Image source: NIH Image Gallery via Flickr.

Small-cap DNA-based cancer immunotherapy and infectious-disease vaccine developer Inovio Pharmaceuticals (INO -12.33%) reported its third-quarter earnings results on Monday, and it seems like Wall Street and investors like what they saw.

Inovio's Q3, by the numbers
For the quarter, Inovio generated $24.2 million in revenue, up substantially from the $1.8 million it recorded in the year-ago period. The primary catalysts involved a payment from the Defense Advanced Research Projects Agency for Inovio's ongoing research into a cure for Ebola, as well as $15 million in recognized revenue from the company's collaborative agreement with AstraZeneca's MedImmune for the development of INO-3112. Inovio notes that the remaining $12.5 million of its $27.5 million upfront payment from MedImmune will be recognized at a later date.

In terms of Inovio's bottom line, the company reported a profit (yes, a profit) of $0.08 per share, compared with a net loss per share in the prior-year quarter of $0.12 per share. Wall Street had been expecting a profit of only $0.04 per share. However, Inovio was quick to point out that certain circumstances, such as the timing of its DARPA payment and the recognition of its upfront payment from MedImmune, influenced its profits and may not be replicable in future quarters. In other words, expect Inovio to return to quarterly losses in the coming months.

Inovio's report also shows that the company ended the quarter with $170.8 million in cash and cash equivalents compared to $93.6 million at the end of 2014. Its DARPA contract and recent collaborations should provide a cash runway that, in my estimation, extends well into 2019.


Image source: National Cancer Institute. 

Take note of these subtleties
While it's great to see Inovio delivering a rare (but expected) profit, investors would be wise to focus on the subtleties of Inovio's report, which are much more important.

For instance, Inovio's collaboration with AstraZeneca during the third quarter marked the second big-name pharma company that it's snagged a development deal with. If you recall, Inovio and Roche currently have a licensing deal in place for the development of INO-1800, the company's hepatitis B candidate. Having two brand-name pharmaceutical partners implies that Inovio may have the ability to monetize its pipeline and/or development platform on an as-needed basis. This bodes very well for the company's long-term future and its ability to avoid cash burn concerns. The $700 million in development, regulatory, and sales milestones that Inovio can earn for the advancement of INO-3112 doesn't hurt, either.

Speaking of cash burn, Inovio's $170.8 million in cash and cash equivalents essentially removes cash fears from investors' minds for two, or maybe even three, years. This should allow Wall Street and investors to focus on the bread and butter of Inovio's valuation -- its pipeline -- without external concerns.

What awaits Inovio in 2016?
Since we now know that Inovio's balance sheet is healthy, we can turn our attention to what catalysts are coming up in the next year.

As mentioned in Inovio's earnings press release, interim data from its phase 1 study of INO-5150, an immunotherapy designed to target prostate specific antigens in men with relapsing prostate cancer, should be available in 2016. Although immunogenicity will be observed, safety will be the primary factor Inovio focuses on in its initial clinical study.

Image source: National Cancer Institute.

Likewise, Inovio plans to launch a phase 1 study of its Middle East respiratory syndrome compound GLS-5300, which is partnered with GeneOne Life Science, before the end of the year. This would, in all likelihood, put Inovio and GeneOne on track to report initial safety data at some point in 2016.

The company will also be finalizing the design of its phase 3 study of lead drug candidate, VGX-3100, an experimental treatment for cervical dysplasia caused by human papillomavirus types 16 or 18, with the Food and Drug Administration in the first quarter. VGX-3100 offers Inovio its best chance at recurring revenue, although clinical results from its late-stage study probably won't be available until 2018.

Beyond what Inovio stated in its report, the company is also on pace to report phase 1 data for INO-3106, an experimental treatment for aerodigestive cancer caused by HPV type 6, phase 1 results for INO-1400 as a treatment for breast, lung, and pancreatic cancer, and interim data from INO-3112, a potential treatment for head and neck and cervical cancer, next year.

These catalysts could play a big role in determining whether or not Inovio's stock heads higher in 2016, and they very well could act as a dangling carrot for other drug developers looking to license or purchase growth.

With that being said, only savvy investors who have a high penchant for risk should be considering an investment in Inovio, even at depressed levels. Even with a diverse pipeline, ample cash to run its business for years to come, and growing partnerships, profits are not guaranteed. Until Inovio can prove to investors that it can generate recurring sales, it'll remain a high-risk, but potentially high-reward, investment.