Inovio Pharmaceuticals, Inc. (INO) Q1 2016 Earnings Report, Transcript and Summary

Greetings and welcome to the Inovio Pharmaceuticals First Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeff Richardson. Thank you, sir. You may begin.

Good morning, ladies and gentlemen. Thank you for joining us today. Today’s call may contain certain forward-looking statements relating to our business, including our plans to develop DNA immunotherapies and electroporation-based delivery technologies, products and product candidates, as well as our capital resources. All of which involves certain assumptions, risks and uncertainties that are beyond our control and could cause actual results to differ materially from these statements. A description of these risks can be found in the latest SEC disclosure documents and our recent press release. These statements speak only as of today’s date and we undertake no duty to update or revise them. Presenting today are Dr. J. Joseph Kim, Inovio’s President and CEO; and Peter Kies, our CFO. I will now pass the call over to Joseph.

Good morning, everyone. Thank you for joining us today for a review of our corporate and product development. The number one point I’d like you to take away from this morning’s call is that Inovio is executing. We are on track to meet our deliverable and trial initiations, data reporting and key corporate developments. I know our phase III VGX-3100 trial is of vital importance to awaiting patients and to our investors. I am pleased to report that last month, Inovio held constructive end of phase II meetings with both the US FDA and European EMA. These meetings provided an affirmative path forward toward an indication for VGX-3100 to treat HPV-16/18-related high grade cervical dysplasia that is consistent with our previously stated expectations for a pivotal phase III registration study. We are now finalizing the trial details and are on track to start the study in 2016. I can confirm that all of Inovio’s clinical, regulatory and manufacturing gears are in full motion to support the launch of this study. We have already pre-qualified almost 150 trial sites in 25 different countries. We have selected and are revving up our global CRO partners to help execute our trial. We have completed product manufacturing on a commercial scale and we have designed and manufactured the CELLECTRA 5PSP commercial devices scaling ready-to-dose VGX-3100 in phase III patients in 2016. With these accomplishments and our regulatory meetings behind us, we have a clear path to phase III trial initiation. Let me now update you on the other products in Inovio’s immuno-oncology pipeline. First, INO-5150. Inovio’s immunotherapy for prostate cancer targeting two antigens, prostate-specific antigen and prostate-specific membrane antigen in men with biochemically relapsed prostate cancer, we expect to complete the enrollment of this 60-patient study in the second quarter, the current quarter since prostate cancer takes 300,000 lives each year and is the second most personally diagnosed cancer in men. Inovio is advancing INO-5150 to provide an immunotherapy solution for this important cancer. You can expect to see interim immune response data from this study before the end of this year. Second, INO-1400, Inovio’s immunotherapy that targets the antigen hTERT because high levels of hTERT or human telomerase reverse transcriptase expression are found in 85% of human cancers, Inovio’s product candidates post a potential as a broad spectrum universal cancer therapeutic. Our original target for this study were cancers of the pancreas, lung and breast. We have now tripled the tumor type in this trial to include head and neck squamous cell, ovarian, colorectal, gastric and hepatocellular and esophageal cancer, and increase the number of trial sites from one to six across the United States. The immunology and safety data from the expanded INO-1400 study will become a basis for many products to be advanced against this multitude of tumor sites. We do expect to report interim immune response data from the first indications by year-end. In general, we see hTERT as being a foundation antigen in most of our immunotherapies combining different antigens and checkpoint inhibitors. We already have plans to include this antigen with two others in our new cancer immunotherapy INO-5400 which we expect to unveil later in the year. Finally, we are looking forward to another first for Inovio combining an Inovio immunotherapy product with another immuno-oncology technology. We look forward to initiating such a study with MedImmune with our HPV immunotherapy by year-end. More details will come with the launch of this study. We have laid the foundation for this trial with our studies of INO-3112 alone in HPV-related head and neck cancer and cervical cancer patients from which we also expect additional immune response data in 2016. In aggregate, we see the immune response data from our early cancer clinical studies is helping to characterize the potential of our immunotherapy alongside any checkpoint inhibitor or as a complement to technologies targeting other mechanisms of cancer immunity cycle. Now, for a financial update from our CFO, Peter Kies.

Thanks, Joseph. For the three months ended, March 31, 2016, total revenue was $8.1 million compared to $5.2 million for the same period in 2015. Total operating expenses were $23.6 million compared to $13.5 million. Net loss attributed to common stockholder for the quarter ended March 31, 2016 was $8 million or $0.11 per share compared to $10.6 million or $0.17 per share for the quarter ended March 31, 2015. The increase in revenue was primarily due to increase in development payments from our DARPA Ebola grant. Research and development expenses for first quarter 2016 were $18.2 million compared to $9.4 million for first quarter 2015. The increase in research and development expenses was generally related to increased investment in all our product development programs. General and administrative expenses were $5.4 million for the first quarter 2016 versus $4.1 million for the first quarter 2015. Finally, as of March 31, 2016, cash and cash equivalents and short-term investments were $146.8 million compared to $163 million as of December 31, 2015. At quarter-end, the company had 72.3 million shares outstanding and 80.7 million fully diluted. More detailed information can be found in our press release issued this morning and on our website in the Investor Relations section under SEC filings. Joseph, back to you.

Thank you, Peter. Now, let me review with the review of significant progress in our infectious disease product pipeline. First Zika, it seems [indiscernible] each new medical report tells us that Zika virus is spreading to new areas with suggestions that new diseases are emanating from this virus. The WHO has declared the epidemic of microcephaly in Brazil of public health emergency of international concerns. The CDC recently concluded that Zika is a cause of microcephaly and other severe fetal brain defects. While there is significant effort still required to adequately characterize these diseases, and their relationship to Zika, we do not think that the virus and its impact are likely to go away soon on their own. Once again, with our SynCon’s process, we rapidly generated a synthetic vaccine candidate that shows promise against yet another emerging infectious threat. We have already generated strong immune responses in animal models with our vaccine. We will initiate and conduct our first human trial in 2016 for Zika. Second, Ebola, remember Inovio is developing an Ebola preventive vaccine and treatment for those infected based on a $45 million DARPA grant we received last year. In the first quarter, we reported that interim data from the Phase I study of INO-4212 Ebola vaccine in 75 healthy subjects showed it was safe, tolerable and generated strong t-cell and antibody responses. We plan to fully analyze the data from this clinical trial and report them in a publication. We are also excited by the demonstration of the protective efficacy of our vaccine against a lethal virus challenge in several nonhuman primate challenge studies. Third, from the deadly virus from Africa, to one from the Middle East that is MERS or Middle East Respiratory Syndrome virus. Inovio is recruiting for its collaborative MERS vaccine trial with GeneOne Life Science in partnership with the Walter Reed Army Institute of Research where the trial is being conducted. The primary and secondary goal of this first in man Phase I trial are to obtain safety and immunogenicity data. This trial represents the first and the only MERS vaccine to be tested in humans for this disease that has no approved vaccines or treatment. We expect to report interim data later this year from this study. Fourth, we published in the first quarter that Inovio’s novel dMAb antibody and DNA vaccine targeting the chikungunya virus provided 100% protection against the legal virus challenge in pre-clinical settings. While conventional vaccine and marketed monoclonal antibody technology have shown limited ability to provide an effective solution to chikungunya virus to-date, Inovio’s DNA vaccine and DNA delivered monoclonal antibody product show potential separately and in combination to offer rapid and long-term protection through large populations from chikungunya virus infection. Looking at the big picture, we expect that this paradigm of combining our DNA-based monoclonal antibody and a DNA vaccine has presence to an array of infectious diseases and to cancer. Furthermore, Inovio’s dMAb technology may provide clear advantages of our conventional monoclonal antibody technology including faster development, easier product manufacturing and more favorable pharmacokinetics. This is already the third disease area in which we have reported notable results from our dMAb technology and we expect to publish even more papers on this throughout the year. While M&A is not the primary focus of Inovio’s business plan, we are most currently focused on business development opportunities that will enhance Inovio’s opportunities and competitive positioning. We were pleased to conclude our acquisition of BioJect, needle-free injection asset. I won’t repeat the details of that transaction which we outlined in last week's news release. However, I will emphasize that we are immediately moving forward and working with this complementary technology to create novel skin vaccine delivery devices. In summary, we are delivering on our plans to start a Phase III registration trial for lead products to move our cancer pipeline forward, and to obtain funding for and advance our products for challenging infectious diseases. It is clear that we have important milestones well within our grasp in the next several months. I look forward to sharing more details about our Phase III programs when we start the study. You will also hear a lot more about Zika vaccine clinical study we will conduct this year. With well-defined strategies for product development, partnerships and commercialization, we continue to execute on these strategies for the benefit of our shareholders, patients and employees. Thank you for your attention this morning; let's go to the first question.

[Operator Instructions] Our first question comes from the line of Charles Duncan with Piper Jaffray. Please proceed with your question.

First of all, congrats on the recent progress with the regulatory agencies and thanks for taking my question. Joe, I wanted to ask about VGX-3100, I know that you were or that you said you’d share more details with us when you initiate that trial and perhaps [indiscernible] but I’m wondering if you could share with us some of the additional details that you or feedback from the agency in terms of perhaps number of patients or the endpoints that you're discussing?

So, the VGX-3100 meetings with the regulatory agency particularly with the FDA in the Phase II meeting provided us with a very constructive and positive guidelines and concurrence on the end points that were much similar to what we had stated and proposed. So, the end points will be very much similar to our Phase II design. And also the number of patients in total is in line with what I had projected for better part of last year between 350 and 400 total patients. So we are very pleased to have successfully gone through this regulatory important milestone and we are racing ahead to get this trial started as soon as possible in the 2016. I project sometime in the next several months we'll be able to announce the start of the study and leading up to that we will detail the Phase II detailed design and endpoint at that time.

Okay, and then with regards to kind of projecting the timelines and the size of the trial, is it consistent with the cost estimate that you had made in the past?

Yes, absolutely. We feel that we have full -- we did a fundraising in 2015 to fully fund our Phase III trial. We feel that we are in a very - a good resource position to be able to execute VGX-3100 Phase III trial as well as all of the other exciting programs we have in oncology and infectious disease.

My second question was on the infection disease efforts, it almost seems like those efforts could form the basis of the very exciting pipeline without immuno-oncology efforts and so you kind of have a very broad platform that could probably support different companies but as you look at those infectious disease efforts, which one, would you pick a favorite in terms of demonstrating I will call it a technical feasibility from a clinical perspective or highlight what your pipeline can do or your technology can do. And then second, could you pick one from a commercial perspective?

Yes, I agree with your 100% Charles that our platform is able to support and advance important products for cancer and infectious disease. In fact that's what I and our team have been working so diligently to build in the last 10, 15 years. Inovio has is the overnight success that’s taken 15 years to occur, but we have a platform that can pump out these products using the same mechanism of immune action and we have over, as you know, 1000 patent filings protecting our assets. So in terms of the infectious disease, I’m glad you asked, commercially, I’m very excited about our partner product with Roche, which is a therapy for treating Hepatitis C infection. As you know, over 250 million people are chronically infected with HPV virus throughout the world and that’s more than double the size of Hep C market and unlike the Hepatitis C market, HPV market has very little drug effective drug treatments available. So what we’re going in a global Phase I study, which is very ambitious, but that’s what we do here at Inovio, with the resources and backing of growth is we’re testing our HPV therapy in patients who are on antiviral drugs, but we want to see if we can convert the chronic infected patients into whether we can see the signals of clearing these infections. So we’re focused on looking at parameters beyond just immunogenicity and safety, but looking at things like S antigen and E antigen conversions. And then, so I’m very excited about that. There is a second study that I haven’t even discussed, but it’s our HIV vaccine that’s currently in a Phase I clinical study fully funded by the US government to our NIH contracts and in our partnership with The HIV Vaccine Trials Network of our PENNVAX-GP vaccine. That will be finalizing the enrollment of 94 patients later this year and we’ll really demonstrate whether we can generate the powerful T cell responses in healthy volunteers and we have a sister study that we’ll be looking at in treating HIV infective patients when we treat with our immunotherapy. So, there is lot more studies to come, but I don’t want to undersell the important data we received from Ebola trial. As I mentioned earlier, we were able to generate very high levels of antibody and T cell responses in our Ebola vaccine and we’re in the process of merging that with our efficacy from animal models and non-human primates and we are hopeful that we can go forward for a licensor through an animal rule in the next several years. The FDA has put the animal rule in place for allowing for an approval for a vaccine that can perhaps treat or prevent against very highly deadly infectious agents. And then lastly, I don’t want to -- I think Zika is extremely important. It’s becoming from a regional or more of a tropical disease problem to a highly infectious, highly problem causing and even more commercially attractive infectious disease targets. When we delve into this program, none of those were outlined clearly, but because of our leadership, I’m sure that Inovio will have the first vaccine to be tested in humans later this year. So more to come and I’m very excited about all of these very important advancements from our clear path forward for our Phase III product all the way to our other important products in our pipeline.

Thanks for the added color, Joe. We’ll forward to the VGX-3100 Phase III start and then the additional data from all these other programs.

Thank you. And then let me just sort of last touch on to this. One of our strengths at Inovio is our prolific platform that can generate multiple products. When I started this business 15 years ago, I didn’t want Inovio to be a one trick pony. So we have a very strong platform that’s protected by a fortress of IP position and then we’re adding even more technologies, both internally and through acquisitions and from them, from the platform, we’re developing multiple potentially game changing products and by the way, we’re not doing all of those on our own, we’re bringing important partners and licensees such as Roche, MedImmune, DARPA, NIH, NCI and others. So I’m really excited because lot of our hard work is starting to show in the execution of so many of these programs. So, and I’m very excited about where we’re and what we’re going to show in the next coming months.

Our next question comes from the line of Thomas Shrader with Stifel. Please proceed with your question.

Good morning. Thanks for taking the question. I guess I want to explore a little bit more where Charles was, so is it -- so you have an agreement on a Phase III endpoint or you have guidance and then you’re left with some leeway to design trial around it, are there more meetings, can you give us a sense of whether we’re waiting for anything else?

So we’ve had our end-of-Phase II meeting. We’re still waiting to get the written comments back. Based on the meeting and it was a very concurring and very helpful meeting and we expect the endpoint, the finalized endpoint to be one in line as what we had in our Phase II design, what was published in the latest with the beta, and in terms of the size and others, we expect to be the same. I couldn’t have imagined a better end-of-Phase II meeting prior to the meeting than what we actually had. As a new technology, going after transformative game changing therapies, there could be lot of pitfalls along the way and I can honestly and loudly tell you that we have a clear path in our stage 95 [ph] newly paved path to our Phase III and I couldn’t be any more excited about those.

So you’re just reluctant to really be specific before you get the minutes is what you’re telling us?

And we’d like to hold the cards close to our vest until we execute this. Some may say this is, but we -- this is a very important event and milestone for Inovio and for the field of active immunotherapy. This is the first DNA immunotherapy to go into Phase III in a meaningful way and we would like to end and certainly it is for the first for Inovio. So we want to make sure we can do this right the first time and we feel very strongly about that and I feel very good about where we are. And this will really set the tone for all of our other follow-on products that are coming right behind VGX-3100, both in oncology and infectious disease. But Phase II, we’re going to provide the details of the study as we ramp up to the launch of VGX-3100 study.

Okay. Totally reasonable. In the world of Zika right now, do you anticipate a grant kind of akin to Ebola is available, are there RFPs floating around for those kinds of money and will you start human testing without some sort of external funding?

So last question first, yes, I think we feel strongly that having the leadership position in terms of the best vaccine as well as most physician vaccine to be in the first into human testing is critically important. That’s why we partner with GeneOne. They have the manufacturing capability, they have the other knowhow and it wasn’t just GeneOne, Tom. We put the old band together, it’s the same team that of the collaborators that are progressing and advancing our Zika vaccine program. It’s the same group of collaborators that had progressed the MERS vaccine as the first and only vaccine in human testing today and as you mentioned, our Ebola vaccine. So back to the first part of the question, we think Zika is even a bigger problem potentially than Ebola or MERS or any other emerging global viral threats out there, So we think there will be funding available, especially the leading vaccine candidates that will be going into human testing this year. So I can't comment on anything in more detail, but I think there will be lot more information about that timing throughout this year as well

Okay. And then last question, so the Chikungunya program should be going extremely well, are you confident that that and maybe Zika is easier than dengue and dengue vaccines at least to date work very poorly, do you have a sense that Zika would be easier or is it just too early to know?

So quick answer might be – well, I don't think there is a quick answer, it really depends. Zika was discovered in 1947, but very little work or research has been done since until 2015, so we are still - the field is learning about the impact of Zika and the epidemiology and the spread kinetics of Zika as well. Dengue, people have been studying for many years and there are many different reasons why dengue is such a tough nut to crack from the vaccine standpoint, not to mention the emerging threats of Chikungunya. What I do project in the future is there may be a need for a combination of vaccine that combines dengue, Chikungunya and Zika and that's something that will be very exciting for the global health field and because it’s pretty much carried by the same mosquito, same strands of mosquito, so that could be a huge commercial target for combo vaccines like that.

All right, perfect. Thank you very much. Congratulations again.

Thank you, Tom.

[Operator Instructions] Our next question comes from the line of Jonathan Aschoff with Brean. Please proceed with your question.

Thank you and good morning. Joe, I was wondering, is there any program you have that cannot ultimately be converted over to the Bioject administration with a simple PK study and then a second part of that is which products at present are being developed as a needle-free injection on the start?

So, Jonathan, good question. In theory, we can remove needles everywhere up and down our pipelines with the Bioject technology. Now let me just remind you that [indiscernible] are not singularly enough to generate the level of human responses and efficacy in humans. What we envision and the reasons why we like technology so much and so much more valuable in our hands that in our view compared to as a separate entity as the Bioject is because it allows us to remove the needle on both our intramuscular as well as intradermal delivery, so especially in intradermal. So next generation devices that we are developing have very little needle penetration into the skin or no penetration at all for electroporation delivery, so it may sound futuristic but I can project in months or years to come that we could have a purely prophylactic vaccine that we can deliver to children, baby or elderly with very minimal or zero pain and be able to generate this effective immune responses in them. So Bioject acquisition is a very important key step in aligning for us to do that. In terms of what products we're still reviewing everything but in research we’ve done RSV, Zika, HIV and other so - in animal setting. So we’ve done a lot of kicking of the tires before we acquired - before we wanted to own the technology. So, we have lot of data that we have in-house, that will multitudes of development having Bioject as one of the key technologies in delivery.

And so then just a follow up, what are the B and T cell responses that you get where the only variable is the [indiscernible] administration?

So in our Ebola vaccine study in 75 patients of healthy volunteers, our intradermal delivery, this is a two millimeter injection into the skin showed very strong immune responses as good or better than intramuscular delivery in terms of generating the antibody responses. And we think this is the route to go for the skin for the preventive side. All the while intramuscular delivery route is generating the best T-cell responses, which is a critical in immuno-oncology in our HPV programs. So we’ve already designed and manufactured our commercial device CELLECTRA 5PSP that’s going into Phase III for VGX-3100, so we have – let me restate that we have a commercial device where we're testing in Phase III for 3100 and they will go seamlessly into the commercial launch if and when we have our successful Phase III results from the upcoming trials. So we have a very systematic strategic plans for both intramuscular and intradermal delivery routes for our products.

Okay, thank you.

Our next question comes from the line of Jason McCarthy with Maxim. Please proceed with your question.

Hi, Joe, congratulations on all the progress.

Thank you.

Just a couple of questions. When do you think we will see the immune data from DNA program whether an ID or oncology and in oncology for the INO5150, the interim data that we will towards the end of the year will you be also monitoring decreases in patient PSA and any potential regression in tumor?

So last question first. Yes, we will be monitoring those. It will be an interim look. We will be finishing the enrollment of 60 patients. So the predominant focus will be on safety and immunogenicity, but we are also tracking other signals of efficacy or antitumor effects as you mentioned. Now the dMab and I am very excited about the dMab technology. It is a transformative application of our platform that we're already using for immunotherapy in vaccines, but can you imagine being able to cut out the middlemen like Amgen and J&J and Merck who are making these very valuable conventional monochrome antibodies. We are funded with DARPA’s funding to work out all of the early technology, but I'm pleased to say that most of our development work is going even beyond my very aggressive R&D timeline. So when can we see that in humans, we think very soon and we are paring out all of the prep work to make that happen, but I would say at this point in 2017 is the earliest time, but there really is a lot of exciting advancements that’s going on both in infectious disease products that’s with in dMab and funded by DARPA and others to do, but also in the fields of oncology there will be multiple papers that will come out in the future months about the application of dMAb in oncology in animal models and look forward to translating those into the clinic either alone or with potential partners going forward. So there is – believe me there is going to lot of exciting reports coming out from the dMAb side of our platform in the coming months.

Okay, great.

Thank, Jason.

Thank you. We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.

So, we would like to thank you all for joining us this morning. So the last thing I want to say and actual message I want to leave off this morning's call is that Inovio is on track and we are executing. We have multiple advancements, not just our Phase III ready product but all up and down our pipeline with oncology and infectious disease candidates that I reviewed this morning. So please stay tuned and I thank you for your attention this morning.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day half.