Results & Analyst Call Summary

Inovio Pharmaceuticals
INO

Conference date: March 15, 2017 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2016 (Q4, fourth quarter)


Forward-looking statements

Overview: Revenue in the quarter came from grants and collaboration as Inovio continues to move therapies towards FDA approval.

Basic data (GAAP):

Revenue was $8.5 million, down sequentially from $12.5 million, but up from $5.9 million in the year-earlier quarter.

Net income was negative $26.2 million, down sequentially from negative $20.8 million, and down from $18.0 million year-earlier.

EPS (earnings per share, diluted) was negative $0.35, down sequentially from negative $0.28, and down from negative $0.25 year-earlier.

Guidance:

none

Quarter Highlights:

CEO Dr. Joseph Kim said: "In 2017 we expect to report immune response data from clinical studies in six different diseases; the initiation of our phase 3 study of cervical dysplasia and two immuno-oncology combination studies, one by MedImmune and one by Inovio; and additional business development steps. We look forward to a highly productive year in advancing our unique immunotherapy platform and products.” In q4 we announced $15 million in grants for Ebola and Zika research.

A pivotal Phase III study of VGX-3100 for cervical dysplasia was planned for initiation in Q4 2016 by Inovio, which completed its post Phase 2 meetings with the FDA and EMA about the trial. But the FDA has placed the trial on hold apparently related to manufacturing the delivery device, not to the data from prior trials. Was prepared to initiate the trial in November, now not until at least Q2 2017. See FDA Requests Additional Information for details. Inovio fully expects to be able to comply with the FDA request.

"Subsequent to year end Inovio announced a collaboration and license agreement providing ApolloBio Corporation (NEEQ:430187) with the exclusive right to develop and commercialize VGX-3100 within Greater China. In this agreement, Inovio will receive a $3 million signing fee and a $12 million milestone upon lifting of the VGX-3100 phase 3 pre-initiation clinical hold by the FDA. ApolloBio will also invest in Inovio common stock subsequent to lifting of the clinical hold at a volume weighted average price encompassing a trading period prior to and following the lifting of the clinical hold. The aggregate investment, expected to be completed in the first half of 2017, will not exceed $35 million and may be a lower amount such that ApolloBio will not be the largest shareholder in Inovio." If successful would also generate double-digit royalties.

A Phase 2 study of VGX-3100 for vulvar neoplasia (VIN) is planned for 2017.

Inovio created a subsidiary, Geneos Therapeutics, to develop cancer therapies based on personalized neo-antigens. Operating capital will be independently secured by Geneos.

Licensed a foot-and-mouth disease vaccine to Plumbline Life Sciences, which will fund development.

Inovio completed enrollment of 22 subjects in the Phase I study of our HPV-driven cancer immunotherapy, INO-3112, in head & neck cancer patients. Reported interim immune response and safety data in 4Q 2016 that showed robust responses in first 4 of 5 subjects.. 3112 is licensed to MedImmune, which will start an additional combination trial with a PD1 checkpoint inhibitor in the first half of 2017.

SynCon WT1 cancer antigen data showed it could break immune tolerance, article was published in Molecular Therapy.

Inovio is developing Ebola vaccines, including a dMAb (DNA-based monoclonal antibody) version. Interim INO-4212 Phase 1 data on 75 healthy volunteers showed it was safe and generated strong immune responses. An additional 125 healthy subjects have been enrolled. Antibody data for the second stage should be available in 2017.

Inovio initiated a Phase 1 trial for its Zika vaccine, GLS-5700, in July. That is in partnership with GeneOne Life Science. All 39 subjects have been dosed. Interim immune response and safety data showed high levels of antibody in all subjects.

Inovio’s phase I trial to evaluate safety and tolerability of PENNVAX®-GP, the company’s "universal" DNA vaccine for HIV has completed enrollment. The trial will measure immune responses following administration of the vaccine in four groups of healthy subjects receiving the vaccine with and without an immune activator (DNA IL-12). This 94-patient study is being conducted by the HIV Vaccines Trial Network (HVTN) and funded by the National Institute of Allergy and Infectious Diseases (NIAID)." Data should be available in the first half of 2017.

Inovio’s partner for its DNA vaccine for Middle East Respiratory Syndrome (MERS), GeneOne Life Science Inc., Phase I trial is now fully enrolled. MERS has no current treatment. Preliminary data reported in Q4 2016 was positive, with 98% of subjects showing immune responses..

Ongoing studies include INO-1400 in HTERT breast, lung and pancreatic cancer has now been extended to more tumor types: head & neck squamous cell, ovarian, colorectal, gastric and esophageal cancers. Enlarging to 5 trial sites with 54 subjects. Interim immune response data from first indications in 2017. The final readout will be in 2018, but could start later stage studies based on earlier cohort data. Believes it will be combined with other vaccines and checkpoint inhibitors, with more information to be provided in Q1.

A Phase 1 trial for INO-1800 for Hepatitis B enrollment completed, with preliminary data possible in 2017. The 90 patient study just completed enrollment.

Completed enrollment of 62 subjects in the phase I study of our INO-5150 prostate cancer immunotherapy. We expect to report interim immune response and safety data in 2017.

Initiated a Phase 1 trial for INO-8000 for hepatitis C partnered with the NCI and Mayo Clinic. Will measure safety, tolerability, and immune response.

Inovio is developing a set of DNA-based vaccines that allow cells to create monoclonal antibodies (dMAb technology). During the quarter Inovio announced it has positive pre-clinical results from a dMAb vaccine for Dengue fever. Inovio's Chikungunya dMAB vaccine showed good preclinical results.

A new product, INO-5401, has a list of cancer antigens, and could work as a universal cancer therapy in combination with checkpoint inhibitors.

MedImmune continues to work towards getting its INO-3112 for cancers caused by HPV, in combination with other immunotherapy molecules, into a Phase 2 trial.

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

R&D expense was $23.9 million. General and administrative expense was $7.0 million. Gain on sale of assets of $0 million. Total operating expenses were $30.9 million. Operating profit negative $ million. Loss on investment $ million. Interest and other income $ million. Loss from fair value of stock warrants $0 million

Cash and equivalents balance (including short-term investments) ended at $104.8 million, down sequentially from $119.7 million million.

Cash is adequate to fund all key initiatives. Continues to seek non-dilutive funding including grants to develop its products.

Inovio had 260 employees at year end, up from 150 at the beginning.

Q&A:

Puerto Rico Zika trial, endpoints, criteria for good data? The first study had a 100% response rate. In PR the design is 80 vaccine to 80 placebo, randomized, looking for efficacy. We expect it to remain as the first Zika vaccine. We are also taking patient serum and putting it in animals to have challenge studies.

5401 and checkpoint inhibitors, details? We have disclosed the 3 cancer antigens in the product, plus IL12 immune activator, plus a checkpoint inhibitor. It is meant as a universal cancer therapy. In the coming quarter we will release details like the first types of cancer to be targeted.

2017 cash burn rate, milestones? We discussed the ApolloBio milestones. Also some from MedImmune, and others. We expect $60 to $65 million net burn in 2017.

Most important 2017 achievement? Getting Phase 3 started for 3100.

Color on 3100 device delay? Additional information and testing of the device. We are doing everything we can to move this forward. We believe we can complete this in the first half of this year. The predictability from our Phase 1/2 device to the Phase 3 device should be high.

The VGX-3100 for vulvar neoplasia (VIN) phase 2 trial will be using the older device, so it should not be delayed by the FDA hold on the new device. VIN surgery can be painful and not work, and we think we can get Orphan Drug status for this.

DNA based monoclonals update? DMABs are one of our favorite development programs. Our last Gates Foundation grant, $9 million in December, was to make a Zika DMAB. We are expecting about a half-dozen publications this year on our pre-clinical studies with DMABs. We are likely to take our first to a clinical trial within 12 months.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2017 William P. Meyers