ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking 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 proprietary device technology and DNA medicine candidates may fail to show the desired safety and efficacy traits in clinical trials; the availability of funding; the ability to manufacture our DNA medicine 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 government healthcare laws and proposals.
INOVIO, CELLECTRA, the INOVIO logo, and our other trademarks or service marks appearing in this Annual Report are our property. Solely for convenience, the trademarks and trade names in this report are referred to without the ® and TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. Products or service names of other companies mentioned in this Annual Report may be trademarks, trade names or service marks of their respective owners.
References herein to “we,” “our,” “us,” “INOVIO” or the “Company” refer to INOVIO Pharmaceuticals, Inc. and its consolidated subsidiaries. References herein to “DNA medicines” refers to our product candidates in development.
Overview
We are a clinical-stage biotechnology company focused on developing and commercializing DNA medicines to help treat and protect people from HPV-associated diseases, cancer and infectious diseases. Our platform harnesses the power of in vivo protein production, featuring optimized design and delivery of DNA medicines that teach the body to manufacture its own disease-fighting tools.
We use proprietary technology to design DNA plasmids, which are small circular DNA molecules that work like software the body’s cells can download to produce specific proteins to target and fight disease. Our proprietary investigational CELLECTRA® devices are designed to deliver the plasmids into the body’s cells for optimal effect, without the use of chemical adjuvants, lipid nanoparticles or viral vectors.
Our lead candidate is INO-3107 for the treatment of recurrent respiratory papillomatosis, or RRP, a chronic, rare and debilitating disease characterized by the growth of small tumors, or papillomas, in the respiratory tract primarily caused by HPV-6 and/or HPV-11 genotypes. Although mostly benign, these papillomas can cause severe, sometimes life-threatening airway obstruction and respiratory complications. The standard of care for RRP is repeated invasive surgery.
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In 2023, we received feedback from the U.S. Food and Drug Administration, or FDA, that the data from this completed trial could be used to support the submission of a Biologic License Application, or BLA, for review under the FDA’s accelerated approval program. As part of submitting our BLA under the accelerated program, we will need to satisfy all FDA filing requirements and initiate a confirmatory clinical trial prior to BLA submission. We previously expected to be able to submit our BLA by the end of 2024; however, during our device testing process we identified a manufacturing issue involving the single-use disposable administration component of the CELLECTRA 5PSP device that we plan to use in the confirmatory trial and that will be submitted for approval for commercial use. We resolved the manufacturing issue in the first quarter of 2025 and are currently on track to begin a rolling submission of the BLA in mid-2025 and to request priority review, with a goal of receiving file acceptance by the FDA by the end of 2025.
We are developing INO-3112, a DNA medicine candidate targeting HPV 16/18 combined with a DNA plasmid encoding for human IL-12 as an immune activator, for the treatment of oropharyngeal squamous cell carcinoma, or OPSCC, a type of head and neck cancer commonly known as throat cancer.
We have entered into a clinical collaboration and supply agreement with Coherus BioSciences, Inc. to evaluate the combination of INO-3112 and LOQTORZI (toripalimab-tpzi) in a clinical trial for patients with locoregionally advanced, high-risk, HPV16/18 positive OPSCC. Under the terms of the supply agreement, Coherus will provide LOQTORZI for a planned Phase 3 clinical trial. We have also gained alignment with FDA on the design of the planned Phase 3 trial in the United States and received initial feedback from European regulatory authorities on the proposed design of the trial in Europe.
We are also developing INO-5401, an immunotherapy consisting of three DNA plasmids encoding for three tumor associated antigens, for the treatment of glioblastoma multiforme, or GBM, an aggressive type of brain cancer that accounts for more than 50% of all primary malignant brain tumors. GBM is one of the most complex, deadly, and treatment-resistant cancers.
In addition to our development efforts with the product candidates described above, we are actively developing or planning to develop DNA medicines for other indications, including HPV-related anal dysplasia; cancers in people with certain gene mutations; and a potential vaccine booster to protect against the Ebola virus. We were previously conducting clinical trials of a DNA medicine candidate for the treatment of HPV-related cervical high-grade squamous intraepithelial lesions, or HSIL, but announced in 2023 that we were ceasing development for this indication in the United States. However, our collaborator ApolloBio Corporation continues to conduct a Phase 3 clinical trial of this candidate in China and plans to seek regulatory approval for and potentially commercialize the candidate in that jurisdiction.
Our partners and collaborators include Advaccine Biopharmaceuticals Suzhou Co, ApolloBio Corporation, AstraZeneca, Coherus Biosciences, Defense Advanced Research Projects Agency (DARPA), HIV Vaccines Trial Network, International Vaccine Institute (IVI), Kaneka Eurogentec, National Cancer Institute (NCI), National Institutes of Health (NIH), National Institute of Allergy and Infectious Diseases (NIAID), Plumbline Life Sciences, Regeneron Pharmaceuticals, Richter BioLogics, the University of Pennsylvania, the Walter Reed Army Institute of Research, and The Wistar Institute.
All of our DNA medicine 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 material revenues unless and until we obtain marketing approval for and successfully commercialize INO-3107 and our other product candidates. We earn revenue from license fees and milestone revenue and collaborative research and development agreements and contracts. Our DNA medicine candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All DNA medicine 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.
As of December 31, 2024, we had an accumulated deficit of $1.7 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.
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 report.
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
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carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements:
Research and Development Expenses - Clinical Trial Accruals
Our activities have largely consisted of research and development efforts related to developing proprietary device technologies, DNA medicine candidates and dMABs. For clinical trial expenses, judgments used in estimating accruals rely on estimates of total costs incurred based on participant enrollment, completion of studies and other events. 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, included elsewhere in this report.
Results of Operations
The consolidated financial data for the years ended December 31, 2024 and 2023 is presented in the following table and the results of these periods are used in the discussion thereafter.
Year Ended December 31, Increase/(Decrease) 2024 vs. 2023
Operating expenses:
*Not meaningful
Revenue
Revenue was primarily derived under collaborative arrangements and other contracts, including arrangements with affiliated entity, for the years ended December 31, 2024 and 2023. We derived 100% and 29%, respectively, of our revenue from a single collaborator, ApolloBio, in those years.
Research and Development Expenses
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for full-time research and development employees, facilities expenses, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, fees paid to contract research organizations and other consultants, and outside expenses. We utilize a labor reporting system to record employee compensation on a project-by-project basis. Unallocated research and development expenses include engineering and device-
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related expenses that are not allocable to a specific project, as well as stock-based compensation, other employee-related expenses that are not related to a specific project, and facilities and depreciation expenses.
Research and development costs are expensed as incurred. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
The following tables summarize our research and development expense by product candidate for the years ended December 31, 2024 and 2023:
Years Ended December 31, Increase (Decrease)
(a) Net of contributions received from grant agreements and recorded as contra-research and development expense.
(b) Includes impairment of intangible assets of $2.0 million recorded in 2023.
The $11.1 million overall decrease in research and development expenses year over year was primarily the result of:
•$12.3 million in lower employee compensation, including stock-based compensation, due to lower headcount following our corporate restructuring undertaken in 2023;
•$8.1 million in lower drug manufacturing expenses for other programs;
•$7.5 million in lower drug manufacturing and clinical study expenses related to INO-4800 after we discontinued this program in 2022;
•$3.4 million in lower drug manufacturing and engineering services related to other COVID-19 studies that we ceased after we discontinued development of INO-4800;
•$2.0 million related to the impairment charge on intangible assets in 2023 which did not recur;
•$1.9 million in lower immunology and clinical study expenses related to INO-3107;
•$1.3 million in lower clinical study expenses related to VGX-3100 as we discontinued development of this product candidate in the third quarter of 2023; and
•$1.3 million in lower clinical study and subcontractor expenses related to our CEPI LASSA and MERS grants.
These decreases were offset by:
•$10.6 million in higher drug manufacturing related to INO-3107;
•$6.8 million in higher engineering professional and outside services related to our device development;
•$4.7 million of lower contra-research and development expense recorded from grant agreements; and
•$4.6 million of higher expensed inventory.
Contributions received from current grant agreements and recorded as contra-research and development expense were $2.1 million and $6.8 million for the years ended December 31, 2024 and 2023, respectively. The decrease was primarily due to decreases of $3.6 million and $553,000, respectively, in reimbursements from Advaccine and expenses earned under the sub-grants through Wistar.
General and Administrative Expenses
General and administrative expenses, which include business development expenses and patent expenses, were $37.0 million for the year ended December 31, 2024 as compared to $47.6 million in 2023. The $10.6 million overall decrease was primarily the result of:
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•$5.4 million in lower employee compensation, including employee and consultant stock-based compensation, as a result of lower headcount and lower weighted average grant date fair value for the awards granted during 2024; and
•$4.7 million in lower legal expenses related to litigation matters settled in 2023 that did not recur in 2024.
Impairment of Goodwill
In September 2023, we concluded that our goodwill was impaired due to a sustained decline in our stock price and related market capitalization, and a general decline in equity values in the biotechnology industry. Based on this analysis, we recognized a non-cash, pre-tax goodwill impairment charge of $10.5 million during the three months ended September 30, 2023. For more information, see Note 8 – Goodwilland Intangible Assets to the consolidated financial statements included in this report.
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, 2024 and 2023 was $6.4 million and $10.4 million, of which $2.8 million and $4.5 million was included in research and development expenses and $3.6 million and $5.9 million was included in general and administrative expenses, respectively.
Interest Income
The $3.4 million decrease in interest income for the year ended December 31, 2024 as compared to 2023 was primarily due to a lower short-term investment balance.
Interest Expense
The $1.0 million decrease in interest expense for the year ended December 31, 2024 as compared to 2023 was primarily due to our senior convertible promissory notes that were repaid in full on March 1, 2024.
Change in Fair Value of Common Stock Warrant Liability
We recognized a gain of $2.8 million from a decrease in the fair value of our common stock warrant liability for the year ended December 31, 2024. This change was related to the revaluation of the liability associated with the Warrants, as defined below, we issued in December 2024 and was primarily the result of a decrease in our stock price during the period between the issuance date and December 31, 2024. We will continue to estimate the fair value of these Warrants at each balance sheet date and will record gain or loss on the statement of operations for changes between balance sheet dates.
(Loss) Gain on Investment in Affiliated Entity
The (loss) gain on investment in affiliated entity resulted from the change in the fair market value of our investment in PLS of $(1.2) million and $773,000 for the years ended December 31, 2024 and 2023, respectively. 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 on Available-for-Sale Equity Securities
The net unrealized gain on available-for-sale equity securities for the years ended December 31, 2024 and 2023 was $2.1 million and $5.9 million, respectively, which resulted from a change in the fair market value of the investments.
Other Expense, net
Other expense, net, of $3.2 million for the year ended December 31, 2024 was primarily due to a realized loss on our short-term investments sold during the year, as well as the financing costs we incurred in connection with the issuance of the Warrants, as defined below, in December 2024. Other expense, net, of $4.7 million for the year ended December 31, 2023 was primarily the result of realized losses on short-term investments sold during the year.
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, 2024, we had net operating loss carry forwards for U.S. federal, California and Pennsylvania income tax purposes of $1.1 billion, $259.9 million and $88.6 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 $46.1 million and $7.9 million, respectively, net of the federal research and development credits that will expire due to IRC Section 383 limitations. The net operating losses and credits began to expire during 2025.
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Liquidity and Capital Resources
Our primary uses of cash are to finance research and development activities, including clinical trial activities for the advancement of our DNA medicine candidates. We have satisfied our cash requirements principally from proceeds from the sale of equity and debt securities, indebtedness and grants and government contracts.
Working Capital and Liquidity
As of December 31, 2024, we had cash and short-term investments of $94.1 million and working capital of $62.5 million, as compared to $145.3 million and $110.5 million as of December 31, 2023, respectively.
Cash Flows
Operating Activities
Net cash used in operating activities was $104.1 million and $124.4 million for the years ended December 31, 2024 and 2023, respectively. The variance was primarily due to the timing and changes in working capital balances, offset by decreased operating expenses.
Investing Activities
Net cash provided by investing activities was $104.1 million and $87.4 million for the years ended December 31, 2024 and 2023, respectively. The variance was primarily the result of timing differences in short-term investment purchases, sales and maturities.
Financing Activities
Net cash provided by financing activities was $51.5 million and $5.0 million for the years ended December 31, 2024 and 2023, respectively. The variance was primarily due to the aggregate net proceeds of $60.8 million from the April 2024 Offering and December 2024 Offering (described below) and net proceeds of $6.1 million from the sale of common stock under at-the-market sales agreements, offset by the repayment of our convertible senior notes of $16.4 million in March 2024.
Offering of Common Stock and Warrants
On December 16, 2024, we closed an underwritten public offering, or the December 2024 Offering, relating to the issuance and sale of 10,000,000 shares of the common stock, and accompanying warrants to purchase 10,000,000 shares of common stock, or the Warrants, at an offering price of $3.00 per share and accompanying Warrant. The net proceeds from the December 2024 Offering were $27.6 million, after deducting the underwriting discounts and commissions and offering expenses paid by us.
Offering of Common Stock and Pre-Funded Warrants
On April 18, 2024, we closed an underwritten registered direct offering, or the April 2024 Offering, relating to the issuance and sale of 2,536,258 shares of common stock at a price of $7.693 per share and pre-funded warrants to purchase up to 2,135,477 shares of common stock, or the Pre-Funded Warrants, at a price of $7.692 per Pre-Funded Warrant, which represents the per share price for the shares less the $0.001 per share exercise price for each Pre-Funded Warrant. The net proceeds from the April 2024 Offering were $33.2 million, after deducting the underwriting discounts and commissions and offering expenses paid by us.
At-The-Market Sales Agreements
On August 13, 2024, we entered into an Equity Distribution Agreement, or the 2024 Sales Agreement, with an outside sales agent, or Sales Agent, for the offer and sale of our common stock for an aggregate offering price of up to $60.0 million. The 2024 Sales Agreement provides that the Sales Agent is 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 Agent under the 2024 Sales Agreement, and we have provided the Sales Agent with certain indemnification rights.
During the year ended December 31, 2024, we sold 133,900 shares of common stock under the 2024 Sales Agreement. The sales were made at a weighted average price of $7.02 per share, resulting in aggregate net proceeds of $925,000. As of December 31, 2024, there was $59.1 million of remaining capacity under the 2024 Sales Agreement.
On November 9, 2021, we entered into an ATM Equity Offering Sales Agreement, or the 2021 Sales Agreement, with outside sales agents, under which we were able to offer and sell shares of our common stock with aggregate gross proceeds of up to $300.0 million.
During the three months ended March 31, 2024, we sold 543,620 shares of our common stock under the 2021 Sales Agreement at a weighted average price of $9.76 per share, resulting in aggregate net proceeds of $5.2 million. During the year ended December 31, 2023, we sold 875,305 shares of our common stock under the 2021 Sales Agreement at a weighted
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average price of $6.33 per share, resulting in aggregate net proceeds of $5.5 million. We terminated the 2021 Sales Agreement in August 2024 in connection with the entry into the 2024 Sales Agreement described above.
Other Issuances of Common Stock
During the year ended December 31, 2024, stock options to purchase 8,159 shares of common stock were exercised for aggregate net proceeds to us of $68,000, which proceeds were offset by tax payments made related to net share settlement of RSU awards of $421,000. During the year ended December 31, 2023, no stock options were exercised and tax payments of $467,000 were made related to the net share settlement of RSU awards.
During the three months ended March 31, 2023, we issued 760,083 shares of common stock pursuant to a securities class action settlement, as described in Note 11 to our consolidated financial statements included in this report.
FundingRequirements
As of December 31, 2024, we had an accumulated deficit of $1.7 billion and we expect to continue to operate at a loss in the near term. The amount of our accumulated deficit will continue to increase, as it will be expensive to continue research and development efforts. Our current cash resources will not be sufficient to complete the clinical development of our product candidates beyond INO-3107, and we anticipate that additional financing will be required in order to complete the development of and to commercialize and generate revenues from the sale of INO-3107 or any other product candidates that may receive regulatory approval. If these activities are successful and if we receive approval from the FDA to market our DNA medicine candidates, then we will need to raise additional funding to market and sell the approved products and equipment. In addition to the potential issuance of equity or debt securities in order to raise capital, we are also evaluating potential collaborations as an additional way to fund our operations. We expect our cash runway to extend through the fourth quarter of 2025, without giving effect to any further capital raising activities that we may undertake.
Our ability to continue operations is dependent upon our ability to obtain additional capital in the future and achieve profitable operations. We expect to continue to rely on outside sources of financing to meet our capital needs and we may never achieve positive cash flow. In light of these factors, management believes that there is substantial doubt about our ability to continue as a going concern beyond the fourth quarter of 2025. The consolidated financial statements as of and for the year ended December 31, 2024 do not include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
As of December 31, 2024, future minimum payments due under our contractual obligations are 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.
Payments Due by Period
Total Less than1 year 1 – 3 years 3 – 5 years More than5 years
(1) We have entered into operating leases for our facilities, which expire from 2027 to 2029, and operating leases for office equipment, which expire in 2025. We have four active subleases for portions of our Plymouth Meeting corporate headquarters facility with two sublease periods through December 31, 2026, one through December 31, 2027 and one through December 31, 2029. As of December 31, 2024, we expect to receive aggregate future minimum lease payments totaling $2.4 million (non-discounted) over the duration of the sublease agreements, which expected payments are not included in the table above.
(2) Purchase obligations from supply agreements with contract manufacturers.
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. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
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Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. 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 short-term investment-grade securities. Over the past several years, there has been a pronounced overall increase in prevailing interest rates in the United States, which has contributed to the accumulated unrealized loss of $1.9 million in the market value of our investment portfolio as of December 31, 2024.
Foreign Currency Risk
We operate primarily in the United States and most transactions during the year ended December 31, 2024 were made in United States dollars. Accordingly, we do not have 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 investment in PLS, which is denominated in South Korean Won and then translated into United States dollars.
Certain transactions are denominated primarily in foreign currencies, including South Korean Won, Euros, British Pounds and Canadian Dollars. These transactions give rise to monetary assets and 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 and do not engage in exchange rate hedging or hold or issue foreign exchange contracts for trading purposes.
Inflation Risk
Inflation generally affects us by increasing our cost of labor. Although inflation has increased generally in the United States in recent years, we do not believe that inflation has had a material effect on our business, financial condition or results of operations during the year ended December 31, 2024.
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
We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed 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 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, 2024 at the reasonable assurance level.
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Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting and Attestation Report of Registered Public Accounting Firm
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, 2024, 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, 2024.
This Annual Report does not include an attestation report of our registered public accounting firm regarding the effectiveness of internal control over financial reporting as required by Section 404(b) of the Sarbanes-Oxley Act of 2002. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit smaller reporting companies to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting that occurred during the fourth quarter of our fiscal year ended December 31, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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ITEM 9B. OTHER INFORMATION
Trading Plans
During the fiscal quarter ended December 31, 2024, none of our officers or directors, as defined in Rule 16a-1(f), adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.
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 2024 fiscal year, under the captions “Election of Directors,” “Corporate Governance” 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 2024 fiscal year, under the captions “Executive Compensation” (excluding the information under the subheading “Pay Versus Performance Disclosure”) and “Director Compensation."
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 2024 fiscal year, under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans.”
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 2024 fiscal year, under the captions “Executive Officers and Other Information - Certain Relationships and Related Party Transactions” and “Election of Directors.”
ITEM 14. PRINCIPAL ACCOUNTANT 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 2024 fiscal year, under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm.”
68
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1.Financial Statements
Consolidated financial statements required to be filed hereunder begin on Page F-1 in this report.
2.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:
ExhibitNumber Description of Document
69
70
19.1 Insider Trading Policy (filed herewith)
21.1 Subsidiaries of the registrant (filed herewith).
23.1 Consent of Independent Registered Public Accounting Firm (filed herewith).
24.1 Power of Attorney (included on signature page).
71
101.SCH XBRL Taxonomy Extension Schema with Embedded Linkbase Documents.
+ Designates management contract, compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
72
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 18, 2025.
Inovio Pharmaceuticals, Inc.
By: /s/ JACQUELINE E. SHEA
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jacqueline E. Shea 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
Jacqueline E. Shea
/s/ SIMON X. BENITO Chairman of the Board of Directors March 18, 2025
Simon X. Benito
Peter Kies
/s/ ROGER D. DANSEY Director March 18, 2025
Roger D. Dansey
/s/ ANN C. MILLER Director March 18, 2025
Ann C. Miller
/s/ JAY SHEPARD Director March 18, 2025
Jay Shepard
/s/ DAVID B. WEINER Director March 18, 2025
David B. Weiner
/s/ WENDY L. YARNO Director March 18, 2025
Wendy L. Yarno
/s/ LOTA S. ZOTH Director March 18, 2025
Lota S. Zoth
73
INOVIO PHARMACEUTICALS, INC.
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) F-2
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Comprehensive Loss F-6
Consolidated Statements of Stockholders' Equity F-7
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors 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, 2024 and 2023, the related consolidated statements of comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, has negative cash flows from operating activities, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’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 U.S. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
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 included 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 a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
F-2
Accrual of clinical trial expenses
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2002.
San Diego, California
F-3
Inovio Pharmaceuticals, Inc.
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
Current assets:
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Common stock warrant liability 13,255,188 —
Grant funding liability, including from affiliated entity — 109,407
Commitments and contingencies
Inovio Pharmaceuticals, Inc. stockholders’ equity:
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year ended December 31,
Operating expenses:
Other income (expense):
Change in fair value of common stock warrant liability 2,808,608 —
(Loss) gain on investment in affiliated entity (1,166,443) 773,145
Net unrealized gain on available-for-sale equity securities 2,077,182 5,850,626
Net loss per share
Basic and diluted $ (3.95) $ (6.09)
Weighted average number of common shares outstanding
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Year ended December 31,
Other comprehensive loss:
Unrealized (loss) gain on short-term investments, net of tax (45,469) 40,060
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Numberof shares Amount Numberof shares Amount
Unrealized gain on short-term investments, net of tax — — — — — — 40,060 40,060
Foreign currency translation — — — — — — (3,920) (3,920)
Foreign currency translation — — — — — — 32,403 32,403
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Inovio Pharmaceuticals, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets — 145,417
Amortization of operating lease right-of-use assets 1,377,895 736,472
Change in fair value of common stock warrant liability (2,808,608) —
Impairment of intangible assets — 1,984,444
Non-cash interest on senior convertible notes (355,654) 155,814
Net (gain) loss on disposal of fixed assets (22,466) 317,997
Loss (gain) on equity investment in affiliated entity 1,166,443 (773,145)
Changes in operating assets and liabilities:
Accounts receivable, including from affiliated entities 1,206,172 9,332,988
Operating lease right-of-use assets and liabilities, net (1,573,401) (2,020,971)
Grant funding liability, including from affiliated entity (109,407) (2,453,297)
Cash flows from investing activities:
Cash flows from financing activities:
Repayment of convertible senior notes (16,415,000) —
Proceeds from issuance of warrants 16,063,796 —
Proceeds from stock option exercises 67,675 —
Taxes paid related to net share settlement of equity awards (420,795) (466,646)
Effect of exchange rate changes on cash and cash equivalents 32,403 (3,920)
Supplemental disclosure:
Issuance of common stock as part of litigation settlement $ — $ 14,000,000
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Inovio Pharmaceuticals, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
Inovio Pharmaceuticals, Inc. (the “Company” or “INOVIO”) is a clinical-stage biotechnology company focused on developing and commercializing DNA medicines to help treat and protect people from HPV-associated diseases, cancer and infectious diseases. INOVIO's platform harnesses the power of in vivo protein production, featuring optimized design and delivery of DNA medicines that teach the body to manufacture its own disease-fighting tools.
INOVIO uses proprietary technology to design DNA plasmids, which are small circular DNA molecules that work like software the body’s cells can download to produce specific proteins to target and fight disease. The Company's proprietary investigational CELLECTRA devices are designed to deliver the plasmids into the body's cells for optimal effect, without the use of chemical adjuvants, lipid nanoparticles or viral vectors.
INOVIO's lead candidate is INO-3107 for the treatment of recurrent respiratory papillomatosis (RRP), a chronic, rare and debilitating disease of the respiratory tract caused by HPV infection. In its completed Phase 1/2 clinical trial of INO-3107 for the treatment of HPV-6 and HPV-11-associated RRP, 81.3% of patients experienced a reduction in the number of surgical interventions in the year following administration of INO-3107, when compared with the year prior to treatment.
In addition to its development efforts with INO-3107, INOVIO is actively developing or planning to develop DNA medicines for other indications, including HPV-related oropharyngeal squamous cell carcinoma (OPSCC) and anal dysplasia; glioblastoma multiforme (GBM), a deadly form of brain cancer; and a potential vaccine booster to protect against the Ebola virus. The Company was previously conducting clinical trials of a DNA medicine candidate for the treatment of HPV-related cervical high-grade squamous intraepithelial lesions (HSIL) but announced in 2023 that it was ceasing development for this indication in the United States. However, its collaborator ApolloBio Corporation continues to conduct a Phase 3 clinical trial of this candidate in China and plans to seek regulatory approval for and potentially commercialize the candidate in that jurisdiction.
The Company's partners and collaborators include Advaccine Biopharmaceuticals Suzhou Co, ApolloBio Corporation, AstraZeneca, Coherus Biosciences, Defense Advanced Research Projects Agency (DARPA), HIV Vaccines Trial Network, International Vaccine Institute (IVI), Kaneka Eurogentec, National Cancer Institute (NCI), National Institutes of Health (NIH), National Institute of Allergy and Infectious Diseases (NIAID), Plumbline Life Sciences, Regeneron Pharmaceuticals, Richter BioLogics, the University of Pennsylvania, the Walter Reed Army Institute of Research, and The Wistar Institute.
INOVIO 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
The Company incurred a net loss of $107.3 million for the year ended December 31, 2024. The Company had working capital of $62.5 million and an accumulated deficit of $1.7 billion as of December 31, 2024. 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 $94.1 million as of December 31, 2024 are not sufficient to support the Company's operations for a period of at least 12 months from the date it is issuing these financial statements.
On December 16, 2024, the Company closed an underwritten public offering (the "December 2024 Offering"), relating to the issuance and sale of 10,000,000 shares of its common stock, par value $0.001 per share, and warrants to purchase 10,000,000 shares of common stock (the “Warrants”), at an offering price of $3.00 per share and accompanying Warrant. The exercise price of the Warrants is $3.76 per share. The net proceeds from the December 2024 Offering were $27.6 million, after deducting the underwriting discounts and commissions and offering expenses paid by the Company.
On April 18, 2024, the Company closed an underwritten registered direct offering (the “April 2024 Offering”), relating to the issuance and sale of 2,536,258 shares (the “Shares”) of its common stock, par value $0.001 per share, at a price of $7.693 per share and pre-funded warrants to purchase up to 2,135,477 shares of common stock (the “Pre-Funded Warrants”) at a price of $7.692 per Pre-Funded Warrant, which represents the per share price for the Shares less the $0.001 per share exercise price for each Pre-Funded Warrant. The net proceeds from the April 2024 Offering were $33.2 million, after deducting the underwriting discounts and commissions and offering expenses paid by the Company.
Going Concern
The Company’s cash, cash equivalents and short-term investments of $94.1 million as of December 31, 2024 are expected to be sufficient to support the Company's planned operations through the fourth quarter of 2025. The Company's current
F-9
financial resources may not be sufficient to support its planned operations beyond this date without securing additional financing.
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 under 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 $60.8 million from equity offerings during the year ending December 31, 2024, and $6.1 million and $5.5 million from equity offerings under Sales Agreements during the years ending December 31, 2024 and 2023, respectively. 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 may never achieve positive cash flow. In light of these factors, management believes that there is substantial doubt about the Company's ability to continue as a going concern beyond the fourth quarter of 2025. The Company's consolidated financial statements as of and for the year ended December 31, 2024 do not include any adjustments that might result from the outcome of this uncertainty. 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 in the future may 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.
Reverse Stock Split
On January 24, 2024, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment to its certificate of incorporation, as previously amended, to effect a 1-for-12 reverse stock split of its common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every 12 issued and outstanding shares of the Company's common stock were automatically combined into one issued and outstanding share of common stock. The reverse stock split was reflected on the Nasdaq Capital Market beginning with the opening of trading on January 25, 2024. Accordingly, an amount equal to the par value of the decreased shares resulting from the reverse stock split was reclassified from "Additional paid-in capital" to "Common stock" on the balance sheet and statement of changes in stockholders’ equity. Any fractional post-split shares as a result of the reverse stock split were eliminated by the payment of cash for the value of such fractional share. As a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares underlying, and the exercise or conversion prices of, the Company's outstanding stock options and outstanding shares of Series C Cumulative Convertible Preferred Stock and to the number of shares of common stock issuable under the Company's equity incentive plans. The reverse stock split did not change the par value of the Company's common stock or the authorized number of shares of the Company's common stock.
Consolidation
The consolidated financial statements include the accounts of Inovio Pharmaceuticals, Inc. and its wholly-owned subsidiary Inovio Asia LLC.
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 ("CODM"), the President and Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one segment operating primarily within the United States, as further described in Note 16.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
F-10
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 3.
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.
The Company’s financial instruments include cash equivalents, short-term investments, investments in affiliated entity, accounts receivable, prepaid expenses and other assets, accounts payable and accrued expenses and common stock warrant liability. 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. Short-term investments are recorded at fair value on a recurring basis, based on current market valuations. The estimated fair value of the common stock warrant liability is determined by using the Black-Scholes pricing model, as discussed in Note 5.
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 included certain mutual funds and U.S. treasury securities at December 31, 2024 and 2023.
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 included mutual funds, U.S. treasury securities, certificates of deposit, U.S. agency mortgage-backed securities and an equity investment in the Company’s affiliated entity, PLS, at December 31, 2024 and 2023.
Short-term investments are recorded at fair value, based on current market valuations. Unrealized gains and losses on the Company's short-term debt securities 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 from Affiliated Entities
Accounts receivable from affiliated entities 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. There was no allowance for doubtful accounts for potential credit losses as of December 31, 2024 or 2023.
Fixed Assets
Fixed assets include property and equipment and leasehold improvements. 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.
The Company evaluates the carrying value of long-lived assets, which includes fixed assets and right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the asset may not be fully recoverable. No impairment losses have been recognized related to long-lived assets for the years ended December 31, 2024 or 2023.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent
F-11
reporting period while the warrants are outstanding. The Pre-Funded Warrants issued in April 2024 met all the criteria for equity classification and were recorded as a component of additional paid-in capital on issuance. However, the Warrants issued in December 2024 did not meet all the criteria for equity classification and were recorded as a liability at fair value upon issuance. The Warrants met the definition of a derivative and did not meet any scope exceptions under ASC 815. As a result, the fair value of the liability associated with the Warrants will be remeasured at the end of each reporting period while the Warrants are outstanding, and any change in fair value between reporting periods will be recognized as gain or loss on the consolidated statement of operations for that reporting period.
Transaction costs associated with the issuance of the Warrants classified as a liability were expensed at the time of issuance and have been included as part of other expense, net, on the consolidated statement of operations for the year ended December 31, 2024.
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 carryforwards. 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 $349.2 million and $327.5 million at December 31, 2024 and 2023, 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 and Revenue Recognition
The Company assesses whether its collaboration agreements are subject to Accounting Standards Codification ("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”).
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-research and development expense as opposed to revenue on the consolidated statement of operations.
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 and 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 changes in orderly transactions for identifiable or similar investments of the same issuer.
Research and Development Expenses - Clinical Trial Accruals
The Company's activities have largely consisted of research and development efforts related to developing its proprietary device technology and DNA medicine candidates. For clinical trial expenses, judgements used in estimating accruals rely on estimates of total costs incurred based on participant enrollment, completion of studies and other events. 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.
Net Loss Per Share
F-12
Basic net loss per share is computed by dividing the net loss for the year by the weighted average number of shares of common stock outstanding during the year. The outstanding Pre-Funded Warrants (see Note 10) are included in the weighted-average common shares outstanding in the basic net loss per share calculation for the year ended December 31, 2024 given their nominal exercise price.
Diluted net loss per share is calculated in accordance with the treasury stock method for the outstanding Warrants, stock options and restricted stock units ("RSUs") 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 Notes previously issued by the Company (discussed in Note 9) was 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 options 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 such securities from the numerator for the period. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any. For the years ended December 31, 2024 and 2023, basic and diluted net loss per share are the same, as the assumed exercise or settlement of common stock warrants, stock options, service-based RSUs, performance-and market-based RSUs and the potentially dilutive shares issuable upon conversion of the Notes prior to their repayment on March 1, 2024 would have been anti-dilutive.
Basic and diluted net loss per share for the year ended December 31, 2024 and 2023 are calculated as follows:
Year Ended December 31,
Numerator:
Denominator:
Shares used to compute net loss per share, basic and diluted
Weighted-average shares underlying pre-funded warrants 1,505,336 —
Net loss per share
Basic and diluted $ (3.95) $ (6.09)
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,
Warrants to purchase common stock 10,000,000 —
Performance-and market-based restricted stock units 128,800 —
Convertible preferred stock 275 275
Leases
For its long-term operating leases, the Company recognized an operating lease right-of-use asset and an operating lease liability on its consolidated balance sheets. The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the lease 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 Company's operating leases is recognized on a straight-line basis over the term of the lease and is included in operating expenses on the consolidated statements of operations. Variable lease payments including lease operating expenses are recorded as incurred.
F-13
Stock-Based Compensation
The Company incurs stock-based compensation expense related to service-based RSUs, performance-and market-based RSUs and stock options. The fair value of restricted stock is determined by the closing price of the Company's common stock reported on the Nasdaq Capital 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 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 is based on the fact that no dividends have been paid historically and none are currently expected to be paid in the foreseeable future. The Company 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,
Risk-free interest rate 4.22% 4.05%
Expected life in years 5.5 5.5
Dividend yield — —
The weighted average assumptions used in the Black-Scholes model for option grants to non-employees are presented below:
Year Ended December 31,
Risk-free interest rate 4.21% 3.90%
Expected volatility 100% 89%
Expected life in years 6.5 10.0
Dividend yield — —
Recent Accounting Pronouncements
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. 2023-07. In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the Chief Operating Decision Maker (CODM) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis, with early adoption permitted. The Company has adopted ASU 2023-07 and included the segment disclosures in Note 16 below.
ASU No. 2023-09. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance its consolidated financial statements.
ASU No. 2024-03. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU
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2024-03 requires public business entities to disaggregate operating expenses into specific categories such as employee compensation, depreciation, and intangible asset amortization, by relevant expense caption on the statement of operations. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, and may be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance on the consolidated financial statements.
3. Revenue Recognition and Concentration of Credit Risk
During the years ended December 31, 2024 and 2023, 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 2024 Revenue % of TotalRevenue 2023 Revenue % of TotalRevenue
All other, including affiliated entity — — 586,954 71
No revenue recognized during the years ended December 31, 2024 and 2023 was in deferred revenue as of December 31, 2023 and 2022, respectively.
As of December 31, 2024 and 2023, the Company had no accounts receivable balance.
4. Collaborative Agreements
Advaccine Biopharmaceuticals Suzhou Co., Ltd.
In 2020, the Company entered into a Collaboration and License Agreement with Advaccine Biopharmaceuticals Suzhou Co., Ltd. (“Advaccine”), which was amended and restated in 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. The 2021 amendment related to a collaboration between the Company and Advaccine to jointly conduct a global Phase 3 segment of the Company’s clinical trial of INO-4800 that was planned. The parties were jointly participating in the trial and were to equally share the global development costs for the trial, including the Company’s manufacturing costs to supply INO-4800. Advaccine agreed to be fully responsible for conducting the trial in Greater China, including its costs and expenses incurred. The Company has discontinued its internally funded efforts to develop INO-4800 as a COVID-19 heterologous booster vaccine. Advaccine continues to develop INO-4800 with its own resources under the terms of the Advaccine Agreement.
In connection with the 2021 amendment, the Company determined that the global Phase 3 trial component of the agreement was a collaboration and not a contract with a customer and therefore accounts for the 2021 amendment under ASC Topic 808. Reimbursements from Advaccine are recognized as contra-research development expense on the consolidated statement of operations once earned and collectibility is assured.During the years ended December 31, 2024 and 2023, the Company received funding of $0 and $3.6 million respectively, from Advaccine that was recorded as contra-research and development expense.
ApolloBio Corporation
In 2017, the Company entered into an Amended and Restated License and Collaboration Agreement (the "ApolloBio Agreement"),with ApolloBio Corporation ("ApolloBio"), which was amended in June 2023. Under the terms of the ApolloBio Agreement, the Company 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 agreed upon territories.
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 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.
During the years ended December 31, 2024 and 2023, the Company received $218,000 and $245,000, respectively, from the ApolloBio Agreement that was recorded as revenue.
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Coalition for Epidemic Preparedness Innovations (CEPI)
The Company previously entered into agreements with CEPI pursuant to which the Company intended to develop vaccine candidates against Lassa fever and MERS. As part of the arrangement between the parties, CEPI 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. In 2022, the Company announced that it and CEPI would discontinue the development of these product candidates targeting Lassa fever and MERS, following the initial analysis of data from the studies conducted by the Company and funded by CEPI.
During the year ended December 31, 2024, the Company received funding of $1.6 million in connection with the final close-out of these grants, which was recorded as contra-research and development expense. During the year ended December 31, 2023, the Company received funding of $1.8 million in connection with these grants.
Bill & Melinda Gates Foundation
In 2018, 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 2019, Gates funded an additional $1.1 million for the project. During the years ended December 31, 2024 and 2023, the Company recorded $39,000 and $70,000, respectively, as contra-research and development expense related to the Gates dMAb grant.
5. Short-term Investments and Fair Value Measurements
The following is a summary of available-for-sale securities as of December 31, 2024 and 2023:
*No single maturity date.
During the years ended December 31, 2024 and 2023, the Company recorded gross realized gain on investments of $900 and $1,000, respectively, and gross realized loss on investments of $1.9 million and $4.8 million, respectively. During the years ended December 31, 2024 and 2023, the Company recorded net unrealized gain on available-for-sale equity securities of $2.1 million and $5.9 million, respectively. No material balances were reclassified out of accumulated other comprehensive loss for the years ended December 31, 2024 and 2023. 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, 2024, the Company had 19 available-for-sale securities with an aggregate total unrealized loss of $1.9 million. All of the securities had been in a loss position for longer than 12 months as of December 31, 2024.
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
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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, 2024 were primarily due to changes in interest rates, and not due to increased credit risks associated with specific securities. 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, 2024, the Company did not record an allowance for credit losses related to its available-for-sale debt securities.
The following table presents the Company’s assets and liabilities that were measured at fair value on a recurring basis, determined using the following inputs as of December 31, 2024:
Fair Value Measurements at
Assets:
Short-term investments
Liabilities:
The following table presents the Company’s assets that were measured at fair value on a recurring basis, determined using the following inputs as of December 31, 2023:
Fair Value Measurements at
Short-term investments
Level 1 assets at December 31, 2024 consisted of mutual funds and the Company’s investment in its affiliated entity, PLS. Level 1 assets at December 31, 2023 consisted of mutual funds and U.S. treasury securities held by the Company that are
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valued at quoted market prices, as well as the Company’s investment in its 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 losses on the Company's equity securities are reported in the consolidated statement of operations as unrealized gain or loss on available-for-sale equity securities or as a gain or loss on investment in affiliated entity.
Level 2 assets at December 31, 2024 and 2023 consisted of certificates of deposit and U.S. agency mortgage-backed securities 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. 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 the 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, 2024 or 2023.
Level 3 liabilities held as of December 31, 2024 consisted of liabilities associated with the Warrants to purchase common stock issued in the Company's underwritten public offering that closed in December 2024. See Note 10 for additional information about the liability-classified warrants.
The Company reassesses the fair value of the common stock warrant liability at each reporting date utilizing a Black-Scholes pricing model. The following assumptions were used to estimate the fair value of the warrant liability:
On Issuance Date December 31, 2024
Risk-free interest rate 4.3% 4.4%
Expected life in years 5 5
Dividend yield — —
Changes in these assumptions as well as fluctuations in the Company's stock price between the valuation dates can have a
significant impact on the fair value of the common stock warrant liability. Expected volatility was based on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term. Expected term is calculated based on the remaining contractual term of the Warrants. The risk-free rate was based on the U.S. Treasury rate that corresponds to the expected term of the Warrants. As a result of these calculations, the Company recorded a decrease in fair value of the liability of $2.8 million on the consolidated statement of operations for the year ended December 31, 2024.
The following table presents the changes in fair value of the Company’s total Level 3 financial liabilities for the year ended December 31, 2024:
Common Stock Warrant Liability
Issuance of common stock warrants in December 2024 16,063,796
Decrease in fair value of liability (2,808,608)
6. Certain Balance Sheet Items
Prepaid and other current assets at December 31, 2024 and 2023 consisted of the following:
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Accounts payable and accrued expenses at December 31, 2024 and 2023 consisted of the following:
(a)As of December 31, 2024 and 2023, balance included $0 and $1.5 million, respectively, of prepaid manufacturing expenses.
(b)As of December 31, 2024 and 2023, balance included $0 and $4.3 million, respectively, of liability for unused grant funding.
7. Fixed Assets
Fixed assets at December 31, 2024 and 2023 consisted of the following:
Cost AccumulatedDepreciationandAmortization Net BookValue
Depreciation expense for the years ended December 31, 2024 and 2023 was $1.8 million and $2.6 million, respectively. The Company determined that the carrying value of its fixed assets was not impaired during the periods presented. During the year ended December 31, 2024, the Company sold fixed assets with no net book value for a gain of $59,000 and disposed of fixed assets with a net book value of $37,000. During the year ended December 31, 2023, the Company sold fixed assets with no net book value for a gain of $148,000 and disposed of fixed assets with a net book value of $466,000.
8. Goodwill and Intangible Assets
During 2023, as a result of the sustained decline in the Company’s stock price and related market capitalization, and a general decline in equity values in the biotechnology industry, the Company performed a quantitative impairment assessment of
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its goodwill and long-lived assets. The goodwill was determined to be fully impaired as of September 30, 2023, and the Company recorded an impairment charge of $10.5 million.
During 2023, the Company also recorded an impairment charge of $2.0 million to research and development expense for the remaining book value of intangible assets acquired in 2016 from Bioject Medical Technologies, as the Company had no plans to further develop or utilize this technology.
9. Convertible Debt
Convertible Senior Notes
In 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 were senior unsecured obligations of the Company and accrued interest payable in cash semi-annually in arrears on March 1 and September 1 of each year at a rate of 6.50% per annum. The Notes matured on March 1, 2024 and the Company paid the then remaining $16.9 million obligation in full, including accrued interest.
For the years ended December 31, 2024 and 2023, the Company recognized $178,000 and $1.2 million, respectively, of interest expense related to the Notes, of which $178,000 and $1.1 million, respectively, related to the contractual interest coupon.
10. Stockholders’ Equity
Preferred Stock
Shares Outstanding as ofDecember 31,
Shares Authorized Shares Issued 2024 2023
The holder of a share or shares of Series C preferred 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 stock into fully paid and non-assessable shares of common stock. As of December 31, 2024, the conversion value was $326.40 per share, such that the outstanding shares of Series C preferred stock were convertible into an aggregate of 275 shares of common stock.
Offerings of Common Stock and Warrants
On December 16, 2024, the Company closed the December 2024 Offering (see “Basis of Presentation and Liquidity” in Note 2 above).
Each Warrant issued in the December 2024 Offering has an initial exercise price per share of $3.76, subject to certain adjustments. The Warrants may be exercised at any time, in whole or in part, until expiration on December 16, 2029. In the event there is no effective registration statement covering the shares of common stock underlying a Warrant exercise, the Warrants may be exercised via cashless exercise. A holder (together with its affiliates and other attribution parties) may not exercise any portion of a Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would own more than 4.99% (or, for certain holders who so elected prior to the issuance of the Warrants, 9.99%) of the Company’s outstanding Common Stock immediately after exercise, which percentage may be changed at the holder’s election to a lower or higher percentage not in excess of 19.99% upon 61 days’ notice to the Company subject to the terms of the Warrants.
As the Warrants are not indexed to the Company’s common stock, the Company recorded a liability for the Warrants at fair value upon issuance on the Company's consolidated balance sheet. The common stock warrant liability is remeasured to fair value at the end of each reporting period.
As of December 31, 2024, no Warrants issued in the December 2024 Offering had been exercised.
On April 18, 2024, the Company closed the April 2024 Offering (see “Basis of Presentation and Liquidity” in Note 2 above).
Each Pre-Funded Warrant issued in the April 2024 Offering has an initial exercise price per share of $0.001, subject to certain adjustments. The Pre-Funded Warrants may be exercised at any time until exercised in full. A holder (together with its affiliates and other attribution parties) may not exercise any portion of a Pre-Funded Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would own more than 9.99% of the Company’s outstanding Common
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Stock immediately after exercise, which percentage may be changed at the holder’s election to a lower or higher percentage not in excess of 19.99% upon 61 days’ notice to the Company subject to the terms of the Pre-Funded Warrants.
As the Pre-Funded Warrants issued in the April 2024 Offering are indexed to the Company's own shares of common stock (and otherwise meet the requirements to be classified in equity), the Company recorded the consideration received from the issuance of the Pre-Funded Warrants as additional paid-in capital on the Company's condensed consolidated balance sheet as of December 31, 2024.
As of December 31, 2024, no Pre-Funded Warrants had been exercised.
At-The-Market Sales Agreements
On August 13, 2024, the Company entered into an Equity Distribution Agreement (the "2024 Sales Agreement") with an outside sales agent (the "Sales Agent") for the offer and sale of its common stock for an aggregate offering price of up to $60.0 million. The 2024 Sales Agreement provides that the Sales Agent is 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 Agent under the 2024 Sales Agreement, and the Company has provided the Sales Agent with certain indemnification rights.
During the year ended December 31, 2024, the Company sold 133,900 shares of its common stock under the 2024 Sales Agreement. The sales were made at a weighted average price of $7.02 per share, resulting in aggregate net proceeds of $925,000. As of December 31, 2024, there was $59.1 million of remaining capacity under the 2024 Sales Agreement.
On November 9, 2021, the Company entered into an ATM Equity Offering Sales Agreement (the “2021 Sales Agreement”) with outside 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 were entitled to compensation in an amount equal to up to 3.0% of the gross sales proceeds of any common stock sold under the 2021 Sales Agreement. During the three months ended March 31, 2024, the Company sold 543,620 shares of its common stock under the 2021 Sales Agreement at a weighted average price of $9.76 per share, resulting in aggregate net proceeds of $5.2 million. During the year ended December 31, 2023, the Company sold 875,305 shares of its common stock under the 2021 Sales Agreement at a weighted average price of $6.33 per share, resulting in aggregate net proceeds of $5.5 million. The 2021 Sales Agreement was terminated in August 2024 in connection with the entry into the 2024 Sales Agreement described above.
Other Issuances of Common Stock
During the three months ended March 31, 2023, the Company issued 760,083 shares of common stock pursuant to a securities class action litigation settlement, as described in Note 11.
Stock Options and Restricted Stock Units
The Board of Directors adopted the 2023 Omnibus Incentive Plan (the “2023 Plan”) on March 24, 2023, pursuant to which the Company may grant stock options, restricted stock awards, RSUs and other stock-based awards or short-term cash incentive awards to employees, directors and consultants.
The 2023 Plan was approved by stockholders on May 16, 2023. The aggregate number of shares of the Company’s common stock that may be issued under the 2023 Plan will not exceed the sum of 1,166,666 shares plus any shares that may return from time to time from the 2016 Omnibus Incentive Plan (as amended, the “2016 Plan”) as a result of expirations, terminations or forfeitures of awards outstanding under the 2016 Plan as of May 16, 2023. At December 31, 2024, the Company had 800,526 shares of common stock available for future grant under the 2023 Plan, 188,082 shares underlying outstanding but unvested RSUs and 282,579 shares underlying options outstanding to purchase common stock under the 2023 Plan. The awards granted and available for future grant under the 2023 Plan generally vest over three years and have a maximum contractual term of ten years. The 2023 Plan terminates by its terms on March 24, 2033.
Following adoption of the 2023 Plan, no further awards may be made under the 2016 Plan, but outstanding awards continue to be governed by their existing terms. At December 31, 2024, the Company had 129,000 shares underlying outstanding but unvested RSU and options outstanding to purchase 904,669 shares of common stock under the 2016 Plan. The outstanding awards granted under the 2016 Plan generally vest over three years and have a maximum contractual term of ten years.
On June 24, 2022, the Company's board of directors adopted a stock-based incentive plan (the "2022 Inducement Plan"), which provides for the discretionary grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, RSU awards, performance awards, and other awards to individuals as a material inducement to entering into employment with the Company. The aggregate number of shares of the Company’s common stock that may be issued under the 2022 Inducement Plan will not exceed 166,666 shares. At December 31, 2024 the Company had 84,328 shares of common stock available for future grant under the 2022 Inducement Plan, 20,829 shares underlying outstanding but unvested RSUs and options outstanding to purchase 53,684 shares of common stock under the 2022 Inducement Plan. The 2022 Inducement Plan can be terminated by the Company's board of directors at any time.
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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, 2024, the Company had options outstanding to purchase 96,296 shares of common stock under the 2007 Incentive Plan. The awards granted under the 2007 Incentive Plan generally vested over three years and have a maximum contractual term of ten years.
Total employee and director stock-based compensation expense recognized in the consolidated statements of operations for the years ended December 31, 2024 and 2023 was $6.4 million and $10.4 million, respectively, of which $2.8 million and $4.5 million was included in research and development expenses and $3.6 million and $5.9 million was included in general and administrative expenses, respectively.
At December 31, 2024 and 2023, there was $2.1 million and $4.3 million, respectively, of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.5 years and 1.3 years, respectively.
At December 31, 2024 and 2023, there was $2.0 million and $3.5 million, respectively, of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 1.6 years and 1.5 years, respectively.
The fair value of stock options granted to non-employees was estimated using the Black-Scholes pricing model. Total stock-based compensation expense for stock options and RSUs granted to non-employees for the years ended December 31, 2024 and 2023 was $226,000 and $669,000, respectively. As of December 31, 2024, options to purchase 66,056 shares of common stock granted to non-employees remained outstanding.
The following table summarizes total stock options outstanding at December 31, 2024:
Options Outstanding Options Exercisable
At December 31, 2024, the aggregate intrinsic value of options outstanding was $1,000, the aggregate intrinsic value of options exercisable was $0, and the weighted average remaining contractual term of options exercisable was 5.5 years.
At December 31, 2024, the aggregate intrinsic value of unvested RSUs was $618,000 and the aggregate intrinsic value of RSUs which vested during the year ended December 31, 2024 was $1.3 million.
At December 31, 2024, options to purchase 1,337,228 shares of common stock and 337,911 RSUs were expected to vest.
Stock option activity under the Company’s equity incentive plans during the year ended December 31, 2024 was as follows:
Number ofShares Weighted-AverageExercise Price
Restricted stock unit activity under the Company’s equity incentive plans during the year ended December 31, 2024 was as follows:
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Number ofShares
The weighted average exercise price per share was $139.02 for the 38,503 options which expired during the year ended December 31, 2024 and $38.86 for the 9,357 options which expired during the year ended December 31, 2023.
The weighted average grant date fair value per share was $6.69 and $11.19 for options granted during the years ended December 31, 2024 and 2023, respectively.
The weighted average grant date fair value was $8.30 and $10.34 per share for RSUs granted during the years ended December 31, 2024 and 2023, respectively.
The Company received $68,000 in proceeds from the exercise of stock options during the years ended December 31, 2024. No stock options were exercised during the year ended December 31, 2023. The aggregate intrinsic value of options exercised was $39,000 during the year ended December 31, 2024.
Performance- and Market-Based RSUs
In May 2024, the Company granted performance- and-market-based RSUs (such performance-based grants, the "PSU Awards") to key employees under the 2023 Plan. Each PSU was expressed as a target number of RSUs. With respect to the PSU Awards, the Company's Board of Directors established specified performance goals and corresponding performance periods over which the goals must be attained, the satisfaction of which are conditions to earning the PSU Awards and vesting of the underlying RSUs. As of December 31, 2024, 83,800 performance- and market-based RSUs were outstanding.
Of the target number of RSUs underlying each PSU Award, up to 70% (the "Milestone-based RSUs") will vest based on the achievement of specified milestones relating to the development, regulatory status and commercialization of the Company’s lead product candidate INO-3107 (each, a "Milestone," and collectively, the "Milestones"). Each Milestone has a specified deadline for achievement ranging between the end of 2025 and the end of 2027.
The remaining 30% of the target number of RSUs underlying each PSU Award (the "Market-based RSUs") will be eligible to vest based on the Company’s achievement of total stockholder return relative to a peer group consisting of companies in the Russell 2000 Biotechnology Subsector index (the “Relative TSR”) over the period beginning on June 1, 2024 and ending on December 31, 2027 (the “Performance Period”), expressed as a percentile ranking.
The number of Market-based RSUs, if any, actually earned based on the achievement of the Relative TSR goal may range from 50% of the target number of RSUs for performance at a specified threshold percentile, to 100% of the target number of RSUs for performance at the target percentile, and up to 150% of the target number of RSUs for performance at or above a specified maximum percentile. In the event that actual Relative TSR performance is between the threshold and target levels or between the target and maximum levels, the number of RSUs earned based on Relative TSR will be determined based on linear interpolation between the specified percentiles. If the Company’s actual Relative TSR performance is below the threshold percentile, then no RSUs would be earned based on Relative TSR. The number of RSUs earned based on Relative TSR may not exceed the target number of RSUs eligible to vest based on Relative TSR if the Company’s total stockholder return is negative for the Performance Period.
The Company valued the Milestone-based RSUs based on the grant date closing price per share. The Company recognizes stock-based compensation expense over the performance period, if it is probable that the performance condition will be achieved. Adjustments to stock-based compensation expense are made, as needed, each reporting period based on changes in the Company's estimate of the number of units that are probable of vesting.
The Company valued the Market-based RSUs on the grant date using the Monte Carlo simulation method, a generally accepted statistical technique used to simulate a range of possible future stock prices for the Company and the peer group. The determination of fair value was affected by the Company's stock price and a number of assumptions including the expected volatility and the risk-free interest rate. The Company will recognize stock-based compensation expense ratably over the performance period of the award. The market-based RSUs will cliff-vest at the end of the three-year period ranging from zero to 150% of the target number of awards granted.
The significant assumptions used in the Monte Carlo simulation method were as follows:
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Risk-free interest rate 4.60%
Expected volatility 90%
Expected life in years 3.61
Dividend yield —
The grant date fair value of the Milestone-based RSUs was $643,000 based on the grant date closing price per share of $10.96. As of December 31, 2024, the underlying performance milestones of the Milestone-based RSUs were determined to be not probable of achievement, and no stock-based compensation expense was recognized for the year then ended.
The grant date fair value of the Market-based RSUs was $269,000 based on the fair value of $10.69 per share as determined using the Monte Carlo simulation method. For the year ended December 31, 2024, the Company recognized $44,000 in stock-based compensation for the Market-based RSUs.
December 2024 Performance-Based Awards
In December 2024, the Company granted performance-based stock options and RSUs (such performance-based grants, the "December 2024 Awards") to key employees under the 2023 Plan. Each award was expressed as a target number of stock options and RSUs. With respect to the December 2024 Awards, the Company's Board of Directors established specified performance goals and a corresponding performance period over which the goals must be attained, the satisfaction of which are conditions to earning the December 2024 Awards and vesting of the underlying stock options and RSUs. As of December 31, 2024, December 2024 Awards were outstanding covering 25,686 shares of common stock underlying stock options and 19,314 shares of common stock underlying RSUs.
The grant date fair value of the performance-based RSUs was $34,000 based on the grant date closing price per share of $1.78. The grant date fair value of the performance-based stock options was $38,000 based on the Black-Scholes per share value of $1.46. As of December 31, 2024, the underlying performance milestones of the December 2024 Awards were determined to be not probable of achievement, and no stock-based compensation expense was recognized for the year then ended.
11. Commitments and Contingencies
Leases
The Company leases approximately 56,600 square feet of office, laboratory, and manufacturing space in San Diego, California and approximately 57,400 square feet of office space in Plymouth Meeting, Pennsylvania under various non-cancellable operating lease agreements with remaining lease terms as of December 31, 2024 of 2.4 to 5.0 years, which represent the non-cancellable periods of the leases. The Company has excluded the extension options from its lease terms in the calculation of future lease payments as they are not reasonably certain to be exercised. The Company's lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms as well as payments for common area maintenance and administrative services. The Company has received customary incentives from its landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases.
The base rent adjusts periodically throughout the term of the leases. Rent payments under the leases include base rent with annual increases of approximately two to three percent, and additional monthly fees to cover the Company's share of certain facility expenses, including utilities, property taxes, insurance and maintenance.
The Company performed an evaluation of its contracts with customers and suppliers in accordance with ASC Topic 842 and determined that, except for the real estate leases described above and various copier leases, none of its other contracts contain a right-of-use asset.
Operating lease right-of-use assets and liabilities on the consolidated balance sheet represents the present value of the remaining lease payments over the remaining lease terms. Payments for additional monthly fees to cover the Company's share of certain facility expenses are not included in operating lease right-of-use assets and liabilities. The Company uses its incremental borrowing rate to calculate the present value of its lease payments, as the implicit rates in the leases are not readily determinable.
As of December 31, 2024, the maturities of the Company's operating lease liabilities were as follows:
F-24
Year ending December 31,
Total remaining lease payments 14,435,000
Less: present value adjustment (2,570,000)
Total operating lease liabilities 11,865,000
Long-term operating lease liabilities $ 9,368,000
Weighted-average remaining lease term 4.3 years
Weighted-average discount rate 9.0 %
Lease costs included in operating expenses in the consolidated statements of operations for the years ended December 31, 2024 and 2023 were $2.6 million and $3.5 million, respectively. Operating lease costs consisting of the fixed lease payments included in operating lease liabilities are recorded on a straight-line basis over the lease terms. Variable lease costs are recorded as incurred.
In 2023, the Company entered into agreements to sublease a total of approximately 11,400 square feet in its Plymouth Meeting headquarters with sublease terms through December 31, 2026.
During 2024, the Company amended the sublease agreements for its Plymouth Meeting headquarters to extend one sublease term through December 31, 2027 and the other through December 31, 2029.
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.
Legal Proceedings
Securities Litigation
In 2020, a purported shareholder class action complaint was filed naming the Company and its former President and Chief Executive Officer as defendants and alleging that the Company made materially false and misleading statements in violation of certain federal securities laws. In 2022 the parties negotiated an agreement in principle to settle the shareholder class action complaint, which was approved by the court in January 2023. Under the settlement, the Company agreed to pay $30.0 million in cash and issued 760,083 shares of its common stock, with a value of $14.0 million at the time, to settle all outstanding claims. The Company's insurance carriers paid the $30.0 million cash component of the settlement.
Shareholder Derivative Litigation
In 2020, a purported shareholder derivative complaint was filed naming eight current and former directors of the Company as defendants. The lawsuit asserted state and federal claims and was based on the same alleged misstatements as the shareholder class action complaint described above. The lawsuit accused the Company’s board of directors of failing to exercise reasonable and prudent supervision over the Company’s management, policies, practices, and internal controls. The plaintiff sought unspecified monetary damages on behalf of the Company as well as governance reforms.
Between 2020 and 2022, additional shareholder derivative complaints were filed.
In June 2023, the court entered an order preliminarily approving a proposed settlement of the derivative claims, in accordance with a Stipulation of Settlement. The Stipulation of Settlement contemplated that, following the settlement hearing and the final approval of the settlement by the court, the Company would implement certain corporate governance reforms described in the Stipulation of Settlement. The preliminary order also approved the form and manner of the notice of the Settlement. As part of the Settlement, in July 2023 the Company paid $1.2 million to plaintiffs’ counsel for their fees and expenses. In October 2023, the court entered an order and final judgment approving the Settlement, which became effective in November 2023. The Company has implemented the corporate governance reforms in response to the provisions of the Stipulation of Settlement.
F-25
VGXI Litigation
In June 2020, the Company filed a complaint 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 as VGXI, alleging that VGXI had materially breached the Company’s 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. In June 2020, the Company filed a petition for preliminary injunction, which was denied.
Following an appeal by the Company, in July 2020, VGXI filed counterclaims against the Company, alleging that the Company had 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 the Company. VGXI also filed a third-party complaint against Ology Bioservices, Inc., a contract manufacturing organization that the Company had engaged to provide services similar to those that were being provided by VGXI, but VGXI later discontinued its third-party claims. The Company filed an answer to VGXI’s counterclaims, disputing the allegations and the claims raised in VGXI’s filing. In October 2020, the Company filed a notice of discontinuance of appeal with the Pennsylvania Superior Court. A trial date for the litigation has not been set.
The Company intends to aggressively prosecute the claims set forth in its complaint against VGXI and to vigorously defend itself against VGXI’s counterclaims.
GeneOne Litigation
In December 2020, GeneOne filed a complaint in the Court of Common Pleas of Montgomery County, Pennsylvania against the Company, alleging that the Company had breached the CELLECTRA Device License Agreement, or the Agreement, between the Company and GeneOne. The Company terminated the Agreement in October 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 the Company. The Company filed preliminary objections to the complaint, which were overruled by the court. In September 2021, the Company 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. In October 2021, GeneOne filed its answer to the Company’s counterclaims and new matter. On February 29, 2024, the Company filed a motion for summary judgment. On April 1, 2024, GeneOne filed an opposition to the Company’s motion for summary judgment. On June 28, 2024, the court denied the motion for summary judgment. A trial date for this litigation has not been set.
The Company intends to aggressively prosecute the claims set forth in its counterclaims against GeneOne and to vigorously defend itself against the claims in GeneOne’s complaint.
Other Matters
From time to time, the Company may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of its business. Any of these claims could subject the Company to costly legal expenses and, while the Company generally believes that it has adequate insurance to cover many different types of liabilities, its insurance carriers may deny coverage or its policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on the Company's consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage the Company's reputation and business. Except as described above, the Company is not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would be reasonably expected to have a material adverse effect on the Company’s consolidated results of operations or financial position.
12. Income Taxes
In accordance with the guidance pursuant to accounting for income taxes, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax asset will be realized.
The components of pretax loss from operations are as follows:
F-26
Year Ended December 31,
There was no provision for or benefit from income taxes for the years ended December 31, 2024 and 2023.
The reconciliation of income taxes attributable to continuing operations computed at the statutory tax rates to income tax benefit, using a 21% statutory tax rate for December 31, 2024 and 2023, is as follows:
Year Ended December 31,
Foreign tax rate differential — (4,000)
$ — $ —
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 are shown below:
F-27
As of December 31,
Deferred tax assets:
Deferred tax liabilities:
Net deferred tax liabilities $ — $ —
As of December 31, 2024, the Company had federal, California and other state tax net operating loss (NOL) carryforwards of $1.1 billion, $259.9 million and $88.6 million, respectively, net of the net operating losses that will expire due to IRC Section 382 limitations. The aggregate federal net operating losses generated in 2018 and after for the amount of $801.9 million will carryforward indefinitely and be available to offset up to 80% of future taxable income each year. The federal NOL carryforward began to expire in 2025, and the California and other state NOL carryforwards will begin and have begun to expire in 2028 and 2025, respectively, unless previously utilized.