Biological Warfare

Inovio Biomedical Reports First Quarter 2009 Financial Results

Total revenue for the quarter ended March 31, 2009, was $369,000, compared with $653,000 for the same period in 2008. Total operating expenses for the quarter ended March 31, 2009, were $3.9 million, compared with $4.0 million for the same period in 2008. The net loss attributable to common stockholders for the quarter ended March 31, 2009, was $3.5 million, or $0.08 per share, compared with a net loss attributable to common stockholders of $3.0 million, or $0.07 per share for the same period in 2008. Revenue Revenue from license fees and milestone payments for the quarter ended March 31, 2009 was $213,000, compared to $193,000 for the same period in 2008. The increase in revenue under license fees and milestone payments for the three month period ended March 31, 2009, as compared to the comparable period in 2008, was mainly due to revenue recognized from various smaller license agreements.

Revenue recorded under collaborative research and development arrangements for the quarter ended March 31, 2009 was $54,000, compared to $460,000 for the same period in 2008. The decrease in revenue was primarily due to a decrease in Merck collaborative research billings from $235,000 in the three months ended March 31, 2008, to $54,000 in the three months ended March 31, 2009, as well as no billings to Wyeth related to our collaborative agreement, as compared to $225,000 in Wyeth billings for the three months ended March 31, 2008. Revenues from collaborative research and development arrangements are expected to decline in 2009 as compared to 2008, as Wyeth continues to evaluate internal strategic options prior to initiating further development of electroporation-based infectious disease programs. Under our research and collaboration agreement with Merck, we have provided the majority of the required device development for use in their clinical trials and we believe that development activities for Merck will be limited until trial results are obtained.

Grant and miscellaneous revenue for the quarter ended March 31, 2009, was $102,000, compared to no grant and miscellaneous revenue for the same period in 2008. The increase in grant and miscellaneous revenue for the three months ended March 31, 2009, as compared to the comparable period in 2008, was due to revenue recognized from a Department of Defense (U.S. Army) grant we received on September 26, 2008. This grant has a total value of $933,000, will fund research and development of DNA-based vaccines delivered via our proprietary electroporation system and will run through May 2010. This project is focused on identifying DNA vaccine candidates with the potential to provide rapid, robust immunity to protect against biowarfare and bioterror attacks. Operating Expenses Research and development expenses for the quarter ended March 31, 2009, was $964,000, compared to $1.6 million for the same period in 2008. The decrease in research and development expenses for the three months ended March 31, 2009, as compared to the comparable period in 2008, was primarily due to lower personnel costs due to lower employee headcount during the period as well as a decrease in clinical trial expenses as there were minimal costs incurred related to closing down the SECTA clinical programs.

General and administrative expenses, which include business development expenses, for the quarter ended March 31, 2009, was $3.0 million, compared to $2.4 million for the same period in 2008. The increase in general and administrative expenses for the three months ended March 31, 2009, as compared to the comparable period in 2008, was primarily due to extraordinary legal and related fees associated with the pending merger and other corporate matters. We expect these legal fees to decrease to a significant extent in quarters following the merger, should it be approved and consummated. These increases were offset by a decrease in outside consulting services related to partnering our SECTA therapy program and other corporate advisory services as well as lower personnel costs and employee stock-based compensation expense. Net Loss Attributable to Common Stockholders The $443,000 increase in net loss attributable to common stockholders for the year ended March 31, 2009, as compared to the same period in 2008, resulted primarily from a decrease in collaborative research and development revenue recognized from our agreements with Merck and Wyeth, an increase in general and administrative expenses and a decrease in interest income; offset by decrease in research and development expenses and increase in grant and miscellaneous revenue recognized from the Department of Defense (U.S. Army). Capital Resources We ended the first quarter 2009 with cash and cash equivalents of $11.7 million and a negative working capital of $2.6 million, as compared to $14.1 million in cash and cash equivalents and $554,000 in working capital as of December 31, 2008.

The decrease in working capital during the three months ended March 31, 2009, was due to expenditures related to our research and development activities, as well as various general and administrative expenses related to legal, consultants, accounting and audit, and corporate development.

Additionally, working capital was negatively impacted by the reclassification of our auction rate securities (ARS) and related ARS Rights to long-term assets, while our line of credit of $12.1 million, which we anticipate will be paid in full upon the redemption of our ARS by UBS as soon as June 2010, is classified as a current liability. If the line of credit was classified as a long-term liability to offset the long-term ARS and ARS Rights, working capital as of March 31, 2009, would be $9.4 million. Management believes that Inovio’s cash and cash equivalents at March 31, 2009, are sufficient to meet its planned working capital needs through March 31, 2010. To continue our product development we plan to raise additional working capital through equity or debt financings.

In December 2008, Inovio, via our wholly-owned subsidiary Genetronics, Inc., which holds the ARS, accepted an offer of ARS Rights from our investment advisor, UBS. The ARS Rights permit us to require UBS to purchase our ARS at par value at any time during the period of June 30, 2010, through July 2, 2012.

In conjunction with the acceptance of the ARS Rights, we also amended our existing loan agreement with UBS Bank USA, increasing the existing credit line up to $12.1 million, with the ARS pledged as collateral. The loan will be treated as a “no net cost loan,” as it will bear interest at a rate equal to the average rate of interest paid to Genetronics on the pledged ARS, and the net interest cost to Genetronics will be zero. We fully drew down on the line of credit in December 2008. Corporate Update Inovio continued research and development relating to its proprietary electroporation DNA delivery technology and experimental DNA vaccines. Partners and collaborators also advanced preclinical research and clinical studies of DNA vaccines against cancers and infectious diseases delivered using Inovio’s electroporation technology. No new developments regarding these programs were announced during the quarter.

Keywords: Bioengineering, Biological Warfare, Biomedical Engineering, Biomedicine, Biotechnology, Bioterrorism, Biowarfare, Clinical Trial Research, DNA Research, DNA Vaccines, Drug Development, Gene Therapy, Immunization, Medical Device, Merck & Company Inc., Pharmaceutical Business, Pharmaceutical Company, Treatment, Vaccination, Inovio Biomedical Corporation.

This article was prepared by Biotech Business Week editors from staff and other reports. Copyright 2009, Biotech Business Week via NewsRx.com.