.
Contributions received from current grant agreements and recorded as contra-research and development expense were $53.7 million and $47.5 million for the years ended December 31, 2021 and 2020, respectively. The increase year over year was primarily due to increases of $5.9 million, $3.6 million and $2.4 million earned from the DoD OTA Agreement, CEPI Lassa and MERS grant and reimbursements from Advaccine, respectively, partially offset by decreases of $3.2 million and $3.2 million, earned from CEPI and Gates, respectively, related to INO-4800 and device development activities, among other variances.
General and Administrative Expenses
The $4.4$16.5 million increase in general and administrative expenses for the year ended December 31, 20172021 as compared to 20162020 was primarily due to increases of:
•$5.3 million in employee headcount, non-cash stock based compensation, rent expense and depreciation expense of $1.9consultant stock-based compensation;
•$3.9 million $1.7 million, $769,000 and $661,000 respectively. These increases were partially offset by a decrease in employee recruitmentcompensation;
•$2.7 million in insurance expenses; and training expenses
•$2.2 million in legal expenses.
The increase was also due to less contra-general and administrative expense recorded related to gain on foreign exchange of $623,000,$2.8 million, among other variances.
Stock-based Compensation
Employee stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period. Total employee stock-based compensation cost for the years ended December 31, 20172021 and 20162020 was $12.9$25.0 million and $10.2$14.5 million, of which $5.8$13.4 million and $4.8$8.0 million was included in research and development expenses and $7.1$11.6 million and $5.4$6.5 million was included in general and administrative expenses, respectively. A portion of the year over year increase resulted from a change in accounting policy as of January 1, 2017 to recognize forfeitures as they occur rather than estimating forfeitures at the time of grant. The increase for 2021 compared to 2020 was alsoprimarily due to increased headcount, which resulted in an increase in options granted and a higher weighted average grant date fair value for the numberawards granted in the first quarter of employee stock options2021 and restricted stock units (RSUs) granted. At December 31, 2017, there was $5.9 million of total unrecognized compensation cost related to unvested stock options, which we expect to recognize over a weighted-average period of 1.8 years, as compared to $5.8 milliongrants vesting during the period.
Interest Income
The $51,000 increase in interest income for the year ended December 31, 2016 expected to be recognized over a weighted-average period of 1.9 years. At December 31, 2017, there was $5.3 million of total unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 1.8 years,2021 as compared to $4.02020 was primarily due to more interest earned on our higher balance of short-term investment holdings.
Interest Expense
The $6.8 million decrease in interest expense for the year ended December 31, 2016 expected2021 as compared to be recognized over a weighted-average period2020 was primarily due to less interest expense recorded from our convertible senior notes, or the Notes, due to the partial conversions of 2.0 years. Total stock-based compensationthe Notes
into shares of our common stock in the third and fourth quarters of 2020 and the full conversion of the December 2019 Bonds into shares of our common stock in March 2021, as well as no interest expense recorded on our August 2019 Bonds due to their full conversion into shares of our common stock in August 2020.
Gain (Loss) on Investment in Affiliated Entity
The gain (loss) on investment in affiliated entity for options granted to non-employeesthe year ended December 31, 2021 was $(554,000) resulting from the change in the fair market value of our investment in PLS, and for the year ended December 31, 2020 was $36.6 million, resulting from the change in the fair market value of our investments in GeneOne and PLS. During the third quarter of 2020, we sold our full equity interest in GeneOne. We record our investment in PLS at its market value based on the closing price of the shares on the Korea New Exchange Market at each balance sheet date, with changes in fair value reflected in the consolidated statements of operations.
Net Unrealized Gain (Loss) on Available-for-Sale Equity Securities
The net unrealized gain (loss) on available-for-sale equity securities for the years ended December 31, 20172021 and 20162020 was $201,000$(3.2) million and $321,000, respectively.
Gain on sale of assets
In December 2017, we sold assets related to our compound VGX-1027 to GeneOne for$1.7 million, respectively, resulted from a purchase price of $1.0 million. These assets had a carrying value of zero, resulting in the full proceeds being recognized as a gain on sale. The gain on sale of assets for the year ended December 31, 2016 related to our May 2014 sale of animal health assets to Plumbline Life Sciences, or PLS, for which we received proceeds of $1.0 million in 2015 and $1.0 million in 2016.
Interest and Other Income, net
Interest and other income, net, increased by $356,000 for the year ended December 31, 2017 as compared to 2016 primarily due to higher interest earned on short-term investments during the year.
Change in fair value of common stock warrants
The change in fair value of common stock warrants for the years ended December 31, 2017 and 2016 was $807,000 and $128,000, respectively. The variance is primarily due to the revaluation of the liability associated with the registered common stock warrants that we issued in March 2013. We revalue those warrants at each balance sheet date to their fair value. If unexercised, the remaining warrants will expire in September 2018.
Gain (loss) on investment in affiliated entity
We held 1,644,155 common shares, representing a 7.8% and 10.2% ownership interest in GeneOne, as of December 31, 2017 and 2016, respectively. Our investment in GeneOne is measured at fair value on a recurring basis, with changes in the fair value of the investment reflected as other income (expense) in the consolidated statements of operations. The fair market value of the investments.
Share in Net Loss of Geneos
The share in net loss of Geneos represents our interestshare of Geneos' losses during the period after deconsolidation in GeneOne is determined using the closing price of GeneOne's shares of common stock as listed on the Korean Stock Exchange as of December 31, 2017 and 2016.June 2020.
Income Taxes
Since inception, we have incurred operating losses and accordingly have not recorded a provision for U.S. income taxes for any of the periods presented. Utilization of net operating losses and tax credits are subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, or IRC. As of December 31, 2017,2021, we had net operating loss carry forwards for U.S. federal, California and Pennsylvania income tax purposes of approximately $298.9$864.5 million, $68.6$146.5 million and $75.6$89.0 million, respectively, net of the net operating losses that will expire due to IRC Section 382 limitations. We also had U.S. federal and state research and development tax credits of approximately $11.1$35.1 million and $2.1$4.4 million,, respectively, net of the federal research and development credits that will expire due to IRC Section 383 limitations. If not utilized, theThe net operating losses and credits will beginbegan to expire in 2018.during 2021.
Comparison of Years Ended December 31, 20162020 and 20152019
The consolidated financial data forFor a comparison of the years ended December 31, 20162020 and 2015 is presented in the following table and the results2019, you may refer to Part II, Item 7 of these two periods are used in the discussion thereafter.
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Increase/ (Decrease) $ | | Increase/ (Decrease) % |
| Revenues: | | | | | | | |
| Revenue under collaborative research and development arrangements, including from affiliated entity | 7,891,341 |
| | $ | 27,655,700 |
| | $ | (19,764,359 | ) | | (71 | )% |
| Grants and miscellaneous revenue | 27,477,020 |
| | 12,916,411 |
| | 14,560,609 |
| | 113 |
|
| Total revenues | 35,368,361 |
| | 40,572,111 |
| | (5,203,750 | ) | | (13 | ) |
| Operating expenses: | | | | | | | |
| Research and development | 88,712,035 |
| | 57,791,923 |
| | 30,920,112 |
| | 54 |
|
| General and administrative | 23,892,263 |
| | 18,063,890 |
| | 5,828,373 |
| | 32 |
|
| Gain on sale of assets | (1,000,000 | ) | | (1,000,000 | ) | | — |
| | — |
|
| Total operating expenses | 111,604,298 |
| | 74,855,813 |
| | 36,748,485 |
| | 49 |
|
| Loss from operations | (76,235,937 | ) | | (34,283,702 | ) | | (41,952,235 | ) | | (122 | ) |
| Interest and other income, net | 1,257,257 |
| | 305,071 |
| | 952,186 |
| | 312 |
|
| Change in fair value of common stock warrants | 127,554 |
| | 177,561 |
| | (50,007 | ) | | (28 | ) |
| Gain on investment in affiliated entity | 1,110,787 |
| | 2,600,467 |
| | (1,489,680 | ) | | (57 | ) |
| Net loss before income tax benefit | (73,740,339 | ) | | (31,200,603 | ) | | (42,539,736 | ) | | (136 | ) |
| Income tax benefit | — |
| | 2,097,766 |
| | (2,097,766 | ) | | 100 |
|
| Net loss | (73,740,339 | ) | | (29,102,837 | ) | | (44,637,502 | ) | | (153 | ) |
| Net (income) loss attributable to non-controlling interest | — |
| | (84,769 | ) | | 84,769 |
| | (100 | ) |
| Net loss attributable to Inovio Pharmaceuticals, Inc. | $ | (73,740,339 | ) | | $ | (29,187,606 | ) | | $ | (44,552,733 | ) | | (153 | )% |
Revenue
Our total revenue decreased $5.2 million or 13%our Annual Report on Form 10-K for the year ended December 31, 2016 as compared to 2015.
The $19.8 million decrease in revenue under collaborative research and development arrangements for the year ended December 31, 2016 as compared to 2015 was primarily due to a decrease of $14.5 million in revenue recognized from our product licensed to MedImmune under the agreement entered into in August 2015, as well as a decrease of $5.9 million in revenue recognized from the Roche Agreement which include revenues previously deferred related to the partial termination of the Agreement in February 2015 as well as the $3.0 million milestone earned during 2015.
The $14.6 million increase in grants and miscellaneous revenue for the year ended December 31, 2016 as compared to 2015 was primarily due to the increase of $11.6 million in revenue recognized from our DARPA Ebola grant as well as an increase of $3.4 million in revenue from our DARPA subcontract for the treatment of infectious diseases, offset by less revenue recognized from various grants due to the timing of work performed.
Research and Development Expenses
The $30.9 million increase in research and development expenses for the year ended December 31, 2016 as compared to 2015 was primarily due to an increase in headcount during the year to support clinical trials and partnerships, an increase in expenses related to our DARPA Ebola grant, an increase in clinical study costs related to our upcoming Phase 3 trial, an increase in expenses related to our Hepatitis B program and employee non-cash stock based compensation of $9.0 million, $8.6 million, $3.4 million, $2.7 million and $1.6 million, respectively. These were offset by a decrease in sub-license fee expense of $2.6 million based on the up-front payment received from MedImmune and Roche milestone achievement in 2015, among other variances.
General and Administrative Expenses
The $5.8 million increase in general and administrative expenses for the year ended December 31, 2016 as compared to 2015 was primarily due to an increase in employee non-cash stock-based compensation, increase in headcount, employee training, recruitment and related expenses and amortization of intangible assets of $2.8 million, $1.3 million, $688,000 and $562,000, respectively, among other variances.
Stock-based Compensation
Total employee compensation cost for our stock plans for the years ended December 31, 2016 and 2015 was $10.2 million and $5.8 million, of which $4.8 million and $3.2 million was included in research and development expenses and $5.4 million and $2.6 million was included in general and administrative expenses, respectively. The increase for the annual period
year over year was primarily due to an increase in the number of employee and director stock options and restricted stock units granted.
Gain on sale of assets
The gain on sale of assets for each of the years ended December 31, 2016 and 2015 was related to our May 2014 sale of animal health assets to PLS.
Interest and Other Income, net
Interest and other income, net, increased by $952,000 for the year ended December 31, 2016 as compared to 2015 primarily due to higher interest earned on short-term investments as well as the impairments considered to be other-than-temporary recorded on our short-term investments in 2015 which were sold in 2016.
Change in fair value of common stock warrants
The change in fair value of common stock warrants for the years ended December 31, 2016 and 2015 was $128,000 and $178,000, respectively. The variance is primarily due to the revaluation of the common stock warrants of OncoSec Medical Incorporated that we previously held, and which expired unexercised in 2016, and the revaluation of the liability associated2020 filed with the registered common stock warrants that we issued inSEC on March 2013. We revalue these warrants at each balance sheet date to fair value. If unexercised, the remaining warrants will expire in September 2018.1, 2021.
Gain on investment in affiliated entity
The gain is a result of the change in the fair market value of the investment in GeneOne for the year ended December 31, 2016.
Income Tax Benefit
In 2015, we recorded a tax benefit of $2.1 million, which reflected our application of the intraperiod tax allocation rules under which we are required to record a tax benefit in continuing operations to offset the tax provision we recorded directly to other comprehensive income primarily related to unrealized gain on our equity investment in our affiliated entity PLS.
Liquidity and Capital Resources
Historically, our primary uses of cash have been to finance research and development activities including clinical trial activities in the oncology, DNA vaccines and other immunotherapy areas of our business. Since inception, we have satisfied our cash requirements principally from proceeds from the sale of equity securities.
securities, indebtedness and grants and government contracts.
Working Capital and Liquidity
As of December 31, 20172021, we had cash and short-term investments of $127.4$401.3 million and working capital of $103.0$382.7 million, as compared to $104.8$411.6 million and $80.8$429.5 million respectively, as of December 31, 2016. The increase in cash and short-term investments during the year ended December 31, 2017 was primarily due to proceeds from our July 2017 public offering of common stock, as well as sales of common stock under our ATM sales agreement during the period, partially offset by our operating expenses and capital expenditures.2020, respectively.
Cash Flows
Operating Activities
Net cash used in operating activities for the year ended December 31, 2017 of $63.2 million consisted of net loss of ($88.2) million less changes in net operating assets and liabilities of ($713,000), partially offset by net non-cash adjustments of $25.7 million. The primary non-cash income (expenses) added back to net loss included gain on sale of intangible assets of $1.0 million, offset by stock-based compensation of $13.1 million, depreciation and amortization of $3.5was $215.7 million and loss on investment in affiliated entity of $7.0 million.
Net cash used in operating activities for the year ended December 31, 2016 of $62.6 million consisted of net loss of ($73.7) million less changes in net operating assets and liabilities of ($529,000), partially offset by net non-cash adjustments of $11.7 million. The primary non-cash income (expense) added back to net loss included gain on investment in affiliated entity of $1.1 million and gain on sale of intangible assets of $1.0 million, offset by stock-based compensation of $10.5 million and depreciation and amortization of $3.1 million.
Net cash (used in) provided by investing activities was ($27.8 million) and $16.3$178.0 million for the years ended December 31, 20172021 and 2016,2020, respectively. The variance was primarily due to increased research and development expenses offset by the timing and changes in working capital balances.
Investing Activities
Net cash used in investing activities was $175.3 million and $58.8 million for the years ended December 31, 2021 and 2020, respectively. The variance was primarily the result of timing differences in short-term investment purchases, sales and maturities, as well as an increaseoffset by the proceeds from the sale of our investment in GeneOne in 2020 of $40.1 million. Our capital expenditures forwere $1.2 million and $1.5 million, respectively, and we do not expect our new facilities.capital expenditure requirements to increase materially.
Financing Activities
Net cash provided by financing activities was $95.7$211.5 million and $7.8$465.3 million for the years ended December 31, 20172021 and 2016,2020, respectively. The increase in cash provided from financing activitiesdecrease was primarily due to less proceeds from the July 2017 financing and the sale of common stock under our ATM sales agreement duringagreements in 2021 compared to 2020, offset by the period.net proceeds from the January 2021 underwritten public offering.
Issuances of Common Stock
In July 2017,On November 9, 2021, we entered into an ATM Equity OfferingSM Sales Agreement (the “Sales Agreement”) with outside sales agents (collectively, the “Sales Agents”) under which we may offer and sell, from time to time at our sole discretion, shares of our common stock with aggregate gross proceeds of up to $300.0 million, through the Sales Agents.
Subject to the terms and conditions of the Sales Agreement, the Sales Agents may sell the common stock by any method permitted by law deemed to be an “at the market offering”. The Sales Agents will use commercially reasonable efforts to sell the common stock from time to time, based upon instructions from us, including any price, time or size limits or other customary parameters or conditions we may impose. We will pay the Sales Agents a commission of up to three percent (3.0%) of the gross sales proceeds of any common stock sold through the Sales Agents under the Sales Agreement, and we have provided the Sales Agents with certain indemnification rights. During the year ended December 31, 2021, we sold 6,955,341 shares of common stock under the Sales Agreement for aggregate net proceeds of $47.7 million.
On January 25, 2021, we closed an underwritten public offering of 12,500,00020,355,000 shares of our common stock at a public offering price of $6.00$8.50 per share. The net proceeds, after deducting the underwriters' discounts and commissions and other estimated offering expenses payable by us, were $70.1$162.1 million.
In June 2016,May 2018, we entered into an at-the-market,At-the-Market Equity Offering Sales Agreement, or ATM, sales agreementthe 2018 Sales Agreement, with an outside placement agent, or the Placement Agent, to sell shares of our common stock with aggregate gross proceeds of up to $50.0$100.0 million, from time to time, through an ATM“at-the-market” equity offering program under which the Placement Agent willwould act as sales agent. In the first quarter of 2020, we entered into amendments to the 2018 Sales Agreement to increase the amount of our common stock that could be sold through the Placement Agent under the 2018 Sales Agreement to an aggregate offering price of up to $250.0 million. During the three months ended March 31, 2020, we sold 43,148,952 shares of common stock under the 2018 Sales Agreement for aggregate net proceeds of $208.2 million. Following these sales, there was no remaining capacity under the 2018 Sales Agreement.
On April 3, 2020, we entered into a sales agreement, or the 2020 Sales Agreement, with the same Placement Agent to sell shares of our common stock. On that same day, we filed a prospectus supplement for the offer and sale of our common stock pursuant to the 2020 Sales Agreement for aggregate gross proceeds of up to $150.0 million. On May 12, 2020 we filed an additional prospectus supplement for the offer and sale of our common stock pursuant to the 2020 Sales Agreement for an additional $100.0 million of gross proceeds, bringing the maximum gross proceeds of sales under the 2020 Sales Agreement to $250.0 million. Through December 31, 2020, we sold 22,915,934 shares of common stock under the 2020 Sales Agreement for aggregate net proceeds of $246.2 million. On November 8, 2021, we terminated the 2020 Sales Agreement.
During the year ended December 31, 2017, we sold 2,937,4062021, stock options to purchase 1,310,263 shares of common stock under the ATM sales agreementwere exercised for aggregate net proceeds of $24.2$6.7 million, which proceeds were offset by tax payments made related to net share settlement of RSU awards of $4.6 million. During the year ended December 31, 2016, we sold 658,748 shares of common stock under the ATM sales agreement for net proceeds of $6.3 million. As of December 31, 2017, we have availability under the ATM sales agreement to sell up to an additional $18.9 million in shares of our common stock.
During the year ended December 31, 2017,2020, stock options to purchase 452,9732,178,252 shares of common stock were exercised for aggregate net proceeds of $12.3 million, which proceeds were offset by tax payments made related to usnet share settlement of $2.3RSU awards of $4.0 million.
During the year ended December 31, 2016,2019, stock options to purchase 631,06542,969 shares of common stock were exercised for aggregate net proceeds of $113,000, which proceeds were offset by tax payments made related to usnet share settlement of $1.8 million.RSU awards of $893,000.
As of December 31, 2017,2021, we had an accumulated deficit of $523.4 million$1.2 billion and we expect to continue to operate at a loss for some time. The amount of the accumulated deficit will continue to increase, as it will be expensive to continue research and development efforts. These activities will require additional financing. If these activities are successful and if we receive approval from the FDA to market our DNA vaccine products,product candidates, then we will need to raise additional funding to market and sell the approved vaccine products and equipment. We cannot predict the outcome of the above matters at this time. We are evaluating potential collaborations as an additional way to fund operations. We believe that our current cash and short-term investments are sufficient to meet our planned working capital requirements for at least the next twelve months.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue, expenses, and resultsmonths from the date of operations, liquidity, capital expenditures or capital resources.this report.
Contractual Obligations
As of December 31, 2017, we did not have any other material long-term debt or other known2021, future minimum payments due under our contractual obligations exceptare set forth in the table below. We expect to be able to satisfy these obligations, both in the short-term and in the longer-term, with cash on hand and proceeds from sales of our common stock under the Sales Agreement.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
| Total | | Less than
1 year | | 1 – 3 years | | 3 – 5 years | | More than
5 years |
| Convertible senior notes (1) | $ | 19,082,000 | | | $ | 1,067,000 | | | $ | 1,067,000 | | | $ | 16,948,000 | | | $ | — | |
| Operating lease obligations (2) | $ | 24,175,000 | | | $ | 4,085,000 | | | $ | 7,139,000 | | | $ | 6,202,000 | | | $ | 6,749,000 | |
| Manufacturing commitments (3) | $ | 47,427,000 | | | $ | 47,427,000 | | | $ | — | | | $ | — | | | $ | — | |
(1) Amounts represent remaining contractual amounts due under our Notes, including interest based on the fixed rate of 6.5% per year. Although these Notes mature in March 2024, they may be converted into shares of our common stock prior to maturity if certain conditions are met. We may also redeem the Notes prior to their maturity if certain conditions are met. Any redemption prior to maturity would result in repayments of the principal amounts sooner than the scheduled repayments as indicated in the table. See Note 9, "Convertible Debt” in the Consolidated Financial Statements section of this report for thefurther discussion.
(2) We have entered into operating leases for our facilities, which expire in 2018 throughfrom 2023 to 2029, and operating leases for copiers,office equipment, which expire in 20182024. In the fourth quarter of 2019, we entered into two subleases for a portion of our Plymouth Meeting corporate headquarters facility through 2022.
We are contractually obligated to make the following operating lease payments asDecember 31, 2022 and March 31, 2025. As of December 31, 2017:2021, we expect to receive aggregate future minimum lease payments totaling $814,000 (non-discounted) over the duration of the sublease agreements, which expected payments are not included in the table above.
|
| | | | | | | | | | | | | | | | | | | |
| | Total | | Less than 1 year | | 1 – 3 years | | 3 – 5 years | | More than 5 years |
| Operating lease obligations | $ | 38,904,000 |
| | $ | 3,251,000 |
| | $ | 7,647,000 |
| | $ | 8,031,000 |
| | $ | 19,975,000 |
|
(3) We have entered into agreements with contract manufacturers for INO-4800 that contain minimum purchase requirements by us in 2022.
In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other party. It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these types of agreements have not had a material effect on our business, consolidated results of operations or financial condition.
ITEM 7A. QUALITATIVEQUANTITATIVE AND QUANTITATIVEQUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Market risk represents the risk of loss that may impact our consolidated financial position, results of operations or cash flows due to adverse changes in financial and commodity market prices and rates. We are exposed to market risk primarily in the area of changes in United States interest rates and conditions in the credit markets, and the recent fluctuations in interest rates and availability of funding in the credit markets primarily impact the performance of our investments. We do not have any material foreign currency or other derivative financial instruments. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We attempt to increase the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities. Due to the short-term maturities of our cash equivalents and the low risk profile of our
investments at December 31, 2017,2021, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents.
The interest rate on our indebtedness is fixed and not subject to fluctuations in interest rates.
Fair Value Measurements
We account for our common stock warrants pursuant to the authoritative guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company's own stock, on the understanding that in compliance with applicable securities laws, the registered warrants require the issuance of registered securities upon exercise and do not sufficiently preclude an implied right to net cash settlement. We classify registered warrants on the consolidated balance sheet as a current liability that is revalued at each balance sheet date subsequent to the initial issuance.
The investment in affiliated entitiesentity at December 31, 2021 represents our ownership interest in the Korean-based companies, GeneOne andcompany PLS. We report these investmentsthis investment at fair value on the consolidated balance sheet using the closing price of GeneOne and PLS shares of common stock as reported on the date of determination on the Korean Stock Exchange and Korea New Exchange Market, respectively.Market.
Foreign Currency Risk
We have operated primarily in the United States and most transactions during the year ended December 31, 20172021 were made in United States dollars. Accordingly, we have not had any material exposure to foreign currency rate fluctuations, with the exception of certain cash and cash equivalents held in South Korea that are denominated in South Korean Won and the valuation of our equity investmentsinvestment in GeneOne and PLS, which areis denominated in South Korean Won and then translated into United States dollars. We do not have any foreign currency hedging instruments in place.
Certain transactions related to us are denominated primarily in foreign currencies, including South Korean Won, Euros, British Pounds and Canadian DollarsDollars. These transactions give rise to monetary assets and South Korean Won.liabilities that are denominated in currencies other than the U.S. dollar. The value of these monetary assets and liabilities are subject to changes in currency exchange rates from
the time the transactions are originated until settlement in cash. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets where we conduct business.
We do not use derivative financial instruments for speculative purposes. Wepurposes and do not engage in exchange rate hedging or hold or issue foreign exchange contracts for trading purposes. Currently, we do not expect the impact of fluctuations in the relative fair value of other currencies to be material in 2018.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is incorporated by reference to our Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm beginning at page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of December 31, 2017, we carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of ourWe maintain disclosure controls and procedures, (as defined in Rule 13a-15(e) under the Exchange Act). Based uponwhich are designed to ensure that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed in reports that we file or submit under the Exchange Act and our disclosure controls and procedures were also effective to ensure that information we disclose in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosure.disclosures.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Based on an evaluation carried out as of the end of the period covered by this Annual Report, under the supervision and with the participation of our management, including our CEO and CFO, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of December 31, 2021 at the reasonable assurance level.
Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with United States generally accepted accounting principles.
As of December 31, 2017,2021, management, with the participation of the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal
control over financial reporting established in “Internal Control—Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment, management determined that we maintained effective internal control over financial reporting as of December 31, 2017.2021.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of our fiscal year ended December 31, 2017,2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of Independent Registered Public Accounting Firm
The independent registered public accounting firm that audited the consolidated financial statements that are included in this Annual Report on Form 10-K has issued an audit report on the effectiveness of our internal control over financial reporting as of December 31, 2017.2021. The report appears below.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Inovio Pharmaceuticals, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Inovio Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework (the COSO criteria). In our opinion, Inovio Pharmaceuticals, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20172021 and 2016,2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 20172021 and related notes and our report dated March 14, 20181, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for designing, implementing, and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that ourthe audit providesevidence we have obtained is sufficient and appropriate to provide a reasonable basis for our audit opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;those charged with governance; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any evaluationassessment of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
| | | | | |
| |
| |
| San Diego, California | |
March 14, 20181, 2022 | |
ITEM 9B. OTHER INFORMATION
On February 24, 2022, our Board of Directors adopted resolutions (the “Resolutions”) ratifying pursuant to Section 204 of the Delaware General Corporation Law (the “Ratification”) the grant to employees of certain options to purchase common stock and restricted stock units (collectively, the “Grants”). The Board has determined that the Grants were defective corporate acts because they did not fully comply with the requirements of Section 157(c) of the Delaware General Corporation Law. A copy of the Resolutions adopted by the Board setting forth the information with respect to the Ratification required under Section 204 of the Delaware General Corporation Law is attached hereto as Exhibit 99.1.Any claim that the defective corporate acts (including all options and restricted stock units and putative common stock issued upon the exercise of such options or the settlement of such restricted stock unit awards) identified in the Resolutions are void or voidable due to the failure of authorization, or any claim that the Court of Chancery of the State of Delaware should declare in its discretion that the Ratification not be effective or be effective only on certain conditions, must be brought within 120 days from the date of the filing of this Annual Report.For additional detail of the relevant statutory provisions refer to Sections 157, 204 and 205 of the Delaware General Corporation Law.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item 10 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation 14A within 120 days after the end of our 20172021 fiscal year.year, under the captions “Election of Directors” and “Executive Officers and Other Information.”
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation 14A within 120 days after the end of our 20172021 fiscal year.year, under the captions “Compensation Discussion and Analysis,” “Executive Compensation,” “Compensation of Directors” and “Director Compensation Table.”
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item 12 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation 14A within 120 days after the end of our 20172021 fiscal year.year, under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Director independence and other information required by this Item 13 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation 14A within 120 days after the end of our 20172021 fiscal year.year, under the captions “Certain Relationships and Related Party Transactions” and “Election of Directors.”
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item 14 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation 14A within 120 days after the end of our 20172021 fiscal year.year, under the caption “Ratification of Appointment of Registered Public Accounting Firm.”
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
1.Financial Statements
Consolidated financial statements required to be filed hereunder are indexed on Page F-1 hereof.
| |
2. | Financial Statement Schedules2.Financial Statement Schedules |
Schedules not listed herein have been omitted because the information required to be set forth therein is not applicable or is included in the Financial Statements or notes thereto.
3.Exhibits
The following exhibits are filed as part of this annual report on Form 10-K:
|
| | | | | | | | | | |
Exhibit Number | | Description of Document | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
| | |
Exhibit
Number
| | Description of Document |
| | |
| | | |
| | | |
| | |
| | |
| | | |
|
| | |
Exhibit
Number
| | Description of Document |
| | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
|
| | |
Exhibit
Number
| | Description of Document |
| | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
Exhibit
Number
| | Description of Document |
| | | | | | | | | |
| | | |
| | | |
101.INS | | | |
| | | |
| 101.INS | | XBRL Instance Document.Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | |
| | | |
| 101.SCH | | XBRL Taxonomy Extension Schema Document. | |
| | | |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. | |
| | | |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. | |
| | | |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. | |
| | | |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
|
| | | |
+104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
| | | | | |
| + | Designates management contract, compensatory plan or arrangement. |
|
| | | | |
| † | Confidential treatment has been granted for certain portions omitted from this exhibit (indicated by asterisks) pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The confidential portions of this exhibit have been separately filed with the Securities and Exchange Commission.. |
| Commission. |
| †† | |
†† | Confidential treatment has been requested for certainCertain confidential portions omitted fromof this exhibit (indicated by asterisks) pursuant to Rule 24b-2 underwere omitted because the Securities Exchange Act of 1934, as amended. Theidentified confidential portions are not material and are of this exhibit have been separately filed with the Securities and Exchange Commission.type that the registrant treats as private or confidential. |
|
| | | | |
| ^ | These certifications are being furnished solely to accompany this Annual Report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
ITEM 16. FORM 10-K SUMMARY
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 14, 2018.1, 2022.
| | | | | | | | |
| Inovio Pharmaceuticals, Inc. |
| | |
| Inovio Pharmaceuticals, Inc. |
| | |
| By: | /s/ J. JOSEPH KIM |
| | J. Joseph Kim President and Chief Executive Officer and Director |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints J. Joseph Kim and Peter Kies, and each of them severally, his or her true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his or her name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the United States Securities and Exchange Commission in connection with the Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as he or she might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
| /s/ J. JOSEPH KIM | | President, Chief Executive Officer and Director (Principal Executive Officer) | | March 1, 2022 |
| J. Joseph Kim | | | | |
| | | | |
Signature | | Title | | Date |
| | | | |
/s/ J. JOSEPH KIMSIMON X. BENITO | | President, Chief Executive Officer and Director (Principal Executive Officer) | | March 14, 2018 |
J. Joseph Kim | | | | |
| | | | |
/s/ AVTAR DHILLON | | Chairman of the Board of Directors | | March 14, 20181, 2022 |
Avtar DhillonSimon X. Benito | | | | |
| | | | |
| /s/ PETER KIES | | Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) | | March 14, 20181, 2022 |
| Peter Kies | | | | |
| | | | |
/s/ SIMON X. BENITOROGER DANSEY | | Director | | March 14, 20181, 2022 |
Simon X. BenitoRoger Dansey | | | | |
| | | | |
/s/ GEORGE BICKERSTAFFANN MILLER | | Director | | March 14, 20181, 2022 |
George BickerstaffAnn Miller | | | | |
| | | | |
/s/ ANGEL CABRERAJAY SHEPARD | | Director | | March 14, 20181, 2022 |
Angel CabreraJay Shepard | | | | |
| | | | |
/s/ MORTON COLLINS | | Director | | March 14, 2018 |
Morton Collins | | | | |
| | | | |
/s/ ADEL MAHMOUD | | Director | | March 14, 2018 |
Adel Mahmoud | | | | |
| | | | |
| /s/ DAVID WEINER | | Director | | March 14, 20181, 2022 |
| David Weiner | | | | |
| | | | |
| /s/ WENDY YARNO | | Director | | March 14, 20181, 2022 |
| Wendy Yarno | | | | |
| | | | |
| /s/ LOTA ZOTH | | Director | | March 1, 2022 |
| Lota Zoth | | | | |
INOVIO PHARMACEUTICALS, INC.
Index to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TheTo the Shareholders and the Board of Directors and Stockholders of Inovio Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Inovio Pharmaceuticals, Inc. (the “Company”) as of December 31, 20172021 and 2016,2020, the related consolidated statements of operations, comprehensive loss, stockholders‘stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2017,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2021, in conformity with USU.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated March 14, 20181, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company‘sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| | | | | | | | |
| Accrual of Clinical Trial Expenses |
| Description of the Matter | During 2021, the Company incurred $249.2 million for research and development expenses and as of December 31, 2021 accrued $10.3 million for clinical study costs. A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers, including clinical research organizations (“CROs”). External costs to be paid to CROs are accrued and expensed based upon actual work completed in accordance with signed agreements.
Auditing management’s accounting for accrued clinical study costs is especially challenging because the evaluation is dependent upon a high-volume of data and input exchanged between clinical personnel and third-party service providers, such as the number of sites activated, the number of patients enrolled, and the number of patient visits, which is tracked in spreadsheets and other end user computing programs.
|
| How We Addressed the Matter in our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the accounting for accrued clinical trial expenses. For example, we tested controls over management’s assessment and measurement of estimated accrued clinical study costs, including patient enrollment and total cost incurred to date from third-parties.
To test the completeness of the Company’s accrued clinical trial expenses, we obtained from third-parties confirmation of patient enrollment and direct service cost to date for significant clinical trials. We attended internal clinical trial and project status meetings with accounting personnel and the clinical project manager to understand the status of significant clinical trial activities. To assess the appropriate measurement of accrued clinical trial expenses, we inspected key terms, timelines of completion, activities and costs for a sample of vendor contracts, including amendments, and compared these to management’s analyses used in tracking the progress of service agreements. We also tested a sample of subsequent payments by agreeing the invoice to the original accrual and the invoice payments to bank statements. |
| | | | | |
| /s/ Ernst & Young LLP | |
We have served as the Company‘sCompany's auditor since 2002. | |
| |
| San Diego, California | |
March 14, 20181, 2022 | |
Inovio Pharmaceuticals, Inc.
CONSOLIDATED BALANCE SHEETS
|
| | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 23,786,579 |
| | $ | 19,136,472 |
|
| Short-term investments | 103,638,844 |
| | 85,629,412 |
|
| Accounts receivable | 6,003,205 |
| | 15,821,511 |
|
| Accounts receivable from affiliated entities | 486,619 |
| | 748,355 |
|
| Prepaid expenses and other current assets | 2,600,906 |
| | 1,749,059 |
|
| Prepaid expenses and other current assets from affiliated entities | 1,846,007 |
| | 1,512,424 |
|
| Total current assets | 138,362,160 |
| | 124,597,233 |
|
| Fixed assets, net | 18,320,176 |
| | 9,025,446 |
|
| Investment in affiliated entity - GeneOne | 9,069,401 |
| | 16,052,065 |
|
| Investment in affiliated entity - PLS | 2,325,079 |
| | 3,777,510 |
|
| Intangible assets, net | 6,009,729 |
| | 7,628,394 |
|
| Goodwill | 10,513,371 |
| | 10,513,371 |
|
| Other assets | 2,639,354 |
| | 2,113,147 |
|
| Total assets | $ | 187,239,270 |
| | $ | 173,707,166 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable and accrued expenses | $ | 23,278,798 |
| | $ | 19,597,787 |
|
| Accounts payable and accrued expenses due to affiliated entities | 926,943 |
| | 1,072,579 |
|
| Accrued clinical trial expenses | 8,611,892 |
| | 6,368,389 |
|
| Common stock warrants | 360,795 |
| | 1,167,614 |
|
| Deferred revenue | 1,175,353 |
| | 14,762,720 |
|
| Deferred revenue from affiliated entities | 174,110 |
| | 407,292 |
|
| Deferred rent | 877,535 |
| | 446,646 |
|
| Total current liabilities | 35,405,426 |
| | 43,823,027 |
|
| Deferred revenue, net of current portion | 215,853 |
| | 317,808 |
|
| Deferred revenue from affiliated entities, net of current portion | — |
| | 86,694 |
|
| Deferred rent, net of current portion | 9,104,416 |
| | 5,926,424 |
|
| Deferred tax liabilities | 24,766 |
| | 174,793 |
|
| Total liabilities | 44,750,461 |
| | 50,328,746 |
|
| Commitments and contingencies |
| |
|
| Inovio Pharmaceuticals, Inc. stockholders’ equity: | | | |
| Preferred stock—par value $0.001; Authorized shares: 10,000,000, issued and outstanding shares: 23 at December 31, 2017 and December 31, 2016 | — |
| | — |
|
| Common stock—par value $0.001; Authorized shares: 600,000,000 at December 31, 2017 and December 31, 2016, issued and outstanding: 90,357,644 at December 31, 2017 and 74,062,370 at December 31, 2016 | 90,358 |
| | 74,062 |
|
| Additional paid-in capital | 665,775,504 |
| | 556,718,356 |
|
| Accumulated deficit | (523,356,317 | ) | | (434,838,235 | ) |
| Accumulated other comprehensive income (loss) | (117,005 | ) | | 1,327,968 |
|
| Total Inovio Pharmaceuticals, Inc. stockholders’ equity | 142,392,540 |
| | 123,282,151 |
|
| Non-controlling interest | 96,269 |
| | 96,269 |
|
| Total stockholders’ equity | 142,488,809 |
| | 123,378,420 |
|
| Total liabilities and stockholders’ equity | $ | 187,239,270 |
| | $ | 173,707,166 |
|
The accompanying notes are an integral part of these consolidated financial statements.
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| | | | | | | | | | | |
| | For the Year ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Revenues: | | | | | |
| Revenue under collaborative research and development arrangements | $ | 28,407,388 |
| | $ | 6,490,747 |
| | $ | 26,876,533 |
|
| Revenue under collaborative research and development arrangements with affiliated entities | 765,828 |
| | 1,400,594 |
| | 779,167 |
|
| Grants and miscellaneous revenue | 10,474,539 |
| | 27,136,457 |
| | 12,916,411 |
|
| Grants and miscellaneous revenue from affiliated entity | 2,572,331 |
| | 340,563 |
| | — |
|
| Total revenues | 42,220,086 |
| | 35,368,361 |
| | 40,572,111 |
|
| Operating expenses: | | | | | |
| Research and development | 98,572,618 |
| | 88,712,035 |
| | 57,791,923 |
|
| General and administrative | 28,290,369 |
| | 23,892,263 |
| | 18,063,890 |
|
| Gain on sale of assets | (1,000,000 | ) | | (1,000,000 | ) | | (1,000,000 | ) |
| Total operating expenses | 125,862,987 |
| | 111,604,298 |
| | 74,855,813 |
|
| Loss from operations | (83,642,901 | ) | | (76,235,937 | ) | | (34,283,702 | ) |
| Other income (expense): | | | | | |
| Interest and other income, net | 1,612,974 |
| | 1,257,257 |
| | 305,071 |
|
| Change in fair value of common stock warrants | 806,819 |
| | 127,554 |
| | 177,561 |
|
| Gain (loss) on investment in affiliated entity | (6,982,664 | ) | | 1,110,787 |
| | 2,600,467 |
|
| Net loss before income tax benefit | (88,205,772 | ) | | (73,740,339 | ) | | (31,200,603 | ) |
| Income tax benefit | — |
| | — |
| | 2,097,766 |
|
| Net loss | (88,205,772 | ) | | (73,740,339 | ) | | (29,102,837 | ) |
| Net income attributable to non-controlling interest | — |
| | — |
| | (84,769 | ) |
| Net loss attributable to Inovio Pharmaceuticals, Inc. | $ | (88,205,772 | ) | | $ | (73,740,339 | ) | | $ | (29,187,606 | ) |
| Net loss per common share attributable to Inovio Pharmaceuticals, Inc. stockholders | | | | | |
| Basic | $ | (1.08 | ) | | $ | (1.01 | ) | | $ | (0.43 | ) |
| Diluted | $ | (1.09 | ) | | $ | (1.01 | ) | | $ | (0.44 | ) |
| Weighted average number of common shares outstanding used in per share calculations: | | | | | |
| Basic | 81,777,493 |
| | 73,214,766 |
| | 68,198,142 |
|
| Diluted | 81,918,022 |
| | 73,214,766 |
| | 68,365,265 |
|
| | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 71,143,778 | | | $ | 250,728,118 | |
| Short-term investments | 330,170,940 | | | 160,914,935 | |
| Accounts receivable | 5,466,850 | | | 18,559,967 | |
| Accounts receivable from affiliated entities | 2,565,194 | | | 503,782 | |
| Prepaid expenses and other current assets | 38,836,991 | | | 40,357,456 | |
| Prepaid expenses and other current assets from affiliated entities | 261,192 | | | 106,432 | |
| | | |
| Total current assets | 448,444,945 | | | 471,170,690 | |
| | | |
| Fixed assets, net | 17,453,206 | | | 11,348,144 | |
| Investments in affiliated entity | 3,906,796 | | | 4,460,366 | |
| Investment in Geneos | — | | | 434,387 | |
| Intangible assets, net | 2,626,355 | | | 3,146,770 | |
| Goodwill | 10,513,371 | | | 10,513,371 | |
| Operating lease right-of-use assets | 11,571,026 | | | 12,741,296 | |
| Other assets | 1,425,794 | | | 25,957,448 | |
| Total assets | $ | 495,941,493 | | | $ | 539,772,472 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable and accrued expenses | $ | 47,644,530 | | | $ | 21,203,808 | |
| Accounts payable and accrued expenses due to affiliated entities | 548,032 | | | 642,969 | |
| Accrued clinical trial expenses | 10,326,266 | | | 9,950,345 | |
| Deferred revenue | 21,628 | | | 46,628 | |
| | | |
| | | |
| Operating lease liability | 2,603,956 | | | 2,329,394 | |
| Grant funding liability | 4,559,721 | | | 7,474,310 | |
| Grant funding liability from affiliated entities | 37,500 | | | 58,500 | |
| Total current liabilities | 65,741,633 | | | 41,705,954 | |
| Deferred revenue, net of current portion | 64,361 | | | 79,214 | |
| | | |
| Convertible senior notes | 14,959,647 | | | 14,139,988 | |
| Convertible bonds | — | | | 4,515,834 | |
| | | |
| | | |
| | | |
| Operating lease liability, net of current portion | 15,459,559 | | | 18,063,515 | |
| Deferred tax liabilities | 32,046 | | | 32,046 | |
| Grant funding liability from affiliated entity, net of current portion | — | | | 37,500 | |
| Other liabilities | 14,826 | | | 57,663 | |
| Total liabilities | 96,272,072 | | | 78,631,714 | |
| Commitments and contingencies | 0 | | 0 |
| Inovio Pharmaceuticals, Inc. stockholders’ equity: | | | |
| Preferred stock—par value $0.001; Authorized shares: 10,000,000, issued and outstanding shares: 9 at December 31, 2021 and 2020 | — | | | — | |
| Common stock—par value $0.001; Authorized shares: 600,000,000 at December 31, 2021 and 2020, issued and outstanding: 217,382,887 at December 31, 2021 and 186,851,493 at December 31, 2020 | 217,382 | | | 186,851 | |
| Additional paid-in capital | 1,609,589,797 | | | 1,367,406,869 | |
| Accumulated deficit | (1,209,855,522) | | | (906,196,812) | |
| Accumulated other comprehensive income (loss) | (282,236) | | | (256,150) | |
| Total Inovio Pharmaceuticals, Inc. stockholders’ equity | 399,669,421 | | | 461,140,758 | |
| | | |
| | | |
| Total liabilities and stockholders’ equity | $ | 495,941,493 | | | $ | 539,772,472 | |
The accompanying notes are an integral part of these consolidated financial statements.
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSOPERATIONS
|
| | | | | | | | | | | |
| | For the Year ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Net loss | (88,205,772 | ) | | $ | (73,740,339 | ) | | $ | (29,102,837 | ) |
| Other comprehensive income (loss): | | | | | |
| Unrealized gain (loss) on investment in affiliated entity, net of tax | (1,452,431 | ) | | (1,268,404 | ) | | 2,952,201 |
|
| Unrealized gain (loss) on short-term investments, net of tax | 7,458 |
| | (111,967 | ) | | 7,528 |
|
| Comprehensive loss | $ | (89,650,745 | ) | | $ | (75,120,710 | ) | | $ | (26,143,108 | ) |
| Comprehensive income attributable to non-controlling interest | — |
| | — |
| | (84,769 | ) |
| Comprehensive loss attributable to Inovio Pharmaceuticals, Inc. | $ | (89,650,745 | ) | | $ | (75,120,710 | ) | | $ | (26,227,877 | ) |
| | | | | | | | | | | | | | | | | |
| | For the Year ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Revenues: | | | | | |
| | | | | |
| | | | | |
| Revenue under collaborative research and development arrangements | $ | 902,260 | | | $ | 5,170,586 | | | $ | 3,636,945 | |
| Revenue under collaborative research and development arrangements from affiliated entities | 245,310 | | | 1,453,730 | | | 235,649 | |
| Other revenue | 627,188 | | | 786,904 | | | 237,536 | |
| Other revenue from affiliated entities | — | | | — | | | 1,800 | |
| Total revenues | 1,774,758 | | | 7,411,220 | | | 4,111,930 | |
| Operating expenses: | | | | | |
| Research and development | 249,240,324 | | | 94,245,436 | | | 88,017,319 | |
| General and administrative | 53,752,353 | | | 37,247,828 | | | 27,203,156 | |
| | | | | |
| | | | | |
| Total operating expenses | 302,992,677 | | | 131,493,264 | | | 115,220,475 | |
| Loss from operations | (301,217,919) | | | (124,082,044) | | | (111,108,545) | |
| Other income (expense): | | | | | |
| Interest income | 3,363,080 | | | 3,311,846 | | | 2,605,981 | |
| Interest expense | (1,936,447) | | | (8,702,450) | | | (7,948,539) | |
| | | | | |
| Change in fair value of derivative liability | — | | | (75,670,977) | | | (1,763,652) | |
| Gain (loss) on investment in affiliated entities | (553,570) | | | 36,556,658 | | | (3,090,557) | |
| Net unrealized gain (loss) on available-for-sale equity securities | (3,222,838) | | | 1,695,497 | | | — | |
| Other income (expense), net | 343,371 | | | (704,896) | | | 496,200 | |
| Gain on deconsolidation of Geneos | — | | | 4,121,075 | | | — | |
| Loss on extinguishment of convertible bonds | — | | | (8,177,043) | | | — | |
| Gain on extinguishment of convertible senior notes | — | | | 8,762,030 | | | — | |
| Net loss before income tax benefit | (303,224,323) | | | (162,890,304) | | | (120,809,112) | |
| Income tax benefit | — | | | — | | | 257,335 | |
| Share in net loss of Geneos | (434,387) | | | (4,584,610) | | | — | |
| Net loss | (303,658,710) | | | (167,474,914) | | | (120,551,777) | |
| Net loss attributable to non-controlling interest | — | | | 1,063,757 | | | 1,192,558 | |
| Net loss attributable to Inovio Pharmaceuticals, Inc. | $ | (303,658,710) | | | $ | (166,411,157) | | | $ | (119,359,219) | |
| Net loss per share attributable to Inovio Pharmaceuticals, Inc. stockholders | | | | | |
| Basic and diluted | $ | (1.45) | | | $ | (1.07) | | | $ | (1.21) | |
| | | | | |
| Weighted average number of common shares outstanding | | | | | |
| Basic and diluted | 208,829,801 | | | 155,126,857 | | | 98,717,999 | |
| | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYCOMPREHENSIVE LOSS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred stock | | Common stock | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive income (loss) | | Non- controlling interest | | Total stockholders’ equity |
| | Number of shares | | Amount | | Number of shares | | Amount | |
| Balance at December 31, 2014 | 23 |
| | — |
| | 60,741,082 |
| | $ | 60,741 |
| | $ | 443,327,915 |
| | $ | (331,910,290 | ) | | $ | (251,390 | ) | | $ | 310,618 |
| | $ | 111,537,594 |
|
| Issuance of common stock for cash, net of financing costs of $4.0 million | — |
| | — |
| | 10,925,000 |
| | 10,925 |
| | 81,891,438 |
| | — |
| | — |
| | — |
| | 81,902,363 |
|
| Payment to minority stockholders | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (149,559 | ) | | (149,559 | ) |
| Exercise of stock options and warrants for cash | — |
| | — |
| | 551,883 |
| | 552 |
| | 2,598,363 |
| | — |
| | — |
| | — |
| | 2,598,915 |
|
| Stock-based compensation | — |
| | — |
| | — |
| | — |
| | 6,186,848 |
| | — |
| | — |
| | — |
| | 6,186,848 |
|
| Net loss attributable to common stockholders | — |
| | — |
| | — |
| | — |
| | — |
| | (29,187,606 | ) | | — |
| | 84,769 |
| | (29,102,837 | ) |
| Unrealized gain on short-term investments, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,528 |
| | — |
| | 7,528 |
|
| Unrealized gain on investment in affiliated entity, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,952,201 |
| | — |
| | 2,952,201 |
|
| Balance at December 31, 2015 | 23 |
| | — |
| | 72,217,965 |
| | $ | 72,218 |
| | $ | 534,004,564 |
| | $ | (361,097,896 | ) | | $ | 2,708,339 |
| | $ | 245,828 |
| | $ | 175,933,053 |
|
| Issuance of common stock for cash, net of financing costs of $128,000 | — |
| | — |
| | 658,748 |
| | 659 |
| | 6,295,102 |
| | — |
| | — |
| | — |
| | 6,295,761 |
|
| Issuance of common stock for Bioject acquisition | — |
| | — |
| | 440,122 |
| | 440 |
| | 4,299,560 |
| | — |
| | — |
| | — |
| | 4,300,000 |
|
| Payment to minority stockholders | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (149,559 | ) | | (149,559 | ) |
| Exercise of stock options and warrants for cash and vesting of RSUs, net of tax payments | — |
| | — |
| | 450,045 |
| | 449 |
| | 1,640,291 |
| | — |
| | — |
| | — |
| | 1,640,740 |
|
| Cashless exercise of stock options and warrants | — |
| | — |
| | 295,490 |
| | 296 |
| | (296 | ) | | — |
| | — |
| | — |
| | — |
|
| Stock-based compensation | — |
| | — |
| | — |
| | — |
| | 10,479,135 |
| | — |
| | — |
| | — |
| | 10,479,135 |
|
| Net loss attributable to common stockholders | — |
| | — |
| | — |
| | — |
| | — |
| | (73,740,339 | ) | | — |
| | — |
| | (73,740,339 | ) |
| Unrealized loss on short-term investments, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (111,967 | ) | | — |
| | (111,967 | ) |
| Unrealized loss on investment in affiliated entity, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1,268,404 | ) | | — |
| | (1,268,404 | ) |
| Balance at December 31, 2016 | 23 |
| | — |
| | 74,062,370 |
| | $ | 74,062 |
| | $ | 556,718,356 |
| | $ | (434,838,235 | ) | | $ | 1,327,968 |
| | $ | 96,269 |
| | $ | 123,378,420 |
|
| Cumulative effect of accounting change | — |
| | — |
| | — |
| | — |
| | 312,310 |
| | (312,310 | ) | | — |
| | — |
| | — |
|
| Issuance of common stock for cash, net of financing costs of $4.9 million | — |
| | — |
| | 15,437,406 |
| | 15,437 |
| | 94,332,485 |
| | — |
| | — |
| | — |
| | 94,347,922 |
|
| Exercise of stock options for cash and vesting of RSUs, net of tax payments | — |
| | — |
| | 857,868 |
| | 859 |
| | 1,341,391 |
| | — |
| | — |
| | — |
| | 1,342,250 |
|
| Stock-based compensation | — |
| | — |
| | — |
| | — |
| | 13,070,962 |
| | — |
| | — |
| | — |
| | 13,070,962 |
|
| Net loss attributable to common stockholders | — |
| | — |
| | — |
| | — |
| | — |
| | (88,205,772 | ) | | — |
| | — |
| | (88,205,772 | ) |
| Unrealized gain on short-term investments, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,458 |
| | — |
| | 7,458 |
|
| Unrealized loss on investment in affiliated entity, net of tax | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1,452,431 | ) | | — |
| | (1,452,431 | ) |
| Balance at December 31, 2017 | 23 |
| | — |
| | 90,357,644 |
| | $ | 90,358 |
| | $ | 665,775,504 |
| | $ | (523,356,317 | ) | | $ | (117,005 | ) | | $ | 96,269 |
| | $ | 142,488,809 |
|
| | | | | | | | | | | | | | | | | |
| | For the Year ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Net loss | $ | (303,658,710) | | | $ | (167,474,914) | | | $ | (120,551,777) | |
| Other comprehensive income (loss): | | | | | |
| | | | | |
| Foreign currency translation | (30,134) | | | 27,205 | | | — | |
| Unrealized gain (loss) on short-term investments, net of tax | 4,048 | | | (755,963) | | | 1,001,475 | |
| Comprehensive loss | $ | (303,684,796) | | | $ | (168,203,672) | | | $ | (119,550,302) | |
| Comprehensive loss attributable to non-controlling interest | — | | | 1,063,757 | | | 1,192,558 | |
| Comprehensive loss attributable to Inovio Pharmaceuticals, Inc. | $ | (303,684,796) | | | $ | (167,139,915) | | | $ | (118,357,744) | |
The accompanying notes are an integral part of these consolidated financial statements.
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS' EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred stock | | Common stock | | Additional
paid-in
capital | | Accumulated
deficit | | Accumulated
other
comprehensive
income (loss) | | Non-
controlling
interest | | Total
stockholders’
equity |
| | Number
of shares | | Amount | | Number
of shares | | Amount | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Balance at December 31, 2018 | 23 | | | — | | | 97,225,810 | | | $ | 97,226 | | | $ | 707,794,215 | | | $ | (620,426,436) | | | $ | (528,867) | | | $ | 96,269 | | | $ | 87,032,407 | |
| Issuance of common stock for cash, net of capital raising related expenses | — | | | — | | | 3,340,678 | | | 3,340 | | | 9,085,669 | | | — | | | — | | | — | | | 9,089,009 | |
| Exercise of stock options for cash and vesting of RSUs, net of tax payments | — | | | — | | | 794,546 | | | 795 | | | (781,200) | | | — | | | — | | | — | | | (780,405) | |
| Equity component of issuance of convertible notes | — | | | — | | | — | | | — | | | 15,752,698 | | | — | | | — | | | — | | | 15,752,698 | |
| Stock-based compensation | — | | | — | | | — | | | — | | | 10,795,403 | | | — | | | — | | | 105,917 | | | 10,901,320 | |
| Acquisition of non-controlling interest in Geneos, net | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,960,131 | | | 2,960,131 | |
| Net loss attributable to common stockholders | — | | | — | | | — | | | — | | | — | | | (119,359,219) | | | — | | | (1,192,558) | | | (120,551,777) | |
| Unrealized gain on short-term investments, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 1,001,475 | | | — | | | 1,001,475 | |
| Balance at December 31, 2019 | 23 | | | — | | | 101,361,034 | | | $ | 101,361 | | | $ | 742,646,785 | | | $ | (739,785,655) | | | $ | 472,608 | | | $ | 1,969,759 | | | $ | 5,404,858 | |
| Issuance of common stock for cash, net of capital raising related expenses | — | | | — | | | 66,064,886 | | | 66,065 | | | 454,420,335 | | | — | | | — | | | — | | | 454,486,400 | |
| Conversion of preferred stock to common stock | (14) | | | — | | | 5,147 | | | 5 | | | (5) | | | — | | | — | | | — | | | — | |
| Conversion of senior notes to common stock | — | | | — | | | 11,535,660 | | | 11,536 | | | 43,682,850 | | | — | | | — | | | — | | | 43,694,386 | |
| Conversion of August 2019 Bonds to common stock | — | | | — | | | 4,962,364 | | | 4,961 | | | 102,666,349 | | | — | | | — | | | — | | | 102,671,310 | |
| Exercise of stock options for cash and vesting of RSUs, net of tax payments | — | | | — | | | 2,922,402 | | | 2,923 | | | 8,238,701 | | | — | | | — | | | — | | | 8,241,624 | |
| Stock-based compensation | — | | | — | | | — | | | — | | | 15,655,585 | | | — | | | — | | | (8,062) | | | 15,647,523 | |
| Acquisition of non-controlling interest in Geneos, net | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,379,969 | | | 2,379,969 | |
| Deconsolidation of Geneos | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (3,181,640) | | | (3,181,640) | |
| Net loss attributable to common stockholders | — | | | — | | | — | | | — | | | — | | | (166,411,157) | | | — | | | (1,063,757) | | | (167,474,914) | |
| Dissolution of majority-owned subsidiary VGX Animal Health, Inc. | — | | | — | | | — | | | — | | | 96,269 | | | — | | | — | | | (96,269) | | | — | |
| Unrealized loss on short-term investments, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | (755,963) | | | — | | | (755,963) | |
| Foreign currency translation | — | | | — | | | — | | | — | | | — | | | — | | | 27,205 | | | — | | | 27,205 | |
| Balance at December 31, 2020 | 9 | | | — | | | 186,851,493 | | | $ | 186,851 | | | $ | 1,367,406,869 | | | $ | (906,196,812) | | | $ | (256,150) | | | $ | — | | | $ | 461,140,758 | |
| Issuance of common stock for cash, net of capital raising related expenses | — | | | — | | | 27,310,341 | | | 27,310 | | | 209,414,100 | | | — | | | — | | | — | | | 209,441,410 | |
| Conversion of December 2019 Bonds to common stock | — | | | — | | | 1,009,450 | | | 1,009 | | | 4,376,883 | | | — | | | — | | | — | | | 4,377,892 | |
| Exercise of stock options for cash and vesting of RSUs, net of tax payments | — | | | — | | | 2,211,603 | | | 2,212 | | | 2,055,181 | | | — | | | — | | | — | | | 2,057,393 | |
| Stock-based compensation | — | | | — | | | — | | | — | | | 26,336,764 | | | — | | | — | | | — | | | 26,336,764 | |
| Net loss attributable to common stockholders | — | | | — | | | — | | | — | | | — | | | (303,658,710) | | | — | | | — | | | (303,658,710) | |
| Unrealized gain on short-term investments, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | 4,048 | | | — | | | 4,048 | |
| Foreign currency translation | — | | | — | | | — | | | — | | | — | | | — | | | (30,134) | | | — | | | (30,134) | |
| Balance at December 31, 2021 | 9 | | | — | | | 217,382,887 | | | $ | 217,382 | | | $ | 1,609,589,797 | | | $ | (1,209,855,522) | | | $ | (282,236) | | | $ | — | | | $ | 399,669,421 | |
|
| | | | | | | | | | | |
| | For the Year ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Cash flows from operating activities: | | | | | |
| Net loss | $ | (88,205,772 | ) | | $ | (73,740,339 | ) | | $ | (29,102,837 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
| Depreciation | 1,850,376 |
| | 1,708,498 |
| | 1,048,431 |
|
| Amortization of intangible assets | 1,618,665 |
| | 1,377,466 |
| | 870,199 |
|
| Change in value of common stock warrants | (806,819 | ) | | (127,554 | ) | | (177,561 | ) |
| Stock-based compensation | 13,070,962 |
| | 10,479,135 |
| | 6,186,848 |
|
| Amortization of premiums on investments | 319,845 |
| | 266,290 |
| | 348,566 |
|
| Deferred taxes | (150,027 | ) | | (849 | ) | | 14,166 |
|
| Deferred rent | 3,608,881 |
| | (16,728 | ) | | 383,584 |
|
| Loss on short-term investments | 215,423 |
| | 139,249 |
| | 432,174 |
|
| Gain on investment in affiliated entity | 6,982,664 |
| | (1,110,787 | ) | | (2,600,467 | ) |
| Gain on sale of intangible assets | (1,000,000 | ) | | (1,000,000 | ) | | (1,000,000 | ) |
| Income tax benefit from other unrealized gains on securities | — |
| | — |
| | (2,097,766 | ) |
| Changes in operating assets and liabilities: | | | | | |
| Accounts receivable | 9,818,306 |
| | (8,521,899 | ) | | (4,497,225 | ) |
| Accounts receivable from affiliated entity | 261,736 |
| | (714,908 | ) | | (31,627 | ) |
| Prepaid expenses and other current assets | (851,847 | ) | | (831,802 | ) | | (119,284 | ) |
| Prepaid expenses and other current assets from affiliated entity | (333,583 | ) | | (901,772 | ) | | 771,723 |
|
| Other assets | (526,207 | ) | | (1,442,314 | ) | | (196,265 | ) |
| Accounts payable and accrued expenses | 2,829,807 |
| | 6,367,965 |
| | 6,456,581 |
|
| Accrued clinical trial expenses | 2,243,503 |
| | 3,767,906 |
| | 593,051 |
|
| Accounts payable and accrued expenses due to affiliated entity | (145,636 | ) | | 907,532 |
| | 136,640 |
|
| Deferred revenue | (13,689,322 | ) | | 1,527,686 |
| | 10,191,840 |
|
| Deferred revenue from affiliated entity | (319,876 | ) | | (687,827 | ) | | (49,672 | ) |
| Net cash used in operating activities | (63,208,921 | ) | | (62,555,052 | ) | | (12,438,901 | ) |
| Cash flows from investing activities: | | | | | |
| Purchases of investments | (95,700,144 | ) | | (57,317,671 | ) | | (63,526,830 | ) |
| Maturities of investments | 77,162,902 |
| | 76,528,030 |
| | 10,484,267 |
|
| Purchases of capital assets | (10,293,902 | ) | | (2,738,470 | ) | | (2,781,544 | ) |
| Proceeds from sale of intangible assets | 1,000,000 |
| | 1,000,000 |
| | 1,000,000 |
|
| Purchase of intangible and other assets | — |
| | (1,200,000 | ) | | — |
|
| Net cash provided by (used in) investing activities | (27,831,144 | ) | | 16,271,889 |
| | (54,824,107 | ) |
| Cash flows from financing activities: | | | | | |
| Proceeds from issuance of common stock and warrants, net of issuance costs | 94,347,922 |
| | 6,295,761 |
| | 81,902,363 |
|
| Proceeds from stock option and warrant exercises, net of tax payments | 1,342,250 |
| | 1,640,740 |
| | 2,598,915 |
|
| Expenses from other financing activities | — |
| | (149,559 | ) | | (149,559 | ) |
| Net cash provided by financing activities | 95,690,172 |
| | 7,786,942 |
| | 84,351,719 |
|
| Increase (Decrease) in cash and cash equivalents | 4,650,107 |
| | (38,496,221 | ) | | 17,088,711 |
|
| Cash and cash equivalents, beginning of period | 19,136,472 |
| | 57,632,693 |
| | 40,543,982 |
|
| Cash and cash equivalents, end of period | $ | 23,786,579 |
| | $ | 19,136,472 |
| | $ | 57,632,693 |
|
| | | | | | |
| Supplemental disclosure of non-cash activities | | | | | |
| Common stock issued for purchase of Bioject | $ | — |
| | $ | 4,300,000 |
| | $ | — |
|
| Change in amounts accrued for purchases of property and equipment | $ | 851,204 |
| | $ | 164,923 |
| | $ | 225,148 |
|
| Lease incentive recorded as fixed assets and deferred rent | $ | — |
| | $ | 523,856 |
| | $ | 773,000 |
|
The accompanying notes are an integral part of these consolidated financial statements.
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| | For the Year ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Cash flows from operating activities: | | | | | |
| Net loss | $ | (303,658,710) | | | $ | (167,474,914) | | | $ | (120,551,777) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
| Depreciation | 3,040,096 | | | 3,038,996 | | | 3,598,388 | |
| Amortization of intangible assets | 520,415 | | | 547,081 | | | 1,066,294 | |
| Amortization of operating lease right-of-use assets | 1,170,270 | | | 1,041,713 | | | 851,760 | |
| | | | | |
| Change in fair value of derivative liability | — | | | 75,670,977 | | | 1,763,652 | |
| | | | | |
| Stock-based compensation | 26,336,764 | | | 15,647,523 | | | 10,901,320 | |
| Non-cash interest expense | 858,644 | | | 4,077,686 | | | 5,230,954 | |
| Amortization of premiums on investments | 1,633,286 | | | — | | | 1,962 | |
| | | | | |
| Deferred taxes | — | | | — | | | 5,397 | |
| | | | | |
| | | | | |
| Loss (gain) on short-term investments | 5,397 | | | 588,270 | | | (476,368) | |
| Settlement of receivable with shares of common stock from affiliated entity (PLS) | — | | | (1,713,770) | | | — | |
| Gain on deconsolidation of Geneos | — | | | (4,121,075) | | | — | |
| Loss on disposal of fixed assets | — | | | 26,913 | | | 5,889 | |
| Loss (gain) on equity investment in affiliated entities | 553,570 | | | (36,556,658) | | | 3,090,557 | |
| Share of net loss in Geneos | 434,387 | | | 4,584,610 | | | — | |
| Loss on extinguishment of convertible August 2019 bonds | — | | | 8,177,043 | | | — | |
| Gain on extinguishment of convertible senior notes | — | | | (8,762,030) | | | — | |
| Net unrealized loss (gain) on available-for-sale equity securities | 3,222,838 | | | (1,695,497) | | | — | |
| Tax benefit from other unrealized gains on short-term investments | — | | | — | | | (266,215) | |
| Unrealized transaction (gain) loss on foreign-currency denominated debt | (176,927) | | | 15,902 | | | 471,172 | |
| Changes in operating assets and liabilities: | | | | | |
| Accounts receivable | 13,093,117 | | | (17,859,894) | | | 2,616,288 | |
| Accounts receivable from affiliated entities | (2,061,412) | | | 844,423 | | | (593,461) | |
| Prepaid expenses and other current assets | (6,188,872) | | | (38,849,572) | | | (178,008) | |
| Prepaid expenses and other current assets from affiliated entities | (154,760) | | | 374,107 | | | 70,665 | |
| | | | | |
| Other assets | 24,531,654 | | | (23,285,424) | | | (2,026) | |
| Accounts payable and accrued expenses | 26,235,907 | | | 3,115,828 | | | (4,337,829) | |
| Accrued clinical trial expenses | 375,921 | | | 5,962,381 | | | (1,622,037) | |
| Accounts payable and accrued expenses due to affiliated entities | (94,937) | | | 135,650 | | | (248,063) | |
| Deferred revenue | (39,853) | | | (68,078) | | | (180,450) | |
| Deferred revenue from affiliated entities | — | | | 5,725 | | | (1,800) | |
| | | | | |
| Operating lease right-of-use assets and liabilities, net | (2,329,394) | | | (2,091,855) | | | (1,733,599) | |
| Grant funding liability | (2,914,589) | | | 1,409,098 | | | 1,899,364 | |
| Grant funding liability from affiliated entities | (58,500) | | | (784,925) | | | 816,342 | |
| Other liabilities | (42,837) | | | 20,720 | | | (48,507) | |
| Net cash used in operating activities | (215,708,525) | | | (177,979,046) | | | (97,850,136) | |
| Cash flows from investing activities: | | | | | |
| Purchases of investments | (348,953,236) | | | (156,216,677) | | | (100,950,301) | |
| Proceeds from sale of or maturity of investments | 174,839,758 | | | 62,991,023 | | | 92,893,232 | |
| Purchases of capital assets | (1,231,006) | | | (1,520,665) | | | (987,926) | |
| Proceeds from sale of investment of GeneOne | — | | | 40,125,418 | | | — | |
| Decrease in cash resulting from the deconsolidation of Geneos | — | | | (2,774,851) | | | — | |
| Investment in Geneos | — | | | (1,399,999) | | | — | |
| | | | | |
| Net cash used in investing activities | (175,344,484) | | | (58,795,751) | | | (9,044,995) | |
| Cash flows from financing activities: | | | | | |
| Proceeds from issuances of convertible senior notes and convertible bonds | — | | | — | | | 97,443,617 | |
| Costs related to issuances of convertible senior notes and convertible bonds | — | | | — | | | (3,314,757) | |
| Proceeds from issuance of common stock, net of issuance costs | 209,441,410 | | | 454,486,400 | | | 9,089,010 | |
| Proceeds from stock option exercises, net of tax payments | 6,668,741 | | | 12,269,801 | | | 112,522 | |
| Taxes paid related to net share settlement of equity awards, net of proceeds from option exercises | (4,611,348) | | | (4,028,177) | | | (892,928) | |
| Acquisition of non-controlling interest | — | | | 2,379,969 | | | 2,960,131 | |
| Proceeds from Geneos issuance of note payable | — | | | 171,620 | | | — | |
| Net cash provided by financing activities | 211,498,803 | | | 465,279,613 | | | 105,397,595 | |
| Effect of exchange rate changes on cash and cash equivalents | (30,134) | | | 27,205 | | | — | |
| Increase (decrease) in cash and cash equivalents | (179,584,340) | | | 228,532,021 | | | (1,497,536) | |
| Cash and cash equivalents, beginning of period | 250,728,118 | | | 22,196,097 | | | 23,693,633 | |
| Cash and cash equivalents, end of period | $ | 71,143,778 | | | $ | 250,728,118 | | | $ | 22,196,097 | |
| | | | | |
| Supplemental disclosure: | | | | | |
| | | | | |
| Amounts accrued for purchases of property and equipment | $ | 204,815 | | | $ | 136,711 | | | $ | — | |
| Interest paid | $ | 1,077,803 | | | $ | 4,624,764 | | | $ | 2,717,585 | |
| Change in prepaid expenses and other current assets included in fixed assets | $ | 7,709,337 | | | $ | — | | | $ | — | |
| Equity component of issuance of convertible notes | $ | — | | | $ | — | | | $ | 15,752,698 | |
| Right-of-use assets obtained in exchange for lease obligations | $ | — | | | $ | — | | | $ | 14,634,769 | |
| | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
Inovio Pharmaceuticals, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
Inovio Pharmaceuticals, Inc. (the “Company” or “Inovio”“INOVIO”), is a clinical stage biopharmaceuticalbiotechnology company develops active SynCon®focused on bringing to market precisely designed DNA immunotherapiesmedicines and vaccines focused on preventingto help protect people from infectious diseases, including COVID-19, and treating cancersto help treat people with cancer, and infectious diseases. Inovio’s DNA-based immunotherapies,conditions associated with human papillomavirus ("HPV"). INOVIO has shown in combination withclinical trials that its DNA vaccine candidates can be delivered into cells in the body via a proprietary CELLECTRA® delivery devices, are intendedsmart device allowing the nucleic-acid delivered gene products to generate optimal antigen production in vivo, in particularactivate functional CD8+ killer T cell and antibody responses against targeted pathogens and cancers.
The Company's DNA medicines pipeline is comprised of three types of product candidates: prophylactic DNA vaccines, therapeutic DNA immunotherapies, and DNA encoded monoclonal and bispecific antibodies ("dMAbs" and “dBTAs”), all of which utilize the two components of INOVIO's integrated platform, SynCon® and CELLECTRA®.
The Company's proprietary SynCon® technology creates optimized plasmids, which are circular strands of DNA that instruct a cell to fightproduce proteins or antigens to help the person’s immune system respond with antibodies and immune cells which recognize and then help block viruses and destroy cancerous or pre-cancerous cells.
INOVIO's patented CELLECTRA® smart delivery devices facilitate uptake of its DNA medicines into the cell, which has been a key limitation of historical DNA-based technology approaches. Human clinical trial data from more than 15,000 CELLECTRA® smart device administrations across more than 5,000 participants to date have shown a tolerable safety profile.
INOVIO's corporate strategy is to develop, seek regulatory approval for and commercialize its novel DNA medicines to address unmet global health needs. The Company continues to advance and clinically validate an array of DNA medicine candidates that target diseases. Inovio’s synthetic products are based on its SynCon® immunotherapy design. infectious diseases, such as COVID-19, as well as HPV-associated diseases and cancer.
The Company's partners and collaborators include ApolloBio Corporation, AstraZeneca, Beijing Advaccine, The Bill & Melinda Gates Foundation (Gates), Coalition for Epidemic Preparedness Innovations ("CEPI"), The U.S. Department of Defense ("DoD"), Defense Advanced Research Projects Agency ("DARPA"), HIV Vaccines Trial Network, the U.S. Defense Threat Reduction Agency’s Medical CBRN Defense Consortium ("MCDC"), International Vaccine Institute ("IVI"), Kaneka Eurogentec, National Cancer Institute, National Institutes of Health, National Institute of Allergy and Infectious Diseases, Ology Bioservices, the Parker Institute for Cancer Immunotherapy, Plumbline Life Sciences, Regeneron Pharmaceuticals, Inc., Richter-Helm BioLogics, Thermo Fisher Scientific, the University of Pennsylvania, the Walter Reed Army Institute of Research and The Wistar Institute.
The Company and its collaborators are currently evaluating the feasibility of, conducting or planning clinical programsstudies of its proprietary SynCon® immunotherapiesDNA medicines for HPV-caused pre-cancersCOVID-19, which includes both homologous and cancers; prostate, breast, lung and pancreatic cancers; hepatitis B virus ("HBV"); HIV; Ebola;heterologous boosting approaches; Middle East Respiratory Syndrome, ("MERS");or MERS; Lassa fever; Ebola; as well as HPV-associated precancers, including cervical, vulvar, and Zika virus. anal dysplasia; HPV-associated cancers, including head & neck, cervical, anal, penile, vulvar, and vaginal; other HPV-associated disorders, such as recurrent respiratory papillomatosis, or RRP; glioblastoma multiforme, or GBM; and prostate cancer.
The Company's partners and collaborators include MedImmune, LLC, The Wistar Institute, University of Pennsylvania, GeneOne Life Science Inc. ("GeneOne"), Regeneron Pharmaceuticals, Inc., Genentech, Inc., Plumbline Life Sciences, Inc., the Parker Institute for Cancer Immunotherapy, Drexel University, National Microbiology Laboratory of the Public Health Agency of Canada, National Institute of Allergy and Infectious Diseases (“NIAID”), United States Military HIV Research Program (“USMHRP”), U.S. Army Medical Research Institute of Infectious Diseases (“USAMRIID”), National Institutes of Health ("NIH"), HIV Vaccines Trial Network (“HVTN”) and Defense Advanced Research Projects Agency (“DARPA”).
InovioINOVIO was incorporated in Delaware in June 2001 and has its principal executive offices in Plymouth Meeting, Pennsylvania.
2. Summary of Significant Accounting Policies
Basis of Presentation and Liquidity
InovioThe Company incurred a net loss attributable to common stockholders of $88.2$303.7 million for the year ended December 31, 2017. Inovio2021. The Company had working capital of $103.0$382.7 million and an accumulated deficit of $523.4 million$1.2 billion as of December 31, 20172021. The Company has incurred losses in each year since its inception and expects to continue to incur significant expenses and operating losses for the foreseeable future in connection with the research and preclinical and clinical development of its product candidates. The Company’s cash, cash equivalents and short-term investments of $401.3 million as of December 31, 2021, are sufficient to support the Company's operations for a period of at least 12 months from the date it is issuing these financial statements.
In order to continue to fund future research and development activities, the Company will need to seek additional capital. This may occur through strategic alliance and licensing arrangements, grant agreements and/or future public or private debt or equity financings including At-the-Market Equity Offering Sales Agreements (“Sales Agreements”). The Company has a history of conducting debt and equity financings, including the receipt of net proceeds of $162.1 million from a January 2021 underwritten public offering, net proceeds of $47.7 million under a Sales Agreement during the year ended December 31, 2021,
net proceeds of $454.5 million under Sales Agreements during the year ended December 31, 2020, and net proceeds of $9.1 million under a Sales Agreement during the year ended December 31, 2019. The Company also received net proceeds of $75.7 million from a private placement of 6.50% convertible senior notes due 2024 (the “Notes”), net proceeds of $14.5 million from the private placement of 18 billion Korean Won (KRW) (approximately USD $15.0 million based on the exchange rate on the date of issuance) aggregate principal amount of its 1.0% convertible bonds due August 2024 (the "August 2019 Bonds"), and net proceeds of $4.0 million from the private placement of 4.7 billion KRW (approximately USD $4.1 million based on the exchange rate on the date of issuance) aggregate principal amount of its 1.0% convertible bonds due December 2024 (the "December 2019 Bonds" and, together with the August 2019 Bonds, the “Bonds”) during the year ended December 31, 2019. However, sufficient funding may not be available in the future, or if available, may be on terms that significantly dilute or otherwise adversely affect the rights of existing stockholders. If adequate funds are not available, the Company may need to delay, reduce the scope of or put on hold one or more of its clinical and/or preclinical programs.
The Company’s ability to continue its operations is dependent upon its ability to obtain additional capital in the future and achieve profitable operations. The Company expects to continue to rely on outside sources of financing to meet its capital needs and the Company may never achieve positive cash flow. These consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should Inovio be unable to continue as a going concern. Inovio’sThe Company's consolidated financial statements as of and for the year ended December 31, 20172021 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business for the foreseeable future. The Company has evaluated subsequent events after the balance sheet date through the date it issued these consolidated financial statements.
The Company is and, from time to time, may in the future be subject to various legal proceedings and claims arising in the ordinary course of business. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its consolidated financial statements. An estimated loss contingency is accrued in the consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal proceedings, including litigation, government investigations and enforcement actions, could result in material costs, occupy significant management resources and entail civil and criminal penalties, even if the Company ultimately prevails. Any of the foregoing consequences could result in serious harm to the Company’s business, results of operations and financial condition.
Risks and Uncertainties
The global pandemic resulting from COVID-19, caused by a novel strain of coronavirus, SARS-CoV-2, has caused national and global economic and financial market disruptions. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will continue to cause significant disruptions to the global economy, as well as businesses and capital markets around the world.
The Company continues to closely monitor the impact of the COVID-19 pandemic on its employees, collaborators and service providers. The extent to which the pandemic will continue to impact the Company's business and operations will depend on future developments, including travel restrictions to, from and within the United States and other countries, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, including mass vaccination efforts, that are highly uncertain as of the date the Company is issuing these financial statements.
Consolidation
TheseIn June 2020, the Company formed a wholly-owned subsidiary, Inovio Asia LLC, under the laws of South Korea, through which the Company intends to advance its corporate development projects and other functions in South Korea and other Asian countries.
The consolidated financial statements include the accounts of Inovio Pharmaceuticals, Inc. and its subsidiaries. In conjunction with the acquisition in June 2009subsidiary. As of VGX Pharmaceuticals,December 31, 2021 the Company acquired a majority interest in VGX Animal Health and an equity interest in GeneOne, a publicly-traded company in South Korea. In addition to VGX Pharmaceuticals and VGX Animal Health, the Company consolidatesconsolidated its wholly ownedwholly-owned subsidiary Inovio Asia LLC. On December 31, 2020, former wholly-owned subsidiaries Genetronics, Inc. and GENEOS Therapeutics,VGX Pharmaceuticals Inc., and recorded a non-controlling interest for the 15% offormer majority -owned subsidiary VGX Animal Health, it did not own as of December 31, 2017 and 2016. The Company's investment in GeneOne is recorded as investment in affiliated entity within the consolidated balance sheets and is accounted for at fair value at each reporting date, with changes in fair value recorded on the consolidated statements of operations within gain (loss) on investment in affiliated entity.Inc. were merged into Inovio Pharmaceuticals, Inc. All intercompany accounts and transactions have been eliminated upon consolidation. As of June 1, 2020, the Company deconsolidated its former subsidiary Geneos Therapeutics, Inc. ("Geneos"), as the Company no longer held a controlling financial interest. Refer to Footnote 16 for further discussion of Geneos.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one1 segment operating primarily within the United States.
Use of Estimates
The preparation of consolidated financial statements in accordanceconformity with United States generally accepted accounting principlesU.S. GAAP requires the Companymanagement to make estimates and judgmentsassumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosuredisclosures of contingent assets and liabilities. Inovio bases its estimates on historical
experienceliabilities at the date of the consolidated financial statements and on various other assumptions that are believed to be reasonable under the circumstances,reported amounts of revenues and expenses during the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.reporting period. Actual results maycould differ from these estimates under different assumptions or conditions. On an ongoing basis, the Company reviews its estimates to ensure that these estimates appropriately reflect changes in the business or as new information becomes available.those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and short-term investments. The Company limits its exposure to credit loss by placing its cash and investments with high credit quality financial institutions. Additionally, the Company has established guidelines regarding diversification of its investments and their maturities which are designed to maintain principal and maximize liquidity.
The Company has contracts with certain of its customers that have represented more than 10% of the Company's total revenues, as discussed in Note 6.3.
Fair valueValue of Financial Instruments
The guidance regarding fair value measurements establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets that are accessible at the measurement date; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The Company’s financial instruments consist principally ofinclude cash equivalents, short-term investments, and investments in affiliated entities.entities, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses, and convertible senior notes. The carrying amounts of cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses approximate the related fair values due to the short-term maturities of these instruments. Investments consist of available-for-sale securities thatShort-term investments are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of consolidated stockholders’ equity. The Company's investment in Plumbline Life Sciences, Inc. (“PLS”), an affiliated entity, is accounted for as an available-for sale security. The Company’s investment in GeneOne, an affiliated entity, is accounted forrecorded at fair value on a recurring basis, with changes inbased on current market valuations. The Company carries convertible senior notes at face value less unamortized debt discount and issuance costs on its consolidated balance sheet, and it presents the fair value recorded on the consolidated statements of operations within gain (loss) from investment in affiliated entity.such convertible notes and bonds for disclosure purposes only.
Cash and Cash Equivalents
Cash equivalents are considered by the Company to be highly liquid investments purchased with original maturities of three months or less from the date of purchase. Cash and cash equivalents includeincluded certain money market accounts and U.S. treasury securities at December 31, 20172021 and 2016.2020.
Short-term Investments
The Company defines investments as income-yielding securities that can be readily converted into cash or equity investments classified as available-for-sale. Investments includeincluded mutual funds, United States corporate debtU.S. treasury securities, commercial paper, certificates of deposit, U.S. agency mortgage-backed securities and an equity investment in the Company'sCompany’s affiliated entity, PLS, at December 31, 20172021 and 2016.2020.
Short-term investments are recorded at fair value, based on current market valuations. Unrealized gains and losses on the Company's short-term debt investments are excluded from earnings and reported as a separate component of other comprehensive loss until realized. Realized gains and losses and unrealized gains and losses on available-for-sale equity securities are included in non-operating other income (expense) on theconsolidated statements of operations and are derived using the specific identification method for determining the cost of the securities sold.
Accounts Receivable
Accounts receivable are recorded at invoiced amounts and do not bear interest. The Company performs ongoing credit evaluations of its customers’ financial condition. Credit is extended to customers as deemed necessary and generally does not require collateral. Management believes that the risk of loss is significantly reduced due to the quality and financial position of the Company's customers. No allowance for doubtful accounts was deemed necessary at December 31, 20172021 and 2016.
2020.
Fixed Assets
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful life of the assets, generally three to five years. Leasehold improvements are amortized over the shorter of the remaining term of the related leases or the estimated economic useful lives of the improvements. Repairs and maintenance are expensed as incurred.
Long-Lived Assets
All long-lived assets are reviewed for impairment in value when changes in circumstances dictate, based upon undiscounted future operating cash flows, and appropriate losses are recognized and reflected in current earnings, to the extent the carrying amount of an asset exceeds its estimated fair value determined by the use of appraisals, discounted cash flow
analyses or comparable fair values of similar assets. The Company has not recognized any losses on long-lived assets through December 31, 2017.2021.
Valuation of Intangible Assets and Goodwill
Intangible assets are amortized over their estimated useful lives ranging from 2two to 18 years. Acquired intangible assets are continuously being developed for the future economic viability contemplated at the time of acquisition. The Company is concurrently conducting preclinical studies and clinical trials using the acquired intangibles and has entered into licensing agreements for the use of these acquired intangibles.
Historically, the Company has recorded patents at cost and amortized these costs using the straight-line method over the expected useful lives of the patents or 17 years, whichever is less. Patent cost consists of the consideration paid for patents and related legal costs. Effective as of the acquisition of VGX in 2009, all new patent costs are being expensed as incurred, with patent costs capitalized as of that date continuing to be amortized over the expected life of the patent. License costs are recorded based on the fair value of consideration paid and are amortized using the straight-line method over the shorter of the expected useful life of the underlying patents or the term of the related license agreement to the extent the license has an alternative future use. As of December 31, 20172021 and 2016,2020, the Company’s intangible assets resulting from the acquisition of VGX, Inovio AS and Bioject Medical Technologies, Inc. ("Bioject"), and additional intangibles including previously capitalized patent costs and license costs, net of accumulated amortization, totaled $6.0$2.6 million and $7.6$3.1 million, respectively.
The determination of the value of intangible assets requires management to make estimates and assumptions that affect the Company’s consolidated financial statements. The Company assesses potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The Company’s judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of its acquired businesses, market conditions and other factors. If impairment is indicated, the Company will reduce the carrying value of the intangible asset to fair value. While current and historical operating and cash flow losses are potential indicators of impairment, the Company believes the future cash flows to be received from its intangible assets will exceed the intangible assets’ carrying value, and accordingly, the Company has not recognized any impairment losses through December 31, 2017.2021.
Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired businesses. Goodwill is reviewed for impairment at least annually at November 30, or more frequently if an event occurs indicating the potential for impairment. During its goodwill impairment review, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance of the Company. If, after assessing the totality of these qualitative factors, the Company determines that it is not more likely than not that the fair value of its reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, the Company proceedswill proceed to perform the two-stepimpairment test for goodwill impairment. The first step involves comparingin which the estimated fair value of the reporting unit is compared with its carrying value, including goodwill. Ifamount, and an impairment charge will be recorded for the amount by which the carrying amount ofexceeds the reporting unit exceeds itsunit's fair value, the Company performs the second step of the goodwill impairment test to determine the amount of loss, which involves comparing the implied fair value of the goodwill to the carrying value of the goodwill. The Company may also elect to bypass the qualitative assessment in a period and elect to proceed to perform the first step of the goodwill impairment test.if any. The Company performed its annual assessment for goodwill impairment as of November 30, 2017,2021, identifying no impairment.
Although there are inherent uncertainties in this assessment process, the estimates and assumptions the Company is using are consistent with its internal planning. If these estimates or their related assumptions change in the future, the Company may be required to record an impairment charge on all or a portion of its goodwill and intangible assets. Furthermore, the Company cannot predict the occurrence of future impairment triggering events nor the impact such events might have on its reported asset values. Future events could cause the Company to conclude that impairment indicators exist and that goodwill or other intangible assets associated with its acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on the Company’s results of operations. See Note 8 for further discussion of the Company’s goodwill and intangible assets.
Income Taxes
The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities along with net operating loss and tax credit carry forwards. The Company records a valuation allowance against its deferred tax assets to reduce the net carrying value to an amount that it believes is more likely than not to be realized. When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the period such determination is made.
Valuation allowances against the Company’s deferred tax assets were $94.0$237.2 million and $113.4$159.7 million at December 31, 20172021 and 2016,2020, respectively. Changes in the valuation allowances, when they are recognized in the provision for income taxes, are included as a component of the estimated annual effective tax rate.
Collaboration Agreements
The Company assesses whether its collaboration agreements are subject to ASC Topic 808: Collaborative Arrangements (“Topic 808”) based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within
the scope of Topic 808 and the Company concludes that its collaboration partner is not a customer, the Company presents such payments as a reduction of research and development expense. If payments from the collaboration partner to the Company represent consideration from a customer, then the Company accounts for those payments within the scope of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“Topic 606”).
Revenue Recognition
The Company recognizes revenuesrevenue when all fourit transfers promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligations. At contract inception, the Company assesses the goods or services agreed upon within each contract and assess whether each good or service is distinct and determine those that areperformance obligations. The Company then recognizes as revenue the amount of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery oftransaction price that is allocated to the products and/or services has occurred; (3)respective performance obligation when (or as) the selling priceperformance obligation is fixed or determinable; and (4) collectability is reasonably assured.satisfied.
Grant revenueCollaborative Arrangements
The Company receivesenters into collaborative arrangements with partners that typically include payment of one or more of the following: (i) license fees; (ii) product supply services; (iii) milestone payments related to the achievement of developmental, regulatory, or commercial goals; and (iv) royalties on net sales of licensed products. Where a portion of non-refundable, grantsupfront fees or other payments received are allocated to continuing performance obligations under available government programs. Government grants towards current expendituresthe terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as revenue when there(or as) the underlying performance obligation is reasonable assurance thatsatisfied.
As part of the accounting for these arrangements, the Company has complied with all conditions necessarymust develop estimates and assumptions that require judgment of management to receivedetermine the grants, collectabilityunderlying stand-alone selling price for each performance obligation which determines how the transaction price is reasonably assuredallocated among the performance obligation. The standalone selling price may include items such as forecasted revenues, development timelines, discount rates and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.
License Fees
If a license to intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the related expenditureslicensee is able to use and benefit from the license. For licenses that are incurred.
License fee and milestone revenue
The Company has adopted a strategy of co-developing or licensing its gene delivery technology for specific genes or specific medical indications. Accordingly,bundled with other promises, the Company has entered into collaborative research and development agreements and has received third-party funding for pre-clinical research and clinical trials. Agreements that contain multiple elements are analyzedutilizes judgment to assess the nature of the combined performance obligation to determine whether the deliverablescombined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
Product Supply Services
Arrangements that include a promise for future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. The Company evaluates whether it is the principal or agent in the arrangement. The Company had determined that it is the principal in the current arrangements as the Company controls the product supply before it is transferred to the customer.
Milestone Payments
At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the agreement canCompany's or its collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achieving such milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration or other revenues and earnings in the period of adjustment.
Royalties
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be separatedthe predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or whether they must(ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its collaborative arrangements.
Grants
The Company accounts for various grant agreements under the contributions guidance under Subtopic 958-605, Not-for-Profit Entities-Revenue Recognition, which is outside the scope of Topic 606, as the government agencies granting the Company funds are not receiving reciprocal value for their contributions. All contributions received from current grant agreements are recorded as a contra-expense as opposed to revenue on the consolidated statement of operations.
Derivative Liabilities
The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives requiring separate recognition in the Company's financial statements. The result of this accounting treatment is that the fair value of the embedded derivative is revalued at each balance sheet date and recorded as a liability, and the change in fair value during the reporting period is recorded in other income (expense) in the consolidated statements of operations. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, unitcompound derivative instrument. The classification of accountingderivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Derivative instrument liabilities are classified in accordance with the FASB's Accounting Standards Update (“ASU”) No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a rightbalance sheet as current or license to use an asset,non-current based on whether or another performance obligation. The delivered item(s) were considered a separate unit of accounting if allnot net-cash settlement of the following criteria were met: (1) the delivered item(s) has value to the customer on a standalone basis; (2) therederivative instrument is objective and reliable evidenceexpected within twelve months of the fair valuebalance sheet date.
Foreign Currency Transactions
The functional and presentation currency of the undelivered item(s); and (3) ifCompany is the arrangement includesU.S. dollar. Transactions denominated in a general right of return relative tocurrency other than the delivered item, delivery or performance offunctional currency are recorded on the undelivered item(s) is considered probable and substantially in the Company's control. If these criteria were not met, the deliverable was combined with other deliverables in the arrangement and accounted for as a combined unit of accounting.
Arrangement consideration is allocatedinitial recognition at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (“VSOE”) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, the Company uses its best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are fixed or determinable. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement.
Upfront license fee payments are recognized upon delivery of the license if facts and circumstances dictate that the license has standalone value from the undelivered items, the relative selling price allocation of the license is equal to or exceeds the upfront license fee, persuasive evidence of an arrangement exists, the price to the collaborator is fixed or determinable, and collectability is reasonably assured. Upfront license fee payments are deferred if facts and circumstances dictate that the license does not have standalone value. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period.
The Company applies ASU No. 2010-17, Revenue Recognition (Topic 605): Milestone Method of Revenue Recognition(“Milestone Method”). Under the Milestone Method, the Company will recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
1. The consideration is commensurate with either the entity's performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity's performance to achieve the milestone,
2. The consideration relates solely to past performance, and
3. The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.
A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity's performance or on the occurrence of a specific outcome resulting from the entity's performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the Company.
Business Combinations
The cost of an acquired business is assigned to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of the estimated fair valuesexchange rate at the date of acquisition. the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate at that date. The cumulative translation adjustment is included in the accumulated other comprehensive income (loss) within the statement of stockholders' equity. Exchange differences are included in general and administrative expenses in the consolidated statement of operations. Non-monetary assets and liabilities measured at cost are remeasured at the exchange rate at the date of the transaction.
Variable Interest Entities (VIE)
The Company assessesevaluates its ownership, contractual and other interests in entities that are not wholly-owned to determine if these entities are VIEs, and, if so, whether the Company is the primary beneficiary of the VIE. In determining whether the Company is the primary beneficiary of a VIE and therefore required to consolidate the VIE, the Company applies a qualitative approach that determines whether it has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the rights to receive benefits from, the VIE that could potentially be significant to that VIE. The Company will continuously perform this assessment, as changes to existing relationships or future transactions may result in the consolidation or deconsolidation of a VIE.
Equity Investments
Under ASC Topic 321, Investments - Equity Securities, the Company must measure equity investments (except those accounted for under the equity method, those that result in consolidation of the investee and certain other investments) at fair value which isand recognize any changes in fair value in the consolidated statement of operations. The Company can elect a measurement alternative for equity investments that do not have readily determinable fair values and do not qualify for the practical expedient in ASC Topic 820, Fair Value Measurement, to estimate fair value using the net asset value per share (or its equivalent). The Company's equity investments that do not have readily determinable fair values and do not qualify for the net asset value practical expedient for estimating fair value are measured at cost, less any impairments, plus or minus changes resulting from observable price that would be received to sell an assetchanges in orderly transactions for identifiable or paid to transfer a liability in an orderly transaction between market participants at the measurement date, using a variety of methods including, but not limited to, an income approach and a market approach such as the estimation of future cash flows of acquired business and current selling prices of similar assets. Fair valueinvestments of the assets acquired and liabilities assumed, including intangible assets, are measured based on the assumptions and estimations with regards to the variable factors such as the amount and timing of future cash flows for the asset or liability being measured, appropriate risk-adjusted discount rates, nonperformance risk, or other factors that market participants would consider. Upon acquisition, the Company determines the estimated economic lives of the acquired intangible assets for amortization purposes, which are based on the underlying expected cash flows of such assets. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that is not individually identified and separately recognized. Actual results may vary from projected results and assumptions used in the fair value assessments.same issuer.
Research and Development Expenses
The Company’s activities have largely consisted of research and development efforts related to developing electroporation delivery technologies, andDNA vaccines, DNA immunotherapies and vaccines.dMABs. Research and development expenses consist of expenses incurred in performing research and development activities including salaries and benefits, facilities and other overhead expenses, clinical trials, contract services and other outside expenses. Research and development expenses are charged to operations as they are incurred. These expenses result from the Company's independent research and development efforts as well as efforts associated with collaborations and licensing arrangements. The Company reviews and
accrues clinical trial expense based on work performed, which relies on estimates of total costs incurred based on patientparticipant enrollment, completion of studies and other events. The Company follows this method since reasonably dependable estimates of the costs applicable to various stages of a research agreement or clinical trial can be made. Accrued clinical trial costs are subject to revisions as trials progress. Revisions are charged to expense in the period in which the facts that give rise to the revision become known. Historically, revisions have not resulted in material changes to research and development expense; however, a modification in the protocol of a clinical trial or cancellation of a trial could result in a charge to the Company's results of operations.
Advance payments for goods or services to be rendered in the future for use in research and development activities are deferred and included in prepaid expenses and other assets. The deferred amounts are expensed as the related goods are delivered or the services are performed.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss for the year by the weighted average number of common shares outstanding during the year. Diluted net loss per share is calculated in accordance with the treasury stock method for the outstanding stock options and restricted stock units and reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock. The dilutive impact of the outstanding Notes and Bonds issued by the Company (discussed in Note 9) has been considered using the "if-converted" method. The calculation of diluted net loss per share requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrantsoptions or other securities and the presumed exercise of such securities are dilutive to net loss per share for the period, an adjustment to net loss used in the calculation is required to remove the change in fair value of the warrantssuch securities from the numerator for the period. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any, underany. For the treasury stock method.
The following tables reconcile the components of the numeratoryears ended December 31, 2021, 2020 and denominator included in the calculations of2019, basic and diluted net loss per share:
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Numerator | | | | | |
| Net loss attributable to Inovio Pharmaceuticals, Inc. | $ | (88,205,772 | ) | | $ | (73,740,339 | ) | | $ | (29,187,606 | ) |
| Adjustment for decrease in fair value of warrant liability | (806,819 | ) | | — |
| | (721,591 | ) |
| Numerator for use in diluted net loss per share | $ | (89,012,591 | ) | | $ | (73,740,339 | ) | | $ | (29,909,197 | ) |
| | | | | | |
| Denominator | | | | | |
| Weighted average number of common shares outstanding | 81,777,493 |
| | 73,214,766 |
| | 68,198,142 |
|
| Effect of dilutive potential common shares from warrants | 140,529 |
| | — |
| | 167,123 |
|
| Denominator for use in diluted net loss per share | 81,918,022 |
| | 73,214,766 |
| | 68,365,265 |
|
| | | | | | |
| Net loss per share, diluted | $ | (1.09 | ) | | $ | (1.01 | ) | | $ | (0.44 | ) |
share are the same, as the assumed exercise or settlement of stock options, restricted stock units and the potentially dilutive shares issuable upon conversion of the Notes and Bonds are antidilutive.
The following table summarizes potential shares of common stock that were excluded from diluted net loss per share calculation because of their anti-dilutive effect:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Options to purchase common stock | 10,488,993 | | | 8,906,624 | | | 9,265,390 | |
| | | | | |
| Service-based restricted stock units | 2,448,868 | | | 2,558,052 | | | 2,069,936 | |
| Performance-based restricted stock units | 663,353 | | | 663,353 | | | — | |
| Convertible preferred stock | 3,309 | | | 3,309 | | | 8,456 | |
| Convertible notes | 3,049,980 | | | 3,049,980 | | | 14,585,653 | |
| August 2019 Bonds | — | | | — | | | 3,799,071 | |
| December 2019 Bonds | — | | | 1,009,450 | | | 1,009,450 | |
| Total | 16,654,503 | | | 16,190,768 | | | 30,737,956 | |
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Options to purchase common stock | 7,694,870 |
| | 6,806,183 |
| | 5,862,364 |
|
| Warrants to purchase common stock | — |
| | 284,091 |
| | 276,813 |
|
| Restricted stock units | 1,234,168 |
| | 798,834 |
| | 230,000 |
|
| Convertible preferred stock | 8,456 |
| | 8,456 |
| | 8,456 |
|
| Total | 8,937,494 |
| | 7,897,564 |
| | 6,377,633 |
|
Leases
Leases are classified as either capital orFor its long-term operating leases. Leases which transfer substantially all ofleases, the benefits and risks incidental to the ownership of assets are accounted for as if there wasCompany recognized an acquisition of anoperating lease right-of-use asset and incurrencean operating lease liability on its consolidated balance sheets. The lease liability is determined as the present value of future lease payments using an obligationestimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the inceptionlease commencement date. The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent. The Company determines the lease term at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise.
Fixed rent expense for the lease. All otherCompany's operating leases are accounted for as operating leases. Inovio’s Plymouth Meeting, PA headquarters and San Diego, CA facility leases, which have escalating payments, are expensedis recognized on a straight-line basis over the term of the lease. The allowance provided bylease and is included in operating expenses on the lessor for non-structural, normal leasehold improvementsconsolidated statements of operations. Variable lease payments including lease operating expenses are considered tenant incentives and are amortized on a straight-line basis over the term of the lease. These leases represent the primary expense and commitment as indicated in Note 11, “Commitments”. Other leases exist for office machinery, such as copiers, wherein lease expense is recorded as incurred.
Stock-Based Compensation
The Company incurs stock-based compensation expense related to restricted stock units ("RSUs") and stock options. The fair value of restricted stock units is determined by the closing price of the Company's common stock reported on the NASDAQNasdaq Global Select Market on the date of grant. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility and expected option life. The Company amortizes the fair value of the awards on a straight-line basis over the requisite vesting period of the awards. Expected volatility is based on historical volatility. The expected life of options granted is based on historical expected life. The risk-free interest rate is based
on the U.S. Treasury yield in effect at the time of grant. The dividend yield of zero is based on the fact that no dividends have been paid historically and none are currently expected to be paid in the foreseeable future. Upon adoption of ASU 2016-09 on January 1, 2017, theThe Company elected to remove the forfeiture rate from the calculation and recorded a cumulative catch-up adjustment to accumulated deficit with a corresponding offset to additional paid-in-capital of $312,000. Previously, the forfeiture rate was based on historical data and the Company recorded stock-based compensation expense only for those awards that were expected to vest.recognizes forfeitures as they occur.
The weighted average assumptions used in the Black-Scholes model for option grants to employees and directors are presented below:
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Risk-free interest rate | 0.91% | | 0.63% | | 2.42% |
| Expected volatility | 93% | | 78% | | 70% |
| Expected life in years | 6 | | 6 | | 6 |
| Dividend yield | — | | — | | — |
| | | | | |
|
| | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Risk-free interest rate | 2.20% | | 0.91% | | 0.99% |
| Expected volatility | 73% | | 76% | | 74% |
| Expected life in years | 6 | | 5 | | 5 |
| Dividend yield | — | | — | | — |
| Forfeiture rate | N/A | | 7% | | 7% |
Stock‑basedThe Company adopted ASU 2018-07 on January 1, 2019, which generally aligned the accounting for stock-based compensation expense related to stock options granted to non‑employees is recognized based on thefor non-employees with that of employees. The fair value of the stock options determinedgranted to non-employees was estimated using the Black‑Scholes optionBlack-Scholes pricing model, as they are earned. model.
The fair value of the non-employee options is remeasured at each reporting period.
Assumptionsweighted average assumptions used in the Black-Scholes model for option grants to non-employees are presented below:
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Risk-free interest rate | 1.45% | | 0.82% | | 2.45% |
| Expected volatility | 87% | | 76% | | 88% |
| Expected life in years | 10 | | 10 | | 10 |
| Dividend yield | — | | — | | — |
|
| | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Risk-free interest rate | 2.4%-2.6% | | 2.3%-2.5% | | 2.1%-2.3% |
| Expected volatility | 97%-102% | | 71%-104% | | 105%-108% |
| Expected life in years | 9-10 | | 7-10 | | 7-10 |
| Dividend yield | — | | — | | — |
Recent Accounting Pronouncements - Recently Adopted
ASU No. 2016-09. In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation-Improvements to Employee Share-Based Payment Accounting. The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this standard were effective for the Company's annual year and first fiscal quarter beginning on January 1, 2017 with early adoption permitted. The Company adopted this guidance as of January 1, 2017 using a modified retrospective transition method. As a result of the adoption of this standard, the Company elected to change its policy from estimating forfeitures to recognizing forfeitures when they occur. The Company recorded an adjustment of $312,000 to accumulated deficit with a corresponding offset to additional paid-in-capital at January 1, 2017. The Company also reversed a deferred tax asset related to the balance of unrecognized excess tax benefits of $1.1 million, with an offsetting adjustment to the valuation allowance.
Recent Accounting PronouncementsPending Adoption
The recent accounting pronouncements below may have a significant effect on the Company's financial statements. Recent accounting pronouncements that are not anticipated to have an impact on or are unrelated to the Company's financial condition, results of operations, or related disclosures are not discussed.
ASU No. 2014-09. 2020-06.In May 2014,August 2020, the FASB issued ASU No. 2014-09, Revenue from 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts with Customers ("Topic 606”in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which amendedsimplifies the existing accounting standards for revenue recognition, outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new standard requires a company to recognize revenue upon transfer of goods or services to a customer atguidance on an amount that reflects the expected consideration to be received in exchange for those goods or services. The amended guidance defines a five-step approach for recognizing revenue, which will require a company to use more judgment and make more estimates than under the current guidance. The Company adopted this new standard effective January 1, 2018, using the modified retrospective transition method. Under this method, the Company’s results will remain as reported and starting in 2018 will be under the new method. The Company has completed its preliminary evaluation of the impact of adoption of Topic 606 on certain of its existing agreements as follows:
Collaboration Agreement with MedImmune
The Company has determined that no cumulative catch-up adjustment is required.
The Company expects theissuer’s accounting for contingent milestone payments to be a significant change in accounting for its licenseconvertible instruments and collaboration agreements. Topic 605 provides guidance specific to the accounting for milestone payments, including the ability to defer the recognition of any milestones until received and, if certain criteria are met, the ability to recognize milestone payments as revenue when received. However, Topic 606 does not contain guidance specific to milestone payments, thereby requiring potential milestone payments to be considered in accordance with the overall model of Topic 606. As a result, revenues from contingent milestone payments may be recognized earlier under Topic 606 than under Topic 605, based on an assessment of the probability of achievement of the milestone and the likelihood of a significant reversal of such milestone revenue at each reporting date. This assessment may result in recognizing milestone revenue before the milestone event has been achieved. In addition, Topic 606 changes guidance regarding the accounting for variable consideration received from licensees, which may impact the estimation of, and determination of the timing of, the related revenue recognition
Grant Agreements
The Company has determined that as of January 1, 2018, accounting for the Company’s various grant agreements falls under the contributions guidance under Subtopic 958-605, Not-for-Profit Entities-Revenue Recognition, which is outside the scope of Topic 606, as the government agencies granting the Company funds are not receiving reciprocal value for their contributions. Beginning on January 1, 2018, all contributions received from current grant agreements will be recorded as a contra-expense as opposed to revenue on the consolidated statement of operations. New grant agreements will be evaluated to determine if they represent contribution transactions or exchange transactions. If the Company performs research and development services with no performance obligations to provide the agency granting the funds reciprocal value for the contributions received, then the consideration received under the grant would result in amounts recognized as contra expense, as opposed to revenue.
ASU No. 2016-01. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amended guidance requires the Company to measure and record equity investments, except those accounted for under the equity method of accounting that have a readily determinable fair value, at fair value and for the Company to recognize the changes in fair valuecontracts in its consolidated statements of operations, instead of recognizing unrealized gains and losses through accumulated other comprehensive income (loss), as currently done under the existing guidance. The amended guidance also changes several disclosure requirements for financial instruments, including the methods and significant assumptions used to estimate fair value. The standardown equity. ASU 2020-06 is effective for annual reporting periodspublic entities for fiscal years beginning after December 15, 2017, including2021, and interim periods within those annual reporting periods. Thefiscal years. Effective January 1, 2022, the Company will adopt this guidance on January 1, 2018 and will make any adjustments to beginning balances through a cumulative-effect adjustment to accumulated deficit on that date. The Company has evaluated the impact of the adoption of this accounting standard and expects it to have no impact on its financial statements and related disclosures.
ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, Leases. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU will be effective for the Company beginning January 1, 2019 with early adoption permitted.2020-06. The Company is currently evaluatingfinalizing its analysis of certain assumptions that will be utilized at the impacttransition and expects the effect of adopting ASU 2020-06 will result in an increase to retained earnings, a decrease to additional paid-in capital, and an increase to the convertible senior notes. The Company expects that interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost.
3. Revenue Recognition and Concentration of Credit Risk
During the years ended December 31, 2021, 2020 and 2019, the Company recognized revenue from various license and other agreements. The following table indicates the percentage of total revenues in excess of 10% with any single customer:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Customer | 2021 Revenue | | % of Total
Revenue | | 2020 Revenue | | % of Total
Revenue | | 2019 Revenue | | % of Total
Revenue |
| | | | | | | | | | | |
| AstraZeneca | $ | 41,659 | | | 2 | % | | $ | 170,587 | | | 2 | % | | $ | 3,194,877 | | | 78 | % |
| Advaccine | — | | | — | | | 5,000,000 | | | 68 | | | — | | | — | |
| Plumbline Life Sciences, Inc. (affiliated entity) | 245,310 | | | 14 | | | 1,370,396 | | | 18 | | | — | | | — | |
| Department of Defense | 754,853 | | | 43 | | | — | | | — | | | — | | | — | |
| All other, including affiliated entities | 732,936 | | | 41 | | | 870,237 | | | 12 | | | 917,053 | | | 22 | |
| Total revenue | $ | 1,774,758 | | | 100 | % | 1 | $ | 7,411,220 | | | 100 | % | | $ | 4,111,930 | | | 100 | % |
Of the total revenue recognized during the year ended December 31, 2021, $46,000 was in deferred revenue as of December 31, 2020. During the year ended December 31, 2020, the Company recognized revenue of $127,000 that was included in deferred revenue at December 31, 2019. Performance obligations are generally satisfied within 12 months of the applicationinitial contract date.
As of this accounting standard update on itsDecember 31, 2021, $3.6 million, or 65%, and $1.9 million, or 34%, of the Company's accounts receivable was attributable to the DoD and the CEPI MERS grant, respectively. As of December 31, 2020, $11.4 million, or 62%, and $7.1 million, or 38%, of the Company's accounts receivable was attributable to the DoD and Advaccine, respectively. There is minimal credit risk with these customers based upon collection history, their size and financial statements and related disclosures.condition. Accordingly, the Company does not consider it necessary to record a reserve for uncollectible accounts receivable.
3.4. Collaborative Agreements
MedImmuneAdvaccine Biopharmaceuticals Suzhou Co., Ltd.
On August 7, 2015, TheDecember 31, 2020, the Company entered into a Collaboration and License Agreement with Advaccine Biopharmaceuticals Suzhou Co., Ltd. (“Advaccine”), which was amended and restated on June 7, 2021 (as amended and restated, the “Advaccine Agreement”). Under the terms of the Advaccine Agreement, the Company granted to Advaccine the exclusive right to develop, manufacture and commercialize the Company’s vaccine candidate INO-4800 within the territories of China, Taiwan, Hong Kong and Macau (referred to collectively as “Greater China”) and 33 additional countries in Asia. Advaccine does not have the right to grant sublicenses, other than to affiliated entities, without the Company’s express prior written consent. As part of the collaboration, Advaccine also granted to the Company a non-exclusive license to certain DNA vaccine manufacturing processes.
The June 2021 amendment relates to the collaboration between the Company and Advaccine to jointly conduct the global Phase 3 segment of the Company’s ongoing Phase 2/3 trial of INO-4800 and expand the existing collaboration to include the planned global Phase 3 trial. The parties will jointly participate in the trial and will equally share the global development costs for the trial, including the Company’s manufacturing costs to supply INO-4800. In certain instances, the Company will have the right to convert the exclusive license to a non-exclusive license in the licensed territories, other than Greater China, unless Advaccine agrees to pay the Company its full share of development costs in excess of a specified maximum. Notwithstanding the foregoing, Advaccine will be fully responsible for conducting the trial in Greater China, including its costs and expenses incurred. The Company will be fully responsible for its costs and expenses, if any, incurred solely as a result of its activities in connection with the performance of the trial in the United States. The parties may continue to conduct clinical trials of INO-4800 outside of the territories covered by the Advaccine Agreement.
In the event that a global purchasing entity desires to enter into a purchase agreement for INO-4800 in both parties’ territories, the parties will enter into good faith negotiations for an arrangement to supply INO-4800 to such entity. In addition, the Company is permitted to enter into an agreement with MedImmune,a global purchasing entity to authorize the entity to conduct a portion of the global biologics research and development armPhase 3 trial in the licensed territory outside of AstraZeneca. Greater China.
Under the agreement, MedImmune acquired exclusive rights to the Company's INO-3112 immunotherapy, renamed as MEDI0457, which targets cancers caused by human papillomavirus (HPV) types 16 and 18. MedImmuneAdvaccine Agreement, Advaccine made an upfront payment of $27.5 million to the Company of $3.0 million in September 2015 and has agreedJanuary 2021. In addition to make additional future development, regulatory and commercial event based payments totaling up to $700 million. MedImmune will fund all development costs associated with INO-3112 immunotherapy. Thethe upfront payment, the Company is entitled to receive up to mid-singlean aggregate of $206.0 million upon the achievement of specified milestones related to double-digit tiered royalties on INO-3112 product sales. Within the broader collaboration,development, regulatory approval and commercialization of INO-4800, including the achievement of specified net sales thresholds for INO-4800 in Greater China and the additional covered territories, if approved. As of December 31, 2020 the Company had earned a $2.0 million milestone payment based on the enrollment of the first participant in the Phase 2 clinical trial for the product in the Advaccine territory. The Company will also be entitled to receive a royalty equal to a high single-digit percentage of annual net sales in each region within the licensed territory, subject to reduction in the event of competition from biosimilar products in a particular region and MedImunnein other specified circumstances. Advaccine’s obligation to pay royalties will attemptcontinue, on a licensed product-by-licensed product basis and region-by-region basis, for ten years after the first commercial sale in a particular region within Greater China or, if later, until the expiration of the last-to-expire patent covering a given licensed product in a given region.
Beginning in the first calendar year following the first commercial sale of INO-4800 in the licensed territory outside of Greater China, Advaccine will pay the Company an annual maintenance fee of $1.5 million for a period of five years, which fee will be creditable against any royalties payable by Advaccine with respect to develop upsales outside of Greater China.
Under the Advaccine Agreement, the Company will supply Advaccine’s clinical requirements of INO-4800 and devices, although Advaccine may manufacture INO-4800 for its clinical use and may procure alternate suppliers. Advaccine is responsible for the manufacture and supply of INO-4800 itself or through a contract manufacturer for commercial use. Upon Advaccine’s reasonable request, the parties may negotiate a separate clinical and/or commercial supply agreement.
The Advaccine Agreement will continue in force on a region-by-region basis until Advaccine has no remaining royalty obligations in such region. Either party may terminate the Advaccine Agreement (i) in the event the other party shall have materially breached its obligations thereunder and such default shall have continued for a specified period after written notice thereof or (ii) upon the bankruptcy or insolvency of the other party. In addition, the Company may terminate the agreement, upon prior written notice, if Advaccine (i) ceases all development or commercialization activities for at least nine months, subject to two additional DNA-based cancer vaccine productscertain exceptions, or (ii) challenges the validity, enforceability or scope of any of the patents licensed by the Company to Advaccine under the Advaccine Agreement, subject to certain conditions. Advaccine may terminate the Advaccine Agreement at any time for convenience upon nine months’ written notice to the Company, if such notice is provided before the first commercial sale of INO-4800 in the licensed territory, or 18 months’ written notice thereafter; provided that the Company may accelerate the effectiveness of such termination to the extent permitted by law.
The Company evaluated the terms of the Advaccine Agreement under ASC Topics 606 and 808 at inception and determined that the contract was with a customer and therefore should be accounted for under ASC Topic 606. The license to INO-4800 in the territories was identified as the only distinct performance obligation on a standalone basis as of the inception of the Advaccine Agreement. The Company concluded that the license was distinct from potential future manufacturing and supply obligations. The Company further determined that the transaction price under the Advaccine Agreement consisted of the $3.0 million upfront payment received in January 2021 plus the initial $2.0 million milestone payment which was achieved upon contract signing. The future potential milestone amounts were not included in the Company's current product pipeline, which MedImmune will have the exclusive rightstransaction price, as they were all determined to develop and commercialize. The Company has assessed event-based payments under the authoritative guidance for research and development milestones and determined that nonebe fully constrained. As part of the event- based payments represent a milestone under the milestone method of accounting.
The Company identified the deliverables at the inceptionevaluation of the agreement. The Company has determined that the license to INO-3112, the license for the research collaboration products with related researchdevelopment and development services and the product development services for INO-3112 individually represent separate units of accounting because each deliverable has standalone basis. The Company considered the provisions of the multiple-element arrangement guidance in determining whether the deliverables outlined above have standalone basis and thus should be treated as separate units of accounting. The Company determined that the license for INO-3112, the license for the research collaboration products with related research and development services, and the product development services for INO-3112 have standalone basis and represent separate units of accounting because the rights conveyed permit MedImmune to perform all efforts necessary to complete development, commercialize and begin selling the product upon regulatory approval. In addition, MedImmune has the appropriate development, regulatory and commercial expertise with products similar to the product licensed under the agreement and has the ability to engage third parties to manufacture the product allowing MedImmune to realize the value of the license without receiving any of the remaining deliverables. MedImmune can also sublicense its license rights to third parties. Also,milestones constraint, the Company determined that the product development services for INO-3112 represents an individual unitachievement of accountingsuch milestones is contingent upon success in future clinical trials and regulatory approvals, each of which is uncertain. Future potential milestone amounts may be recognized as MedImmune could perform such services and/or could acquire these on a separate basis. The best estimated selling prices for these units of accounting were determined based on market conditions,revenue under the terms of comparableAdvaccine Agreement, as well as under other collaborative agreements for similar technology in the pharmaceutical and biotechnology industry, the Company's pricing practices and pricing objectives and the nature of the research and development services toarrangements, if unconstrained. Reimbursable program costs will be provided. While market data andrecognized proportionately with the cost-to-recreate method under the cost approach were considered throughout the valuation process, ultimately, the estimated selling pricesperformance of the licenses were determined utilizing two formsunderlying services or delivery of drug supply and are excluded from the relief from royalty method undertransaction price.
Under Topic 606, the income approach. The arrangement considerationentire transaction price of $5.0 million was allocated to the deliverables based onlicense performance obligation. The Company determined that as of December 31, 2020, the relative selling price method.
The amount allocable totransfer of technology has occurred for the delivered unit or units of accounting is limited to the amount that is considered fixeduse and determinable and is not contingent upon the delivery of additional items or meeting other specified performance conditions. Based on the resultsbenefit of the Company's analysis,license and accordingly, the $27.5performance obligation was fully satisfied. The Company accordingly recognized $5.0 million up-front payment was allocated as follows: $15.0 million to the product license to INO-3112 and $12.5 million for the license to the research collaboration products and related research and developments services. The amount allocated to the license for INO-3112 was recognized asin revenue under collaborative
research and development arrangements on the consolidated statement of operations during the year ended December 31, 2015 as this was determined to be earned upon the granting of the license and delivery of the related knowledge and data. The remaining amount related to the research collaboration products and related research and development services of $12.5 million was recognized as revenue under collaboration research and development arrangements during the quarter ended June 30, 2017, upon selection of the first research collaboration product candidate by MedImmune. The Company believes that no substantive value related to the research collaboration products license and research services was transferred to MedImmune prior to their selection of the first research collaboration product since there was no economic benefit from the research unless such product candidate was selected. Therefore, the Company believes the license for the research collaboration products was delivered and the research services were completed upon the selection of the product candidate by MedImmune in June 2017. The Company performs certain product development services for INO-3112 and is reimbursed by MedImmune for these services. The Company recognizes revenues associated with these services as revenues under collaborative arrangements as the related services are performed and according to the relative selling price method of the allocable arrangement consideration. In December 2017, the Company received a $7.0 million milestone payment from MedImmune triggered by the initiation of the Phase 2 portion of an ongoing clinical trial under the agreement. This amount was recognized in full as revenue for the year ended December 31, 2017. During the years ended December 31, 2017 and 2016, the Company recognized revenues of $22.3 million and $1.5 million from MedImmune, respectively.2020. As of December 31, 2017 and 2016, the Company has a deferred revenue balance of $1.1 million and $13.7 million, respectively, related to the Agreement. As of December 31, 2017 and 2016,2020, the Company had an accounts receivable balance of $1.7$7.1 million and $1.2 million, respectively, related to thefrom Advaccine. There has been no additional revenue earned under this collaboration agreement with MedImmune.Advaccine for the year ended December 31, 2021.
Roche
In September 2013, the Company entered into a Collaborative, License, and Option Agreement with Roche and received an upfront payment of $10.0 million. The parties agreed to co-develop multi-antigen DNA immunotherapies targeting prostate cancer and hepatitis B.
On November 14, 2014, Roche provided notice to the Company that it would be partially terminating the agreement with respect to the development of the Company’s DNA immunotherapy targeting prostate cancer. The termination was effective in February 2015. All of Roche’s rights to the Company’s DNA immunotherapy targeting prostate cancer, including the right to license the product to other parties, have been returned to the Company.
On July 28, 2016, Roche provided notice to the Company that it would be discontinuing the agreement and its development of INO-1800, the Company’s DNA immunotherapy against the hepatitis B virus. The termination was effective in October 2016. All of Roche’s rights to INO-1800, including the right to license the product to other parties, have been returned to the Company. In February 2017, the Company received full payment of $8.5 million from Roche for its past and future obligations associatedconnection with the termination ofJune 2021 amendment, the agreement.
The Company identified the deliverables at the inception of the agreement. The Company determined that the licenseGlobal Phase 3 trial component of the agreement is a collaboration and not a contract with a customer and therefore concluded to account for the targets, the option right to license additional vaccines, research andJune 2021 amendment under ASC Topic 808. Reimbursements from Advaccine will be recognized as contra-research development services, manufacturing and drug supply, and participation in the joint steering committee individually represented separate units of accounting because each deliverable had standalone value. The amount allocable to the delivered unit or units of accounting using the best estimated selling price was limited to the amount that was considered fixed and determinable and was not contingent upon the delivery of additional items or meeting other specified performance conditions.
Basedexpense on the resultscondensed consolidated statement of the Company's analysis, the $10.0 million up-front payment was allocated as follows: $8.4 million to the license to the targets, $1.5 million to the option rightoperations once earned and $155,000 to the joint steering committee obligation. The amounts allocated to the licenses for the targets was recognized as revenue in 2013 as these were determined to be earned upon the granting of the license and delivery of the related knowledge and data. The Company recognized revenues associated with research and development services and manufacturing and drug supply as revenues under collaborative arrangements as the related services were performed and according to the relative selling price method of the allocable arrangement consideration. collectibility is assured.During the yearsyear ended December 31, 2017 and 2016, the Company recognized revenues of $6.1 million and $4.9 million from Roche, respectively. As of December 31, 2017 and 2016, the Company has an accounts receivable balance of $0 and $2.4 million, respectively, related to the Roche Agreement.
DARPA- Ebola
In April 2015,2021, the Company received a grantfunding of $4.5 million from the Defense Advanced Research Projects Agency ("DARPA") to lead a collaborative team to develop multiple treatmentAdvaccine that was recorded as contra-research and prevention approaches against Ebola. The consortium, led by the Company, is taking a multi-faceted approach to develop products to prevent and treat Ebola infection. The award covers pre-clinical development costs as well as good manufacturing practice manufacturing costs and the Phase 1 clinical study costs. The funding period is over two years and covers a base award of $19.6 million and an option award of $24.6 million, which was exercised in September 2015. The development proposal includes a second option of $11.1 million to support additional product supply and clinical development activities. The options are contingent upon the successful completion of certain pre-
clinical development milestones. During the years ended December 31, 2017 and 2016, the Company recognized revenues of $9.8 million and $22.4 million, respectively, from DARPA related to the grant. As of December 31, 2017 and 2016, the Company had a deferred revenue balance of $149,000 and $1.2 million, respectively, related to the DARPA grant. As of December 31, 2017 and 2016, the Company had an accounts receivable balance of $4.1 million and $9.2 million, respectively, related to the DARPA grant.expense.
ApolloBio Corporation
On December 29, 2017, the Company entered into an Amended and Restated License and Collaboration Agreement or the ApolloBio Agreement,(the "ApolloBio Agreement"),with ApolloBio Corporation or ApolloBio.("ApolloBio"), with an effective date of March 20, 2018. Under the terms of the ApolloBio Agreement, the Company has granted to ApolloBio the exclusive right to develop and commercialize VGX-3100, its DNA immunotherapy product candidate designed to treat pre-cancers caused by HPV, within the territories of China, Hong Kong, Macao and Taiwan. The territory may be expanded to include Korea in the event that no patent covering VGX-3100 issues in China within the three years following the Effective Date of the ApolloBio Agreement, as defined below.agreed upon territories.
Under the ApolloBio Agreement, ApolloBio will pay the Company anreceived proceeds of $19.4 million in March 2018, which comprised the upfront payment of $23.0 million less $2.2 million in foreign income taxes and such$1.4 million in certain foreign non-income taxes. The foreign income taxes were recorded as a provision for income taxes and the foreign non-income taxes were recorded as a general and administrative expense, on the consolidated statement of operations. The Company also incurred advisory fees of $960,000 in connection with receiving the upfront payment isfrom ApolloBio. These fees were determined to be made within three business days followingincremental costs of obtaining the date of approval ofcontract. The Company applied the practical expedient that permits a company to expense incremental
costs to obtain a contract when the expected amortization period is one year or less and recorded the fees in general and administrative expense during the quarter ended March 31, 2018. No additional advisory fees are due related to the ApolloBio Agreement by ApolloBio’s board of directors and shareholders, or the Effective Date, which the Company expects to occur in the first quarter of 2018. In the event that such upfront payment is not made on or before April 7, 2018, the Company has the right to terminate the Agreement in its entirety.Agreement.
In addition to the upfront payment, the Company is entitled to receive up to an aggregate of $20.0 million, less required income, withholding or other taxes, upon the achievement of specified milestones related to the regulatory approval of VGX-3100 in accordance with the United States, China and Korea.ApolloBio Agreement. In the event that VGX-3100 is approved for marketing, the Company will be entitled to receive royalty payments based on a tiered percentage of annual net sales, with such percentage being in the low- to mid-teens, subject to reduction in the event of generic competition in a particular territory. ApolloBio’s obligation to pay royalties will continue for 10 years after the first commercial sale in a particular territory or, if later, until the expiration of the last-to-expire patent covering the licensed products in the specified territory.
The ApolloBio Agreement will continue in force until ApolloBio has no remaining royalty obligations. Either party may terminate the ApolloBio Agreement in the event the other party shall materially breach or default in the performance of its material obligations thereunder and such default continues for a specified period after written notice thereof. In addition, ApolloBio may terminate the ApolloBio Agreement at any time beginning one year after the effective date for any reason upon 90 days written notice to the Company.
4. Investments
Investments at December 31, 2017The Company evaluated the terms of the ApolloBio Agreement under ASC Topic 606, and 2016the license to VGX-3100 in the territories was identified as the only distinct performance obligation on a standalone basis as of the inception of the agreement. The Company concluded that the license was distinct from potential future manufacturing and supply obligations. The Company further determined that the transaction price under the agreement consisted of mutual funds, United States corporate debt securities and an equity investmentthe $23.0 million upfront payment. The future potential milestone amounts were not included in the Company's affiliated entity PLS. Thetransaction price, as they were all determined to be fully constrained. As part of the evaluation of the development and regulatory milestones constraint, the Company classifies all investments as available-for-sale, asdetermined that the saleachievement of such investmentsmilestones is contingent upon success in future clinical trials and regulatory approvals, each of which is uncertain at this time. Future potential milestone amounts may be required prior to maturity to implement management strategies. Available-for-sale securities are recorded at fair value, based on current market valuations. Unrealized gainsrecognized as revenue under the ApolloBio Agreement, as well as under other collaborative research and losses on available-for-sale securitiesdevelopment arrangements, if unconstrained. Reimbursable program costs will be recognized proportionately with the performance of the underlying services or delivery of drug supply and are excluded from earningsthe transaction price. As of December 31, 2021 there have been no significant reimbursable program costs under the ApolloBio Agreement.
Under Topic 606, the entire transaction price of $23.0 million was allocated to the license performance obligation. The Company determined that during the quarter ended June 30, 2018, the transfer of technology occurred and are reportedaccordingly, the performance obligation was fully satisfied.
AstraZeneca
On August 7, 2015, the Company entered into a license and collaboration agreement with MedImmune, the global biologics research and development arm of AstraZeneca ("AstraZeneca"). Under the agreement, AstraZeneca acquired exclusive rights to the Company's INO-3112 immunotherapy, renamed as a separate componentMEDI0457, which targets cancers caused by human papillomavirus (HPV) types 16 and 18, with the ability to sublicense those license rights. AstraZeneca made an upfront payment of other comprehensive loss until realized. Realized gains$27.5 million to the Company in September 2015. AstraZeneca was obligated to make potential future development and losses are includedregulatory event-based payments to the Company and potential future commercial event-based payments, in non-operating other income (expense)each case upon the achievement of specified milestones related to MEDI0457 set forth in the license and collaboration agreement. AstraZeneca was funding all development costs associated with MEDI0457 immunotherapy. The Company was entitled to receive up to mid-single to double-digit tiered royalties on MEDI0457 product sales. Under the consolidated statement of operations and are derived usingagreement, AstraZeneca could also request the specific identification method for determiningCompany to provide certain clinical manufacturing at an agreed upon price. The Company determined these options did not represent material rights at the costinception of the securities sold. During the years ended December 31, 2017 and 2016, net realized loss on investments of $215,000 and $139,000 was recorded, respectively. The Company assessed each of its investments on an individual basis to determine if any decline in fair value was other-than-temporary. There were no impairments considered to be other-than-temporary during the years ended December 31, 2017 and 2016. Interest and dividends on investments classified as available-for-sale are included in interest and other income, net, in the consolidated statements of operations. agreement.
As of December 31, 2017, the Company had 42 available-for-sale securitiesrecognized all of the $27.5 million upfront payment as revenue, as all identified material performance obligations had been met with respect to that payment. In both December 2018 and March 2019, the Company recognized as revenue $2.0 million in milestone payments from AstraZeneca triggered by AstraZeneca’s initiation of the Phase 2 portion of ongoing clinical trials in the second and third major indication, respectively, under the agreement.
On October 28, 2021, AstraZeneca provided notice to the Company to terminate the INO-3112 / MEDI0457 development program under the agreement. As a gross unrealized loss position,result of the termination, the agreement has been terminated in its entirety and the Company has no further obligations under the collaboration.
Coalition for Epidemic Preparedness Innovations
On April 11, 2018, the Company entered into agreements with CEPI, pursuant to which 16the Company intends to develop vaccine candidates against Lassa fever and MERS. The goal of the collaboration between the Company and CEPI is to conduct research and development so that investigational stockpiles will be ready for clinical efficacy trial testing during potential
disease outbreaks. The agreements with CEPI contemplate preclinical studies, as well as Phase 1 and Phase 2 clinical trials, occurring over multiple years. As part of the arrangement between the parties, CEPI has agreed to fund up to an aggregate of $56 million of costs over a five-year period for preclinical studies, as well as planned Phase 1 and Phase 2 clinical trials, to be conducted by the Company and collaborators, with funding from CEPI based on the achievement of identified milestones. During the years ended December 31, 2021 and 2020, the Company received funding of $10.0 million and $6.4 million, respectively, related to these grants and recorded those payments as contra-research and development expense. As of December 31, 2021, the Company had an accounts receivable balance of $1.9 million and recorded $23,000 as deferred grant funding on the consolidated balance sheet related to these CEPI grants.
In January 2020, CEPI awarded the Company a grant of up to $9.0 million to support preclinical and clinical development of INO-4800 through Phase 1 human testing in the United States. In April 2020, CEPI awarded the Company a grant of $6.9 million to work with the International Vaccine Institute ("IVI") and the Korea National Institute of Health ("KNIH") to conduct clinical trials of INO-4800 in South Korea, a grant of $5.0 million to accelerate development of the Company's next-generation intradermal electroporation device, known as CELLECTRA® 3PSP, for the intradermal delivery of INO-4800, and a grant of $1.3 million to support large-scale manufacturing of INO-4800. During the years ended December 31, 2021 and 2020, the Company received funding of $6.9 million and $10.0 million, respectively, from CEPI related to these grants for INO-4800 and recorded such amounts as contra-research and development expense. As of December 31, 2021 the Company had $1.8 million recorded as deferred grant funding on the consolidated balance sheet related to the CEPI grants related to INO-4800.
Bill & Melinda Gates Foundation
In October 2018, the Bill & Melinda Gates Foundation (“Gates”) awarded and funded the Company a grant of $2.2 million to advance the development of dMAbs to address issues in infectious disease prevention and therapy. This technology has high relevance for the control of influenza and HIV. This next-generation approach to the delivery of monoclonal antibodies would make the technology accessible to low and middle-income countries. In August 2019, Gates funded an additional $1.1 million for the project. During the years ended December 31, 2021 and 2020, the Company recorded $182,000 and $463,000, respectively, as contra-research and development expense related to the Gates dMAb grant. As of December 31, 2021, the Company had $384,000 recorded as deferred grant funding on the consolidated balance sheet related to the grant.
In March 2020, Gates awarded and funded the Company a grant of $5.0 million to accelerate the development of the CELLECTRA® 3PSP device for the intradermal delivery of INO-4800. During the years ended December 31, 2021 and 2020, the Company recorded $893,000 and $4.1 million, respectively, as contra-research and development expense related to this Gates grant.
Department of Defense (DoD)
In June 2020, the Company entered into an Other Transaction Authority for Prototype Agreement (the “OTA Agreement”) with the DoD to fund the Company’s efforts in developing the CELLECTRA® 3PSP device and associated arrays to be used for delivery of INO-4800 against COVID-19. Under the OTA Agreement, the Company intends to develop the CELLECTRA® 3PSP device and arrays for use in the U.S. military population and the U.S. population as a whole, subject to approval of the device by the U.S. Food and Drug Administration (the “FDA”). The OTA Agreement is also expected to support large-scale manufacturing of the CELLECTRA® 3PSP device, as well as large-scale DNA plasmid production for manufacture and supply of a specified number of doses of INO-4800 in support of FDA approval of the device. The total unrealized lossamount of $108,000 werefunding being made available to the Company under the OTA Agreement is $54.5 million. The Company has determined that the OTA Agreement should be considered under Subtopic 958-605, Not-for-Profit Entities-Revenue Recognition, which is outside the scope of Topic 606, as the government agency granting the Company funds is not receiving reciprocal value for their contributions. The Company will record contra-research development expense on the consolidated statement of operations in such positionthe same period that the underlying expenses are incurred.
Additionally, in June 2020, the Company was awarded a fixed-price contract (the “Procurement Contract”) from the DoD for longer than 12 months.the purchase of the Company’s intradermal CELLECTRA® 2000 device and accessories. The CELLECTRA® 2000 devices will be used to inject INO-4800 in the Company’s later-stage clinical trials. The total purchase price under the Procurement Contract is expected to be approximately $10.7 million. As of December 31, 2021, the Company determined that the Procurement Contract falls under the scope of ASC Topic 606 as the contract is with a customer and the Company is able to satisfy its obligations under the arrangement as the Phase 3 clinical trials of INO-4800 are underway. Performance obligations under the Procurement Contract consist of the delivery of a specified number of CELLECTRA® 2000 devices and accessories. The total transaction price was allocated to the individual performance obligations based on the determined standalone selling price for the devices and accessories. The Company will recognize revenue on the consolidated statement of operations upon shipment of the purchased devices and accessories. During the year ended December 31, 2021, the Company recorded revenue of $755,000 from the Procurement Contract. This revenue was recognized at a 100% margin as the sale was for products whose related inventory had previously been written down to zero.
During the years ended December 31, 2021 and 2020, the Company recorded $27.1 million and $21.2 million, respectively, as contra-research and development expense related to the OTA agreement. As of December 31, 2021, the Company had an accounts receivable balance of $3.6 million on the consolidated balance sheet from the DoD. As of December 31, 2021, the Company had $2.3 million recorded as deferred grant funding on the consolidated balance sheet related to the Procurement Contract.
In April 2021, the Company announced that the DoD had notified the Company that it will discontinue funding for the Phase 3 segment of the Company's clinical trial of INO-4800 in the United States, while continuing funding under the OTA Agreement and Procurement Contract.
5. Short-term Investments and Fair Value Measurements
The following is a summary of available-for-sale securities as of December 31, 20172021 and 2016:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | As of December 31, 2021 |
| | Contractual
Maturity (in years) | Cost | | Gross Unrealized
Gains | | Gross Unrealized
Losses | | Fair Market Value |
| Mutual funds | --- | | $ | 192,966,772 | | | $ | 87,069 | | | $ | (1,614,411) | | | $ | 191,439,430 | |
| U.S. treasury securities | Less than 1 | | 94,193,441 | | | — | | | (9,921) | | | 94,183,520 | |
| Commercial paper | Less than 1 | | 39,967,853 | | | — | | | — | | | 39,967,853 | |
| Certificates of deposit | Less than 1 | | 2,976,210 | | | 15,618 | | | (338) | | | 2,991,490 | |
| U.S. agency mortgage-backed securities | * | | 1,608,137 | | | 4,508 | | | (23,998) | | | 1,588,647 | |
| | | | | | | | | |
| | | $ | 331,712,413 | | | $ | 107,195 | | | $ | (1,648,668) | | | $ | 330,170,940 | |
|
| | | | | | | | | | | | | | | | | |
| | | | As of December 31, 2017 |
| | Contractual Maturity (in years) | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Market Value |
| Mutual funds | --- | | $ | 68,776,165 |
| | $ | 42,097 |
| | $ | (252,373 | ) | | $ | 68,565,889 |
|
| US corporate debt securities | Less than 2 | | 35,210,121 |
| | 3,032 |
| | (140,198 | ) | | 35,072,955 |
|
| Investment in affiliated entity (PLS) | --- | | — |
| | 2,325,079 |
| | — |
| | 2,325,079 |
|
| Total investments | | | $ | 103,986,286 |
| | $ | 2,370,208 |
| | $ | (392,571 | ) | | $ | 105,963,923 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | As of December 31, 2020 |
| | Contractual
Maturity (in years) | Cost | | Gross Unrealized
Gains | | Gross Unrealized
Losses | | Fair Market Value |
| Mutual funds | --- | | $ | 153,177,675 | | | $ | 2,339,639 | | | $ | (644,140) | | | $ | 154,873,174 | |
| Certificates of deposit | Less than 1 | | 3,000,000 | | | 26,260 | | | (10,000) | | | 3,016,260 | |
| U.S. agency mortgage-backed securities | * | | 3,062,256 | | | — | | | (36,755) | | | 3,025,501 | |
| | | | | | | | | |
| | | $ | 159,239,931 | | | $ | 2,365,899 | | | $ | (690,895) | | | $ | 160,914,935 | |
*No single maturity date. |
| | | | | | | | | | | | | | | | | |
| | | | As of December 31, 2016 |
| | Contractual Maturity (in years) | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Market Value |
| Mutual funds | --- | | $ | 60,883,065 |
| | $ | 94,374 |
| | $ | (387,693 | ) | | $ | 60,589,746 |
|
US corporate debt securities
| Less than 2 | | 25,098,122 |
| | 6,853 |
| | (65,309 | ) | | 25,039,666 |
|
| Investment in affiliated entity (PLS) | --- | | — |
| | 3,777,510 |
| | — |
| | 3,777,510 |
|
| Total investments | | | $ | 85,981,187 |
| | $ | 3,878,737 |
| | $ | (453,002 | ) | | $ | 89,406,922 |
|
5. Marketable Securities and Fair Value Measurements
The guidance regarding fair value measurements establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets that are accessible at the measurement date; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company did not have any transfer of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value hierarchy duringDuring the years ended December 31, 20172021 and 2016.2020, the Company recorded gross realized gain on investments of $394,000 and $744,000, respectively, and gross realized loss on investments of $399,000 and $1.3 million, respectively. During the years ended December 31, 2021 and 2020, the Company recorded net unrealized (loss) gain on available-for-sale equity securities of $(3.2) million and $1.7 million, respectively. No material balances were reclassified out of accumulated other comprehensive income (loss) for the years ended December 31, 2021, 2020 and 2019. Interest and dividends on investments classified as available-for-sale are included in interest income in the consolidated statements of operations. As of December 31, 2021, the Company had 24 available-for-sale securities in a gross unrealized loss position, of which 6 with an aggregate total unrealized loss of $766,000 were in such position for longer than 12 months.
The Company periodically reviews its portfolio of available-for-sale debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For the debt securities where the fair value of the investment is less than the amortized cost basis, the Company has assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on available-for-sale debt securities as of December 31, 2021 were primarily due to changes in interest rates, and not due to increased credit risks associated with specific securities. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. Based on the credit quality of the available-for-sale debt securities that are in an unrealized loss position, and the Company’s estimates of future cash flows to be collected from those securities, the Company believes the unrealized losses are not credit losses. Accordingly, at December 31, 2021, the Company has not recorded an allowance for credit losses related to its available-for-sale debt securities.
The following table presents the Company’s assets and liabilities that arewere measured at fair value on a recurring basis, and are determined using the following inputs as of December 31, 2017:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at |
| | December 31, 2021 |
| | Total | | Quoted Prices
in Active Markets
(Level 1) | | Significant
Other Unobservable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Short-term investments | | | | | | | |
| Mutual funds | $ | 191,439,430 | | | $ | 191,439,430 | | | $ | — | | | $ | — | |
| U.S. treasury securities | 94,183,520 | | | 94,183,520 | | | — | | | — | |
| Commercial paper | 39,967,853 | | | — | | | 39,967,853 | | | — | |
| Certificates of deposit | 2,991,490 | | | — | | | 2,991,490 | | | — | |
| U.S. agency mortgage-backed securities | 1,588,647 | | | — | | | 1,588,647 | | | — | |
| | | | | | | |
| Total short-term investments | 330,170,940 | | | 285,622,950 | | | 44,547,990 | | | — | |
| | | | | | | |
| Investment in affiliated entity | 3,906,796 | | | 3,906,796 | | | — | | | — | |
| Total assets measured at fair value | $ | 334,077,736 | | | $ | 289,529,746 | | | $ | 44,547,990 | | | $ | — | |
|
| | | | | | | | | | | | | | | |
| | Fair Value Measurements at |
| | December 31, 2017 |
| | Total | | Quoted Prices in Active Markets (Level 1) | | Significant Other Unobservable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Assets: | | | | | | | |
| Money market funds | $ | 9,843,482 |
| | $ | 9,843,482 |
| | $ | — |
| | $ | — |
|
| Mutual funds | 68,565,889 |
| | — |
| | 68,565,889 |
| | — |
|
| US corporate debt securities | 35,072,955 |
| | — |
| | 35,072,955 |
| | — |
|
| Investments in affiliated entities | 11,394,480 |
| | 11,394,480 |
| | — |
| | — |
|
| Total assets | $ | 124,876,806 |
| | $ | 21,237,962 |
| | $ | 103,638,844 |
| | $ | — |
|
| Liabilities: | | | | | | | |
| Common stock warrants | $ | 360,795 |
| |
|
| | $ | — |
| | $ | 360,795 |
|
| Total liabilities | $ | 360,795 |
| |
|
| | $ | — |
| | $ | 360,795 |
|
The following table presents the Company’s assets and liabilities that arewere measured at fair value on a recurring basis, and are determined using the following inputs as of December 31, 2016:2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at |
| | December 31, 2020 |
| | Total | | Quoted Prices
in Active Markets
(Level 1) | | Significant
Other Unobservable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) |
| | | | | | | |
| Cash and cash equivalents | | | | | | | |
| U.S. treasury securities | $ | 59,996,800 | | | $ | 59,996,800 | | | $ | — | | | $ | — | |
| | | | | | | |
| Short-term investments | | | | | | | |
| | | | | | | |
| Mutual funds | 154,873,174 | | | 154,873,174 | | | — | | | — | |
| Certificates of deposit | 3,016,260 | | | — | | | 3,016,260 | | | — | |
| U.S. agency mortgage-backed securities | 3,025,501 | | | — | | | 3,025,501 | | | — | |
| Total short-term investments | 160,914,935 | | | 154,873,174 | | | 6,041,761 | | | — | |
| | | | | | | |
| Investments in affiliated entity | 4,460,366 | | | 4,460,366 | | | — | | | — | |
| | | | | | | |
| Total assets measured at fair value | $ | 225,372,101 | | | $ | 219,330,340 | | | $ | 6,041,761 | | | $ | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| | Fair Value Measurements at |
| | December 31, 2016 |
| | Total | | Quoted Prices in Active Markets (Level 1) | | Significant Other Unobservable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Assets: | | | | | | | |
| Money market funds | $ | 10,300,813 |
| | $ | 10,300,813 |
| | $ | — |
| | $ | — |
|
| Mutual funds | 60,589,746 |
| | — |
| | 60,589,746 |
| | — |
|
| US corporate debt securities | 25,039,666 |
| | — |
| | 25,039,666 |
| | — |
|
| Investments in affiliated entities | 19,829,575 |
| | 19,829,575 |
| | — |
| | — |
|
| Total assets | $ | 115,759,800 |
| | $ | 30,130,388 |
| | $ | 85,629,412 |
| | $ | — |
|
| Liabilities: | | | | | | | |
| Common stock warrants | $ | 1,167,614 |
| | $ | — |
| | $ | — |
| | $ | 1,167,614 |
|
| Total liabilities | $ | 1,167,614 |
| | $ | — |
| | $ | — |
| | $ | 1,167,614 |
|
Level 1 assets at December 31, 20172021 and 20162020 consisted of money marketmutual funds and U.S. treasury securities held by the Company that are valued at quoted market prices, as well as the Company’s investmentsinvestment in GeneOneits affiliated entity, PLS. The Company accounts for its investment in 597,808 common shares of PLS based on the closing price of the shares on the Korea New Exchange Market on the applicable balance sheet date. Unrealized gains and PLS (see Note 12 for additional information aboutlosses on the Company’s investmentsCompany's equity securities are reported in thesethe consolidated statement of operations as unrealized gain (loss) on available-for-sale equity securities or as a gain (loss) on investment in affiliated entities).entity.
Level 2 assets at December 31, 2017 and 20162021 consisted of US corporate debtcommercial paper, certificates of deposit and U.S. agency mortgage-backed securities and mutual funds held by the Company that are initially valued at the transaction price and subsequently valued, at the end of each reporting period, typically utilizing market observable data. Level 2 assets at December 31, 2020 consisted of certificates of deposit and U.S. agency mortgage-backed securities. The Company obtains the fair value of its Level 2 assets from a
professional pricing service, which may use quoted market prices for identical or comparable instruments, or inputs other than quoted prices that are observable either directly or indirectly. The professional pricing service gathers quoted market prices and observable inputs from a variety of industry data providers. The valuation techniques used to measure the fair value of the Company's Level 2 financial instruments were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models such as discounted cash flow techniques. The Company validates the quoted market prices provided by the primary pricing service by comparing theirthe service's assessment of the fair values of the Company's investment portfolio balance against the fair values of the Company's investment portfolio balance obtained from an independent source.
There were no Level 3 assets held as of December 31, 2017. Level 32021 and 2020.
6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets held at December 31, 20162021 and 2020 consisted of a warrant received by the Company in 2012 to purchase shares of common stock of OncoSec Medical Incorporated (“OncoSec”). This warrant expired unexercised in March 2017 and was considered to have zero value as of December 31, 2016. Another warrant to purchase shares of common stock of OncoSec held by the Company expired unexercised in September 2016.
The Company recorded a change in fair value of the OncoSec warrants of $0, $(6,000) and $(544,000) for the years ended December 31, 2017, 2016 and 2015, respectively. The change in fair value is reflected in the Company's consolidated statement of operations as a component of change in fair value of common stock warrants.
Level 3 liabilities held as of December 31, 2017 and 2016 consisted of common stock warrant liabilities associated with warrants to purchase the Company's common stock issued in March 2013. If unexercised, the warrants will expire in September 2018. During the years ended December 31, 2017 and 2016, none of these warrants were exercised. See Note 10 for additional information about the warrants.
As of December 31, 2017 the Company had a $361,000 common stock warrant liability. The Company reassesses the fair value of the common stock warrants at each reporting date utilizing a Black-Scholes pricing model. Inputs used in the pricing model include estimates of stock price volatility, expected warrant life and risk-free interest rate. The Company develops its estimates based on historical data. The assumptions used to estimate the fair value of common stock warrants at December 31, 2017 and 2016 are presented below:
following:
| | | | | | | | | | | |
| 2021 | | 2020 |
| Prepaid manufacturing expenses (a) | $ | 27,474,159 | | | $ | 35,661,947 | |
| Other prepaid expenses | 11,362,832 | | | 4,695,509 | |
| | | |
| $ | 38,836,991 | | | $ | 40,357,456 | |
|
| | | |
| | Year Ended December 31, |
| | 2017 | | 2016 |
| Risk-free interest rate | 1.75% | | 1.1% |
| Expected volatility | 55% | | 61% |
| Expected life in years | 0.70 | | 1.70 |
| Dividend yield | — | | — |
Changes(a)Includes prepaid manufacturing expenses related to deposits made to reserve capacity for the manufacture of INO-4800. The Company deposited a total of $50.0 million to reserve manufacturing capacity, of which $30.0 million was paid in these assumptions as well as fluctuations2020 and the remainder paid in the Company's stock price between the valuation dates can have a significant impact on the fair valuefirst quarter of the common stock warrant liability. As a result of2021. Of these calculations, the Company recorded a decreasedeposits, $35.0 million was included in fair value of $(807,000), $(134,000) and $(722,000) for the years ended December 31, 2017, 2016 and 2015, respectively. The change in fair value is reflected in the Company's consolidated statement of operations as a component of change in fair value of common stock warrants.
The following table presents the changes in fair value of the Company’s total Level 3 financial liabilities for the years ended December 31, 2017 and 2016:
|
| | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 |
| Balance at beginning of year | $ | 1,167,614 |
| | $ | 1,301,138 |
|
| Decrease in fair value included in change in fair value of common stock warrants | (806,819 | ) | | (133,524 | ) |
| Balance at end of year | $ | 360,795 |
| | $ | 1,167,614 |
|
6. Major Customers and Concentration of Credit Risk
|
| | | | | | | | | | | | | | | | | | | | |
| Customer | 2017 Revenue | | % of Total Revenue | | 2016 Revenue | | % of Total Revenue | | 2015 Revenue | | % of Total Revenue |
| MedImmune | $ | 22,269,773 |
| | 53 | % | | $ | 1,518,639 |
| | 4 | % | | $ | 16,037,731 |
| | 40 | % |
| DARPA | 9,983,927 |
| | 24 |
| | 26,602,183 |
| | 75 |
| | 11,582,623 |
| | 28 |
|
| Roche | 6,107,254 |
| | 14 |
| | 4,917,929 |
| | 14 |
| | 10,778,688 |
| | 27 |
|
| NIAID | — |
| | — |
| | 118,171 |
| | — |
| | 901,475 |
| | 2 |
|
| GeneOne (affiliated entity) | 551,208 |
| | 1 |
| | 1,188,432 |
| | 4 |
| | 450,000 |
| | 1 |
|
| All other | 3,307,924 |
| | 8 |
| | 1,023,007 |
| | 3 |
| | 821,594 |
| | 2 |
|
| Total revenue | $ | 42,220,086 |
| | 100 | % | | $ | 35,368,361 |
| | 100 | % | | $ | 40,572,111 |
| | 100 | % |
During the years ended December 31, 2017, 2016 and 2015, the Company recognized revenue from various license fees, collaborative research and development agreements, grants and government contracts. As ofexpenses in December 31, 2017, $4.1 million, or 69%, and $1.7 million, or 28%, of the Company's accounts receivable was attributable to DARPA and MedImmune, respectively. As of December 31, 2016, $12.1 million, or 73%, $2.4 million, or 15%, and $1.2 million, or 7%, of accounts receivable was attributable to DARPA, Roche and MedImmune, respectively.2021.
The Company’s accounts receivable from DARPA includes $1.6 million of amounts that are unbilled as of December 31, 2017. Unbilled amounts range from 1 to 9 months in age and are attributable to the fact that the Company is awaiting an invoice from its sub-contractor prior to submission of an aggregate invoice to DARPA. The Company believes that all criteria for revenue recognition under SAB 104 have been met, and also anticipates that all such amounts will be invoiced and collected within the next 12 months and has included these amounts as current assets in its consolidated balance sheet.
There is minimal credit risk with these customers based upon collection history, their size and financial condition. Accordingly, the Company does not consider it necessary to record a reserve for uncollectible accounts receivable.
7. Fixed Assets
Fixed assets at December 31, 20172021 and 2016 consist2020 consisted of the following:
| | | | | | | | | | | | | | | | | |
| Cost | | Accumulated
Depreciation
and
Amortization | | Net Book
Value |
| As of December 31, 2021 | | | | | |
| Leasehold improvements | $ | 15,803,108 | | | $ | (8,258,608) | | | $ | 7,544,500 | |
| | | | | |
| Laboratory equipment | 12,392,916 | | | (4,279,816) | | | 8,113,100 | |
| Office furniture and fixtures | 2,827,476 | | | (2,599,643) | | | 227,833 | |
| Computer equipment and other | 5,374,084 | | | (3,806,311) | | | 1,567,773 | |
| $ | 36,397,584 | | | $ | (18,944,378) | | | $ | 17,453,206 | |
| As of December 31, 2020 | | | | | |
| Leasehold improvements | $ | 15,179,447 | | | $ | (6,549,418) | | | $ | 8,630,029 | |
| Laboratory equipment | 4,788,678 | | | (3,727,508) | | | 1,061,170 | |
| Office furniture and fixtures | 2,828,675 | | | (2,296,942) | | | 531,733 | |
| Computer equipment and other | 4,544,915 | | | (3,419,703) | | | 1,125,212 | |
| $ | 27,341,715 | | | $ | (15,993,571) | | | $ | 11,348,144 | |
|
| | | | | | | | | | | |
| | Cost | | Accumulated Depreciation and Amortization | | Net Book Value |
| As of December 31, 2017 | | | | | |
| Leasehold improvements | $ | 14,553,993 |
| | $ | (2,042,871 | ) | | $ | 12,511,122 |
|
| Laboratory equipment | 3,787,578 |
| | (1,724,946 | ) | | 2,062,632 |
|
| Office furniture and fixtures | 3,366,896 |
| | (1,471,705 | ) | | 1,895,191 |
|
| Computer equipment and other | 3,718,266 |
| | (1,867,035 | ) | | 1,851,231 |
|
| | $ | 25,426,733 |
| | $ | (7,106,557 | ) | | $ | 18,320,176 |
|
| As of December 31, 2016 | | | | | |
| Leasehold improvements | $ | 5,248,311 |
| | $ | (1,199,415 | ) | | $ | 4,048,896 |
|
| Laboratory equipment | 3,534,302 |
| | (1,072,188 | ) | | 2,462,114 |
|
| Office furniture and fixtures | 1,814,493 |
| | (1,108,187 | ) | | 706,306 |
|
| Computer equipment and other | 3,684,521 |
| | (1,876,391 | ) | | 1,808,130 |
|
| | $ | 14,281,627 |
| | $ | (5,256,181 | ) | | $ | 9,025,446 |
|
Depreciation expense for the years ended December 31, 2017, 20162021, 2020 and 20152019 was $1.9$3.0 million, $1.7$3.0 million and $1.0$3.6 million, respectively. The Company determined that the carrying value of these long-lived assets was not impaired during the periods presented. During the year ended December 31, 2021 the Company disposed of fixed assets with a net book value of $89,000 and accumulated depreciation of $89,000.
8. Goodwill and Intangible Assets
The following sets forth goodwill and intangible assets by major asset class:
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | December 31, 2017 | | December 31, 2016 |
| | Useful Life (Yrs) | Gross | | Accumulated Amortization | | Net Book Value | | Gross | | Accumulated Amortization | | Net Book Value |
| Indefinite lived: | | | | | | | | | | | | | |
| Goodwill(a) | | | $ | 10,513,371 |
| | $ | — |
| | $ | 10,513,371 |
| | $ | 10,513,371 |
| | $ | — |
| | $ | 10,513,371 |
|
| Definite lived: | | | | | | | | | | | | | |
| Patents | 8 – 17 | | 5,802,528 |
| | (5,681,673 | ) | | 120,855 |
| | 5,802,528 |
| | (5,618,854 | ) | | 183,674 |
|
| Licenses | 8 – 17 | | 1,323,761 |
| | (1,190,609 | ) | | 133,152 |
| | 1,323,761 |
| | (1,161,861 | ) | | 161,900 |
|
CELLECTRA®(b) | 5 – 11 | | 8,106,270 |
| | (7,252,108 | ) | | 854,162 |
| | 8,106,270 |
| | (6,825,028 | ) | | 1,281,242 |
|
| GHRH(b) | 11 | | 335,314 |
| | (271,948 | ) | | 63,366 |
| | 335,314 |
| | (240,264 | ) | | 95,050 |
|
| Bioject (c) | 2 – 15 | | 5,100,000 |
| | (1,405,556 | ) | | 3,694,444 |
| | 5,100,000 |
| | (562,222 | ) | | 4,537,778 |
|
| Other(d) | 18 | | 4,050,000 |
| | (2,906,250 | ) | | 1,143,750 |
| | 4,050,000 |
| | (2,681,250 | ) | | 1,368,750 |
|
| Total intangible assets | | | 24,717,873 |
| | (18,708,144 | ) | | 6,009,729 |
| | 24,717,873 |
| | (17,089,479 | ) | | 7,628,394 |
|
| Total goodwill and intangible assets | | | $ | 35,231,244 |
| | $ | (18,708,144 | ) | | $ | 16,523,100 |
| | $ | 35,231,244 |
| | $ | (17,089,479 | ) | | $ | 18,141,765 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | December 31, 2021 | | December 31, 2020 |
| | Weighted Average Useful
Life
(Yrs) | Gross | | Accumulated
Amortization | | Net Book
Value | | Gross | | Accumulated
Amortization | | Net Book
Value |
| Indefinite lived: | | | | | | | | | | | | | |
| Goodwill | | | $ | 10,513,371 | | | $ | — | | | $ | 10,513,371 | | | $ | 10,513,371 | | | $ | — | | | $ | 10,513,371 | |
| Definite lived: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Licenses | 10 | | 1,323,761 | | | (1,305,600) | | | 18,161 | | | 1,323,761 | | | (1,276,852) | | | 46,909 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Bioject (a) | 12 | | 5,100,000 | | | (2,735,556) | | | 2,364,444 | | | 5,100,000 | | | (2,468,889) | | | 2,631,111 | |
| Other (b) | 18 | | 4,050,000 | | | (3,806,250) | | | 243,750 | | | 4,050,000 | | | (3,581,250) | | | 468,750 | |
| Total intangible assets | 11 | | 10,473,761 | | | (7,847,406) | | | 2,626,355 | | | 10,473,761 | | | (7,326,991) | | | 3,146,770 | |
| Total goodwill and intangible assets | | | $ | 20,987,132 | | | $ | (7,847,406) | | | $ | 13,139,726 | | | $ | 20,987,132 | | | $ | (7,326,991) | | | $ | 13,660,141 | |
| |
(a) | Goodwill was recorded from the Inovio AS acquisition in January 2005, the acquisition of VGX Pharmaceuticals in June 2009 and the acquisition of Bioject in April 2016 for $3.9 million, $6.2 million and $400,000, respectively. |
| |
(b) | CELLECTRA® and GHRH are developed technologies which were recorded from the acquisition of VGX Pharmaceuticals.
|
| |
(c) | Bioject intangible assets represent the estimated fair value of developed technology and intellectual property which were recorded from the acquisition of Bioject. |
| |
(d) | Other intangible assets represent the estimated fair value of acquired intellectual property from the Inovio AS acquisition. |
(a)Bioject intangible assets represent the estimated fair value of developed technology and intellectual property which were recorded from an asset acquisition.
(b)Other intangible assets represent the estimated fair value of acquired intellectual property.
Aggregate amortization expense on intangible assets was $1.6$520,000, $547,000 and $1.1 million $1.4 million and $870,000 for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively. Amortization expense related to intangible assets at December 31, 20172021 is expected to be incurred as follows:
| | | | | |
| Year ending December 31, | |
| 2022 | $ | 493,000 | |
| 2023 | 276,000 | |
| 2024 | 253,000 | |
| 2025 | 253,000 | |
| 2026 | 253,000 | |
| Thereafter | 1,098,000 | |
| $ | 2,626,000 | |
|
| | | |
| Year ending December 31, | |
| 2018 | $ | 1,249,584 |
|
| 2019 | 1,066,251 |
|
| 2020 | 547,081 |
|
| 2021 | 520,414 |
|
| 2022 | 492,818 |
|
| Thereafter | 2,133,581 |
|
| | $ | 6,009,729 |
|
There were no impairment or impairment indicators present and no losses were recorded during the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.
9. Convertible Debt
Convertible Senior Notes
On February 19, 2019 and March 1, 2019, the Company completed a private placement of $78.5 million aggregate principal amount of its 6.50% convertible senior notes due 2024 (the “Notes”). The Notes were sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Net proceeds from the offering were $75.7 million.
The Notes are senior unsecured obligations of the Company and accrue interest payable in cash semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2019, at a rate of 6.50% per annum. The Notes will mature on March 1, 2024, unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding November 1, 2023, the Notes will be convertible at the option of the holders only upon the satisfaction of certain circumstances. Thereafter, the Notes will be convertible at the option of the holders at any time until the close of business on the scheduled trading day immediately before the maturity date. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. The initial conversion rate was 185.8045 shares per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $5.38 per share), subject to adjustment upon the occurrence of specified events.
The Company may redeem all, or any portion, of the Notes for cash if the last reported sale price per share of the Company's common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such redemption notice. The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The Company evaluated the accounting for the issuance of the Notes and concluded that the embedded conversion features meet the requirements for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its consolidated balance sheet, and that the cash conversion guidance applies. Therefore, the Notes issuance proceeds of $78.5 million are allocated first to the liability component based on the fair value of non-convertible debt with otherwise identical residual terms with the residual proceeds allocated to equity for the conversion features. The Company determined that the fair value of the non-convertible debt upon issuance of the Notes was $62.2 million and recorded this amount as a liability and the offsetting amount as a debt discount as a reduction to the carrying value of the Notes on the closing date. The debt issuance costs associated with the Notes of $2.8 million are allocated to the liability and equity component in the same proportion as the issuance proceeds.
The Company determined that all other features of the Notes were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's consolidated financial statements.
The Company determined that the expected life of the Notes was equal to the period through November 1, 2023 as this represents the point at which the Notes are initially subject to repurchase by the Company at the option of the holders. Accordingly, the total debt discount of $18.6 million, inclusive of the fair value of the embedded conversion feature derivative at issuance, is being amortized using the effective interest method through November 1, 2023. The effective interest rate of the liability component is 13.1%.
During the year ended December 31, 2020, the Company received notices for the conversion of $62.1 million of principal amount of the Notes, which were settled into an aggregate of 11,535,660 shares of the Company's common stock. The fair value of the Notes at the date of conversion was $43.7 million compared to the carrying value of $52.5 million, resulting in a $8.8 million gain on extinguishment of debt. This gain was recorded in the consolidated statement of operations. To measure the fair value of the converted Notes as of the conversion dates, the Company engaged a third-party valuation expert and utilized a binomial lattice model.
The balance of the Notes at December 31, 2021 is as follows:
| | | | | |
| Principal amount | $ | 78,500,000 | |
| Principal amount converted into common shares | (62,085,000) | |
| Unamortized debt discount on the liability component | (1,591,909) | |
| Unamortized debt issuance cost | (219,101) | |
| Accrued interest | 355,657 | |
| Net carrying amount | $ | 14,959,647 | |
For the years ended December 31, 2021 and 2020, the Company recognized $1.9 million and $6.9 million, respectively, of interest expense related to the Notes, of which $1.1 million and $4.1 million, respectively, related to the contractual interest coupon.
As of December 31, 2021, future minimum payments due under the Notes, representing contractual amounts due, including interest based on the fixed rate of 6.5% per annum, are as follows:
| | | | | | | | | | | | | | |
| | | | |
| | | | | | | | |
| | | | | | | | |
| 2022 | | $ | 1,067,000 | | | | | | | |
| 2023 | | 1,067,000 | | | | | | | |
| 2024 | | 16,948,000 | | | | | | | |
| | | | | | | | |
| Total | | $ | 19,082,000 | | | | | | | |
August 2019 Convertible Bonds
On August 1, 2019, the Company closed a private placement of the August 2019 Bonds with an aggregate principal amount of 18 billion Korean Won (KRW) (approximately USD $15.0 million based on the exchange rate on the date of issuance) issued to institutional investors led by Korea Investment Partners (KIP), a global venture capital and private equity firm based in Seoul, Korea. Net proceeds from the offering were $14.5 million.
The August 2019 Bonds, which were unsecured obligations of the Company, were issued on August 1, 2019 and accrued interest at a coupon rate of 1.00% per annum, payable quarterly. The August 2019 Bonds were scheduled to mature on July 31, 2024, unless earlier converted or repurchased. On August 3, 2020, the August 2019 Bonds were converted in full into an aggregate of 4,962,364 shares of the Company's common stock, leaving no further August 2019 Bonds outstanding. The initial conversion rate was 211.0595 shares per KRW1,000,000 in principal amount (equivalent to an initial conversion price of approximately USD $4.00 per share based on the exchange rate as of July 30, 2019), subject to adjustment upon the occurrence of specified events. The conversion rate was reset on January 2, 2020 and was subject to reset quarterly thereafter if the current market price was lower than the conversion price then in effect. The conversion rate as of the date of conversion on August 1, 2020 was 275.69 shares per KRW1,000,000 in principal amount (equivalent to a conversion price of approximately USD $3.14 per share).
The Company evaluated the accounting for the issuance of the August 2019 Bonds and concluded that the embedded conversion feature was considered a derivative requiring bifurcation from the August 2019 Bonds as it did not meet the equity scope exception due to the fact that it was denominated in a currency other than the Company's functional currency. The fair value of the conversion feature at August 1, 2019 was $7.1 million, which was recorded as a reduction to the carrying value of the debt. This debt discount was being amortized to interest expense over the term of the debt using the effective interest method. The conversion option was accounted for as a derivative liability, which was revalued each reporting period with the resulting change in fair value reflected in other income (expense), net, in the consolidated statements of operations.
The Company determined that all other features of the August 2019 Bonds were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's consolidated financial statements.
At their issuance, the Company determined that the expected life of the August 2019 Bonds was through August 1, 2022 as this represented the point at which the August 2019 Bonds were initially subject to repurchase by the Company at the option of the holders. Accordingly, the total debt discount of $7.3 million, inclusive of the fair value of the embedded conversion feature derivative at issuance, was being amortized using the effective interest method through August 1, 2022. For the year ended December 31, 2020, the Company recognized $1.6 million of interest expense related to the August 2019 Bonds, of which $87,000 related to the contractual interest coupon.
Immediately prior to the August 2020 conversion in full of the August 2019 Bonds, the derivative liability associated with the August 2019 Bonds was revalued at $84.5 million. The change in fair value of the derivative liability was an increase of $75.7 million, which was recorded on the consolidated statement of operations for the year ended December 31, 2020. To measure the fair value of the derivative liability as of the conversion date, the Company engaged a third-party valuation expert.
Upon conversion, a loss on extinguishment of $8.2 million was recorded on the consolidated statement of operations for the year ended December 31, 2020. This loss represents the difference between (a) the calculated fair value of the derivative liability immediately prior to its derecognition plus the carrying amount of the debt component including any unamortized debt discount and issuance costs and (b) the fair value of the 4,692,364 shares of the Company's common stock issued upon conversion.
December 2019 Convertible Bonds
On December 26, 2019, the Company closed a private placement of convertible promissory notes (the “December 2019 Bonds”) with an aggregate principal amount of 4.7 billion KRW (approximately USD $4.1 million based on the exchange rate on the date of issuance) issued to a Korea-based institutional investor. Net proceeds from the offering were $4.0 million.
The December 2019 Bonds, which were unsecured obligations of the Company, were issued on December 31, 2019 and accrue interest at a coupon rate of 1.00% per annum, payable quarterly. The December 2019 Bonds were scheduled to mature on December 31, 2024, unless earlier converted or repurchased. On March 17, 2021, the December 2019 Bonds were converted in full into an aggregate of 1,009,450 shares of the Company's common stock, leaving no further December 2019 Bonds outstanding. The initial conversion rate was 214.7766 shares per KRW1,000,000 principal amount of Bonds (equivalent to an initial conversion price of approximately USD $4.00 per share based on the exchange rate as of December 19, 2019), subject to adjustment upon the occurrence of certain events. As of the conversion date of March 17, 2021, the conversion rate had not been reset from the initial conversion rate.
The Company evaluated the accounting for the issuance of the December 2019 Bonds and concluded that the embedded conversion feature did not require bifurcation from the December 2019 Bonds. Although the embedded conversion feature met the definition of a derivative, it qualified for the equity scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its consolidated balance sheet. The December 2019 Bonds were denominated in a foreign currency other than the Company’s functional currency, which would typically violate the settlement provision criteria when analyzing whether the conversion option is indexed to an entity’s own stock. However, per the terms of the agreement, the functional currency rate required to be used in a conversion scenario was fixed as of the date preceding the date of issuance of the Bonds. Therefore, the fluctuation in functional currency did not impact the settlement of the conversion option. Further,
as there was no cash conversion feature or beneficial conversion feature on the date of issuance, and the Bonds were not issued at a substantial premium, all of the proceeds were recorded as a liability.
The Company determined that all other features of the December 2019 Bonds were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's consolidated financial statements.
At their issuance, the Company determined that the expected life of the December 2019 Bonds was through December 31, 2022 as this represented the point at which the December 2019 Bonds were initially subject to repurchase by the Company at the option of the holders. The effective interest rate of the December 2019 Bonds is 6.2%. For the years ended December 31, 2021 and 2020, the Company recognized $50,000 and $253,000, respectively, of interest expense related to the December 2019 Bonds, of which $9,000 and $40,000, respectively, related to the contractual interest coupon.
As of December 31, 2021, all outstanding December 2019 Bonds were converted into 1,009,450 shares of the Company's common stock. Upon conversion, the $4.4 million carrying value of the December 2019 Bonds was reclassified to stockholders' equity.
10. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 20172021 and 2016 consist2020 consisted of the following:
| | | | | | | | | | | |
| 2021 | | 2020 |
| Trade accounts payable | $ | 24,213,673 | | | $ | 825,516 | |
| Accrued compensation | 16,112,912 | | | 13,127,257 | |
| Accrued subcontract costs | 11,602 | | | 247,796 | |
| | | |
| Other accrued expenses | 7,306,343 | | | 7,003,239 | |
| | | |
| | | |
| | | |
| | | |
| $ | 47,644,530 | | | $ | 21,203,808 | |
|
| | | | | | | |
| | As of December 31, |
| | 2017 | | 2016 |
| Trade accounts payable, including from affiliated entity | $ | 7,564,830 |
| | $ | 5,920,642 |
|
| Accrued compensation | 7,997,152 |
| | 6,531,983 |
|
| Accrued subcontract costs | 3,746,937 |
| | 5,475,359 |
|
| Other accrued expenses | 3,969,879 |
| | 1,669,803 |
|
| | $ | 23,278,798 |
| | $ | 19,597,787 |
|
10.11. Stockholders’ Equity
Preferred Stock
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Shares Outstanding as of
December 31, |
| | Shares Authorized | | Shares Issued | | 2021 | | 2020 |
| | | | | | | |
| | | | | | | |
| Series C Preferred Stock, par $0.001 | 1,091 | | | 1,091 | | | 9 | | | 9 | |
| | | | | | | |
|
| | | | | | | | | | | |
| | | | | | Shares Outstanding as of December 31, |
| | Shares Authorized | | Shares Issued | | 2017 | | 2016 |
| Series C Preferred Stock, par $0.001 | 1,091 |
| | 1,091 |
| | 23 |
| | 23 |
|
TheIn June 2020, 14 shares of the Company’s Series C Preferred Stock have the following pertinent rights and privileges, as set forth in the Company’s Amended and Restated Certificate of Incorporation and its Certificates of Designations, Rights and Preferences related to the various series of preferred stock.
Rights on Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “liquidation event”), before any distribution of assets of the Company shall be made to or set apart for the holders of common stock, the holders of Series C Preferred Stock, pari passu, are entitled to receive payment of such assets of the Company in an amount equal to $10,000 per share of such series of preferred stock plus any accumulated and unpaid dividends thereon (whether or not earned or declared).
If the assetswere converted into an aggregate of the Company available for distribution to stockholders exceed the aggregate amount of the liquidation preferences payable with respect to all5,147 shares of each series of preferred stock then outstanding, then, after the payment of such preferences is made or irrevocably set aside, the holders of the Company’s common stock are entitled to receive a pro rata portion of such assets based on the aggregate number of shares of common stock held by each such holder. The holders of the Company’s outstanding preferred stock shall participate in such a distribution on a pro-rata basis, computed based on the number of shares of common stock which would be held by such preferred holders if immediately prior to the liquidationstock.
event all of the outstanding shares of the preferred stock had been converted into shares of common stock at the then current conversion value applicable to each series.
A Change of Control of the Company (as defined in the Certificates of Designations, Rights and Preferences) is not a liquidation event triggering the preferences described above, and is instead addressed by separate terms in the Series C Certificates of Designations, Rights, and Preferences.
Although the liquidation preferences are in excess of the par value of $0.001 per share of the Company’s preferred stock, these preferences are equal to or less than the stated value of such shares based on their original purchase price.
Voting Rights
The holders of Series C Preferred Stock have full voting rights and powers equal to the voting rights and powers of holders of the Company’s common stock and are entitled to notice of any stockholders’ meeting in accordance with the Company’s Bylaws. Holders are entitled to vote on any matter upon which holders of the Company’s common stock have the right to vote, including, without limitation, the right to vote for the election of directors together with the holders of common stock as one class. Series C Preferred holders are entitled to 368 votes for each share of Series C Preferred Stock held.
Holder Optional Conversion Right
The holder of anya share or shares of Series C Preferred Stockpreferred stock has the right at any time, at such holder’s option, to convert all or any lesser portion of such holder’s shares of the Preferred Stockpreferred stock into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (i) the aggregate Liquidation Preference applicable to the particular series of preferred shares, plus accrued and unpaid dividends thereon by (ii) the applicable Conversion Value (as defined in the relevant series’ Certificate of Designations, Rights and Preferences) then in effect for such series of preferred shares.common stock. As of December 31, 2017,2021, the Conversion Value wasconversion value was $27.20 per share, such that the outstanding shares of Series C Preferred Stockpreferred stock were convertible into 8,456an aggregate of 3,309 shares of common stock. The Company is not obligated to issue any fractional shares or scrip representing fractional shares upon such conversion and instead shall pay the holder an amount in cash equal to such fraction multiplied by the current market price per share of the Company’s common stock.
Company Mandatory Conversion Option
The Company has the option upon thirty (30) days prior written notice, to convert all of the outstanding shares of the Series C Preferred Stock into such number of fully paid and non-assessable shares of common stock as is determined by dividing (i) the aggregate Liquidation Preference of the shares of the relevant series of preferred stock to be converted, plus accrued and unpaid dividends thereon by (ii) the applicable Conversion Value (as defined in the relevant series’ Certificate of Designations, Rights and Preferences) then in effect, if the following triggering events have occurred:
(i) the price of the Company’s common stock exceeds $72.00 per share for 20 out of 30 consecutive trading days; and
(ii) the average daily trading volume (subject to adjustment for stock dividends, subdivisions and combinations) of the common stock exceeds 6,250 shares for at least 20 out of 30 consecutive trading days.
Common Stock
On JulyNovember 9, 2021, the Company entered into an ATM Equity OfferingSM Sales Agreement (the “2021 Sales Agreement”) with outside sales agents (collectively, the “Sales Agents”) for the offer and sale of its common stock for an aggregate offering price of up to $300.0 million. The 2021 Sales Agreement provides that the Sales Agents will be entitled to compensation in an amount equal to up to 3.0% of the gross sales proceeds of any common stock sold through the Sales Agents under the 2021 Sales Agreement. For the year ended December 31, 2021, the Company sold 6,955,341 shares of its common stock under the 2021 Sales Agreement. The sales were made at a weighted average price of $6.96 per share, resulting in aggregate net proceeds of $47.7 million. As of December 31, 2021 there was $251.6 million of remaining capacity under the 2021 Sales Agreement.
On January 25, 2017,2021, the Company closed an underwritten public offering of 12,500,00020,355,000 shares of common stock at a public offering price of $6.00$8.50 per share. The net proceeds to the Company, after deducting the underwriters' discounts and commissions and other offering expenses, were $70.1$162.1 million.
On April 3, 2020, the Company and the Placement Agent entered into a new Sales Agreement (the "2020 Sales Agreement") to sell shares of its common stock. On April 3, 2020 and May 12, 2020, the Company filed prospectus supplements pursuant to the 2020 Sales Agreement for the offer and sale of its Common Stock for aggregate gross proceeds of up to an aggregate of $250.0 million.
During the year ended December 31, 2020, the Company sold a total of 22,919,934 shares of its common stock under the 2020 Sales Agreement. The sales were made at a weighted average price of $10.91 per share resulting in aggregate net proceeds of $246.2 million. As of December 31, 2020, there was no remaining capacity under the 2020 Sales Agreement.
In June 2016,May 2018, the Company entered into an At-the-Market Equity Offeringa Sales Agreement (the “Sales Agreement”) with an outside placement agent (the “Placement Agent”) to sell shares of its common stock with aggregate gross proceeds of up to $50.0$100.0 million, from time to time, through an “at-the-market” equity offering program under which the Placement Agent will act as sales agent. UnderDuring the first quarter of 2020, the Company and the Placement Agent entered into amendments to the Sales Agreement (as so amended, the Company will set"2018 Sales Agreement") to increase the parameters for the saleamount of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation on the number of sharescommon stock that maycould be sold in any one trading day and any minimum price below which sales may not be made. Theunder the 2018 Sales Agreement provides that the Placement Agent will be entitledfrom $100.0 million to compensation for its services in an amount equal to 2.0% of the gross proceeds from the sales of shares sold through the Placement Agent under the Sales Agreement. The Company has no obligation to sell any shares under the Sales Agreement, and may at any time suspend solicitation and offers under the Sales Agreement.
$250.0 million. During the yearthree months ended DecemberMarch 31, 2017,2020, the Company sold a total43,148,952 shares of 2,937,406 shares ofits common stock under the 2018 Sales Agreement. The sales were made at a weighted average price of $8.41$4.92 per share, withresulting in aggregate net proceeds to the Company of $24.2$208.2 million. As of DecemberMarch 31, 2017, the Company has sold an aggregate of 3,596,154 shares of common stock2020, there was no remaining capacity under the Sales Agreement for net proceeds of $30.5 million. Accordingly, as of December 31, 2017 the Company may sell up to an additional $18.9 million in shares of its common stock under the2018 Sales Agreement.
Warrants
The Company accounts for registered common stock warrants issued in March 2013 under the authoritative guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, on the understanding that in compliance with applicable securities laws, the registered warrants require the issuance of registered securities upon exercise and do not sufficiently preclude an implied right to net cash settlement. The Company classifies registered warrants on the consolidated balance sheet as a current liability which is revalued at each balance sheet date subsequent to the initial issuance. Determining the appropriate fair-value model and calculating the fair value of registered warrants requires some judgment, including estimating stock price volatility and expected warrant life. The Company develops its estimates based on historical data. A small change in the estimates used may have a relatively large change in the estimated valuation. The Company uses the Black-Scholes pricing model to value the registered warrants. Changes in the fair market value of the warrants are reflected in the consolidated statement of operations as “Change in fair value of common stock warrants".
The following table summarizes the warrants outstanding as of December 31, 2017 and 2016:
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | As of December 31, 2017 | | As of December 31, 2016 |
| Issued in Connection With: | | Exercise Price | | Expiration Date | | Number of Warrants | | Common Stock Warrant Liability | | Number of Warrants | | Common Stock Warrant Liability |
| March 2013 financing | | $ | 3.17 |
| | September 12, 2018 | | 284,091 |
| | $ | 360,795 |
| | 284,091 |
| | $ | 1,167,614 |
|
| Total | | | | | | 284,091 |
| | $ | 360,795 |
| | 284,091 |
| | $ | 1,167,614 |
|
During the years ended December 31, 2017 and 2016, no warrants to purchase shares of the Company's common stock which were issued in connection with the March 2013 financing were exercised.
Stock Options and Restricted Stock Units
The Company has a stock-based incentive plan, the 2016 Omnibus Incentive Plan (the(as amended to date, the "2016 Incentive Plan"), pursuant to which the Company may grant stock options, restricted stock awards, and restricted stock unitunits and other stock-based awards (“RSUs”)or short-term cash incentive awards to employees, directors and consultants.
The 2016 Incentive Plan was originally approved by the Company's stockholders on May 13, 2016. The2016, and an amendment to the plan to increase the number of shares available for issuance was approved by the stockholders on May 8, 2019. As of December 31, 2021, the maximum number of shares of the Company’s common stock available for issuance over the term of the 2016 Incentive Plan may not exceed 6,000,000 shares, provided that commencing withwas 20,000,000 shares. On the first business day of each calendar year, beginning January 1, 2018, such maximum number of shares shall be increased by 2,000,000 shares of common stock unless the Board determines, prior to January 1 for any such calendar year, to increase such maximum amount by a fewer number of shares or not to increase the maximum amount at all for such year. On January 1, 2018,2022, the maximum number of shares to be issued was increased by 2,000,000. At December 31, 2017, there were 6,000,000 shares of common stock reserved for issuance upon exercise of incentive awards granted and to be granted at future dates under the 2016 Incentive Plan. At December 31, 2017,2021, the Company had 3,994,5114,481,745 shares of common stock available for future grant under the 2016 Incentive Plan, 819,5072,448,868 shares underlying outstanding but unvested RSUsrestricted stock units and options outstanding to purchase 1,136,0578,060,957 shares of common stock under the 2016 Incentive Plan. The awards granted and available for future grant under the 2016 Incentive Plan generally vest over three years and have a maximum contractual term of ten years. The 2016 Incentive Plan terminates by its terms on March 9, 2026.
The Company’s previous stock-based incentive plan, the Amended and Restated 2007 Omnibus Incentive Plan (the "2007 Incentive Plan"), was adopted on March 31, 2007 and terminated by its terms on March 31, 2017. At December 31, 2017,2021, the Company had 414,661 shares underlying outstanding but unvested RSUs and options outstanding to purchase 6,357,0712,428,036 shares of common stock under the 2007 Incentive Plan. The awards granted under the 2007 Incentive Plan generally vest over three years and have a maximum contractual term of ten years.
At December 31, 2017, the Company also had options outstanding to purchase 201,742 shares of common stock under the VGX Equity Compensation Plan, which the Company assumed in connection with its acquisition of VGX in 2009. The termsTotal employee and conditions of the options outstanding under this plan remain unchanged.
Totaldirector stock-based compensation costexpense recognized in the consolidated statementstatements of operations for the years ended December 31, 2017, 20162021, 2020 and 20152019 was $12.9$25.0 million, $10.2$14.5 million and $5.8$9.8 million,, respectively, of which $5.8$13.4 million, $4.8$8.0 million and $3.2$5.9 million was included in research and development expenses and $7.1$11.6 million, $5.4$6.5 million and $2.6$3.9 million was included in general and administrative expenses, respectively.
At December 31, 20172021 and 2016,2020, there was $5.9$16.5 million and $5.8$4.4 million, respectively, of total unrecognized compensation cost, respectively,expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.82.0 years and 1.91.4 years, respectively.
At December 31, 20172021 and 2016,2020, there was $5.3$13.4 million and $4.0$10.9 million, respectively, of total unrecognized compensation cost, respectively,expense related to unvested RSUs,restricted stock units, which is expected to be recognized over a weighted-average period of 1.8 years and 2.01.9 years, respectively.
The fair value of stock options granted to non-employees at the measurement dates werewas estimated using the Black-Scholes pricing model. Total stock-based compensation expense for stock options and restricted stock units granted to non-employees for the years ended December 31, 2017, 20162021, 2020 and 20152019 was $201,000, $321,000$1.4 million, $1.2 million and $385,000,$970,000, respectively. As of December 31, 2017,2021, options to purchase 701,367632,375 shares of common stock granted to non-employees remained outstanding.
The following table summarizes total stock options outstanding at December 31, 2017:2021:
| | | | | Options Outstanding | | Options Exercisable | | | Options Outstanding | | Options Exercisable |
| Exercise Price | | Shares Underlying Options Outstanding | | Weighted-Average Remaining Contractual Life (in Years) | | Weighted Average Exercise Price | | Shares Underlying Options Exercisable | | Weighted Average Exercise Price | Exercise Price | | Shares Underlying Options
Outstanding | | Weighted-Average
Remaining
Contractual Life
(in Years) | | Weighted
Average
Exercise Price | | Shares Underlying Options
Exercisable | | Weighted Average
Exercise Price |
| $1.48-$3.00 | | 1,177,183 |
| | 4.6 | | $ | 2.25 |
| | 1,177,183 |
| | $ | 2.25 |
| |
| $1.60-$3.00 | | $1.60-$3.00 | | 272,063 | | | 1.8 | | $ | 2.25 | | | 262,148 | | | $ | 2.24 | |
| $3.01-$6.00 | | 753,932 |
| | 3.4 | | $ | 4.64 |
| | 668,244 |
| | $ | 4.57 |
| $3.01-$6.00 | | 2,583,652 | | | 6.8 | | $ | 3.80 | | | 2,137,202 | | | $ | 3.88 | |
| $6.01-$9.00 | | 4,709,442 |
| | 7.6 | | $ | 7.09 |
| | 2,639,454 |
| | $ | 7.23 |
| $6.01-$9.00 | | 4,148,238 | | | 6.4 | | $ | 7.60 | | | 2,848,150 | | | $ | 7.48 | |
| $9.01-$12.00 | | 357,603 |
| | 8.0 | | $ | 9.79 |
| | 263,180 |
| | $ | 9.83 |
| $9.01-$12.00 | | 2,562,668 | | | 8.8 | | $ | 10.95 | | | 827,259 | | | $ | 10.77 | |
| $12.01-$15.00 | | 696,710 |
| | 6.2 | | $ | 12.96 |
| | 696,710 |
| | $ | 12.96 |
| $12.01-$15.00 | | 824,184 | | | 5.1 | | $ | 13.54 | | | 663,646 | | | $ | 13.40 | |
| $15.01-$25.62 | | $15.01-$25.62 | | 98,188 | | | 8.6 | | $ | 20.64 | | | 52,227 | | | $ | 20.67 | |
| | | 7,694,870 |
| | 6.6 | | $ | 6.77 |
| | 5,444,771 |
| | $ | 6.68 |
| | 10,488,993 | | | 6.9 | | $ | 7.93 | | | 6,790,632 | | | $ | 7.22 | |
Stock option activity under the Company’s equity incentive plans during the year ended December 31, 20172021 was as follows:
In the normal course of business, the Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party. It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of the Company's obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these types of agreements have not had a material effect on its business, consolidated results of operations or financial condition.
13. Business Combination
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 20172021 and 20162020 are shown below:
The following table summarizes the activity related to the Company's unrecognized tax benefits:
The Company is also a collaborator with Wistar on an Integrated Preclinical/Clinical AIDS Vaccine Development (IPCAVD) grant from the National InstituteNIAID, with funding through February 2022.
