For most publicly traded companies, quarterly financial updates give investors a chance to dissect revenue, earnings, and other financial metrics. These updates are chock-full of data to pore over. That's not the case with Inovio Pharmaceuticals (INO 1.21%).
The reality is that for clinical-stage biotechs like Inovio, most of the numbers investors like to dig into with other companies can be thrown out the window. Inovio provided an update on its second-quarter performance after the market closed on Tuesday, and there were only three things that really mattered for investors.
1. Cash position
Cash is king for clinical-stage biotechs. It should be. With few or no ongoing sources of revenue, how much cash a company has to continue to fund operations is paramount.
The good news for Inovio is that the biotech finished Q2 with plenty of cash. Inovio reported $95.6 million in cash, cash equivalents, and short-term investments as of June 30, 2018. This reflected a decline of $17.2 million from the end of the first quarter.
How long will this cash stockpile last? If the company had no additional revenue coming in, it would run out of money pretty soon. Inovio's operating expenses so far this year have averaged around $32 million per quarter. In Q2, the biotech's operating expenses totaled nearly $29.7 million.
Of course, Inovio is likely to generate some revenue. However, it seems likely that the company will need to raise additional cash next year, if not sooner. That probably means another stock offering is on the way in the not-too-distant future. The last time Inovio conducted a stock offering, its share price fell nearly 31% in the following weeks.
2. Impact of partnerships
Inovio's good news in the second quarter was that it did generate a nice chunk of revenue. The biotech reported revenue of nearly $24.4 million. That was a big jump from the $1.5 million in revenue announced in the first quarter.
The company's Q2 figure underscored the importance of Inovio's partnerships. An up-front payment from ApolloBio of $23 million accounted for most of Inovio's revenue in the second quarter. Inovio and ApolloBio entered a collaboration agreement in January for VGX-3100. The deal gave ApolloBio exclusive rights to develop and market the DNA immunotherapy in China, Hong Kong, Macau, and Taiwan.
Without the influx of cash from ApolloBio, Inovio's year-over-year revenue comparison would have looked pretty dismal. The company received $13.8 million in the prior-year period from another partner, AstraZeneca's MedImmune subsidiary, and another $2.1 million from its previous collaboration with Roche.
3. VGX-3100 update
Investors should especially like six words included in Inovio's second-quarter results press release: "Reveal 1 Phase 3 enrollment on track." Reveal 1 is the biotech's pivotal late-stage clinical study evaluating VGX-3100 in treating cervical dysplasia caused by the human papillomavirus (HPV).
Inovio reported that 70 sites in 16 countries continue to recruit patients for the study. The company expects that number to grow to around 90 sites by the end of August.
Staying on schedule with the Reveal 1 study is enormously important to Inovio. VGX-3100 is the company's lead pipeline candidate. Inovio has already run into one major delay after the U.S. Food and Drug Administration (FDA) placed a clinical hold on phase 3 testing of the immunotherapy in October 2016. The biotech wasn't able to move forward with the study until June 2017.
Inovio claims a robust pipeline for a clinical-stage biotech. The company has a couple of immunotherapies in phase 2 clinical testing and two more in phase 2 clinical trials. It is also very active in the early development of antiviral vaccines targeting HIV, MERS, Ebola, and Zika.
But the single most important thing for investors to look forward to is how well VGX-3100 fares in the phase 3 Reveal 1 study. Initial results from this study could be available in the latter part of 2019. If VGX-3100 is successful, you can bet that Inovio stock will skyrocket.
Market research firm EvaluatePharma views Inovio as a dark horse of sorts in the vaccine space. The firm thinks that Inovio could rank as the No. 8 vaccine maker based on sales between 2017 and 2024. This assumes that VGX-3100 will win regulatory approval and generate $622 million in sales by 2024.
There's no guarantee of success for VGX-3100, though. And, as mentioned earlier, Inovio will likely have to go the well again to raise more cash. My view is that investors would be better off waiting for the biotech to replenish its coffers before seriously considering buying the stock.