SAN DIEGO (PRWEB) August 7, 2008
Total revenue for the three and six months ended June 30, 2008 was $663,000 and $1.3 million, respectively, as compared to $496,000 and $999,000, respectively, for the same periods in 2007. Revenue consisted of license fees, milestone payments, revenue recognized from collaborative research and development arrangements and grants.
Total operating expenses for the three and six months ended June 30, 2008 were $4.8 million and $8.8 million, respectively, as compared to $5.3 million and $10.1 million, respectively, for the three and six months ended June 30, 2007.
The net loss attributable to common stockholders for the three and six months ended June 30, 2008 was $4.0 million, or $0.09 per share and $7.0 million, or $0.16 per share, respectively, as compared with a net loss attributable to common stockholders of $3.8 million, or $0.09 per share and $7.5 million, or $0.19 per share, respectively, for the three and six months ended June 30, 2007.
Revenue from license fees and milestone payments was $204,000 and $397,000, respectively, for the three and six months ended June 30, 2008, as compared to $209,000 and $444,000, respectively, for the three and six months ended June 30, 2007. The slight decrease in revenue under license fees and milestone payments for the three and six month periods ended June 30, 2008, compared with the same periods in 2007, was primarily due to less revenue recognized from the Merck licensing agreement as this agreement was fully amortized during 2007, offset by revenue recognized from various license agreements.
Revenue from collaborative research and development arrangements during the three and six months ended June 30, 2008 was $459,000 and $919,000, respectively, as compared to $286,000 and $534,000, respectively, for the same periods in 2007. The increase in revenue under collaborative research and development arrangements during the three and six months ended June 30, 2008, compared with the same periods in 2007, was primarily due to an increase in Wyeth billings based on our collaborative agreement, offset by slightly lower Merck collaborative research billings. Billings from research and development work performed pursuant to the Wyeth and Merck agreements are recorded as revenue when the related research expenditures are incurred.
There was no grant and miscellaneous revenue for the three and six months ended June 30, 2008, compared with $0 and $21,000, respectively, for the three and six months ended June 30, 2007. The decrease in grant and miscellaneous revenue was due to no revenue being recognized from the U.S. Army grant due to completion of the defined project.
Research and development expenses for the three and six months ended June 30, 2008 were $1.7 million and $3.3 million, respectively, as compared to $2.9 million and $5.4 million for the three and six months ended June 30, 2007, respectively. The decrease in research and development expenses for the three and six months ended June 30, 2008, compared with the same periods in 2007, was primarily due to a decrease in SECTA clinical trial expenses associated with patient enrollment, clinical site costs, data collection and monitoring costs, and costs related to the use of outside Clinical Research Organizations ("CROs") and Clinical Research Associates ("CRAs"). Some of this decrease was offset by higher costs associated with the expansion of our in-house engineering and research resources relating to DNA vaccine research activities.
General and administrative expenses, which include business development expenses and amortization of intangible assets, were $3.1 million and $5.5 million for the three and six months ended June 30, 2008, respectively, as compared to $2.3 million and $4.6 million for the three and six months ended June 30, 2007, respectively. The increase in general and administrative expenses for the three and six months ended June 30, 2008, compared to the same periods in 2007, was primarily due to an increase in outside consulting services and legal fees related to the negotiation and execution of the definitive merger agreement with VGX Pharmaceuticals, Inc., announced July 7, 2008.
Net Loss Attributable to Common Stockholders
The decrease in net loss attributable to common stockholders for the six months ended June 30, 2008, compared with the same period in 2007, resulted primarily from the increase in collaborative research and development revenue and the decrease in research and development operating expenses, as described above.
We ended the second quarter of 2008 with cash and short-term investments of $8.1 million and working capital of $5.7 million, compared with $27.3 million in cash and short-term investments and $25.6 million in working capital as of December 31, 2007. The decrease in working capital during the six months ended June 30, 2008, was primarily due to the reclassification of $12.5 million of auction rate security ("ARS") investments from short-term to non-current assets. The remaining decrease in working capital was primarily due to expenditures related to our research and development and clinical trial activities, as well as various general and administrative expenses related to consultants, legal, accounting and audit, corporate development, and investor relations activities.
With respect to the reclassification of ARS investments, we originally purchased six high-grade ARSs, issued primarily by municipalities, for approximately $13.6 million. In March 2008, our investment advisor informed us that decreased market liquidity for this type of security caused the valuation of these investments to fall below par. At June 30, 2008, we recorded on our consolidated balance sheet an unrealized loss of $1.1 million on these investments and reclassified $12.5 million as a non-current asset.
These securities retain the AAA/AA ratings they had when we purchased them, and have yielded uninterrupted interest payments that we receive on a monthly basis directly from the issuers. The lack of liquidity may require us to hold the ARSs until they are redeemed by the issuer or to maturity, but we believe the decline in their liquidity and fair value is temporary. We expect that liquidity of these investments is not required to fund our operations during the next twelve months. The Company anticipates receiving approval of and executing a $5.0 million line of credit from its investment advisor in the third quarter, secured by the ARS, to provide additional working capital.
The operational highlights for the second quarter included further positive interim results reported by our partners from ongoing DNA vaccine clinical studies. A summary of these results follows, covering R&D and clinical studies using Inovio's electroporation delivery technology. More details can be found in the news release section of Inovio's website.
The University of Southampton presented interim data from its phase I/II clinical study of an experimental DNA-based prostate cancer vaccine, indicating that the combination of this DNA vaccine and electroporation DNA delivery was safe and well-tolerated. Patients treated using electroporation displayed higher levels of antibody and cellular immune responses. Data from preclinical studies performed in collaboration with scientists at Beth Israel Deaconess Medical Center (BIDMC) demonstrated a 77-fold increase in dendritic cells at the site of administration of a DNA vaccine delivered with electroporation compared to a similar amount of DNA delivered using a DNA injection alone. The result suggested that electroporation provides a strong adjuvant effect capable of priming the immune system, partially explaining the apparent enhancement that electroporation has provided in enhancing the potency of DNA vaccines in humans. Tripep AB reported preliminary results from the first patient to complete treatment with Tripep's therapeutic hepatitis C virus (HCV) vaccine, ChronVac-C(R), which was delivered using Inovio's electroporation-based DNA delivery system. In this phase I/II clinical study, the treatment has been shown to be tolerable and safe. In samples taken before, during and after treatment, preliminary results from the first two patients in the intermediate dose group to complete treatment against hepatitis C virus infection showed that the viral levels in blood decreased up to 87% and 98%, respectively, during treatment. Simultaneous activation of the patients' T-cell responses to the hepatitis C virus was recorded in conjunction with the viral load reductions. Pre-clinical results from two proprietary plasmid DNA-based universal influenza vaccine candidates using the company's proprietary electroporation delivery technology and, specifically, a new intradermal device, showed that 100% of immunized mice given a lethal challenge of highly pathogenic H5N1 influenza virus (A/Vietnam/1203/04) survived and showed only minor weight loss. These experimental universal vaccines are based on conserved genes common to multiple strains of seasonal influenza and even potential pandemic influenza, suggesting they may have the possibility to provide widespread protection against such viruses. In addition, we entered into a license agreement with Advanced BioScience Laboratories, Inc. (ABL) so that ABL may conduct certain internal research on DNA vaccines delivered using electroporation and to offer electroporation delivery of DNA vaccines as a service for its research customers. Inovio will receive a royalty on such services.
Subsequent to the quarter, we announced the signing of a definitive merger agreement with VGX Pharmaceuticals, Inc., a privately-held DNA vaccine developer, which provides for the issuance of Inovio Biomedical securities in exchange for all of the outstanding securities of VGX Pharmaceuticals, subject to completion of the registration of the Inovio Biomedical securities to be issued with the U.S. Securities and Exchange Commission (SEC), receipt of approval from both companies' stockholders of the transaction, listing approval from the American Stock Exchange and other customary closing conditions. The parties expect to complete the merger in the fourth quarter of 2008, however, the actual timing of the transaction will depend on a number of factors, some of which are beyond either company's control.
About Inovio Biomedical Corporation
Inovio Biomedical (AMEX: INO) is focused on developing multiple DNA-based immunotherapies and DNA vaccines. Inovio is a leader in developing human applications of electroporation using brief, controlled electrical pulses to increase cellular uptake of a useful biopharmaceutical. Human data has shown that Inovio's electroporation-based DNA delivery technology can significantly increase gene expression and immune responses from DNA vaccines. Immunotherapy partners include Merck, Wyeth, Vical, University of Southampton, Moffitt Cancer Center, the U.S. Army, National Cancer Institute, and International Aids Vaccine Initiative. Inovio's technology is protected by an extensive patent portfolio covering in vivo electroporation. More information is available at http://www.inovio.com.
This press release contains certain forward-looking statements relating to our plans to develop our electroporation drug and gene delivery technology, our operations and strategic business events. Actual events or results may differ from our expectations as a result of a number of factors, including the uncertainties inherent in clinical trials and product development programs (including, but not limited to, the fact that pre-clinical and clinical results referenced in this release may not be indicative of results achievable in other trials or for other indications and that results from one study may necessarily not be reflected or supported by the results of other similar studies), the availability of funding to support continuing research and studies in an effort to prove safety and efficacy of Inovio's technology as a delivery mechanism, the availability or potential availability of alternative therapies or treatments for the conditions targeted by Inovio or its collaborators, including alternatives that may be more efficacious or cost-effective than any therapy or treatment that Inovio and its collaborators hope to develop, evaluation of potential opportunities, issues involving patents and whether they or licenses to them will provide Inovio with meaningful protection from others using the covered technologies, whether such proprietary rights are enforceable or defensible or infringe or allegedly infringe on rights of others or can withstand claims of invalidity and whether Inovio can finance or devote other significant resources that may be necessary to prosecute, protect or defend them, the level of corporate expenditures, assessments of our technology by potential corporate or other partners or collaborators, capital market conditions, our ability to coordinate with VGX Pharmaceuticals to efficiently move the proposed merger through the registration and stockholder approval process, the timeliness with which regulators respond to filings and requests for approval related to the proposed merger, evaluation of the transaction by the American Stock Exchange, which may impact the current and/or additional listing of Inovio's securities, and other factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2007, our 10-Q for the six months ended June 30, 2008 and other regulatory filings from time to time including, but not limited to, the registration statement/proxy statement and related consent solicitation materials to be filed by Inovio under Form S-4 pursuant to the merger agreement. There can be no assurance that any product in our product pipeline will be successfully developed or manufactured, that final results of clinical studies will be supportive of regulatory approvals required to market licensed products, that the proposed merger will be consummated or that any of the forward-looking information provided herein will be proved accurate.
INOVIO BIOMEDICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,2008 December 31,2007 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 8,106,802 $ 10,250,929 Short-term investments — 16,999,600 Accounts receivable 560,796 1,139,966 Prepaid expenses and other current assets 561,042 613,656 Total current assets 9,228,640 29,004,151 Investments 12,487,900 — Fixed assets, net 403,108 401,727 Intangible assets, net 5,962,380 6,186,430 Goodwill 3,900,713 3,900,713 Other assets 282,000 282,000 Total assets $ 32,264,741 $ 39,775,021 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 1,881,287 $ 1,807,305 Accrued clinical trial expenses 594,483 573,767 Common stock warrants 453,196 367,071 Deferred revenue 546,610 544,410 Deferred rent 71,094 61,946 Total current liabilities 3,546,670 3,354,499 Deferred revenue, net of current portion 4,172,811 4,335,806 Deferred rent, net of current portion 59,591 99,712 Deferred tax liabilities 918,750 950,250 Total liabilities 8,697,822 8,740,267 Stockholders' equity: Preferred stock 113 113 Common stock 43,886 43,815 Additional paid-in capital 171,330,708 170,730,621 Receivables from stockholders (50,000 ) (50,000 ) Accumulated deficit (146,892,807 ) (139,847,326 ) Accumulated other comprehensive (loss) income (864,981 ) 157,531 Total stockholders' equity 23,566,919 31,034,754 Total liabilities and stockholders' equity $ 32,264,741 $ 39,775,021 INOVIO BIOMEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months EndedJune 30, Six Months EndedJune 30, 2008 2007 2008 2007 Revenue: License fee and milestone payments $ 203,924 $ 209,265 $ 396,753 $ 443,754 Revenue under collaborative research anddevelopment arrangements
459,110 286,312 919,295 534,302 Grant and miscellaneous revenue — — — 21,423 Total revenue 663,034 495,577 1,316,048 999,479 Operating expenses: Research and development 1,679,264 2,907,836 3,276,652 5,424,247 General and administrative 3,086,180 2,344,551 5,487,685 4,635,712 Total operating expenses 4,765,444 5,252,387 8,764,337 10,059,959 Loss from operations (4,102,410 ) (4,756,810 ) (7,448,289 ) (9,060,480 ) Interest income 191,371 286,792 490,120 509,860 Other income (expense) (112,733 ) 727,305 (87,312 ) 1,066,610 Net loss (4,023,772 ) (3,742,713 ) (7,045,481 ) (7,484,010 ) Imputed and declared dividends on preferredstock
— (8,244 ) — (23,335 ) Net loss attributable to common stockholders
$ (4,023,772 ) $ (3,750,957 ) $ (7,045,481 ) $ (7,507,345 ) Amounts per common share — basic and diluted:
Net loss per share attributable to common stockholders
$ (0.09 ) $ (0.09 ) $ (0.16 ) $ (0.19 ) Weighted average number of common shares outstanding — basic and diluted
43,874,739 40,674,947 43,856,341 39,193,023