Inovio Pharmaceuticals Inc (INO) 2017 Q2 法說會逐字稿

Greetings, and welcome to the Inovio Pharmaceuticals Inc. Second Quarter 2017 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeff Richardson, Vice President of Strategic Relations. Thank you, sir. You may begin.

Good afternoon, ladies and gentlemen. Thank you for joining us today. 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, products and product candidates as well as our capital resources, all of which involve certain assumption, risk and uncertainties that are beyond our control and could cause actual results to differ materially from these statements.

A description of these risks can be found in the latest SEC disclosure documents and recent press releases. These statements speak only as of today's date and we undertake no duty to update or revise them. Presenting today will be Dr. J. Joseph Kim, Inovio’s President and CEO; and Peter Kies, our CFO. Now, Dr. Kim.

Thank you, Jeff. Good afternoon, everyone. The focus of today's call is on executing our strategy. Executing our strategy to advance Inovio's Phase III and Phase II immuno-oncology products into key data and business milestones. We spoke last in May, I told you we delivered a strong package to the FDA in response to their device-related questions and comments pertaining to our VGX-3100 Phase III pre-cancer program. The FDA agreed with us and lifted our clinical hold, allowing Inovio to deliver on our promise to initiate a Phase III study for our lead product in the first half of 2017. We also told you that during the whole period, we were moving ahead on our trial preparations. Our preparations paid off. In just over 1 months since we initiated Phase III, we have activated 27 sites in the United States, up, running and recruiting patients. By the year-end, we expect to have activated at least 50 sites in the U.S., Europe, Asia and Africa. Initiating Inovio's first Phase III program marks a significant milestone: for the company; for DNA-based immunotherapy; and most importantly, for women suffering from cervical pre-cancer caused by chronic HPV infection. The pivotal data from this program, if positive, could support the licensure application of VGX-3100 as the first immunotherapy for this disease. But beyond treating this one HPV associated disease, Inovio’s goal is to own HPV treatments period.

Here's the clinical road map with my vision for Inovio’s HPV therapeutic ownership. First, we begin with our first Phase III program for HPV-associated cervical dysplasia. We combine that with the company's now initiated Phase II clinical trial of VGX-3100 for treating HPV-related vulvar neoplasia and to that we'll add planned 2018 clinical trial for treating HPV-associated anal neoplasia. To those in-house trials, we add MEDI0457, formerly called INO-3112, check point inhibitor-based combination study with AstraZeneca's MedImmune targeting HPV-associated metastatic head and neck cancers. With this broad clinical roster, we are well-positioned to comprehensively treat HPV-associated pre-cancers and cancers across the continuum of HPV infection through to cancer in both women and men. We want to become the go-to therapeutic solution provider for all diseases caused by HPV infection. To that end, in April, Inovio commenced a randomized open label Phase II trial to evaluate the efficacy of VGX-3100 in women with high-grade HPV-related vulvar intraepithelial neoplasia or VIN, a disease with a high unmet medical need.

You may not know this, but HPV in this VIN is one of the major causes of morbidity for young and middle-aged women with HPV-induced pre-cancer. It is also associated with repetitive need for surgery, multiple biopsies and a major cause of pain and sexual dysfunction. Extending our immuno -- extending our immuno-oncology franchise in May, Inovio announced that MedImmune commenced a new Phase I/IIa clinical trial investigating the combination of MEDI0457 and immunotherapy designed by Inovio to generate antigen-specific killer T cells targeting HPV-associated tumors and in (inaudible) MedImmune's PDL-1 checkpoint inhibitor. The combination trials intended to enroll 50 patients with metastatic HPV-associated head and neck cancer with persistent or recurrent disease after chemotherapy treatment. This study marks a significant moment for Inovio. As you might recall, in 2015, MedImmune acquired exclusive rights to Inovio’s INO-3112 immunotherapy for all HPV-associated cancers.

MedImmune provided an upfront payment of $27.5 million to Inovio as well as potential future payments upon reaching development and commercial milestones totaling up to $700 million. MedImmune will also fund all development cost, while Inovio is entitled to receive up to double-digit tier royalties on MEDI0457 product sales. In this current convo study, we expect that the Phase II portion of the trial will trigger a milestone payment from MEDI by early 2018. As a part of this deal, the 2 companies have also collaborated on a new funded research program, which MedImmune has now selected a new cancer immunotherapy candidate to advance into the clinic. This new product candidate was designed and constructed by Inovio to treat an undisclosed cancer and will also trigger milestone payments from MedImmune as well as royalty based on sales.

In addition to MedImmune, our technology's promise in cancer has attracted significant attention from other pharma companies developing or marketing oncology products. Just in the past quarter, we struck 2 independent collaboration agreements with Regeneron and Genentech. In May, Inovio and Regeneron entered into a immuno-oncology clinical study agreement for glioblastoma combination therapy. The Phase I/IIa clinical study will combine Regeneron's PD-1 inhibitor REGN2810 and Inovio's T-cell activator INO-5401 and immune activator INO-9012 in brain cancer. INO-5401 includes 3 of Inovio's top SynCon cancer antigens, these are; WT1, hTERT and PSMA, which are expressed widely in multiple tumor types. Thus, INO-5401 has the potential to be a powerful and broad cancer immunotherapy in combination with checkpoint inhibitors. The open-label trial, which is expected to begin before year-end is designed to evaluate the safety and efficacy of the combination therapy in approximately 50 patients.

To focus on the disease for a moment, Senator John McCain's recent diagnosis, GBM, is the most aggressive form of brain cancer and its prognosis is extremely poor. Therefore, if this combination treatment shows at least a moderate level of efficacy against this aggressive cancer, we would expect to have an expedited approval will pass for INO-5401.

Building on our INO-5401 cancer product development, in June, Inovio entered into a collaboration agreement with Genentech to commence a clinical trial to evaluate the combination of 5401 and Genentech's PDL-1 checkpoint inhibitor TECENTRIQ in patients with advanced bladder cancer. This Phase I/II immuno-oncology trial is also anticipated to start later this year and is designed to evaluate the safety, immune response and clinical efficacy of the combination therapy in approximately 80 patients with advanced bladder cancer.

Combining INO-5401/INO-9012 with TECENTRIQ may provide a synergistic therapeutic effect as a result of generating high levels of activated T cells and simultaneously inhibiting PDL-1.

We have chosen metastatic bladder cancer as the second cancer indication to test for INO-5401 with a checkpoint inhibitor because it is a highly immune-responsive cancer. Bladder cancer has often been described as an immunogenic tumor, and here our approach is to augment the anti-PD-1, PDL-1-driven efficacy by further enhancing the T cells against the tumor in a tumor antigen-specific manner. As you can see from our recent collaborations, I'm a strong believer in combination in immuno-oncology regimens employing an immunotherapy to generate significant antigen-specific killer T cells, then blocking T cell suppression via checkpoint inhibition. With our strategic selection of our first combo efficacy studies in GBM and bladder cancer, we believe we can demonstrate the immense potential of INO-5401 as a universal cancer immunotherapy to treat patients with multiple cancers. This is why, unlike our MedImmune license deal, Inovio decided to retain the full economic rights to INO-5401 under these collaboration studies.

As you know well, Inovio is not just a promising immuno-oncology development company. Our technology is nimble enough to target challenging infectious diseases, IV products that may become stockpiled vaccines and those that have -- also have commercial potential. And we are accomplishing all this vaccine development with an extensive non-dilutive external funding.

Inovio will continue to advance these vaccines for combating emerging infectious diseases with external funding. Recently, Inovio reported that its HIV vaccine PENNVAX-GP produced amongst the highest overall levels of immune responses rates ever observed in a human study by an HIV vaccine. These significant results are consistent with Inovio’s recent data reported from Ebola, Zika and MERS clinical trials in terms of achieving nearly 100% vaccine response rates with a favorable safety profile.

Winding up our infectious disease results for this quarter. In June, we announced full enrollment of our second Phase I clinical trial in Puerto Rico evaluating our Zika vaccine, GLS-5700 in 160 volunteers. Along with safety and immune responses, the study is also assessing differences in Zika infection rates in participants given either placebo or vaccine as part of an exploratory efficacy endpoint being evaluated over 1 year. Inovio is very proud to be at the forefront of Zika vaccine development and to produce foundational data that clearly supports advancement of DNA technology and our vaccine candidates. We were the first to clinical vaccine testing and the first to report positive immune data from the clinical trial. We look forward to the prospect of securing external funding for Phase II efficacy studies in our effort to potentially commercialize our Zika vaccine. We expect to report on additional data from our vaccine clinical studies and publish the data in the top medical journals this year.

Now I'd like to introduce our CFO Peter Kies, who will discuss our recent capital raise and our financial results. Peter?

Thank you, Joseph. Before I walk through our financials, let me focus on our recent financing. On July 25, we closed an underwritten public offering of 12.5 million shares of our common stock for gross proceeds of $75 million. After deducting underwriter discounts and commissions and estimated offering expenses payable by us, the net proceeds to us were $70.2 million. We have granted the underwriters an option through August 18 to purchase up to 1.875 million additional shares of our common stock on the same terms and conditions. Looking at the big picture, our July financing will fund our future to the benefit of the shareholders and patients in need. It nearly doubles Inovio cash position and allows for a runway that will allow us to meaningfully fund our development programs. With these proceeds, we expect to be able to advance our VGX-3100 Phase III trials, 4 Phase II immunotherapy oncology trials and fund other pipelines advancements. The financing will also add new -- this financing actually also added new institutional investors to our shareholder base. We also look forward to reporting on new data from INO-5150, INO-1400 and INO-1800 immunotherapy Phase I data. All in the second half of this year.

We previously announced back in February, Inovio entered into a collaborative and license -- collaboration and license agreement with ApolloBio Corporation. If the agreement receives the appropriate approvals from Apollo's stock exchange, its Board of Directors and its shareholders then the agreement will become effective. At which time we will expect to receive up to $50 million in payments from Apollo, consisting of $15 million in upfront payments for the license of 3100 and Greater China and up to $35 million in the form of an equity investment in our common stock.

I refer you to our Q2 press release for more details, but our top line financials are: total revenue was $20.4 million for the 3 months ended June 30, 2017, compared to $6.2 million for the same period in 2016. Total operating expenses for the 3 months ended June 30, 2017, were $30 million compared to $24.4 million for the same period in 2017. Net loss attributed to common stockholders for the quarter ended June 30, 2017, was $9.5 million or $0.13 per share compared to $8.7 (sic) [18.7] million or $0.26 per share for the same quarter ended June 30, 2016. The increase in revenue was primarily due to $13.8 million in revenue recognized from our MedImmune agreement from the initial $27.5 million upfront payment received in September 2015. This revenue recognition occurred upon MedImmune's definitive selection of a new cancer product candidate to be tested in the clinical trials, as a new immunotherapy against an undisclosed cancer target for our ongoing research. A successful advancement of this new product candidate by MedImmune will also trigger future milestone payments and sales-based royalties. Joseph, back to you.

Thanks, Peter. I would like to follow-up on our recent financing as well. As the largest individual shareholder of Inovio and the CEO, I try to avoid dilution as much as possible. In fact, we have funded much of the advancement of our technology and platform with over $150 million in nondilutive grants and contracts received over the last few years from top funders like the NIH, DARPA and the Gates Foundation as well as corporate partnerships with MedImmune and Roche. Still, we are in a new drug development business and this business requires a lot of capital. We undertook the last round of equity financing to make sure we have a sufficient balance sheet to fund our important late-stage efficacy studies in immuno-oncology. I don't have to remind our long-term shareholders we have licensed just one of our Phase I product candidates to MedImmune for a $700 million overall deal. I believe that both VGX-3100 and INO-5401 could each be worth several times more. Our current financial resources will allow us the development time to prove this.

Let me close with this message. We said we would start our pivotal Phase III trial in an HPV-caused cervical pre-cancer in the first half and we did. In addition to our Phase III trial, and the Phase II trial for vulvar pre-cancer, we have 3 different PD-1 or PDL-1 immuno-oncology combo efficacy studies with 3 different top companies: MedImmune, Regeneron and Genentech. It's 3 shots on goal with 3 different checkpoint inhibitors. In fact, I believe Inovio already has the most extensive and dynamic T cell immunotherapy combo portfolio in our field.

Our focus now is on executional excellence, our focus on the execution of our efficacy studies to bring meaningful data to the market and our shareholders. I have no doubt that Inovio will accomplish this because we have a superior technology and products, we have sufficient financial and supporting resources as well as the right partners and collaborators. But most of all, we have an extremely dedicated and experienced team executing our programs. We get up every day with a real sense of urgency because we all know that the patients are waiting. Thank you for your attention. The floor is now open for Q&A with the analysts.

(Operator Instructions) Our first question is coming from the line of Charles Duncan with Piper Jaffray.

Congratulations on the progress in the quarter. Also let me add that I actually think -- I've covered lot of stocks for many years. And you guys have actually done, in my opinion, a very nice job of monetizing the platform and seeking out nondilutive financing. So that's just my perspective. Quick question, VGX-3100 and cervical dysplasia. Nice update in terms of number of sites opened. I'm wondering if you could provide us a goal by the end of the year in terms of not only sites open, I think you mentioned that, but also percentage of patients enrolled by year-end '17?

Thank you, Charles -- Chaz for helpful comment and the question as well. Our policy is not to update on our goals or an actual accrual until we're done. So we know we have 2 sets of 198 patient studies that will be -- we are conducting for REVEAL 1 and REVEAL 2 studies. We plan to open a total of 100 total sites across the globe. So I've already stated that we'll have about 50 sites up and running. And just between you and me and all of our employees here, we would like to accrue and recruit as rapidly as possible.

And I'm sure that's the case. And when you say that sites are up and running, does that mean that some patients have been enrolled or at least in screening for those sites that have been opened?

Yes. We have multiple patients in screening. And again, I'm going to refrain from referring to an actual dosing and so on. But it's for -- we were preparing, as we discussed before, during the device hold, we were preparing our sites, getting all the paperwork and our [BLA] approvals. So when we had the -- finally the clinical hold removed on our 5PSP device, we were able to hit the road running. So I can assure you our overall objective #1 is to accrue and enroll these patients as rapidly as possible.

Okay. And then I believe in your prepared remarks you mentioned that you anticipated patients or sites in the U.S., in Asia and in Africa. Can you give us a target in terms of the percentage of patients that are U.S., Asia and Africa -- African patients, is it 1/3 each or is it 40 40 20 or...?

We expect a couple countries in Asia. We have South Africa as one of our sites. But other than that, the U.S. and Europe will be the predominant sites that -- countries and regions, which will provide the patients for us. But once they're up, we don't have any quotas for each country. It's first come first serve. So if we enroll everyone in the U.S., it's however unlikely because of the ex- U.S. patients, there are lot more of them outside the U.S. But our primary commercial, initial target markets are U.S. and Europe. So we would expect most of the patients will come out of those 2 regions.

Okay. And then one last question hopping over to vulvar neoplasia with 3100. Can you give us some sense of time-to-data? Would you anticipate that next year? Top line data on that study?

Yes. So it's 36 patients, so it's dramatically smaller than our CIN trials. It's an open label trial because there's very little regression in a placebo group. So that allows us to track the progress of the patients visually. So I think by late next year, or even early following year, we may have a very good idea. But all of these are predicated upon the enrollment of the first percentages of patients. So we are, again, pressing the pedal to the metal with our VIN study.

The next question is coming from the line of Ram Selvaraju with Rodman & Renshaw.

I wanted to ask, firstly, with respect to 3100, if you could just clarify for us. What you expect to be the sequence of data released from the Phase III program, if there is only going to be a single readout of data or if we can expect to see some interim indications of efficacy as the trial program progresses? Secondly, I wanted to ask about the plan for ApolloBio to advance VGX-3100 in the Greater China territory? And when this clinical development might start? And what kind of shape or form it might take in terms of the sort of trial or trials they might decide to run? And finally, if you could perhaps comment on the potential utilization of your technology platform, including, but not limited to MEDI0457 within the immuno-oncology context? And when you anticipate that this might potentially be expanded beyond combination with PD-1 and PDL-1 alone into other checkpoint inhibitor and other I/O strategies?

These are all great questions. And I'm going to briefly go through each of them directly.

So VGX-3100 both REVEAL 1 and 2 are designed to unblind at the end of the study, including the safety follow-ups. So REVEAL 1, very quickly, is first 3 months of dosing 3x; month 9, efficacy readout. But there is 12-month safety on top of that. It will be unblinded at the end of that time. REVEAL 2, although it will be started about a quarter behind REVEAL 1 and the on-drug time is identical to REVEAL 1, REVEAL 2 will have a shorter follow-up, safety follow-up. So our goal is to unblind both studies at the same time in 2020 and file for a BLA application in 2021. So the market should expect the data in 2020 both -- from both REVEAL 1 and REVEAL 2 Phase III studies. Obviously, if we can enroll patients faster we'll report as -- -- that much faster. So our focus is on enrollment, enrollment, enrollment and we have a very dedicated team working on that. And number 2, ApolloBio, we are waiting for their approval process for this agreement. We'll report on the exact development path in China. But I think, what I can tell you about this, is there will be a lot of leveraging of our global trial going on REVEAL 1 and REVEAL 2. And we're doing this deal with ApolloBio for 2 reasons. One, upfront and equity investment, obviously, $50 million is important. Number two, though, it's more important that in our loan development plan, our goal -- our primary markets, as I stated earlier, is U.S. and Europe. And China is way down, but there are perhaps 10x if not 50x as many patients who can benefit from VGX-3100, who live currently in Greater China. So it's our efforts to both access the market quicker in China and bring economic value back to Inovio through our collaboration with ApolloBio. But also to be able to bring this important immunotherapy for this condition to women who are suffering from pre-cancerous lesions in China.

And then lastly, PD-1, PDL-1, it seems like the PD-1 and PDL-1 are special, in that they are able to bring important levels of efficacy and very important number of cancers. We feel that for the most part other than melanoma, overall efficacy for PD-1 and PDL-1 checkpoint inhibitors are about 20%, 15% to 20% ORR is what you're seeing for bladder, less than that for head and neck alone and so on. Ovarian is less and GBM is certainly much, much less. So we think the combination of our T cell-generating immunotherapy like MEDI0457 as well as INO-5401 is a great one-two punch. Generate the antigen-specific, tumor-specific T cells, knock down the defensive mechanism that the tumor cells have in PD-1 and PDL-1, and then, led the T cells go at the tumor. So we think that's a great strategy. But also your last comment about combining with other immunomodulatory molecules. Yes, PD-1 and PDL-1 inhibitors are not the only games in town, they're just the biggest gains and towns right now. But as -- right now there are 5 products from that class already on the market with over 40 others in the clinical development from what I heard at ASCO this year. That's going to be a very crowded market. So obviously, the folks who have the T cell-generating immunotherapies are going to lag Inovio. We'll continue to have the leverage. And we're looking for other combinations that can bring higher impact besides PD-1 and PDL-1. Because we think we have that covered pretty well. Between MedImmune, Regeneron and Genentech, I think we have the best combination therapy strategy out there in the whole field. So I feel very good about that and we're looking for other combination, collaboration or partnerships going forward as well.

The next question is coming from the line of Jason McCarthy with Maxim Group.

I was wondering if you can give us a sense of the speed of enrollments in the other HPV studies. The particular -- in vulvar neoplasia? And when can we expect data? And what's the progress.

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expect to see some data, even interim data there?

Yes, I agree with you. I think we had a great quarter on multiple fronts. We got our Phase III approved. We got the Phase II approved for VIN, as we referred to. And we're able to add to our balance sheet since then. So all systems are firing for us, at this point. I feel extremely fortunate to have Inovio where it is and having all the resources and trials at disposal, including our partnership program with MEDI and our recent collaboration studies with Regeneron and Genentech 450, 401. Back to VIN, we just got the approval to start that Phase II trial in the second quarter. So we have sites up. We will have more sites up, and we expect to have the patients moving forward. It's a 36-patient study. So it's a much smaller in scale than even our Phase IIb steady was for our CIN indication. And unlike CIN indication, the VIN study is going to be an open-label. So it's a randomized, but it's an open-label. There is very few self-progressors out there with high recurrence rates, even after surgery. So this is a horrible disease for these patients. And our goal is to bring this immunotherapy to -- by leveraging the same antigen-specific T cells that we've seen generated in cervical dysplasia patients, same power up -- to clear the virus HPV 16 and 18 in cervical dysplasia patients. We hope to see that in our VIN study. And in terms of data, I think I'm going to wait before I can project beyond late 2018 or 2019 type of projections because I think it's too early. But this study will have an advantage that it's an open label and it's a disease unlike cervix, you can -- the doctors can follow the progress visually. So we have reporting mechanisms written into the protocol that will help us guide the progress of the program much earlier even. So we're quite excited about the progress and the second indication for VGX-3100.

Okay. If I could, one more question. I wanted to diverge from the oncology and maybe talk a little bit about infectious disease and particularly, PENNVAX. You had great data back in May. Can you just give us an update, what are the plans for PENNVAX going forward? And where do you see that fitting into Inovio’s priorities right now?

Yes, Jason. I agree with you. The data that was presented as a surprise, it was a late breaker. It was an HVTN conference. It was not originally slated to be presented at the plenary session. I think the data was so overwhelmingly impressive, as I remarked, the T cells and antibody responses were at the highest observed by any vaccine that the HVTN has tested over the last 25, 30 years. So I think their actions speak volumes. So it was an interim look that provided a very high levels of PENNVAX-GP's ability to generate both antibodies and T cells in 94 healthy volunteers for that study. So what's going on since May, is more complete analysis is being done by the HVTN. The other part of this trial is not that we don't trust our own numbers, but it's great to see similar levels of consistent immune responses in these vaccines whether you're doing an HIV vaccine with HVTN where, just to jog your memory, this was a funded program by the NIH with the $25 million contract to Inovio. And HVTN is also funded by the NIH. And they conducted -- designed, conducted and executed the trial. Their core labs are doing all the assays. So it's a true third-party observation and reporting of our vaccine program that validates a similar level of almost 100% response rates that we have seen with MERS and Ebola as well as an actual 100% response rate we have seen in the Zika vaccine program. So more complete analysis, immune analysis will be done, will be presented at future -- further at future vaccine conferences and they will be published. Where do we go from here, in terms of product development? We are working with HVTN and looking for securing a next round of funding for moving this to a preventive Phase II setting or more advanced setting. That could be a larger trial of similar nature or even a field study as a bona fide Phase IIb study. Those details have to get worked out. In the meantime, we and our collaborators have received a -- almost a $7 million direct grant from the NIH to test PENNVAX-GP in a therapeutic setting. So our previous 94-person study were done in healthy volunteers. So it was being looked at as a preventive vaccine. One of the hallmarks of Inovio’s therapies in vaccines are we can use it in most cases to treat the disease or prevent infection in terms of infectious diseases. So we have a very ambitious study that we're planning with NIH funding that will start, we expect, in the first half of 2018, where our goal is to suppress or eliminate HIV virus in chronically infected patients for our own highly active anti-retroviral drug. So no one's really suffering in the developed countries because of the advent and the extensive use of these combination drug therapies. But no one has been able to clear the virus from their body. So all these patients are living chronically. They're not getting sick, per say, but they're having to take the drug for rest of their lives, and the virus is lurking in their reservoir, hiding away. So our ambitious plan is to combine a checkpoint inhibitor with PENNVAX-GP. So we're throwing the heavy artillery with the highly active anti-retroviral drugs. And in small number of patients our ambitious goal is to see if we can displace the virus by one-two punch of drugs and immunotherapy. And we hope we can see some signal of this. Again, it's a high-risk, high benefit potential. Just can you imagine, if you can cure a person, HIV infected person using PENNVAX-GP along with these other regimens. I think it's a -- one of the most exciting programs for us. Thankfully, we have the full external funding to do these things. And that's what I wanted to stress earlier in the prepared remarks. All of our vaccines programs have received external secure funding to advance them, and Inovio will continue to use this business model to advance what I think are highly important global health products for these emerging infectious diseases.

It appears we have no further questions at this time. So I'd like to pass the floor back over to Dr. Kim for any additional concluding comments.

Thank you. I'd like to thank you all for listening. I think we had a great quarter. We expect to have an even more exciting future with our Phase III program as well as 4 Phase IIs. We have the sufficient resources to execute. So it's all about executional excellence going forward. Thank you very much.

Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation. And you may disconnect your lines at this time.