Inovio Pharmaceuticals(INO) - 2023 Q1 - Quarterly Report

Part I. Financial Information This section provides INOVIO Pharmaceuticals, Inc.'s unaudited condensed consolidated financial statements and related notes for Q1 2023 Item 1. Financial Statements This section details INOVIO Pharmaceuticals, Inc.'s unaudited condensed consolidated financial statements for Q1 2023, including balance sheets, income statements, and cash flows, with explanatory notes Condensed Consolidated Balance Sheets%20Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of March 31, 2023 ASSETS and LIABILITIES (March 31, 2023) | ASSETS (March 31, 2023) | Amount ($) | | :---------------------- | :--------- | | Cash and cash equivalents | 28,238,152 | | Short-term investments | 195,513,005 | | Total current assets | 233,896,429 | | Total assets | 266,582,724 | | LIABILITIES (March 31, 2023) | Amount ($) | | Accounts payable and accrued expenses | 24,752,171 | | Convertible senior notes (current) | 16,394,841 | | Total current liabilities | 55,151,077 | | Total liabilities | 67,369,042 | | STOCKHOLDERS' EQUITY (March 31, 2023) | Amount ($) | | Total stockholders' equity | 199,213,682 | - Total assets decreased from $348.5 million at December 31, 2022, to $266.6 million at March 31, 2023. Total liabilities decreased from $126.2 million to $67.4 million in the same period[10] Condensed Consolidated Statements of Operations%20Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, including revenue, expenses, and net loss for the three months ended March 31, 2023 Operating Metrics (Three Months Ended March 31,) | Metric (Three Months Ended March 31,) | 2023 ($) | 2022 ($) | | :------------------------------------ | :------- | :------- | | Revenue from collaborative arrangements and other contracts | 114,943 | 199,074 | | Research and development expenses | 30,176,511 | 55,978,611 | | General and administrative expenses | 13,890,610 | 15,953,458 | | Total operating expenses | 44,067,121 | 71,932,069 | | Loss from operations | (43,952,178) | (71,732,995) | | Net loss | (40,649,317) | (79,073,719) | | Net loss per share (Basic and diluted) | (0.16) | (0.36) | - The company significantly reduced its net loss by 48.6% year-over-year, from $(79.1) million in Q1 2022 to $(40.6) million in Q1 2023, primarily due to a substantial decrease in research and development expenses[13] Condensed Consolidated Statements of Comprehensive Loss%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section details the company's comprehensive loss, including net loss and other comprehensive income/loss items for the three months ended March 31, 2023 Comprehensive Loss (Three Months Ended March 31,) | Metric (Three Months Ended March 31,) | 2023 ($) | 2022 ($) | | :------------------------------------ | :------- | :------- | | Net loss | (40,649,317) | (79,073,719) | | Other comprehensive (loss) income: | | | | Foreign currency translation | (1,918) | (6,555) | | Unrealized gain (loss) on short-term investments, net of tax | 117,862 | (169,097) | | Comprehensive loss | (40,533,373) | (79,249,371) | - Comprehensive loss decreased by 48.8% from $(79.2) million in Q1 2022 to $(40.5) million in Q1 2023, driven by the reduction in net loss and a positive shift in unrealized gains on short-term investments[16] Condensed Consolidated Statements of Stockholders' Equity%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit as of March 31, 2023 Stockholders' Equity (March 31, 2023) | Stockholders' Equity (March 31, 2023) | Amount ($) | | :------------------------------------ | :--------- | | Common stock | 262,738 | | Additional paid-in capital | 1,728,030,842 | | Accumulated deficit | (1,528,497,101) | | Accumulated other comprehensive loss | (582,797) | | Total Inovio Pharmaceuticals, Inc. stockholders' equity | 199,213,682 | - Total stockholders' equity decreased from $222.4 million at December 31, 2022, to $199.2 million at March 31, 2023, primarily due to the net loss incurred during the period, partially offset by common stock issuance for legal settlement and stock-based compensation[19] - The company issued 9,121,000 shares of common stock for a legal settlement, contributing $14.0 million to stockholders' equity[19] Condensed Consolidated Statements of Cash Flows%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023 Cash Flow Activity (Three Months Ended March 31,) | Cash Flow Activity (Three Months Ended March 31,) | 2023 ($) | 2022 ($) | | :------------------------------------------------ | :------- | :------- | | Net cash used in operating activities | (36,664,478) | (61,882,102) | | Net cash provided by investing activities | 18,999,893 | 21,332,353 | | Net cash (used in) provided by financing activities | (424,704) | 28,422,017 | | Decrease in cash and cash equivalents | (18,091,207) | (12,134,287) | | Cash and cash equivalents, end of period | 28,238,152 | 59,009,491 | - Net cash used in operating activities decreased by 40.8% from $61.9 million in Q1 2022 to $36.7 million in Q1 2023, mainly due to decreased operating expenses and timing of working capital changes[22][173] - Net cash provided by investing activities decreased slightly from $21.3 million in Q1 2022 to $19.0 million in Q1 2023, primarily due to timing differences in short-term investment transactions[22][174] - Net cash used in financing activities was $(0.4) million in Q1 2023, a significant change from $28.4 million provided in Q1 2022, due to no proceeds from common stock sales under the Sales Agreement in 2023[22][175] Notes to Condensed Consolidated Financial Statements%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes supporting the condensed consolidated financial statements, covering accounting policies, liquidity, and specific financial items 1. Organization and Operations This note describes INOVIO Pharmaceuticals, Inc.'s core business as a biotechnology company focused on developing DNA medicines for various diseases - INOVIO Pharmaceuticals, Inc. is a biotechnology company focused on developing and commercializing DNA medicines for HPV, cancer, and infectious diseases[24][149] - The company's DNA medicine candidates generate immune responses (CD4+, CD8+, and memory T-cells) using precisely designed plasmids delivered by its proprietary smart device, CELLECTRA[25][150] - INO-3107, a lead candidate for HPV-6 and HPV-11 associated Recurrent Respiratory Papillomatosis (RRP), showed a statistically significant reduction in median surgeries in Phase 1/2 trials[26][150] 2. Basis of Presentation, Liquidity and Risks and Uncertainties This note addresses the company's financial position, including net loss, accumulated deficit, liquidity, and future capital requirements - The company incurred a net loss of $40.6 million for the three months ended March 31, 2023, and had an accumulated deficit of $1.5 billion[32] - Cash, cash equivalents, and short-term investments totaled $223.8 million as of March 31, 2023, sufficient to support planned operations for at least 12 months[32] - Additional capital will be needed to fund future R&D activities, potentially through strategic alliances, licensing, grants, or public/private debt or equity financings[33] 3. Critical Accounting Policies This note outlines the company's critical accounting policies, particularly those related to collaboration agreements, revenue recognition, and milestone payments - The company accounts for collaboration agreements under ASC Topic 808 or Topic 606, depending on whether the partner is a customer or involved in joint operating activities[36] - Revenue from non-refundable, upfront license fees is recognized when the license is transferred and the licensee can use and benefit from it[39] - Milestone payments are included in the transaction price if considered probable of being reached and a significant revenue reversal would not occur, with re-evaluation each reporting period[40] 4. Revenue Recognition This note details the company's revenue sources, including contributions from affiliated entities and other contracts for the three months ended March 31, 2023 Revenue Source (Three Months Ended March 31,) | Revenue Source (Three Months Ended March 31,) | 2023 ($) | 2022 ($) | | :-------------------------------------------- | :------- | :------- | | From affiliated entity Plumbline Life Sciences, Inc. | 0 | 9,000 | | From various other contracts | 115,000 | 190,000 | | Total Revenue | 115,000 | 199,000 | 5. Short-term Investments and Fair Value Measurements This note provides details on the company's short-term investments, including their fair value measurements and associated unrealized gains or losses Available-for-Sale Securities (March 31, 2023) | Available-for-Sale Securities (March 31, 2023) | Cost ($) | Fair Market Value ($) | | :--------------------------------------------- | :------- | :-------------------- | | Mutual funds | 85,986,541 | 79,831,242 | | U.S. treasury securities | 111,591,593 | 111,649,420 | | Certificates of deposit | 2,977,897 | 2,990,765 | | U.S. agency mortgage-backed securities | 1,402,093 | 1,041,578 | | Total short-term investments | 201,958,124 | 195,513,005 | - The company recorded a net unrealized gain on available-for-sale equity securities of $3.2 million for the three months ended March 31, 2023, compared to a net unrealized loss of $(4.8) million in the prior year period[46] - As of March 31, 2023, the company had $6.5 million in aggregate unrealized losses on 24 available-for-sale securities, primarily due to changes in interest rates rather than credit risks[46][47] 6. Certain Balance Sheet Items This note provides a breakdown of specific balance sheet items, including prepaid and other current assets, and accounts payable and accrued expenses Prepaid and Other Current Assets | Prepaid and Other Current Assets | March 31, 2023 ($) | December 31, 2022 ($) | | :------------------------------- | :----------------- | :-------------------- | | Insurance recovery | — | 30,000,000 | | Prepaid manufacturing expenses | 565,072 | 1,401,028 | | Other prepaid expenses | 4,349,241 | 18,729,453 | | Total | 4,914,313 | 50,130,481 | Accounts Payable and Accrued Expenses | Accounts Payable and Accrued Expenses | March 31, 2023 ($) | December 31, 2022 ($) | | :------------------------------------ | :----------------- | :-------------------- | | Trade accounts payable | 11,194,396 | 19,862,487 | | Accrued compensation | 7,607,673 | 12,574,921 | | Accrued litigation settlement | — | 44,000,000 | | Other accrued expenses | 5,950,102 | 3,249,477 | | Total | 24,752,171 | 79,686,885 | - The company issued 9,121,000 shares of common stock during Q1 2023 as part of a $44.0 million securities class action settlement, with the $30.0 million cash component paid by insurance carriers[54] 7. Goodwill and Intangible Assets This note details the company's goodwill and intangible assets, including their net book value and associated amortization expenses Goodwill and Intangible Assets | Asset Class | March 31, 2023 Net Book Value ($) | December 31, 2022 Net Book Value ($) | | :-------------------- | :-------------------------------- | :----------------------------------- | | Goodwill | 10,513,371 | 10,513,371 | | Licenses | — | — | | Bioject | 2,047,778 | 2,111,111 | | Other | — | 18,750 | | Total intangible assets | 2,047,778 | 2,129,861 | | Total goodwill and intangible assets | 12,561,149 | 12,643,232 | - Aggregate amortization expense on intangible assets was $82,000 for Q1 2023, down from $127,000 in Q1 2022[57] - Estimated aggregate amortization expense for the remainder of fiscal year 2023 is $190,000[57] 8. Convertible Debt This note describes the company's convertible senior notes, including their principal amount, carrying value, and related interest expense - The company has $78.5 million aggregate principal amount of 6.50% convertible senior notes due March 1, 2024[58][59] - As of March 31, 2023, the net carrying amount of the convertible senior notes was $16.4 million, with $62.1 million of the original principal amount converted into common shares[63] - Interest expense related to the Notes was $313,000 for both Q1 2023 and Q1 2022[63] 9. Stockholders' Equity This note provides information on the company's stockholders' equity, including authorized and issued shares, and recent stock transactions Stock Type and Shares (March 31, 2023) | Stock Type | Authorized Shares | Issued Shares (March 31, 2023) | | :-------------------------------- | :---------------- | :----------------------------- | | Common Stock, $0.001 par value | 600,000,000 | 262,739,126 | | Series C Preferred Stock, $0.001 par value | 1,091 | 1,091 | - No shares were sold under the 2021 ATM Equity Offering Sales Agreement during Q1 2023, leaving $167.4 million in remaining capacity[66] - The company issued 9,121,000 shares of common stock in Q1 2023 as part of a securities class action settlement[66] 10. Net Loss Per Share This note presents the basic and diluted net loss per share, along with the weighted average common shares outstanding for the period Net Loss Per Share (Three Months Ended March 31,) | Metric (Three Months Ended March 31,) | 2023 | 2022 | | :------------------------------------ | :--- | :--- | | Basic and diluted net loss per share | (0.16) | (0.36) | | Weighted average common shares outstanding (Basic and diluted) | 258,437,714 | 218,940,693 | - Potential common shares excluded from diluted net loss per share calculation due to anti-dilutive effect totaled 20.5 million in Q1 2023, including options, RSUs, preferred stock, and convertible notes[73] 11. Stock-Based Compensation This note details the company's stock-based compensation expenses for employees, directors, and non-employees, and unrecognized compensation Stock-Based Compensation (Three Months Ended March 31,) | Stock-Based Compensation (Three Months Ended March 31,) | 2023 ($) | 2022 ($) | | :------------------------------------------------------ | :------- | :------- | | Total employee and director stock-based compensation expense | 3,600,000 | 7,200,000 | | Included in R&D expenses | 1,500,000 | 3,700,000 | | Included in G&A expenses | 2,100,000 | 3,500,000 | | Non-employee stock-based compensation expense | 220,000 | 550,000 | - Total unrecognized compensation expense for unvested stock options was $10.5 million, expected to be recognized over a weighted-average period of 1.7 years[76] - Total unrecognized compensation expense for unvested service-based RSUs was $6.1 million, expected to be recognized over a weighted-average period of 1.7 years[77] 12. Related Party Transactions This note describes transactions with related parties, including revenue from Plumbline Life Sciences and research expenses with The Wistar Institute - The company recognized no revenue from Plumbline Life Sciences, Inc. (PLS) in Q1 2023, down from $9,000 in Q1 2022, and held an 18.7% ownership interest in PLS[79][80] - Contra-research and development expense from The Wistar Institute (Wistar) was $211,000 in Q1 2023, a decrease from $1.5 million in Q1 2022, related to sub-grant agreements[84] - Research and development expenses recorded from Wistar increased to $422,000 in Q1 2023 from $181,000 in Q1 2022[85] 13. Commitments and Contingencies This note outlines the company's commitments and contingencies, including operating lease liabilities and legal settlements for class action and derivative lawsuits Operating Lease Liabilities (March 31, 2023) | Operating Lease Liabilities (March 31, 2023) | Amount ($) | | :------------------------------------------- | :--------- | | Total remaining lease payments | 19,137,000 | | Less: present value adjustment | (4,371,000) | | Total operating lease liabilities | 14,766,000 | | Less: current portion | (2,580,000) | | Long-term operating lease liabilities | 12,186,000 | | Weighted-average remaining lease term | 5.8 years | | Weighted-average discount rate | 8.6% | - The company settled a securities class action lawsuit in January 2023 for $30.0 million in cash (paid by insurance) and $14.0 million in common stock (9,121,000 shares issued)[93][54] - A settlement in principle was reached for the shareholder derivative litigation in March 2023, with preliminary approval sought in April 2023[98][99] 14. Collaborative Agreements This note details key collaborative agreements, including those with Advaccine, CEPI, and the DoD, and their implications for product development and funding - Advaccine Biopharmaceuticals Suzhou Co., Ltd. will continue to develop INO-4800 (COVID-19 vaccine candidate) with its own resources in Greater China and 33 other Asian countries, following INOVIO's discontinuation of internally funded efforts[108] - Under the Advaccine Agreement, INOVIO is entitled to receive up to $200.0 million in milestone payments and high single-digit royalties on net sales[109] - The company and CEPI discontinued development of vaccine candidates for Lassa fever and MERS in November 2022 after initial data analysis[122] - Funding received from CEPI for INO-4800 grants decreased from $510,000 in Q1 2022 to $53,000 in Q1 2023[124] - The DoD discontinued funding for the Phase 3 segment of the INO-4800 clinical trials in 2021, and all performance obligations under the CELLECTRA 2000 device procurement contract were satisfied[126] 15. Income Taxes This note explains the company's income tax position, including the absence of a tax provision or benefit due to net operating losses and a full valuation allowance - The company did not record any income tax provision or benefit for Q1 2023 or Q1 2022 due to a history of net operating losses and a full valuation allowance against net deferred tax assets[128] 16. Geneos Therapeutics, Inc. This note clarifies the company's relationship with Geneos Therapeutics, Inc., including its ownership interest and licensing agreements for immunotherapy technology - INOVIO no longer consolidates Geneos Therapeutics, Inc. as it ceased to be the primary beneficiary in June 2020, holding approximately 26% of outstanding equity as of March 2023[133][143] - The company's investment in Geneos was reduced to $0 as of March 31, 2022, and it will not record further net losses as it has no obligation to fund Geneos[142] - INOVIO exclusively licenses its SynCon immunotherapy and CELLECTRA technology platform to Geneos for personalized, neoantigen-based cancer therapy, with potential future royalty payments[144] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section offers management's analysis of the company's financial condition and operational results for Q1 2023, covering performance, liquidity, and future funding needs Overview This overview describes INOVIO's biotechnology focus on DNA medicines, its R&D stage, lack of product sales, and significant accumulated deficit - INOVIO is a biotechnology company developing DNA medicines for HPV, cancer, and infectious diseases, with lead candidates focused on HPV-related diseases like RRP[149][150] - All DNA medicine candidates are in R&D, with no product sales revenue generated to date, and significant additional R&D efforts and regulatory approvals are required[153] - As of March 31, 2023, the company had an accumulated deficit of $1.5 billion and expects to incur substantial operating losses in the future due to R&D programs[154] Reduction in Force This section details the corporate reorganization, including a 24-employee reduction in force, expected to yield annual savings and a one-time charge - On January 31, 2023, INOVIO implemented a corporate reorganization plan, including a reduction in force of approximately 24 employees (11% of full-time staff)[155] - The Reduction is expected to provide annual savings of approximately $4.3 million and resulted in a one-time pre-tax charge of $1.1 million in Q1 2023[155] Securities Class Action Settlement This section outlines the class action securities litigation settlement, involving cash and common stock, and associated legal fees incurred - In January 2023, a class action securities litigation settlement was approved, involving $30.0 million in cash (paid by insurance) and $14.0 million in common stock (9,121,000 shares issued)[156] - The company incurred approximately $11.0 million in legal fees and related expenses through March 31, 2023, associated with the litigation[156] Critical Accounting Policies and Estimates This section confirms that there have been no significant changes to the company's critical accounting estimates since December 31, 2022 - There have been no significant changes to the company's critical accounting estimates since December 31, 2022[157] Results of Operations This section analyzes the company's operational results, including changes in revenue, research and development, general and administrative expenses, and other income/expense items Operating Metric (Three Months Ended March 31,) | Operating Metric (Three Months Ended March 31,) | 2023 ($) | 2022 ($) | Change ($) | Change (%) | | :---------------------------------------------- | :------- | :------- | :--------- | :--------- | | Revenue | 115,000 | 199,000 | (84,000) | (42)% | | Research and development expenses | 30,177,000 | 55,979,000 | (25,802,000) | (46)% | | General and administrative expenses | 13,900,000 | 16,000,000 | (2,100,000) | (13)% | | Interest income | 2,200,000 | 670,000 | 1,530,000 | 228% | | Net unrealized gain (loss) on available-for-sale equity securities | 3,200,000 | (4,800,000) | 8,000,000 | 167% | | Other expense, net | (2,400,000) | (153,000) | (2,247,000) | 1469% | - The $25.8 million decrease in R&D expenses was primarily due to lower drug manufacturing and clinical study costs for INO-4800 ($14.3 million), reduced expenses for CELLECTRA 3PSP device ($4.7 million), and lower employee compensation ($4.0 million)[161] - General and administrative expenses decreased by $2.1 million, mainly due to lower stock-based compensation ($1.5 million) and employee compensation ($0.5 million), partially offset by higher legal expenses ($1.5 million)[163] Liquidity and Capital Resources This section assesses the company's liquidity and capital resources, including cash, investments, working capital, and cash flow activities Financial Metrics | Metric | March 31, 2023 ($) | December 31, 2022 ($) | | :-------------------------------- | :----------------- | :-------------------- | | Cash, cash equivalents and short-term investments | 223,800,000 | 253,000,000 | | Working capital | 178,700,000 | 218,400,000 | Cash Flow Activity (Three Months Ended March 31,) | Cash Flow Activity (Three Months Ended March 31,) | 2023 ($) | 2022 ($) | | :------------------------------------------------ | :------- | :------- | | Net cash used in operating activities | (36,700,000) | (61,900,000) | | Net cash provided by investing activities | 19,000,000 | 21,300,000 | | Net cash (used in) provided by financing activities | (425,000) | 28,400,000 | - The company's cash, cash equivalents, and short-term investments decreased by $29.2 million from December 31, 2022, to March 31, 2023[172] Funding Requirements This section discusses the company's funding requirements, noting the sufficiency of current capital for 12 months but the need for additional financing for development and commercialization - Current cash and short-term investments are sufficient for planned working capital requirements for at least the next twelve months[179] - Additional financing will be required to complete clinical development of product candidates and for commercialization, as current resources are insufficient[179] - Restructuring plans and discontinuation of internally funded INO-4800 development are expected to extend the cash runway into Q1 2025[180] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, including interest rate risk, foreign currency risk, and inflation risk, and how these factors could impact its financial condition and results of operations Interest Rate Risk This section addresses the company's exposure to interest rate risk, including unrealized losses in its investment portfolio and mitigation strategies - The company's primary market risk exposure is interest rate sensitivity, with a $6.5 million unrealized loss in its investment portfolio as of March 31, 2023, due to rising interest rates[183] - The company mitigates default risk by investing in short-term investment-grade securities and does not use interest rate derivative instruments[183] Foreign Currency Risk This section discusses the company's limited exposure to foreign currency fluctuations and its policy against using derivative financial instruments for hedging - The company has limited exposure to foreign currency fluctuations, primarily from cash and equity investments denominated in South Korean Won, Euros, British Pounds, and Canadian Dollars[185][186] - The company does not use derivative financial instruments for speculative purposes or engage in exchange rate hedging[187] Inflation Risk This section notes that inflation primarily affects labor costs but has not materially impacted the company's business or financial results in Q1 2023 - Inflation generally affects the company by increasing labor costs, but it has not had a material effect on its business, financial condition, or results of operations during Q1 2023[188] Item 4. Controls and Procedures This section details the company's disclosure controls and procedures, confirming their effectiveness as of March 31, 2023, and reporting no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, at a reasonable assurance level[191] - No changes in internal control over financial reporting occurred during Q1 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[192] Part II. Other Information This section provides other pertinent information, including legal proceedings, risk factors, equity sales, and details on controls and procedures Item 1. Legal Proceedings This section provides updates on various legal proceedings involving the company, including the settlement of a securities class action, ongoing shareholder derivative litigations, and disputes with contract manufacturers VGXI and GeneOne Securities Litigation This section details the settlement of a shareholder class action complaint concerning COVID-19 vaccine statements - A shareholder class action complaint regarding COVID-19 vaccine statements was settled in January 2023 for $30.0 million cash (paid by insurance) and $14.0 million in common stock (9,121,000 shares issued)[195] Shareholder Derivative Litigation This section discusses the consolidation and settlement in principle of multiple shareholder derivative complaints based on similar allegations - Multiple shareholder derivative complaints, based on similar allegations as the class action, have been consolidated and are currently stayed[196][197] - A settlement in principle for the consolidated derivative action and other stockholder demands was agreed upon in March 2023, with preliminary approval sought in April 2023[198][199][200] VGXI Litigation This section outlines the company's complaint against VGXI, Inc. for breach of a supply agreement and VGXI's subsequent counterclaims - The company filed a complaint against VGXI, Inc. in June 2020 for material breach of a supply agreement, seeking specific performance and damages[100][201] - VGXI filed counterclaims alleging breach of supply agreement, misappropriation of trade secrets, and unjust enrichment, which the company disputes[101][203] GeneOne Litigation This section details GeneOne Life Science, Inc.'s complaint alleging breach of a license agreement and the company's counterclaims - GeneOne Life Science, Inc. filed a complaint against the company in December 2020, alleging breach of the CELLECTRA Device License Agreement, which the company terminated[103][205] - The company filed counterclaims alleging GeneOne breached the agreement and intends to aggressively prosecute its claims and defend against GeneOne's claims[104][206] Other Matters This section acknowledges the potential for other disputes in the normal course of business, which could lead to significant legal expenses and adverse effects - The company may be involved in other disputes in the normal course of business, which could lead to costly legal expenses and potentially material adverse effects on financial results or reputation[105][106] Item 1A. Risk Factors This section outlines various risks that could adversely affect the company's business, financial condition, and results of operations, covering financial position, product development, reliance on third parties, commercialization, operational matters, intellectual property, and investment in common stock Risks Related to Our Financial Position and Need for Additional Capital This section highlights risks related to the company's financial position, including a history of operating losses, dependence on product development, and the need for substantial additional capital - The company has incurred significant operating losses since inception, with an accumulated deficit of $1.5 billion as of March 31, 2023, and expects to continue incurring losses[208] - Success is dependent on developing DNA medicines and proprietary smart device technology, as the company has limited revenue sources and no commercially available products[209][210] - Substantial additional capital will be needed for R&D, clinical testing, and market entry, which may be difficult and costly to obtain, potentially leading to dilution or adverse business actions[212][213][214] Risks Related to Product Development, Manufacturing and Regulatory Approval This section addresses risks in product development, manufacturing, and regulatory approval, including FDA approval, clinical trial uncertainties, and reliance on single-source suppliers - Failure to obtain FDA approval for product candidates would prevent commercialization in the United States, significantly impairing revenue generation[215][218] - Clinical trials are lengthy, expensive, and uncertain, with results from earlier studies not always predictive of later-stage trials, and potential delays due to various factors including patient enrollment and regulatory holds[220][222][224] - The company discontinued internally funded development of its COVID-19 vaccine candidate (INO-4800) as a heterologous booster due to market demand, regulatory changes, and diminishing government support[228] - Reliance on single-source suppliers for components and materials for product candidates creates risks of supply disruptions, price increases, and delays[238][239] Risks Related to Reliance on Third Parties This section outlines risks associated with reliance on third parties, including collaborators, government agencies, and contract research organizations (CROs) - Loss of or inability to secure collaborators or partners, or their failure to apply adequate resources, could harm product development and profitability[249][250][251] - Agreements with government agencies are subject to termination and uncertain future funding, which could negatively impact pipeline development and require alternative funding[254][255] - Reliance on third-party CROs to conduct clinical trials poses risks if they fail to meet contractual duties, deadlines, or GCP regulations, potentially delaying regulatory approval[256][257] Risks Related to Commercialization of Our DNA Medicine Candidates This section details risks in commercializing DNA medicine candidates, including establishing marketing and sales capabilities, achieving market acceptance, and securing reimbursement - The company has a small marketing organization and no sales organization; failure to establish these capabilities or partner with third parties could prevent product revenue generation[261] - Commercial success depends on broad market acceptance by the medical community and patients, influenced by factors like safety, efficacy, convenience, pricing, and third-party payor coverage[262][263] - Uncertainty regarding coverage and reimbursement policies from third-party payors could hinder or prevent commercial success, as adequate reimbursement is crucial for product adoption[264][266][268] Risks Related to Employee and Operational Matters This section covers risks related to employee and operational matters, including restructuring impacts, ongoing litigation, leadership changes, and intense industry competition - Restructuring plans, including a 25%+ headcount reduction, may not achieve anticipated results, potentially leading to increased attrition, reduced morale, and increased litigation risk[270][271] - Ongoing and potential future litigation, including shareholder class action and derivative lawsuits, could result in substantial damages, significant legal expenses, and diversion of management's attention[273][274] - Changes in senior leadership, such as the CEO transition in May 2022, create uncertainty and could disrupt operations, employee morale, and relationships with partners[275] - Intense and increasing competition from large pharmaceutical and biotechnology companies, some with greater resources, may impede the successful commercialization of DNA medicines[279][280][281] Risks Related to Our Intellectual Property This section addresses risks concerning intellectual property, including challenges in protection, uncertainties in patent positions, and potential infringement lawsuits - Difficulty and cost in generating and protecting intellectual property (patents, trademarks, trade secrets) may prevent the company from maintaining a competitive advantage[312][317] - The patent positions in biotechnology are highly uncertain, with evolving laws and regulations that may diminish the value of intellectual property or lead to invalid/unenforceable patents[313][314] - Being sued for infringing third-party intellectual property rights would be costly, time-consuming, and could result in substantial damages, injunctions, or the need to redesign products[319][321][322] Risks Related to an Investment in Our Common Stock This section outlines risks associated with investing in common stock, including price volatility, anti-takeover provisions, and the absence of cash dividends - The price of the company's common stock has been and may continue to be highly volatile, subject to substantial drops due to various factors beyond its control[325] - Anti-takeover provisions in charter documents and Delaware law could delay or prevent a change of control, potentially limiting the market price of common stock[330] - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future, making capital appreciation the sole source of potential gain for investors[331] General Risk Factors This section covers general risk factors, including Nasdaq listing compliance, potential fluctuations in operating results, and adverse developments in the financial services industry - Failure to comply with Nasdaq's continued listing standards, specifically the minimum bid price requirement, could lead to delisting, negatively impacting stock price and access to capital markets[334][335] - Quarterly operating results may fluctuate significantly due to various factors, and comparisons are not necessarily meaningful indicators of future performance[336] - Adverse developments in the financial services industry, such as bank failures, could impact the company's access to capital and liquidity, despite maintaining deposits in large financial institutions[339][340] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports the issuance of 9,121,000 shares of common stock during the three months ended March 31, 2023, in connection with a class action securities litigation settlement, relying on an exemption under Section 3(a)(10) of the Securities Act of 1933 - The company issued 9,121,000 shares of common stock during Q1 2023 for a class action securities litigation settlement, under the exemption of Section 3(a)(10) of the Securities Act of 1933[348] Item 5. Other Information This section discloses that the company received a notice from Nasdaq on May 4, 2023, regarding non-compliance with the minimum bid price requirement, and outlines the compliance period and potential actions - On May 4, 2023, the company received a Nasdaq notice for non-compliance with the minimum bid price requirement ($1.00 per share for 30 consecutive business days)[349] - The company has 180 calendar days, until October 31, 2023, to regain compliance by having its common stock close at $1.00 or more for a minimum of ten consecutive business days[350] - Failure to regain compliance could lead to delisting, though the company may be eligible for an additional 180-day period if it transfers to The Nasdaq Capital Market[351] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Certificate of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications, and XBRL interactive data files - Exhibits include the Certificate of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications (pursuant to Regulation S-K and 18 U.S.C. Section 1350), and XBRL Instance Document and Taxonomy Extension files[353] Signatures This section contains the signatures of the company's President, Chief Executive Officer, and Director, Jacqueline E. Shea, and Chief Financial Officer, Peter Kies, certifying the filing of the report on May 10, 2023 - The report is signed by Jacqueline E. Shea, President, Chief Executive Officer and Director, and Peter Kies, Chief Financial Officer, on May 10, 2023[357]