Inovio Pharmaceuticals Inc

NASDAQ:INO

Earnings Call Transcript 2023-Q2

[Operator]

Good day, and welcome to the Inovio Second Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Thomas Hong, Manager of Investor Relations. Please go ahead.

[Thomas Hong, Manager of Investor Relations]

Good afternoon, and thank you for joining the Inovio 2023 second quarter conference call.

Joining me on today's call are Dr. Jacque Shea, President and CEO; Dr. Michael Sumner, Chief Medical Officer; and Mr. Peter Kies, Chief Financial Officer.

Today's call will review our corporate and financial information for the quarter ended June 30, 2023, as well as provide a development progress update for our DNA medicines platform. Following prepared remarks, we will conduct a question-and-answer segment.

During the call, we will be making forward-looking statements regarding future events and the future performance of the company. These events relate to our business plans to develop Inovio's DNA medicines platform, which include clinical and regulatory developments and timing of clinical data readouts, along with capital resources and strategic matters. All of these statements are based on the beliefs and expectations of management as of today.

Actual events or results could differ materially. We refer you to the documents we file from time to time with the SEC, which under the heading Risk Factors identify important factors that could cause actual results to differ materially from those expressed by the company verbally as well as statements made within this afternoon's press release.

This call is being webcast live, and a link can be found on our website, ir.inovio.com, and a replay will be made available shortly after this call is concluded.

I will now turn the call over to Inovio's President and CEO, Dr. Jacque Shea.

[Jacque Shea, President and Chief Executive Officer]

Good afternoon, and thank you to everyone for joining today's call.

In the second quarter of 2023, we continued to make important progress with INO-3107, our candidate for the treatment of recurrent respiratory papillomatosis, or RRP. Following positive results from our Phase 1/2 trial earlier this year, our team is working to initiate a pivotal Phase 3 trial in in adults as quickly as possible. We are targeting the first patient first dose in the first quarter of 2024, which would move us one step closer to delivering on the promise of DNA medicines for patients suffering from this debilitating disease.

We are excited about this next chapter for Inovio and focused on making sure our company is scaled to support advancing our pipeline. With that in mind, and in light of what we see as a particularly challenging funding environment for pre-commercial biotech companies like Inovio, we've made some key shifts in resource allocation for our pipeline, as well as the difficult decision to further reduce our headcount and operational spending to better align with our strategic priorities.

As our CMO, Michael Sumner, and CFO, Peter Kies, will describe in more detail shortly, we announced today our decision to stop further investment in VGX-3100 for cervical HSIL in the U.S. market. We will continue to support our partner ApolloBio as they advance their Phase 3 trial for cervical HSIL in China in a non-biomarker selected population, and appreciate their ongoing efforts to advance promising DNA medicines for patients in that market.

To provide a clearer picture of how these decisions fit with our larger pipeline strategy, I'd like to share an overview of our current product candidates. As you can see here, we have a diverse portfolio across therapeutic areas and paces of development. In the top right corner, we have INO-3107 and advancing that candidate into Phase 3 is our first priority. As I mentioned previously, we are targeting to begin dosing patients in the first quarter of 2024.

In addition, we intend to advance VGX-3100 in anal HSIL, as well as INO-3112 and INO-5401, our oncology product candidates targeting HPV-related head and neck cancer and glioblastoma. We're also excited about the potential for our early-stage candidates targeting infectious diseases, particularly INO-4201, our Ebola booster vaccine candidate. We're also encouraged to see the next generation of infectious disease vaccine candidates based on DNA launch nano particles enter the clinic.

On this slide, you can see the clinical trials currently being conducted with Inovio's DNA medicines. Not only does it highlight the extent of the work that is underway on a number of the key candidates I just mentioned, but it also highlights the importance of our partnership and collaboration, and the breadth of interest among external parties in our technology. Also on this slide, you can see we've included our planned Phase 3 trial for INO-3107 in preparation for that trial to commence.

We are focused on driving clinical progress across our pipeline, particularly for those candidates that we believe are closest to market and have the greatest chance of delivering on the promise of DNA medicine for patients. From a business standpoint, we're focused on ensuring that we have the resources to reach important catalysts. With that in mind, we've taken further steps to right-size our business to match our current pipeline needs, reducing our workforce by approximately 30%, and adjusting our physical footprint by initiating relocation of one of our two R&D facilities in San Diego, California. We estimate these cost savings will enable the company to fund operations into the third quarter of 2025.

With our current capital resources, we believe we can execute on our plans for INO-3107 and, as I mentioned earlier, are targeting the start of the Phase 3 trial in the first quarter of next year. We're also taking steps to advance other promising candidates, with the next stage of clinical development will most likely require additional funding or partnerships, and we're actively pursuing those opportunities.

The decision to reduce the size of our organization was not taken lightly, and I would like to take this moment to extend my deepest gratitude to all of our talented and committed employees, past and present, for their efforts on behalf of the company and contributions to the important progress we're making on our DNA medicines technology that has the potential to treat and protect patients worldwide.

With that, I'd like to turn it over to our Chief Medical Officer, Dr. Mike Sumner, to provide some important clinical highlights and details on our strategic pipeline updates. Mike?

[Michael Sumner, Chief Medical Officer]

Thank you very much, Jacque, and greetings, everyone.

I'd like to start with INO-3107. As Jacque mentioned, we've made some key strategic shifts in an effort to further drive progress across our pipeline. Our immediate focus is on our late-stage clinical candidates with the greatest chances of success, including INO-3107, our candidate for RRP, that has the potential to be our first candidate to market. There is a high unmet need for new therapeutic treatment options for this debilitating disease where patients currently face repeated surgeries.

As we've shared previously, in our recent Phase 1/2 trial, which included patients who had two or more surgeries in the prior year, 81% saw a reduction in surgical interventions as compared to the year prior to treatment. Patients and advocates have expressed time and again that a reduction in even one surgery would have a profound impact.

We announced today that we are targeting to initiate patient dosing in a Phase 3 trial for RRP in the first quarter of 2024 after finalizing discussions with the FDA. In anticipation of this trial's initiation, the clinical research organization we hired to assist us in conducting this multinational trial is working on the plan to begin opening clinical sites.

As we shared during our last quarterly call, data from the completed Phase 1/2 trial were presented by lead investigator, Dr. Ted Mau, at ABEA program as part of COSM in Boston on May 5. As you might remember, the presentation highlighted that 3107 was well tolerated with patients experiencing mostly low-grade treatment-emergent AEs. INO-3107 was also observed to induce cellular immune responses against both HPV-6 and HPV-11, with activated CD4 and CD8 T cells, including cytotoxic CD8 T cells thought to be important for clearance of virally infected cells. Inovio's preliminary analysis indicates a potential correlation between T-cell responses and reduction of surgeries. T-cell responses were also observed at week 52, indicating a persistent cellular memory response.

Also during the second quarter, we announced that 3107 was granted orphan drug designation by the European Commission as a potential treatment for RRP. As a reminder, 3107 was granted orphan drug designation from the FDA for the same indication in July of 2020, making it the first RRP product candidate to receive orphan designations from both U.S. and EU regulatory bodies.

Moving on to VGX-3100. As announced in our press release, Inovio will cease further development of VGX-3100 as a potential treatment for cervical HSIL in the U.S. This decision is driven by several factors, including the previously announced FDA feedback that we would be required to conduct one or more additional well-controlled trials in the biomarker-selective population before being considered for registration.

In addition, the biomarker we developed with QIAGEN was quite novel. It is a cutting edge microRNA based assay that was developed specifically for this trial based on data collected in our previous trials. However, as we previously reported, the biomarker did not perform as expected in REVEAL2. An error analysis of why this occurred indicates that a significant amount of additional work would need to be done to further develop the biomarker before it could be used prospectively in any new Phase 3 trials.

These challenges, which would require significant investments and lead to a very long development timeline, make our continued pursuit of VGX-3100 for cervical HSIL in the U.S. market less attractive than other opportunities in our pipeline.

That being said, we remain very encouraged by the data achieved in both of our REVEAL studies, particularly the viral clearance and lesion regression data, which we believe will be supportive evidence for partners focused on other global markets where both the options for and access to treatment for cervical dysplasia are different. For instance, our partner ApolloBio continues to conduct its ongoing Phase 3 trial of 3100 in cervical HSIL patients in China, a market where we continue to see potential for a treatment to be developed for this indication. Of note, ApolloBio is not utilizing the novel biomarker that was part of Inovio's REVEAL2 trial.

As you may recall, in REVEAL2, we achieved secondary endpoint of viral clearance and tissue regression in the ITT population. And this is the same endpoint that is the primary endpoint in ApolloBio's clinical trial.

We are also discussing the development of 3100 for additional ex-U.S. markets with other potential partners where we believe 3100 could be a valuable treatment option, if current and future trial can result in regulatory approval.

Let's turn now to our plans for developing 3100 as a potential treatment for anal HSIL. This disease affects an estimated 210,000 to over 1 million people in the U.S., with a similar estimate for Europe. Our interest in this target has increased slightly based on two primary factors: firstly, the promising viral clearance data observed in both Phase 3 trials conducted for the cervical indication, suggests that 3100 has the potential to treat this difficult disease target; and secondly, because the treatment paradigm has evolved for anal HSIL, with thought leaders now believing that a more proactive approach to patient care is warranted.

Results published in the New England Journal in June of 2022 from a multi-year study sponsored by the National Cancer Institute called the ANCHOR study showed the treatment of anal HSIL reduced the risk of anal cancer compared to active monitoring without treatment. The study produced results that are moving the medical community towards a more proactive approach in preventing lesions that can progress to cancer.

There's one catch in this shift, however. There are very few effective options available to treat anal HSIL beyond surgery. We believe 3100 could potentially fill this critical medical need given its ability to clear both lesions and virus as we observe not only in the cervical Phase 3 trials, but also in our open label Phase 2 trial in HIV negative anal HSIL patients, in which we saw the 50% or 11 out of 22 participants had no evidence of HPV-16/18 positive HSIL at week 36 and 46% or 10 out of 22 showed no evidence of HPV-16/18 on biopsy. In addition, Inovio is supporting an externally sponsored study run by the AIDS Malignancy Consortium, examining the potential of VGX-3100 in HIV-positive individuals with anal HSIL.

Inovio is also taking steps to advance INO-3112 for HPV-related head and neck cancer, INO-5401 for glioblastoma, and INO-4201 as an Ebola vaccine booster. We believe there is significant potential for each of these candidates as Jacque noted. We're working to identify strategic partnerships and focused funding opportunities to continue their late-stage development. We expect to have additional updates on our development plans for these candidates in future quarterly earnings calls.

With that, I'll now turn the call over to our CFO, Peter Kies, for our second quarter 2023 financial summary. Peter?

[Peter Kies, Chief Financial Officer]

Thank you, Mike.

Today, I'd like to provide an overview of Inovio's financial condition for the second quarter of 2023 and some additional content around the reorganization we announced on August 1.

As Jacque and Mike discussed earlier, we made some strategic shifts in our development pipeline and aligned our headcount and operational spend to help ensure Inovio is well positioned to advance our late-stage candidates to important catalysts. We estimate the cost savings we announced today will allow us to fund operations into third quarter of 2025. This projection includes a cash burn estimate of approximately $34 million for the third quarter 2023, including an expected one-time charge of approximately $2.1 million related to the headcount reduction. We expect the cash burn will decrease incrementally from there throughout the remainder of 2023 and 2024. These projections do not include any funds that may be raised through our existing at-the-market program or other capital raise activities.

Taking a look at our operating expenses, as you can see on the slide, I've highlighted the reduction in our operating expenses over the last year. In the second quarter of 2023, our total operating expenses were $37.3 million, which is down 64% from the second quarter in 2022 and down 15% from the first quarter of 2023.

Breaking down total operating expenses, we see that research and development expenses for the second quarter of 2023 were $23.7 million compared to $56.5 million for the same period in 2022, a 58% reduction quarter-over-quarter. The decrease in R&D expenses was primarily the result of lower drug manufacturing costs, clinical trial expenses, and outside services related to INO-4800, the other -- and other COVID studies, actually, as well as lower employee and consulting compensation including stock-based compensation, among other variances.

G&A expenses for the second quarter of 2023 were $13.5 million compared to $48.5 million for the same period in 2022, a 72% drop. The decrease in G&A expenses was primarily related to a significant one-time cost in the second quarter of 2022 related to the settlement of the class action litigation and related legal expenses, as well as severance incurred in 2022, among other variances.

Our revenue for the second quarter of 2023 were $226,000 compared to $784,000 for the same period in 2022.

These factors combined to bring our net loss for the second quarter of 2023 to $35.5 million or $0.13 per share basic and dilutive, compared to a net loss of $108.5 million or $0.46 per share basic and dilutive for the second quarter in 2022. This represents a 67% year-over-year reduction in our net loss.

We finished the second quarter of 2023 with $194.9 million in cash, cash equivalents, and short-term investments compared to $253 million as of December 31, 2022.

As a reminder, you can find our full financial statements in this afternoon's press release as well in -- as in our Form 10-Q filed with the SEC.

And with that, I'll turn it back over to Jacque.

[Jacque Shea, President and Chief Executive Officer]

Thanks, Peter. I'd now like to open up the call to answer any questions you might have. Operator?

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Gregory Renza with RBC Capital Markets. Please go ahead.

[Unidentified Analyst]

Hi, guys. It's Anish on for Greg. Thanks for taking my questions. Just on the restructuring, I wanted to ask, given the current financial and labor constrains that are associated with the restructuring, would you consider any strategic partnership decisions to potentially offload resource requirements for clinical development of pipeline assets, external BD or sale of any of these developmental assets? And could you perhaps give us some insight into any conversations thus far in levels of interest? Thanks so much.

[Jacque Shea, President and Chief Executive Officer]

Yes, thanks. That's an important question. So, first of all, I'd like to say, we have great confidence in our pipeline. We have great confidence in our people. And clearly, we're looking at a range of different opportunities to advance our pipeline candidates forward, particularly the late-stage candidates that are -- that we're looking to move into the next stage of clinical development.

And as you all have seen from our pipeline slides and our clinical slides, Inovio has always worked across a range of different business models, including out-licensing, strategic partnerships, collaborations with the academic sectors. And we're going to continue to do that to advance our pipeline forward in the best ways that we can see fit.

[Unidentified Analyst]

Great. Thanks. I really appreciate the color.

[Operator]

Our next question comes from Roger Song with Jefferies. Please go ahead.

[Roger Song, Jefferies]

Great. Thanks for taking the question. Maybe the first one is the 3107 for RRP. Can you give us a little bit color around the discussion with the FDA? What are the key outstanding items before you can move into the Phase 3? And recently, one of your competitor doing the similar trial, they confirmed they can do a single-arm trial for the pivotal. I'm just curious what are the potential outcome for FDA discussion and the potential Phase 3 study design for your RRP program. Thank you.

[Jacque Shea, President and Chief Executive Officer]

Yes. Nice to hear from you, Roger. So, an important question around 3107. So, what talked about in today's call was that really our focus on getting the next trial started in quarter one last -- next year, and we've had some very good, very positive interactions with the FDA. And I'll hand over to Mike to provide a bit more color here. Mike?

[Michael Sumner, Chief Medical Officer]

Yeah. So, thank you. I mean, as we announced today, we are obviously far along in our discussions with respect to trial design, otherwise we would not be in the position to open up clinical trial sites. We haven't provided too much additional detail with respect to the other conversations, but we did say on our quarterly call that we are addressing some elements related to our devices. Obviously, 3107 is a combination product. And it's only natural that as the FDA looked at us commencing a Phase 3 study, that they'd also have questions relating to our device aspect of that product. But really, we've been very happy with our discussions and I think we're in a very good place to progress this asset into the clinic.

[Roger Song, Jefferies]

Okay. Great. Thanks for the color. And maybe another one. For your 3100 moving from cervical to anal, just curious how much learning from your cervical can be applied to anal, particularly for the biomarker. Do you plan to apply the biomarker strategy to anal as well? Thank you.

[Michael Sumner, Chief Medical Officer]

Yeah, good question. At present, we have not decided to use the biomarker in the anal HSIL program. We think based on all the evidence we've seen from our REVEAL studies and from the Phase 2 that we conducted, there's no need to introduce the biomarker element into that. I think we obviously had a good look at what our biomarker taught us from the REVEAL2 data. And clearly, we learned a lot from that, and we would be in a position to use that information in other programs, but certainly for anal HSIL, that is not our plan at present.

[Roger Song, Jefferies]

That's great. Thank you. That's it from me.

[Operator]

The next question comes from Hartaj Singh with Oppenheimer. Please go ahead.

[Hartaj Singh, Oppenheimer]

Great. Thank you for the two questions and thanks for the updates. Again, just going back to 3107, maybe just if you can talk a little bit about, just roughly speaking, the number of patients, how long will it take you to recruit patients? What will be the evaluation period? If you can just give us some general commentary there? I know you're a little bit constrained. And then, will your patient population be different in the Phase 3, the inclusion/exclusion criteria relative to the Phase 1/2? That's the first question.

And second is just on INO-5401, what your updates there are? And that, how the discussions on the joint committee with Regeneron are going? Thank you for the questions.

[Jacque Shea, President and Chief Executive Officer]

Okay. So, Hartaj, maybe I'll take the second question first, 5401. So that study is still wrapping up. We still have patients on that study who are still getting dosed. And we are in discussions with Regeneron as well as Professor David Reardon, lead PI on that program, about the right next steps for that program. So, we'll be providing updates on our next steps for that candidate in due course, once we've wrapped up that study.

Mike, do you want to talk about 3107? Perhaps it would be helpful to just kind of recap the Phase 1/2 data in our patient population and talk about how we see moving forward.

[Michael Sumner, Chief Medical Officer]

Yeah, absolutely. So, as you'll recall with our Phase 1/2 study, the patient population that we recruited needed to have a minimum of two surgeries in the preceding year. And the efficacy we saw in the entire population, which did range, I think, up to eight surgeries was relatively consistent across the breadth of previous surgeries. So, we really got no reason to re-examine that aspect of our patient population. As you recall, we saw -- we were very pleased with the efficacy signal that we saw in Phase 1/2 study with an 81% reduction in surgeries.

With respect to the number of patients and how long to recruit, we haven't provided that level of detail just yet. But what I would say, we have talked to the fact that this is going to be a global trial. And so, as we've looked -- done our side evaluations, we're seeing the same clinical need that we've seen in the United States. These patients do not have good treatment options beyond surgery. And so, we're hoping based the fact that we can share our Phase 1/2 data with them and the encouraging results from that, that we would -- we will hope that we can recruit this study in a relatively timely manner. I always hesitate to say that, because I'm always on the hook for recruiting those patients, but this is certainly a disease state where there is a significant pent-up clinical need.

[Jacque Shea, President and Chief Executive Officer]

And if I can just add to that, Mike, in the Phase 1/2 study, we saw a very good tolerability profile. Some of the key attributes of our platform are the ability to re-dose without any anti-vector immunity. And DNA medicines have now been in a large number of patients across various different therapeutic areas and candidates, and we've been very pleased with the safety and tolerability data that we've generated to date. So I think we've also worked in a large number of countries. And I think that experience of working globally is going to a service in good stead here.

[Hartaj Singh, Oppenheimer]

Yeah. No, that helps a lot. And I think the two orphan drug designations also mean something, the two different areas. Just a quick follow-up, Jacque, which is then, is the standard of care in terms of surgery in different countries pretty consistent? Like, there's not going to be any consistency, right, if you go from country to country? Just any feedback there? Thank you for all the questions.

[Jacque Shea, President and Chief Executive Officer]

Yeah. This is really a clinical question. I'll ask Mike to comment on that.

[Michael Sumner, Chief Medical Officer]

Yeah, actually excellent question. We, obviously, did take this into account, and it was one of the questions as we looked at other countries. And as we also mentioned in our last quarterly earnings call, surgery criteria was one of the elements that we were discussing with the FDA. And now we think we've come to a good way of standardizing those to make sure that the patients as they come into the study and actually have surgical interventions during the study that they'll be fairly standardized from site to site.

[Hartaj Singh, Oppenheimer]

Great. Thank you so much. That helps a lot.

[Operator]

The next question comes from Dipesh Patel with H.C. Wainwright. Please go ahead.

[Dipesh Patel, H.C. Wainwright]

Hi, guys. This is Dipesh standing in for Yi Chen. Just one question for me today. As you're aware, back in April, you had presented data from the Phase 1b trial of INO-4201. When can we expect further updates on this program?

[Jacque Shea, President and Chief Executive Officer]

That's a great question, Dipesh. So, just to remind people, so INO-4201 is our Ebola booster vaccine candidate, and we reported data which basically shows that we were able to boost responses in 100% or 36 out of 36 people that have previously received the Merck ERVEBO vaccine. So, we're currently going through the process of discussing our plans with -- for the next stage of those studies with regulators and with our collaborators. And we'll providing -- we'll be providing updates on that program in due course. So stay tuned for that.

[Dipesh Patel, H.C. Wainwright]

Great. Thank you very much for the update.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference over to Jacque Shea, President and CEO, for any closing remarks.

[Jacque Shea, President and Chief Executive Officer]

Thank you for your questions and for joining us today.

Over the past year, we've engaged in an essential strategic overhaul, focusing our efforts on those pipeline candidates for the closest to market with the greatest likelihood of success and scaling our business appropriately. These efforts have been critical to ensuring that Inovio has the resources needed to continue to make important clinical progress to innovate and ultimately deliver on the promise of DNA medicine for patients and shareholders alike. I look forward to sharing updates on INO-3107 and our other DNA medicine candidates as our team continues to focus on advancing the next phases of development.

With that, thank you again for your attention, and have a good evening, everyone.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.