Inovio Reports Second Quarter 2006 Financial Results.SAN DIEGO San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. -- Inovio Biomedical bi·o·med·i·cal adj. 1. Of or relating to biomedicine. 2. Of, relating to, or involving biological, medical, and physical sciences. Corporation (AMEX AMEX See: American Stock Exchange :INO Ino (ī`nō), in Greek mythology, daughter of Cadmus. She was the wife of Athamas, to whom she bore Learchus and Melicertes. She plotted to kill her stepchildren, Phrixus and Helle, but their mother, Nephele, saved them with the help of a winged ) today reported financial results for the three and six months ended June 30, 2006. Total revenue for the three and six months ended June 30, 2006 was $662,690 and $1,360,683, respectively, as compared to $2,951,616 and $3,913,537 for the same periods in 2005. Revenue consisted of license fees, milestone payments, revenue recognized from collaborative research and development arrangements and grants. Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the three and six months ended June 30, 2006 were $3,865,416 and $7,376,391, respectively, as compared to $5,136,858 and $13,319,476, respectively, for the three and six months ended June 30, 2005. Included in total operating expenses for the six months ended June 30, 2005, was a $3,332,000 non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. related to the write-off of acquired in-process research and development ("IPR&D") resulting from our acquisition of Inovio AS in January 2005. The net loss attributable to common stockholders for the three and six months ended June 30, 2006 was $(3,083,193), or $(0.10) per share and $(5,789,418), or $(0.19) per share, respectively, as compared with a net loss attributable to common stockholders of $(2,328,633), or $(0.12) per share and $(11,613,923), or $(0.61) per share, respectively, for the three and six months ended June 30, 2005. Included in net loss attributable to common stockholders for the six months ended June 30, 2005, was the $3,332,000 non-cash charge, as well as a non-cash imputed Attributed vicariously. In the legal sense, the term imputed is used to describe an action, fact, or quality, the knowledge of which is charged to an individual based upon the actions of another for whom the individual is responsible rather than on the individual's dividend charge of $1,942,773 related to the private placement we completed in January 2005. Revenue Revenue from license fees and milestone payments was $171,062 and $322,116, respectively, for the three and six months ended June 30, 2006, as compared to $2,133,282 and $2,233,121, respectively, for the three and six months ended June 30, 2005. The decrease in revenue from license fees and milestone payments for the three and six month period ended June 30, 2006, as compared to comparable periods in 2005, was mainly due to the recognition of a $2,000,000 milestone payment during the three months ended June 30, 2005, resulting from the achievement of a clinical milestone by Merck. Revenue from collaborative research and development arrangements during the three and six months ended June 30, 2006 was $232,351 and $508,581, respectively, as compared to $523,419 and $1,029,031, respectively, for the same periods in 2005. This decrease in revenue was primarily due to less collaborative research and development revenue recognized from the Merck Agreement. Grant and miscellaneous revenue was $259,277 and $529,986, respectively, for the three and six months ended June 30, 2006, as compared to $294,915 and $651,385, respectively, for the three and six months ended June 30, 2005. The decrease in grant and miscellaneous revenue for the three and six months ended June 30, 2006, as compared to the comparable periods in 2005, was mainly due to less revenue recognized from our European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community and U.S. Army grants received from the acquisition of Inovio AS due to timing of the work performed. Operating Expenses Research and development expenses for the three and six months ended June 30, 2006 were $1,981,895 and $3,622,320, respectively, as compared to $3,519,623 and $6,860,004 for the three and six months ended June 30, 2005, respectively. The decrease in research and development expenses for the three and six months ended June 30, 2006, as compared to the comparable periods in 2005, was primarily due to a decrease in clinical trial expenses. Historically, clinical expenses have included the use of an outside Clinical Research Organization ("CRO"). Throughout the six months ended June 30, 2006, we increased the use of internal resources to more cost effectively fulfill those activities formerly undertaken by this CRO. The remainder of the decrease was primarily due to lower cost of manufacturing products to support these clinical trials and research collaborations, decreased external research expenses and other expenses associated with our clinical trials and lower outside regulatory consulting costs associated with our clinical trials. These were offset by an increase in share-based compensation expense of $82,195 and $208,851 for the three and six months ended June 30, 2006, respectively, related to options issued to employees, which were required to be expensed in 2006 per SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123(R), which was not applicable in 2005. General and administrative expenses for the three and six months ended June 30, 2006 were $1,827,271 and $3,641,571, respectively, as compared to $1,560,985 and $3,033,722 for the three and six months ended June 30, 2005, respectively. The increase in general and administrative expenses for the three and six months ended June 30, 2006, as compared to the comparable periods in 2005, was mainly due to share-based compensation expense of $263,979 and $629,094, respectively, related to options issued to employees. Amortization of intangible assets was $56,250 and $112,500 during the three and six months ended June 30, 2006, respectively, as compared to $56,250 and $93,750 for the three and six months ended June 30, 2005, related to an intangible asset associated with contracts and intellectual property acquired as part of our purchase of Inovio AS in January 2005. Operating expenses for the six months ended June 30, 2005 includes a $3,332,000 non-cash charge related to the write-off of acquired IPR&D resulting from the Inovio AS acquisition. The amount expended for IPR&D represents the estimated fair value of purchased in-process technology for projects that, as of the acquisition date, had not reached technological feasibility and had no alternative future use. There were no such charges related to acquisitions during the same period in 2006. Net Loss Attributable to Common Stockholders The decrease in net loss attributable to common stockholders for the six months ended June 30, 2006, as compared to the same period in 2005, resulted mainly from the $3,332,000 non-cash charge related to the write-off of acquired IPR&D, as well as decreased clinical trial and research and development expenses. In addition, in connection with the January 2005 private placement, we recorded an imputed dividend charge of $1,942,773 for the six months ended June 30, 2005. There was no such charge for the six months ended June 30, 2006. These decreases were offset, in part, by an increase in share-based compensation expense related to options issued to employees. Capital Resources As of June 30, 2006, we had cash and short-term investments of $10,873,116 and working capital of $9,281,043, as compared to $17,166,567 in cash and short-term investments and $14,185,032 in working capital as of December 31, 2005. The decrease in working capital during the six months ended June 30, 2006 was primarily due to expenditures related to our research and development and clinical trial activities, as well as various general and administrative expenses related to legal, corporate development, investor relations Investor relations The process by which the corporation communicates with its investors. and financing activities. Corporate Update Following are operational highlights of the first half of 2006 and a summary of our business objectives going forward: Corporate Development --In January 2006, Inovio signed an agreement with Swedish-based Tripep AB to develop a therapeutic vaccine therapeutic vaccine Immunology A vaccine–eg, Salk's Remune™ intended to treat a viral infection by stimulating the immune system. See Vaccine therapy. for hepatitis C virus
abbr. hepatitis C virus HCV 1 Hepatitis C virus, see there 2. Human coronavirus. See Coronavirus. ). The vaccine will be based on Tripep's proprietary HCV antigen and delivered to infected individuals using Inovio's Medpulser DNA DNA: see nucleic acid. DNA or deoxyribonucleic acid One of two types of nucleic acid (the other is RNA); a complex organic compound found in all living cells and many viruses. It is the chemical substance of genes. Delivery System. Initiation of a Phase I clinical trial Noun 1. phase I clinical trial - a clinical trial on a few persons to determine the safety of a new drug or invasive medical device; for drugs, dosage or toxicity limits should be obtained phase I is expected to begin in 2006 and will be performed in Sweden. --Subsequent to the end of the second quarter, Inovio established an agreement with P2 Partners, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control to seek partnering opportunities for our Selective Electrochemical electrochemical /elec·tro·chem·i·cal/ (-kem´i-k'l) pertaining to interaction or interconversion of chemical and electrical energies. e·lec·tro·chem·i·cal adj. Tumor Ablation (SECTA) therapy program. P2 is specialized in providing transaction advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal to small and mid-sized companies in the healthcare industry. Clinical Development Oncology --We continued to expand enrollment of sites and patients in the U.S. and internationally for our two Phase III Noun 1. phase III - a large clinical trial of a treatment or drug that in phase I and phase II has been shown to be efficacious with tolerable side effects; after successful conclusion of these clinical trials it will receive formal approval from the FDA pivotal head and neck studies to evaluate our Selective Electrochemical Tumor Ablation (SECTA) therapy for treating recurrent and second primary squamous cell carcinomas squamous cell carcinoma n. A carcinoma that arises from squamous epithelium and is the most common form of skin cancer. Also called cancroid, epidermoid carcinoma. . Our goal is to complete enrollment of 200 patients in the next six months and then submit this data for review by the Drug Safety Monitoring Safety Monitoring of a clinical trial is conducted by an independent physician with relevant expertise. This is accomplished by review of adverse event, immediately after they occur, with timely follow-up through resolution. Board. --We continued to expand enrollment of sites and patients in Europe for our two pre-marketing clinical studies - one treating patients with newly diagnosed or recurrent squamous cell carcinoma of the head and neck, the other treating patients with newly diagnosed or recurrent skin cancers requiring potentially disfiguring surgery disfiguring surgery A popular term for surgery that mutilates, especially if it affects the face, hands and arms; the term mutilating surgery generally refers to other body regions . Both studies support the planned commercial launch of the SECTA therapy in Europe by creating a reference and potential customer base among physicians who are opinion leaders, providing local experience and establishing centers of excellence to facilitate sales, and documenting clinical and pharmacoeconomic benefits to support reimbursement approval. Our goal is to complete the treatment of 80 patients for each study in the next six months. --We are enrolling patients in a Phase I study to treat locally recurrent breast cancer after a mastectomy mastectomy (măstĕk`təmē), surgical removal of breast tissue, usually done as treatment for breast cancer. There are many types of mastectomy. In general, the farther the cancer has spread, the more tissue is taken. or partial mastectomy using our SECTA therapy. We aim to complete enrollment by the end of 2006. --In 2005, we initiated a Phase I pancreatic cancer pancreatic cancer Malignant tumour of the pancreas. Risk factors include smoking, a diet high in fat, exposure to certain industrial products, and diseases such as diabetes and chronic pancreatitis. Pancreatic cancer is more common in men. study. We believe that a potential pancreatic disease indication for SECTA would be commercially attractive due to the unmet clinical need for improved local control. However, with the goal of maintaining a focused and more manageable clinical program, we downsized our clinical programs by terminating this study during the second quarter of 2006. Gene Delivery/DNA Vaccines Our goal in gene delivery is to enable our partners to further their development of DNA vaccines and gene therapies addressing a broad range of diseases with significant unmet needs. Our focus to accomplish this goal is to advance our development of proprietary intellectual property and develop state-of-the-art in vivo in vivo /in vi·vo/ (ve´vo) [L.] within the living body. in vi·vo adj. Within a living organism. in vivo adv. electroporation electroporation (i·lekˈ·trō·p  ·rāˑ·sh equipment. We developed two systems to enable gene
delivery: the MedPulser(R) DNA Delivery System designed for
intramuscular intramuscular /in·tra·mus·cu·lar/ (-mus´ku-ler) within the muscular substance. in·tra·mus·cu·lar adj. Abbr. IM Within a muscle. delivery of DNA plasmid and the MedPulser(R) DNA Electroporation Therapy electroporation therapy Therapeutics A form of drug delivery that generates electrical pulses via an electrode placed in a tumor to enhance the ability of a chemotherapeutic–eg, bleomycin to enter tumor cells involves using electric fields to open pores in System designed for the delivery of DNA plasmids to tumor tissue. We have entered into multiple agreements with pharmaceutical and biotechnology companies Top 100 Biotechnology Companies The following is a list of the top 100 biotechnology companies ranked by revenue. The first nine companies qualify for the list of the top 50 pharmaceutical companies. to develop products wherein we license our technology to a partner and provide electroporation equipment under a supply agreement and device regulatory support during the development stage of the product. The partner is responsible for the cost of all development activities. This strategy has allowed for the cost effective development of a number of products and our gene delivery program is currently a source of revenue for us. Typical partnering deals include up-front license fees, milestone payments, development arrangements, royalties on product sales and supply agreements for clinical devices. In 2005, the following four Inovio partners initiated Phase I clinical studies: --Vical - immunotherapy product (IL-2) delivered into melanoma lesions --H. Lee Moffitt Cancer Center & Research Institute - immunotherapy product (IL-12) delivered to melanoma lesions --University of Southampton - prostate cancer prostate cancer, cancer originating in the prostate gland. Prostate cancer is the leading malignancy in men in the United States and is second only to lung cancer as a cause of cancer death in men. vaccine delivered into skeletal muscle --Merck - vaccine targeting breast, colorectal, ovarian, or non-small cell lung cancers Lung Cancer, Non-Small Cell Definition Non-small cell lung cancer (NSCLC) is a disease in which the cells of the lung tissues grow uncontrollably and form tumors. Description There are two kinds of lung cancers, primary and secondary. expressing HER-2 and/or CEA CEA carcinoembryonic antigen. CEA abbr. carcinoembryonic antigen CEA (Carcinoembryonic antigen) . Each of these clinical studies continues to enroll patients. In June, 2006, we had a strong presence at the American Society of Gene Therapy American Society of Gene Therapy (ASGT) is a professional non-profit medical and scientific organization dedicated to:
RMR Registered Merit Reporter RMR Reliability Must-Run (electric generation plant's status to maintain grid voltage/reliability) RMR Recurring Monthly Revenue (finance) , LLC (related to H. Lee Moffitt Cancer Center). Dr. Richard Heller presented positive interim results regarding the safety of our gene delivery technology in the Moffitt clinical study and the utility of our technology in enhancing gene delivery, gene expression, and immune response immune response n. An integrated bodily response to an antigen, especially one mediated by lymphocytes and involving recognition of antigens by specific antibodies or previously sensitized lymphocytes. . We expect our partner, Tripep AS of Sweden, to initiate their Phase I clinical study for their hepatitis C Hepatitis C Definition Hepatitis C is a form of liver inflammation that causes primarily a long-lasting (chronic) disease. Acute (newly developed) hepatitis C is rarely observed as the early disease is generally quite mild. agent in 2006. In a collaborative study supported by a congressional appropriation awarded to Inovio in 2005, researchers from the U.S. Army Medical Research Institute for Infectious Diseases infectious diseases: see communicable diseases. (USAMRIID USAMRIID United States Army Medical Research Institute of Infectious Diseases (US DoD) ) at Fort Detrick Fort Detrick is a U.S. Army Medical Command installation located in Frederick, Maryland, USA. Its 1,200 acres (5 km) support a multi-governmental community that conducts biomedical research and development, medical material , MD, demonstrated that vaccination with a DNA vaccine delivered using Inovio's electroporation technology resulted in survival of the majority of animals after a lethal challenge with highly pathogenic Lassa fever virus Lassa fever virus a highly fatal, hemorrhagic disease of humans caused by an arenavirus transmitted from certain rodents. . This virus is considered to be a possible agent for bioterrorism and biowarfare. In a similar program, another partner, RMR, LLC, is currently employing electroporation technology (which is exclusively licensed to Inovio) in the pre-clinical development Pre-clinical development is a stage in the development of a new drug that begins before clinical trials (testing in humans) can begin, and during which important safety and pharmacology data is collected. of an anthrax vaccine An´thrax vac´cine 1. (Veter.) A fluid vaccine obtained by growing a bacterium (Bacillus anthracis, formerly Bacterium anthracis) in beef broth. It is used to immunize animals, esp. cattle. under a Department of Defense Small Business Innovation Research (SBIR SBIR Small Business Innovation Research (program/grant) SBIR Space Based Infra-Red SBIR Speaker-Boundary Interference SBIR Site Backsurface-referenced Ideal Plane/Range (silicon wafers) ) Program grant. We continue to pursue strategic partnerships we believe have the potential to advance the use of our gene delivery technology to enable or enhance the delivery of their proprietary DNA vaccines or gene-based treatments for diseases with unmet needs. We believe that such deals may bring additional credibility and financial resources that would further establish our role as a leader in the promising field of DNA vaccines and gene-based treatments. Intellectual Property In the first half of 2006, we strengthened our intellectual property position with the award of new patents as well as the acquisition of rights to strategic patents from Sphergen SARL SARL South African Radio League SARL Société Anonyme à Responsabilité Limitée (French: limited liability company) SARL Salem Animal Rescue League (Salem, NH) SARL Sociedade Anónima de Responsabilidade Limitada and RMR, LLC. Collectively, our patent portfolio places the company in a preeminent position with respect to patents and patent rights in the rapidly expanding field of electroporation-based delivery of gene-based treatments for cancers, infectious diseases and protein-proficiency diseases. About Inovio Biomedical Corporation Inovio Biomedical Corporation is a late stage biomedical company focused on commercializing its proprietary Selective Electrochemical Tumor Ablation (SECTA) therapy. SECTA targets a significant unmet clinical need: the local treatment of solid tumors, with selective killing of cancer cells cells once believed to be peculiar to cancers, but now know to be epithelial cells differing in no respect from those found elsewhere in the body, and distinguished only by peculiarity of location and grouping. See also: Cancer while preserving healthy tissue. Inovio is moving its lead product, the MedPulser(R), through pre-marketing studies for head and neck cancer and skin cancers in Europe, where it has CE Mark accreditation, a U.S. Phase III pivotal study for head and neck cancer, and Phase I trials for pancreatic and breast cancer. Merck, Vical, University of Southampton In the most recent RAE assessment (2001), it has the only engineering faculty in the country to receive the highest rating (5*) across all disciplines.[3] According to The Times Higher Education Supplement , and H. Lee Moffitt Cancer Center are using Inovio's gene delivery technology in clinical studies of novel DNA therapeutics delivered using electroporation. Inovio is a leader in developing human therapeutic applications of electroporation, with the industry's most extensive patent portfolio covering in vivo electroporation. More information is available at www.inovio.com. This press release contains certain forward-looking statements relating to our plans to develop our electroporation drug and gene delivery technology and to maximize shareholder value. Actual events or results may differ from our expectations as a result of a number of factors, including the uncertainties inherent in clinical trials and product development programs, evaluation of potential opportunities, the level of corporate expenditures, the assessment of our technology by potential corporate partners, capital market conditions, and other factors set forth in the our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005, our Form 10-Q Form 10-Q See 10-Q. for the three months ended June 30, 2006, and other regulatory filings. There can be no assurance that any product in our product pipeline will be successfully developed or manufactured, or that final results of clinical studies will be supportive of regulatory approvals required to market licensed products.
INOVIO BIOMEDICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2006 2005
(Unaudited)
ASSETS
Cash and cash equivalents $ 1,873,116 $17,166,567
Short-term investments 9,000,000 --
Accounts receivable 385,228 284,171
Prepaid expenses and other current assets 880,267 870,169
------------- -------------
Total current assets 12,138,611 18,320,907
Fixed assets, net 471,068 375,613
Patents and other assets, net 2,393,692 2,148,090
Goodwill 4,290,594 4,290,594
Intangible assets, net 3,731,250 3,843,750
------------- -------------
Total assets $23,025,215 $28,978,954
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 1,430,129 $ 1,864,935
Accrued clinical trial expenses 504,058 1,064,497
Deferred revenue 923,381 1,206,443
------------- -------------
Total current liabilities 2,857,568 4,135,875
Deferred rent 263,213 285,875
Deferred tax liabilities 1,044,750 1,076,250
Long-term liabilities -- 10,206
------------- -------------
Total liabilities 4,165,531 5,508,206
------------- -------------
Stockholders' equity:
Preferred stock 1,028 1,562
Common stock 30,869 29,469
Additional paid-in capital 138,934,399 137,739,954
Shareholder note receivable (50,000) --
Accumulated deficit (120,059,360) (114,269,942)
Other comprehensive income (loss) 2,748 (30,295)
------------- -------------
Total stockholders' equity 18,859,684 23,470,748
------------- -------------
Total liabilities and stockholders'
equity $23,025,215 $28,978,954
============= =============
INOVIO BIOMEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- ------------------------
2006 2005 2006 2005
----------- ----------- ----------- ------------
Revenue:
License fee and
milestone payments $ 171,062 $2,133,282 $ 322,116 $ 2,233,121
Revenue under
collaborative
research and
development
arrangements 232,351 523,419 508,581 1,029,031
Grant and
miscellaneous
revenue 259,277 294,915 529,986 651,385
----------- ----------- ----------- ------------
Total revenue 662,690 2,951,616 1,360,683 3,913,537
----------- ----------- ----------- ------------
Operating expenses:
Research and
development 1,981,895 3,519,623 3,622,320 6,860,004
General and
administrative 1,827,271 1,560,985 3,641,571 3,033,722
Amortization of
intangible assets 56,250 56,250 112,500 93,750
Charge for acquired
in-process research
and development -- -- -- 3,332,000
----------- ----------- ----------- ------------
Total operating
expenses 3,865,416 5,136,858 7,376,391 13,319,476
----------- ----------- ----------- ------------
Loss from operations (3,202,726) (2,185,242) (6,015,708) (9,405,939)
Interest and other
income 153,956 54,237 333,078 135,135
----------- ----------- ----------- ------------
Net loss (3,048,770) (2,131,005) (5,682,630) (9,270,804)
Imputed and declared
dividends on
preferred stock 34,423 197,628 106,788 2,343,119
----------- ----------- ----------- ------------
Net loss
attributable to
common
stockholders $(3,083,193)$(2,328,633)$(5,789,418)$(11,613,923)
=================================================
Amounts per common
share - basic and
diluted:
Net loss $ (0.10) $ (0.11) $ (0.19) $ (0.49)
Imputed and declared
dividends on
preferred stock (0.00) (0.01) (0.00) (0.12)
-------------------------------------------------
Net loss per share
attributable to
common stockholders $ (0.10) $ (0.12) $ (0.19) $ (0.61)
=================================================
Weighted average
number of common
shares - basic and
diluted 30,568,369 19,022,474 30,097,487 18,826,449
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