Inovio Pharmaceuticals Inc (INO) 2014 Q4 法說會逐字稿

Greetings and welcome to the Inovio Pharmaceuticals, Inc. fourth-quarter and year-end 2014 financial results conference call. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bernie Hertel, VP of Investor Relations and Communications. Thank you, sir, you may begin.

Thank you. Good morning, everyone, today's call may contain certain forward-looking statements relating to our business including our plans to develop DNA immunotherapies and electroporation-based delivery technologies as well as our capital resources.

Please keep in mind that actual events or results may differ from the expectations discussed as a result of a number of factors including uncertainties inherent in preclinical studies; clinical trials and product development programs; including but not limited to the fact that preclinical and clinical results referenced on the call may not be indicative of results achievable in other trials, studies and trials may not achieve the results desired and they may not commence or be completed in the time periods anticipated.

There may also be risks related to collaborative arrangements including the timing and receipt of payments, the availability or potential availability of alternative therapies for the conditions targeted by the Company or its collaborators, issues involving product liability, issues involving patents, the adequacy of our capital resources, the impact of government healthcare proposals and other factors set forth in our annual report on Form 10-K for the year and quarter ended December 31, 2014 and other regulatory filings from time to time.

Finally, there can be no assurance that any product in Inovio's pipeline will be successfully developed or manufactured, that final results of clinical studies will be supportive of regulatory approvals required to market license products, or that any of the forward-looking information provided will be proven accurate. Now, Inovio's President and CEO, Dr. J. Joseph Kim.

Thanks, Bernie, good morning, everyone. Last year was the most important in the Company's history. Why? Because in July Inovio demonstrated for the first time in the field that a DNA active immunotherapy could achieve clinically relevant efficacy using targeted in vivo T-cell activation in a large controlled clinical trial.

In our randomized placebo-controlled double-blind phase II study of over 148 women with high-grade cervical dysplasia caused by HPV 16 or 18 we used the three immunization regimen of our SynCon DNA-based immunotherapy called VGX-3100. Evaluating these women 36 after their first treatment, our endpoints were to measure histologic regression of the precancerous cervical lesions which is an assessment of the cells and virological clearance.

How did we do? Treatment with VGX-3100 resulted in a histological regression of high-grade cervical pre-cancer called CIN 2/3 down to CIN 1 which is a low-grade pre-cancer or to no disease, meeting the study's primary endpoint. In addition, the trial demonstrated clearance of HPV in conjunction with the regression of cervical lesions meeting the secondary endpoint. Robust T cell activity was detected in subjects which received VGX-3100 compared to those who received placebo.

Why is this important for women? These results are a significant step toward providing women and their physicians a nonsurgical approach to treat pre-cancers by stimulating their immune system to eliminate cells that have been detrimentally altered by HPV as well as any presence of the virus itself.

Women treated with this immunotherapy can potentially avoid an invasive procedure, eliminate the small but nevertheless real risk of preterm birth, and reduce the risk of recurrence or of passing on the virus to others.

The data from this proof of concept trial is now guiding the planning of our phase II trial for VGX-3100, the success of which would then bring this product to a vital step closer to clinical use.

What do these results mean for Inovio and its pipeline? These phase II data are vital in planning for the other HPV indications including cervical and head and neck cancers for which we have initiated human studies and anogenital pre-cancers and cancers. These are very important targets.

Equally importantly, you can extrapolate these results for all disease applications of our technology. The results of our efficacy trial validate the potential of our SynCon product to be effective, efficient and safe.

Now let me take a step back and briefly expand on our approach to bringing a new type of medicine, DNA-based immunotherapies, to the market. Like many scientists we have long held the view that we should be able to create a new era of immunotherapy technology to not just prevent but treat challenging diseases.

We have also asked ourselves the question, is there such a thing as an ideal immunotherapy. What would this look like? Our viewpoint and what we have been striving for through our years of R&D and now late stage clinical development is to advance an immunotherapy with the following important characteristics.

We want to help (inaudible) systems recognize and target disease specific antigens, that is proteins unique to cancer or infectious disease. It should not have to be patient specific and personalized. Why remove cells from the body, modify them and reintroduce them to a patient? Why take on the manufacturing, quality control and cost challenges if you can do the most important work in the patient? Keep it simple.

It must activate functional T-cells, CD8 positive killer T-cells with the tools necessary to kill the target cells. These tools include for example, granzyme and perforin. This immunotherapy must generate robust T cell responses, meaning a significant number of T cells, and we want them to be persistent and durable over time. We call this a memory response.

We also do not want to induce any unwanted immune responses against the beneficial agent. We also don't want the medicine to induce toxic inflammatory responses in the patient. Furthermore, in the case of cancer, we want to help the body break its tolerance of cancer cells grown in the body.

This is not intended to be a lecture on immunology. However, to understand and differentiate Inovio's DNA-based immunotherapy technology and its potential, it is vital to appreciate these variables.

The scientists driving our technology have decades of experience and they set a high standard as to how to conduct their research and clinical development. We have published over 80 preclinical and clinical peer reviewed publications just in the last six years. Our view is that ideal immunotherapy is an active immunotherapy that achieves these various factors I just described. Our phase II clinical data has provided significant evidence that we are on the right path.

There are additional factors that define the power, simplicity and potential of our technology. With just three simple injections over three months we generated significant killer CD8 positive T cells that are measurable in the blood, a significant accomplishment compared to most other immunotherapies.

The T cells we generate are then trafficked to the disease tissue; these are often described as a tissue infiltrating T cell. And we see a direct correlation between these CD8 T cells and actual clinical efficacy.

Finally, let me emphasize the importance of safety. We have now treated over 550 subjects over 1,300 immunizations across various clinical studies we've conducted and experience has -- and we have not experienced a single severe adverse event. Our only common adverse event is an injection site redness which is a sign that the immune system is actually at work.

We sometimes take the idea of do no harm for granted. At Inovio it is fundamental to our approach. First, we view our VGX-3100 data as the highlight of 2014 and illustrative of the power of our SynCon constructs coupled with our proprietary delivery technology. Together they drive effective T cell responses able to eliminate lesions and, in this case, viral levels.

For us at Inovio this is but the tip of the iceberg of forthcoming data and our burgeoning pipeline. As a combination of this particular study and milestone there is a much deeper and more detailed review of our phase II efficacy and other data coming soon in a medical journal.

The next key step, as you know, is our plan to independently advance VGX-3100 into a phase III registrational study with target patient characteristics and a treatment regimen similar to our phase II study. Steps we must complete include scaling of commercial level production of our immune therapy product and the delivery devices. We expect to complete our end of phase II meeting with the FDA in 2015 and begin treating women in phase III studies -- phase III study in early 2016, sooner if possible.

With this positive data in tackling HPV-related diseases we want to play a significant role in addressing HPV associated diseases. To this end Inovio has broadened its therapeutic HPV franchise to include other pre-cancers caused by HPV infection such as vulvar, vaginal and other anogenital neoplasia as well as the cancers of the cervix, head and neck and anogenital areas.

Late last year we initiated phase I/II clinical studies of INO-3112 which consists of VGX-3100 plus our IL-12 immune activator against HPV caused cervical cancer and head and neck cancer. Our IL-12 immune activator has been shown to speed the onset and increase the already high level of antigen specific T cells generated by the immunotherapy. We expect to report the first interim data from one of these cancer -- first cancer studies in the second half of this year.

Can our SynCon technology address other cancers not caused by HPV? And that is a resounding yes. The broad evidence in the field is that better way of unleashing and enhancing T-cell responses are bearing results against various cancers. As we advance our view of an ideal immunotherapy to generate functional killer T cells we are well in motion in applying SynCon products to other cancers.

You will be hearing from us about our hTERT construct in the months and years ahead in preclinical studies. We have served significant impact when we target this gene, human telomerase reverse transcriptase which is found in many cancers but is rare in normal cells.

We started a phase I trial of our hTERT immunotherapy alone or in combination with Inovio's IL-12 immune activator in adults with breast, lung or pancreatic cancer at high risk of relapse after surgery and other cancer treatment. Because high levels of hTERT expression are found in 85% of all human cancers, this immunotherapy candidate hosts a potential as a broad spectrum universal cancer therapeutic.

Staying with our rich oncology pipeline, our prostate DNA immunotherapy, INO-5150 targeting prostate specific membrane antigens and prostate specific antigen has achieved regulatory clearance to start a phase I study and we'll soon begin enrolling patients.

A preclinical study in monkeys showed that immunization with INO-50 generated strong and robust T cell immune responses that were the highest generated by a PSA targeting immunotherapy in animal studies and were very similar to the immune responses we generated in patients with VGX-3100, which generated best-in-class T cell immune responses.

While I am proud of the cancer pipeline Inovio has built, let's not forget the value in our product targeting challenging infectious diseases. I will tell you about four of them. Hepatitis B, hepatitis C, Ebola and HIV.

First, hep B. Along with providing full funding, Roche entrusted Inovio with the responsibility of running the first study. We have received regulatory clearance to start the INO-1800 phase I study and will soon begin enrolling patients. The treatment of the first patient in this trial will trigger a milestone payment from Roche.

Second, hepatitis C. Inovio's multi-antigen SynCon immune therapy targeting hep C virus genotypes 1A and 1B is also called INO-8000, is being studied in a phase I/IIa clinical study in Korea in collaboration with our international affiliates, GeneOne Life Sciences.

Together we expect to report interim data from this clinical study later this year. Even though there have been recent therapeutic breakthroughs for this chronic disease, we think we can bring a safer more long-lasting product to market with our DNA-based hep C therapy.

Third is Ebola. We intend to initiate a phase I study of our Ebola immunotherapy called, INO-4212 in the first half of 2015 in collaboration with GeneOne. We will begin this trial with great expectations based on our previous preclinical data -- published preclinical data showing 100% protection of animals immunized with our Ebola DNA vaccine.

In this brief look at our infectious disease pipeline I will end with HIV. Subsequent to year end we reported that a 12 patient phase I study of HIV therapy, PENNVAX-B, in HIV-infected patients revealed that induced T cell immune response characteristics were similar to those observed in extremely rare HIV-infected individuals who without treatment do not progress to further stages of disease. These patients are called the long-term non-progressors.

Scientists believe that part of their ability to control infection may lie in their unique immune responses. That is why our DNA-based immunotherapy approach holds so much promise, because it drove the expansion of activated HIV specific CD8 T cells with functional characteristics similar to those of long-term non-progressors.

The knowledge of from our PENNVAX-B studies and healthy in HIV infected people has been used to create our global multi-clade PENNVAX-GP preventive and therapeutic HIV DNA immunotherapy candidate. Development of this product was funded in part by a $25 million NIH contract over the last five years.

We expect to initiate a phase I study of PENNVAX-GP in the first half of this year. This study will be conducted by the HIV vaccine trials network with funding provided from -- also from the NIH.

We are also very pleased to have announced earlier this morning that Inovio and its All-Star academic collaborators, including the University of Pennsylvania, were awarded a new five-year $16 million grant from the National Institute of Allergy & Infectious Disease, a part of the NIH, to further support our novel DNA-based HIV immunotherapy development.

Under the integrated preclinical clinical AIDS vaccine development program, or IPC AVD, this grant was awarded based in part on the clinical successes of Inovio's PENNVAX HIV vaccine program. The new grant will fund research to expand PENNVAX coverage of HIV strains as well as to further enhance antibody responses generated by the vaccine.

Overall goal of this project is to further build upon this important HIV vaccine approach as well as to gain fundamental insight into new technologies to improve vaccination. As part of this grant's consortium, Inovio will bring its expertise and vaccine constructs, developing and manufacturing of HIV vaccines with researchers of four of the world's leading academic institutions including [U-Penn] and Emory University, Duke University and the University of Massachusetts.

This new award reinforces Inovio's position as one of the eminent global developers of novel HIV therapies to prevent and treat this disease. So on top of the $25 million contract over the last five years we will be receiving additional $60 million over the next five years.

I will close with a quick accounting of our other Company developments. DARPA, the Defense Advanced Research Projects Agency, awarded $12.2 million for a collaborative project to develop Inovio's DNA-based monoclonal antibodies, or dMABs, using technology developed by Inovio and Penn against influenza and antibiotic resistant bacteria. This research is being conducted by scientists from Inovio, Penn, MedImmune.

In previous clinical studies our dMABs demonstrated robust virus neutralization and protected treated animals challenged with a lethal virus. I promise you will be hearing more about Inovio's dMABs going forward.

Remember that conventional monoclonal antibodies have become the most valuable medical product class in recent years. In 2012 worldwide sales of monoclonal antibody products exceeded $50 billion and the top 10 selling pharma drugs, six of them are monoclonal based products. So we are able to apply our technology to get our large supply of this important product class.

On another note, we view as a non-core asset our Animal Health business, VGX Animal Health, Inc. We will still profit from its development. but it is now in the hands of a company, Plumbline Life Sciences of Korea, who will focus on this asset and move it forward.

We granted an exclusive license for animal application of VGX Animal Health's growth hormone releasing hormone or GHRH technology and animal DNA vaccines plus nonexclusive license for Inovio's electroporation delivery system in animals for these applications.

Our VGX Animal Health subsidiary will receive $2 million in cash in multiple payments along with 20% of the outstanding shares of Plumbline, as well as the milestone payments and royalties on product sales. Inovio still retains the shipment application of its GHRH technology. Now our CFO, Peter Keith, will provide our financial highlights. Peter?

Thank you, Joseph. Good morning, everybody. Total revenues was $2.5 million and $10.5 million for the quarter and year ended December 31, 2014 as compared to $1.7 million and $13.5 million for the same period in 2013. Total operating expenses for the quarter and year ended December 31, 2014 were $13.5 million and $50 million as compared to $9.7 million and $33 million for the same periods in 2013.

Net loss attributed it to common shareholders for the quarter and year ended December 31, 2014 was $7.4 million or $0.12 per share and $36.1 million or $0.61 per share as compared with a net loss attributed to common shareholders of $15.5 million or $0.30 per share and $66 million or $1.43 per share for the same quarter and year end -- for the quarter and year ended December 31, 2013.

The improvement of $8.1 million and $29.9 million and net loss resulted primarily from a reduction in a non-cash accounting expense in 2014 related to the change in fair value of the common stock warrants based on a required quarterly market-to-market adjustment to reflect the changes in the Company's stock price.

A look at revenue. We are receiving ongoing payments from Roche under our collaborative research and development agreement. The decrease in revenue was primarily due to the upfront payment associated with the partnership agreement executed in the third quarter of 2013. This was offset by an increase in recognized revenue related to the research and development services performed under the agreement.

Now operating expenses. Research and development expenses for the quarter and year ended December 31, 2014 were $9.2 million and $34.1 million as compared to 60 -- $6.4 million and $21.4 million for the same periods in 2013. The increase in R&D expenses is generally related to an increased investment in our product development programs and our Roche partnership, the latter being fully offset by the development piece from Roche.

General and administrative expenses for the quarter and year ended December 31, 2014 were $4.2 million and $15.9 million compared to $4.3 million and $13.6 million for the quarter and year ended December 31, 2013.

As of December 31, 2014, cash and cash equivalents and short-term investments were $93.6 million compared to $52.7 million as of December 31, 2013. This increase was primarily due to net proceeds from our March financing and warrants and options exercised during the period. Also as of the end of last year the Company had 60.7 million shares outstanding and 66.6 million on a fully diluted basis.

Based on management's projections and analysis the Company believes that cash, cash equivalents and short-term investments are sufficient to meet its planned working capital requirements through the end of 2017 excluding its planned phase III clinical trial of VGX-3100. As you might expect, the Company does expect to raise additional capital to fully fund the study.

More detailed information can be found in our press release issued this morning and on our website in the IR section under SEC Filings. Joseph, now back to you.

Thanks, Peter. It is very clear what are the characteristics of an ideal immune therapy. 2014 was transformational for Inovio and the field because we showed for the first time that an active DNA-based immunotherapy can generate efficacy by activating well targeted robust killer T cells exclusively in the body. We think Inovio is closer than any competitor to achieving such ideal immunotherapy.

We are striving every day to turn this idea into reality with a growing pipeline of preclinical and clinical immunotherapy targeting a range of cancers and challenging infectious diseases. Our aim is to make a big impact on the lives of people suffering from these diseases.

Showing that we are moving in the right direction we have validating data, we have validation in the form of third-party non-dilutive grants now amounting to roughly $85 million over the last six years. We have notable collaborations and our partnership with Roche is focused on one of the most widely prevalent diseases in the world.

And as you can see from today's HIV award announcement, we continue our efforts to secure further grants, collaboration and partnerships to advance our technology and the many products we are building and developing with our novel technology.

Finally, we have an outstanding team of experts and continue to add core strength and bandwidth throughout our organization. I will end by simply saying, we are pleased with our progress and our potential. Over the next few months watch this space and watch Inovio. Now I am ready for your questions.

(Operator Instructions). Charles Duncan, Piper Jaffray.

Thanks for the detailed review of last year. As well congrats on that HIV grant, additional HIV grant. My question is regarding VGX-3100. In terms of the visibility and timelines, I understand that you are doing some more manufacturing work to prepare for a phase III.

But I am wondering if you can tell us if you've actually requested an end of phase II meeting with the FDA. And if so, when -- approximately when that might take place? As well as can you provide some color on the sizing and cost estimates for that phase III?

Good morning, Charles, thank you. So VGX-3100 product manufacturing, as you already know, where you manufacture your phase II -- phase III product is where you manufacture your commercially launched products as well. So we have been scaling up and are conducting manufacturing activities to launch our phase III studies from a newly selected larger contract manufacturer.

Along with that is our delivery devices, we have designed and scaled up a commercially manufacturable and distributable electroporation device. These are simple to use and robust devices that can go out and into mass production and into mass distribution. And we have been taking some time to prepare.

And along with that is the preparation to have the end of phase II meeting with our full phase III clinical protocol, as well as the endpoints where we will seek to get the FDA concurrence. We expect the FDA end of phase II meeting to occur sometime in the midyear this year. And that will allow us to move into our phase III initiation by early 2016 if not sooner.

So obviously we all want to start this important trial as soon as possible. As well as the phase III study size and characteristics. As I've stated before, we expect this trial size to be somewhat larger than the phase II, but because of the low overall P-values of our efficacy parameters, we don't expect it to be a huge size.

So we are currently estimating somewhere between 300 to 400 patients total to get to the endpoints that we want. And as we discussed before, we are looking for a full clearance of the lesions potentially as our phase III endpoint. Clearly that would diminish the placebo effects that you may see in a more easier target.

So I think what we have shown in phase II studies is extremely compelling. From our ability to generate just with the three simple injections into the arm in the first three months of treatment for these women we can clear the CIN 2 or 3 lesions down to normal and also clear the -- eliminate the virus that caused the disease in the first place. And no other treatment option can claim those two things currently or in development.

Yes, we saw that data, and it was impressive. When do anticipate the full phase II data to be published and in what type of journal, could you characterize that? And then finally, can you ballpark the cost of that 300 to 400 patient trial?

Yes, the whole trial all in should be around $80 million to $100 million ballpark. And the full -- we submitted the manuscript to one of the top medical journals and we expect to publish this very impressive efficacy immunogenicity and safety data in one of the top journals. It is currently undergoing a reviewing process at a journal right now.

That is helpful. And then one additional question for you, please. If you could compare and contrast, there has been some other movement in the market with regard to DNA vaccine platforms such as those using listeria. I am wondering if you could point out some of the key differences in your mind if you would just briefly.

Yes, one of the -- I guess the biggest key difference is safety. Our DNA-based immunotherapy sounds as such. It's pure DNA, it is pure naked DNA in water and delivered with [trangen] electrical energy. So in theory it should be as safe as any other drug regimens out there.

And in reality, as I stated, we've treated over 550 patients, over 1,300 different administrations and we haven't had any SAEs. Only thing you see is a redness at the site of injection which just shows that immune responses are getting generated by the therapy. The other difference will be in the immune responses.

Any efficacy without measurable responses in immune oncology is rubbish. So, because otherwise you are just waving your hands. And I think the difference in our field is we want to invest into where there are clear mechanisms of action being demonstrated in randomized controlled double blinded clinical studies like Inovio or some other more nebulous approach.

Speaking to what you had asked earlier, part of our manuscript will include an actual (inaudible) of clinical efficacy, meaning as early as week 6 or week 14, so this is after the second or third injection with our 3100, we can correlate and predict which patients are going to clear the lesions and clear the virus versus those who are not.

So this level of immune responses data collected from a large double blinded trial does not exist anywhere outside of Inovio currently. And we can apply this data set and what we learned from our phase II studies to other cancer product development programs we have ongoing including pancreas, breast, lung and soon to start a prostate cancer programs.

So we are really pushing the envelope in our amino oncology field by our ability to measure and correlate the T cell immune responses both from the blood where the T cells are circulating, but also we can track them to the sites of interest, the tissues of interest whether be it in the cervical tissues, prostate or elsewhere.

Thanks for the added color, Joe. Congrats on a good year of progress.

Thank you very much.

Brian Klein, Stifel.

So first on 3100. Just want to get a better sense of your proposed phase III program. Will you be treating and evaluating patients for the same amount of time? Or do you think you'll extend the evaluation period?

And then secondly, can you give us a sense of what the endpoint might be and if it is going to be the same as the phase II endpoint or if you are looking at potentially some other endpoints?

Thank you, Brian. In terms of the regimen, we expect it to be very similar. So just to recap, there is three injections, one each month, zero, one and three and the clearance of the lesions and the virus are evaluated at month nine. There is also in phase II a one-year additional follow-up post month nine. So that is to measure the safety as well as the durability of these responses and efficacy.

So our phase III study, we expect it to target a similar timeline, but perhaps with additional follow-up, to build up how long and how persistent our efficacy and immunogenicity of these programs.

As far as the endpoints, we haven't finalized, but also it is never final until you get the concurrence with the FDA. But by looking at our phase II data, most of our drug treatment effects in the patients who have cleared, they clear down to normal clearance.

And if you use that perimeter, the P values, which were very good, even goes down further down to 0.006. So likely that will help in reducing the trial size and likely that's one of the ways that we will be able to accelerate the completion of this important phase III study.

The other portion of the trial that I don't want to lose sight of, because it has huge implications not just for HPV based products, but also for other chronic infection targets. That's our ability to eliminate HPV virus from the cervical tissue by treating women with VGX-3100. So we will also be measuring likely in our phase III study.

And that -- this characteristics is going to be a huge factor in our market penetration and our ability to establish our VGX-3100 potentially as the first-line treatment for women who are diagnosed with CIN 2/3 indications.

So we're very excited about that and there hasn't been any other therapies today on the market or in development that has shown such an impressive level of viral clearance using an immunotherapy. And it has other additional implications to our hepatitis B therapy, hep C and HIV therapies as well because we have already demonstrated that we can powerfully impact the elimination of the virus using a targeted immunotherapy as we have done with 3100 phase II results.

Great, thank you. And then just two quick questions on your prostate cancer vaccine. First, can you tell us what the target population you will be going after there will be? And then secondly, do you still plan to re-partner that program?

Well, last question first. As we have with all of our rich pipeline of products in our portfolio, all of these products are for partnerships with a right partner and for a right price. So we have a very active and busy corporate development programs to bring about additional coordinates -- not just for 5150 or 3100, but for other products in our rich pipeline.

Back to prostate cancer, we are going to be looking at an earlier stage patient likely away from the [castra] resistant in the first study. We are looking to see if we can generate the high levels of T cells that we were able to do in cervical pre-cancer patients with 3100 and therefore we can use our correlations to predict our clinical efficacy.

But we feel that the -- where it is most high potential for these immunotherapies to bring about the highest level of significant impact is in a slightly earlier stage than castra resistant end-stage patients.

Great, (multiple speakers).

But more data to come. We expect to finish -- and initiate the studies soon and more data -- more information will come.

Great, thank you.

Jonathan Aschoff, Brean Capital.

I was wondering what could go wrong to either delay the start, the phase III early next year or even result in the request for more phase II work? I was wondering specifically what bearing does -- do follow-ups beyond nine months have on the sufficiency of phase II?

So, as you know, in this area anything can go wrong that can delay. But we don't expect any delays. We do have a lot of balls in the air in terms of scaling up in manufacturing the [plasmas] as well as the devices. And when it comes to the regulatory interactions, I think we have one of the best track records out there, especially with such a novel therapy. But it is not done until the FDA blesses with the concurrence at the end of phase II.

In terms of the follow-up of -- year long follow-up from our primary readout from week 36, we do have a week 88 follow up. But you know, safety from week 36 was very typical of our other trials. We didn't see any SAEs related to the treatment of the drug. There weren't any significant problems compared to the placebo groups. So we don't expect real surprises from week 88.

And I think the efficacy and immune responses that correlates the efficacy speak for themselves. So, we are pretty confident, but I just want to stress that you never know when you are dealing with the FDA. But our track record and our credibility have been extremely good with the FDA.

It is hard to imagine a safety complication. But I was just wondering are they holding you to a maintenance of efficacy or some sort of efficacy at that last endpoint?

We haven't had those discussions with the FDA yet. We will have the end of phase II meeting with the FDA. You know, being an immune-based therapy with clear efficacy readouts, we are pretty optimistic that we will get a straight path into our phase III studies.

Okay, I was just actually curious about the grant that you got. What were the specific successes that inclined them to give you another $16 million?

So the successes, as you know, are based on our two published clinical studies using PENNVAX vaccine, PENNVAX-B. So what we have shown was in a preventive setting, just three injections again at month zero, one and three where we were able to generate the highest CD8 T cell response level using this HIV vaccine than any other HIV vaccine candidates which were tested in the last 20 years, bar none.

So that is immunologically, that is the tops. Similarly same product being studied in HIV-infected patients in a treatment setting in a virally suppressed patient population we're able to generate the T cell signature in these patients that were pretty much identical to what you read out from a long-term non-progressor patients.

Which means these patients can be off drugs and still not progress. They are just genetically blessed with their ability to control. And we can turn, at least in these 12 subjects who volunteer, these HIV-infected patients we are able to generate these important long-term non-progressor T cell traits just with administration of our HIV vaccine.

So we are optimistic certainly with the progress of those programs. Those two studies and advancements prior to the publication led to a $25 million contract from the NIH in the last five years. That has turned into the development of global clade PENNVAX-GP and then this new grant of [$60 million] to us and our academic collaborators really will also further expand our knowledge and development of this important HIV vaccine platform.

So I can't stress anymore, I think our technology, our science, our research have been validated. This $40 million across the last five years and the next five years is one of the largest in the whole HIV research field. So I think dollars speak for themselves. I think the results in the publication speak for themselves.

We do have the measurable [stellar] levels of T cells that can generate use of our immunotherapy. As I stated before, I challenge other platforms of products in our field to generate even similar levels of these immuno responses.

So I think that is where our strength comes from, our technology is grounded in phenomenal science. And not to mention over 600 issued and pending patents globally protecting our assets. So we are very confident of where we are going to take this platform and our rich pipeline of products.

Thanks a lot, Joe.

Jason Kolbert, The Maxim Group.

Hi, Joseph, this is actually Jason McCarthy for Jason Kolbert. I just have a comment on cancer immunotherapy. Good morning. And it sounds like everything is going great, but for cancer immunotherapy in general there is just not a lot of data in humans. And I think your group is fortunate enough or doing so well with the cervical dysplasia that you do have data and you could show that vaccination does work in cancer.

But I think a lot of vaccination is driven by that DNA backbone that you are using. And seeing what happened with Bavarian, Nordic and Bristol-Myers are you turning more attention to prostate cancer in 5150? After Bavarian Nordic is kind of showing that you can vaccinate against prostate cancer and maybe getting 5150 back from Roche might kind of be a blessing in disguise for the Company?

Yes, thank you, Jason. You know, getting a product returned from a license from a large pharma is never pleasant. But in the long run I do think we can develop 5150 and their components even more expansively in this important immuno oncology field. And we are very glad to see the entrance of BMS back into the cancer vaccine field because it really stresses the importance of doing this in product -- cancer areas like prostate cancer.

Obviously it raises the profile of 5150, that is why we are pleased to have announced this morning that all of the regulatory clearance has been given and we should be initiating our study for 5150 in the next few weeks. So we are very excited about that.

Beyond that I think -- I have full confidence that we can generate, as you said, similar levels of T cell immune responses from our prostate cancer patients with 5150 as we've seen with 3100 in cervical pre-cancer.

So as the owner of this largest data set of immune responses in patients we will be able to build out this important big data of information. And we can apply to develop these cancer indications much quicker and more intelligibly than other competitors in the field.

And I think that is going to be an important draw to some of these big pharma folks and we expect to be a very important interest back to this field. And I am very excited to do our prostate cancer study. We think this is an area that we can really leverage what we have and make a huge impact in the field.

Great, again, it sounds like everything is going great. Looking forward to the year.

Thank you very much, Jason.

(Operator Instructions). Yi Chen, HC Wainwright.

My first question is could you give us some color on the age distribution of patients in the completed phase II trial of VGX-3100? And also, if you have such information, the age distribution of people who currently are receiving vaccines -- preventive vaccines for HPV infection? Thanks.

Yes. Well, preventive vaccine is an easier thing because it's published and those are mostly in preteen girls and boys, the highest impact and most marketed target group are in those age groups. Our 3100 is a therapy and it is in treatment of women who've fully diagnosed with either CIN 2 or CIN 3 pre-cancer histologically and our phase II studies require them to have an active viral transcript from measurable at entry by PCR.

So age distribution is we allowed the women of I believe 18 to 55, typically adult age group. And we have stratified these women between placebo and the treatment group. So they were stratified pretty much identically.

In terms of the age distribution, obviously the 3100 group has been older than what the Gardasil and other preventive vaccines have been targeting. But that is because of the indications more than the age distribution.

So, and (technical difficulty) stratification will be presented at the -- published in the manuscript that we expect to come out. But let me just stress, there is no age impact between the placebo and the treated group. They were equally stratified and randomized in a blind fashion.

Thanks. My second question is, in the press release regarding the new funding, additional funding for the HIV program, it says you may consider a -- start a separate phase I study for it. So what kind of difference in design can we expect in this new program as compared to PENNVAX-GP?

Yes, so the $25 million over the last five years resulted in PENNVAX-GP, a global clade coverage vaccine that can be used as a preventive or as a treatment. And the PENNVAX-GP studies in the US phase I studies we expect to start with NIH funding in the first half of this year. So that is from the last $25 million of funding.

So the next five years, this new grant will fund additional research and development of our HIV vaccine program and it will likely culminate in a trial by end of that granting period, so five years from now. So I can't really predict what kind of research finding and development findings it will have because it's into the future. But likely we will have better durability and higher immune responses.

We think it's not going to be much higher in terms of T cell responses magnitude that we have already been generating, but it is also possible with different combination of immuno activators that we have in development. The other focus is also getting antibody-based responses to HIV, which we can -- we are looking in this next five-year research period funded with grants to improve.

So these are probably neutralizing antibody responses, this is the other arm of immune system that can be very important for the preventive vaccine indication. So (technical difficulty) will improve even for PENNVAX in that regard.

So we look forward to really advancing this important vaccine still. So we feel very good about achieving the validation of getting this new award. So we are looking forward to doing a lot more significant research using this significant funding.

Okay, thank you. My final question is considering you will be initiating a few clinical trials in the near term or within this year. What -- could you give us some color on the projected operating expenses for 2015 as compared to 2014?

Yes, so, let me just summarize. We expect to be annual burn of about 30 -- net burn of about $30 million-ish, that is our current projection. Obviously that can change. A lot of our trials are funded like the hep B, HIV, HCV with other people's money. The prostate cancer study will only add $1 million, $1.5 million to our burn because most of the heavy lifting has been done with Roche's money, so for 2015.

So I think we are very good with our cash. Obviously we stated explicitly that we will raise additional capital for Phase III if we are going to take this on ourselves. And even if we are partnering this we may raise the money just to increase our leverage in this partnership discussion.

So I think we are very strong financially and we hope to be even stronger with a lot of the activities we have ongoing and in the clinical development program.

Okay, thank you very much.

Thank you, Yi.

Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over to Mr. Hertel for any additional concluding comments.

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