ITEM 1. BUSINESS
This Annual Report (including the following section regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Annual Report. Additionally, statements concerning future matters, including statements regarding our business, our financial position, the research and development of our products and other statements regarding matters that are not historical are forward-looking statements.
Although forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading “Risk Factors” below, as well as those discussed elsewhere in this Annual Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Overview
Inovio is developing active DNA immunotherapies and vaccines focused on treating and preventing cancers and infectious diseases. Our DNA-based immunotherapies, in combination with our proprietary electroporation delivery devices, are intended to generate robust immune responses, in particular T cells, to fight target diseases. In 2014 we reported that in a controlled Phase 2 clinical study we generated significant, functional antigen-specific T cells that correlated to clinically relevant efficacy against HPV-associated cervical dysplasia (precancer). This data was published in
The Lancet
in September 2015. We are planning to take this product, VGX-3100, into a Phase 3 study for cervical dysplasia in 2017.
Our novel SynCon
®
immunotherapy design has shown the ability to help break the immune system’s tolerance of cancerous cells. Our SynCon
®
product design approach is also intended to facilitate cross-strain protection against known and new unmatched strains of pathogens such as influenza. Given the recognized role of CD8+ killer T cells in eliminating cancerous or infected cells from the body and our published Phase 2 results, our scientists believe our active immunotherapies may play an important role in helping fight multiple cancers and infectious diseases. Human data to date have shown a favorable safety profile of our DNA immunotherapies delivered using electroporation.
We or our collaborators are currently conducting or planning clinical studies of our proprietary SynCon
®
immunotherapies for HPV-caused pre-cancers (including cervical, anal and vulvar neoplasia), HPV-caused cancers (head and neck and cervical), prostate cancer, breast/lung/pancreatic cancer, hepatitis C virus (HCV), hepatitis B virus (HBV), HIV, Ebola, MERS (Middle East Respiratory Syndrome) and Zika virus.
Our corporate strategy is to advance and protect our differentiated immunotherapy platform and use its unique capabilities to design and develop an array of cancer and infectious disease immunotherapy and vaccine products. We aim to advance products through to commercialization. We continue to leverage third party resources through collaborations and partnerships including product license agreements. Our partners and collaborators include MedImmune, LLC, The Wistar Institute, University of Pennsylvania, GeneOne Life Science Inc., ApolloBio Corporation, Plumbline Life Sciences, Inc., Drexel University, National Microbiology Laboratory of the Public Health Agency of Canada, National Institute of Allergy and Infectious Diseases (“NIAID”), United States Military HIV Research Program (“USMHRP”), U.S. Army Medical Research Institute of Infectious Diseases (“USAMRIID”), HIV Vaccines Trial Network (“HVTN”), and Defense Advanced Research Projects Agency (“DARPA”).
Inovio’s Differentiated Immunotherapy Platform
The idea of stimulating the immune system to prevent or treat infections and cancers has been and continues to be a compelling concept. Today the opportunity for immune activating technologies with the potential to fight cancers and chronic infectious diseases has never appeared more promising, with notable technology advancements such as checkpoint inhibitors leading the way in oncology. Yet, while yielding promising results, in many respects the surface has been barely scratched. There remains a significant need and opportunity for further advancements.
Our immunotherapy platform comprising our DNA-based immunotherapy and electroporation delivery technologies has an important fundamental capability with a multitude of possible disease/product opportunities. The basic goal of our platform is to enable in vivo (in the body) generation of useful immune responses to achieve desired therapeutic and preventive outcomes. We have historically been primarily focused on in vivo generation of disease-specific antigens in the body in order to stimulate prophylactic or therapeutic immune responses. More recently we have embarked on an additional new application: in vivo generation of monoclonal antibodies to achieve preventive and therapeutic outcomes complementary to our antigen-generating immunotherapies.
The essence of our platform is that we encode a DNA plasmid for the genetic sequence of an antigen or monoclonal antibody specific to a targeted disease. We can combine multiple such plasmids into a “product,” inject the plasmids into tissue of the body, use electroporation to facilitate significant cellular uptake of the plasmids, and then enhance the ability of the intracellular machinery that usually produces useful proteins for the functioning of the body to temporarily produce the target antigen or monoclonal antibody. An antigen produced in this manner will then induce the immune system to generate polyclonal antibodies or T cells with the ability to perform their preventive or therapeutic functions. Similarly, monoclonal antibodies generated in this manner can then also trigger desired immune system functions.
With our core technologies we have developed a rich pipeline of pre-clinical and clinical stage products that have generated, in vivo (in the body), best-in-class immune responses, in particular CD8+ T cells fundamental to eliminating cancerous or infected cells. They are showing their potential to be used against potentially any targeted cancer or infectious disease. Our lead immunotherapy (for treating HPV-associated precancer) met its primary and secondary endpoints in a controlled Phase 2 clinical study, achieving statistically significant and clinically relevant efficacy in association with robust T cell activation. This data was published in
The Lancet
in a paper entitled, “Safety, efficacy, and immunogenicity of VGX-3100, a therapeutic synthetic DNA vaccine targeting human papillomavirus 16 and 18 E6 and E7 proteins for cervical intraepithelial neoplasia 2/3: a randomized, double-blind, placebo-controlled Phase 2b trial.” These results were achieved without serious adverse events. The only statistically significant adverse event was temporary injection site pain and redness.
Our immunotherapies are non-live and non-replicating, and therefore cannot cause the disease. Compared to other technologies our immunotherapies work most naturally with the immune system and within its controls to reduce or minimize the risk of unwanted inflammatory responses.
These results suggest unique and significant market potential not only for our lead product but for our existing and emerging cancer products as well as the broad spectrum of infectious disease products that may be created based on our technology platform.
The Next Generation of Cancer and Infectious Disease Treatment: Inovio's SynCon
®
Immunotherapies
Our SynCon immunotherapies are designed to treat an existing disease (therapeutic) or prevent a disease (prophylactic) by activating and magnifying an immune response to one or more disease-specific antigens (proteins associated with a cancer or infectious disease that the body will recognize as foreign or not normal). Without the quality control and manufacturing challenges and costs of medicines involving ex vivo processes, we direct the patient’s immune system to fight specific organisms or cells in a highly targeted and robust fashion. We do this simply by introducing the genetic code for a target antigen(s) into cells of the body that will serve as a temporary antigen production facility.
Our immunotherapies consist of one or more DNA plasmids (circular string of DNA) encoding one or more selected antigens. Our approach uniquely enables dramatic uptake of the DNA plasmids by cells in localized tissue (typically muscle in the arm for immunotherapies or in the skin for vaccines). After the DNA code for the targeted antigen(s) is introduced to cells, the cells’ natural machinery for producing proteins necessary for the body’s many functions temporarily produce the selected antigen(s) encoded by the DNA sequences. The antigenic proteins manufactured through this process are then presented to the immune system and trigger one or both of two arms of the immune system: the production of preventive antibodies, known as a humoral immune response, and/or the activation of therapeutic CD8+ T-cells, known as a cellular or cell-mediated immune response. These responses then neutralize or eliminate infectious agents (e.g. viruses, bacteria, and other microorganisms) or abnormal cells (e.g. malignant tumor or infected cells). T cells can be immediately “trafficked” to parts of the body where cells are displaying the target antigen. Memory cells are also created for durable effects.
Our SynCon
®
DNA immunotherapies are designed to generate antigen-specific antibody and T cell responses. First we identify one or more antigens that we believe are the best targets to direct the immune system toward a particular cancer or infectious disease. We then apply our SynCon
®
design process, which uses the genetic make-up of the selected antigens from multiple variants of a cancer or strains of a virus.
For each antigen we synthetically create a new genetic sequence that represents a consensus of the slightly different DNA from multiple variants or strains of the targeted antigen. We can synthetically create a differentiated SynCon variant to help the immune system better recognize a cancer self-antigen (a cell and antigen grown in the body), i.e. to “break tolerance.” Alternatively we have proof of principle in human studies that we can generate immune responses with SynCon immunotherapies not matched to different strains of an infectious disease, e.g. influenza, creating more universal protective
capabilities against unmatched strains of a circulating virus. These SynCon
®
constructs may provide a solution to broadly cover the genetic “shift” and “drift” that is typical of many infectious diseases. This new synthetically engineered sequence is similar to the originating sequences but does not match any. It does not exist in nature and is patentable.
The SynCon sequence is inserted into a circular DNA plasmid. The plasmid is optimized at the DNA level for codon usage, improved mRNA stability, and provided with enhanced leader sequences for ribosome loading; it is optimized at the genetic level to enable high expression in human cells. We believe these design capabilities allow us to better target appropriate immune system mechanisms and produce a higher level of the coded antigen to enhance the overall ability of the immunotherapy to induce the desired immune response.
The plasmids are manufactured in a bacterial fermentation process using proven scalable technology. These DNA-based immunotherapies can be stable under normal environmental conditions for extended periods of time.
Inovio’s immunotherapies are injected in a local area of selected tissue (muscle or skin) and then electroporated (see next section) to facilitate significant cellular uptake of the plasmid and expression (production) of the encoded DNA. The resulting immune response to the produced antigens results in significant production of antibodies or T cells.
Another critical attribute of Inovio’s product development platform is the speed of design, pre-clinical testing, cGMP manufacturing, and regulatory approval for translation into clinical development of its vaccine and immunotherapy products. This is an important feature, particularly as it relates to developing a rapid response to globally emerging infectious diseases. Indeed Inovio has led the way in being globally the first entity in 2016 to move a Zika vaccine into human clinical studies a mere 4.5 months after WHO declared the emerging Zika infections to be a Pandemic Health Emergency of International Concern. Prior to that Inovio led the development of the first MERS vaccine to enter into human clinical studies. As such, Inovio’s rapid development platform is well positioned to support global health agencies in order to develop preparedness countermeasures against bioterrorism and/or emerging pandemic agents.
Published human data from three different SynCon
®
DNA immunotherapies--two for treating HPV-caused pre-cancers and cancers as well as one for treating HIV infection--have generated best-in-class T cell responses in terms of magnitude, durability, and/or killing effect, providing evidence of their potential to provide preventive and therapeutic capabilities against cancers and infectious diseases. This best-in-class T cell generation has also been correlated to efficacy (as referenced above).
Electroporation Delivery Technology
Despite how compelling the idea of delivering DNA encoding an antigen has been, delivering the DNA or nucleic acids directly into a cell through the cell’s protective membrane has been a significant challenge to the broad field of DNA and RNA vaccines. Our immunotherapies are delivered into cells of the body in a small local area of tissue using our highly efficient, proprietary electroporation (EP) DNA delivery technology. EP uses brief, locally applied electric fields to create temporary and reversible permeability, or pores, in the cell membrane. Using this method increases the cellular uptake of the DNA plasmids by a thousand-fold or more compared to delivering “naked DNA” alone. This extent of cellular uptake has proven to enable the best-in-class immune responses that we have reported, along with the efficacy results generated by these immune responses.
Alternative delivery approaches based on the use of viruses, bacteria, and lipids are complex and expensive and have in the past created concerns regarding safety. Because the vector itself possesses many additional antigens specific to the vector it can attract unwanted immune responses against itself (believed to compromise such vectors’ ability to deliver their DNA “payload” and provide protection). In contrast, DNA vectors possess no antigens of its own: the plasmid results in production of only the target antigen.
We have published data showing superior immune responses generated by our SynCon
®
immunotherapies delivered using our CELLECTRA
®
electroporation technology compared to a leading viral vector (Adenovirus type 5) based approach. We have not seen any published data indicating the capability of alternative technologies focused on using genetic code to generate preventive or therapeutic antigens to exceed Inovio’s immune response data obtained to date, nor match the efficacy and immune responses data generated in our controlled Phase 2 study based on in vivo production of such immune responses.
We believe electroporation provides a relatively straightforward, cost effective method for delivering DNA and RNA into cells with high efficiency, minimal complications, and importantly the ability to enable what we believe to be clinically relevant levels of gene expression, immune responses, and efficacy.
Inovio’s Immunotherapy Products and Product Development
Inovio’s primary focus is, independently and in partnerships, to advance the products developed from its integrated platform consisting of its SynCon
®
immunotherapy and CELLECTRA
®
electroporation technologies. We are currently developing a number of DNA-based immunotherapies for the prevention or treatment of cancer and chronic infectious diseases. The table on the following page summarizes the status of our product development programs.
Active SynCon
®
Immunotherapy Development Programs
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Development Status
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Product Area
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Product and
Indication(s)
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Pre-Clinical
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Phase 1
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Phase 2
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Phase 3
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Partner/Funding/Sponsor
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Cancer
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Cervical dysplasia (CIN 2/3)
(VGX-3100)
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X
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X
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X
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P
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Inovio
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HPV-related cancer (INO-3112)
(VGX-3100 + DNA-based IL-12 cytokine)
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X
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IP
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MedImmune
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Prostate cancer
(INO-5150 +/- DNA-based IL-12 cytokine)
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X
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IP
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Inovio
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hTERT expressing cancers (breast, lung, pancreatic)
INO-1400
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X
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IP
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Inovio
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New cancer target (INO-5400 (hTERT + 2 new antigens) +/- DNA-based IL-12 cytokine with checkpoint inhibitor
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X
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P
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Inovio
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Infectious Disease
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Hepatitis B Virus
INO-1800
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X
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IP
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Inovio
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Hepatitis C Virus
INO-1800 + DNA-based IL-28 cytokine)
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X
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IP
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GeneOne Life Sciences/NCI
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Zika
(GLS-5700)
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X
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IP
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GeneOne Life Sciences
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Ebola
(INO-4212)
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X
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IP
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GeneOne Life Sciences/DARPA
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MERS
(GLS-5300)
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X
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IP
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GeneOne Life Sciences/IVI
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HIV (preventive & therapeutic)
(PENNVAX®-GP)
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X
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IP
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NIH/NIAID
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Universal influenza (INO-3510)
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X
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X
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NIH
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Biodefense targets
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IP
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US AMRIID
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X
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= Completed
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IP
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= In Progress
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P
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= Planning
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Cancer Vaccines/Immunotherapies
Previous Immune Therapy Successes Point to the Potential of Inovio’s Immunotherapy Approach
In recent years there have been multiple technology advancements and product approvals that have highlighted the potential of immunotherapies to usher in a new era of cancer therapeutics. Monoclonal antibodies (mAbs) such as Herceptin
®
and dendritic cell therapy Provenge
®
for prostate cancer have had their varying degrees of success. Herceptin has been used to treat over 420,000 women (Genentech Inc., 2010). While a significant step forward, suitable monoclonal antibodies with desired characteristics have been difficult to design or identify and expensive to produce, and the technology does not lend itself to designing mAbs for many diseases. Dendritic or other cell-based therapy is a highly personalized medicine involving removing cells from the patient, modifying them, multiplying them, then returning them to the body. Besides the high cost and complex processes to manufacture the product, one of the glaring weaknesses of this approach is that it has not been shown to generate high levels of cancer-specific T cells.
Progress in the field of immune checkpoint inhibitors (CIs) created significant optimism regarding the potential for new immunotherapies against a spectrum of cancers. The immune system relies on a safeguard system of checkpoint mechanisms to prevent excessive or incorrectly directed immune responses. Many cancer cells have the ability to “hijack” these checkpoints and neutralize T cells sent by the immune system to eliminate them. Checkpoint inhibitors prevent cancer cells’ ability to interfere with these checkpoints and enable T cells (especially CD8 killer T cells) to complete their appropriate
and intended killing function against cancer cells. Clinical studies by multiple companies of different checkpoint inhibitors have shown notable therapeutic impact against melanoma and other cancers - yet, with response rates in the 15-20% range (and only in the case of melanoma going up to the 40% range), there remains an important and valuable opportunity to improve these results. Observations suggest CIs may be less effective if there is not a high enough pre-existing level of antigen-specific CD8 T cells in the tumor micro-environment, ie the tumor is “cold” rather than “hot” (with a significant level of T cells). More recently scientists have recognized that a strong T cell generating “active” immunotherapy may be able to transform a cold tumor into a hot tumor and in combination with a checkpoint inhibitor may possess significant therapeutic potential to fight cancers.
More recently, a new category of immunotherapies called adoptive cell transfer, for example CAR-T technology, has provided further evidence of the merit of providing an enhanced T cell presence to fight cancer. CAR-T has achieved dramatic results in B cell cancers. Unfortunately it has also been associated with significant side effects. When this technology has been applied to solid tumors it has generated significant cytokine storms that have resulted in severe side effects including deaths. Moreover, adoptive cell transfer such as CAR-T, like dendritic cell therapy, involves removing T cells from a patient, modifying them to better target a cancer cell, multiplying the T cells, then returning them to the patient. These complex therapeutic products need to be manufactured and released for each patient, leading to expensive manufacturing and increased supply chain complexity. Moreover, this technology is still in early clinical development.
So while the last two decades have yielded promising technology advancements that better harness or activate capable killer T cells, there is significant untapped potential to develop “ideal” immunotherapies to fight cancers and infectious diseases.
What is an “ideal” active immunotherapy? We want products that are effective, efficient, and safe. Specifically we want immunotherapies that:
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Target disease-specific antigens (i.e. proteins unique to a cancer or infectious disease)
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Do not depend on complex manufacturing processes such as removal of dendritic cells or T-cells from the patient that are then modified in the laboratory, amplified and then re-introduced in the patient as autologous or allogeneic cell based therapies.
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Activate functional
killer T cells with the necessary killing tools (e.g. granzyme and perforin)
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Generate robust T cell responses (e.g. a significant number of T cells) that are persistent and durable over time (memory response)
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Do not induce unwanted immune responses
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Do not induce toxic inflammatory responses
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Are capable of “breaking tolerance” of cancer cells grown in the body.
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Our Phase 2 data (discussed under HPV Immunotherapy-VGX-3100) show we are achieving these ideal characteristics with our active immunotherapy approach to activating significant antigen-targeted T cells and we are advancing a growing pipeline of pre-clinical and clinical immunotherapy products.
HPV Immunotherapy-VGX-3100
High Grade Cervical Dysplasia (CIN 2/3)
Human papillomavirus (HPV) is a causative agent responsible for cervical pre-cancers (cervical dysplasia), cervical cancer, other anogenital cancers, and one of the most rapidly growing cancers in men - head & neck cancer. At any given time, approximately 11% of the world’s population is infected with HPV.
HPV is the most common viral infection of the reproductive tract and is recognized as the major cause of cervical cancers. Almost 300 million women globally are estimated to be infected with HPV, with another 30 million additional cases that have progressed to the pre-cancerous stage. Every year over 500,000 new cases of cervical cancer are diagnosed world-wide and approximately half of these women die. Virtually all cases are linked with persistent infection with HPV. Challenges with acceptance, accessibility, and compliance of preventive vaccines have resulted in only 40% of young women being vaccinated in the US, and even less in other countries around the world.
While roughly 90% of HPV infections are cleared by the body on its own (i.e. by the person’s immune system), persistent HPV infection can lead to high grade cervical dysplasia (CIN 3) and, if untreated, eventually invasive cervical cancer. Researchers have estimated the global prevalence of clinically pre-cancerous HPV infections at between 28 and 40 million. HPV 16/18 are the two most prevalent high-risk types of HPV worldwide, causing the vast majority of HPV-related cancers. HPV 16/18 are found in 52% of all high grade pre-cancerous cervical lesions and 70% of cervical cancers.
There is an annual incidence rate of CIN 1 caused by HPV types 16 and 18 of 1.4M in the US and 1.3M in the top 5 European countries. There is an annual incidence rate of CIN 2/3 caused by HPV types 16 and 18 of 195K in the US and 233K in Europe. These represent a significant market opportunity. CIN 1 has no treatment. CIN 2/3 is served only by an invasive surgical procedure.
There are currently two FDA approved preventive vaccines, Gardasil
®
and Cervarix
®
, that protect against HPV types 16 and 18, as well as types 6 and 11 (Gardasil). Preventive HPV vaccines cannot treat or protect those already infected with HPV, which is a large population. In addition, not all girls and women eligible to be vaccinated are receiving these vaccines. In 2013, a US national survey found that 57% of girls aged 13-17 years had received at least one dose of the HPV vaccine series, but only 38% had received all 3 doses in the series. In 2014 only 40% had received the full regimen. Currently there is no viable immunotherapy or drug to fight established HPV infection or treat cervical dysplasia and/or cancer caused by HPV.
Current treatment options for cervical dysplasia are unappealing. The “watch-and-wait” process associated with low grade dysplasia (CIN 1) is a stressful approach. The only available treatment option for high grade cervical dysplasia (CIN 2/3) is surgery, which involves ablating or cutting a women’s cervix to remove the pre-cancerous lesions. While surgical procedures are generally effective in removing lesions, they can lead to cervical scarring and longer-term reproductive risks such as pre-term birth, miscarriage, and infertility. Current CIN excisional and ablative procedures increase risk of pre-term births from 5.6% to 10.7% according to Kyrgiou et al in a meta-analysis published June 2016 in the
British Medical Journal.
Anticipation of these procedures produces significant anxiety for patients, despite their doctor’s reassurances, and full recovery from surgery can take up to several weeks. Because surgery does not clear the underlying HPV infection, there is a 10-16% chance of pre-cancer lesion recurrence as a result of persistent infection or incomplete removal of the lesion during surgery.
Inovio's VGX-3100 is an immunotherapy designed to significantly increase immune responses (humoral and cell mediated) against the E6 and E7 antigens of HPV types 16 and 18 that are present in both pre-cancerous and cancerous cells transformed by these HPV types. E6 and E7 are oncogenes that play an integral role in transforming HPV-infected cells into pre-cancerous and cancerous cells. The goal of the immunotherapy is to stimulate the body's immune system to mount a killer T cell response strong enough to cause the killing of cells producing the E6/E7 protein. The potential of such an immunotherapy would be to treat pre-cancerous dysplasias caused by these HPV types.
Phase 1 Study Results
We completed a Phase 1 study of our cervical precancer immunotherapy (VGX-3100) in 2010. This dose escalation study tested the safety and immunogenicity of VGX-3100 in women previously treated for moderate or severe cervical intraepithelial neoplasia (CIN 2/3), a high grade premalignant lesion that is a precursor to cervical cancer. The trial enrolled patients in three cohorts of six subjects each with VGX-3100 doses of 0.6 mg (0.3 mg each of two DNA plasmids), 2.0 mg, and 6.0 mg. Each subject was dosed at months 0, 1 and 3.
In September 2010, we presented top-line data showing achievement of best-in-class immune responses in this dose escalation study. Data from the trial included:
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Antigen-specific, dose-related T cell responses across the three dose groups;
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Strong antigen-specific antibody responses in all three dose groups;
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VGX-3100 delivered using Inovio’s proprietary CELLECTRA
®
intramuscular electroporation delivery device was generally safe and well tolerated at all dose levels; and
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No immunotherapy-related serious adverse events (SAEs). Reported adverse events and injection site reactions were mild to moderate and required no treatment.
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Immunological analyses of blood samples collected before and after treatment indicate that antigen-specific immune responses were induced against the target proteins produced by Inovio's immunotherapy. We assessed the cellular immune responses by different analytical assays that measure the production of antigen specific T cells as well as their ability to kill in an antigen specific manner. Overall, 17/18 (94%) patients, including 6/6 (100%) of the high dose group, demonstrated vaccine induced antigen (E6 and E7 proteins for HPV types 16 and 18) specific T cell responses.
In July 2011 we reported data demonstrating long-term durability of T cell immune responses of up to two years (at the latest time measured) in 7 of 8 evaluated patients following a fourth vaccination of VGX-3100.
In October 2012 we reported that the immune responses generated in this study displayed a powerful killing effect on cells changed by HPV into precancerous dysplasias. These results appeared in the peer-reviewed journal,
Science-Translational Medicine
, in an article entitled, "Immunotherapy against HPV 16/18 generates potent Th1 and cytotoxic cellular immune responses." In this study, 91% of patients who developed T cell responses showed the presence of CD8 T cells capable of the desired killing activity. Direct killing by CTLs was observed in all immunized subjects (6 of 6) in the 6 mg cohort.
Antibody responses to E6 and E7 antigens were also measured. Specific antibody responses to tumor antigens can function as an important surrogate potency marker for determining the immunogenicity (immune response characteristics) of an immunotherapy, i.e. its ability to induce an immune response. Antibodies were generated against all four antigens, as tested by the enzyme-linked immunosorbent assay (ELISA). Overall, 100% of the study participants (18 of 18) reported antibody positivity to at least two immunotherapy antigens, and 94% (17 of 18) reported positivity to three antigens; 56% (10 of 18) were positive to all four antigens.
More recently, in 2016 we published data in
Molecular Therapy - Oncolytics
on a follow-on study (HPV-002) to our previously reported Phase 1 study (HPV-001). In this study, all volunteers were offered a booster vaccination (fourth dose) 6-18 months after they had completed their initial 3 dose regimen and 13 were enrolled. We demonstrated that vaccine specific immune responses were persistent for 6-18 months following the initial vaccination regimen and were augmented following the booster dose. Importantly, the patients had established memory T cells and upon boosting the cells from patients exhibited a CTL phenotype as well as activated CD8 T cells expressing lytic proteins measurable in the periphery. We were also able to identify HPV specific immune signatures in the periphery and identify putative HPV specific T cell receptor sequences in the cervix of vaccinated patients.
Phase 2
Study Results
Based on the successful results from our Phase 1 study, in March 2011 we initiated a randomized, placebo-controlled, double-blind Phase 2 study of VGX-3100 delivered using our CELLECTRA
®
intramuscular electroporation device in women with HPV type 16 or 18 and diagnosed with, but not yet treated for, high grade cervical intraepithelial neoplasia (CIN 2/3). The women in the study received either 6 mg of VGX-3100 (the highest dose used in our Phase 1 study) or a placebo using the CELLECTRA
®
in vivo electroporation device at months 0, 1, and 3. The study assessed efficacy by measuring regression of cervical lesions from CIN 2/3 to CIN 1 or normal in the treated versus control subjects. Immunological responses were also measured in this clinical study to assess the ability of this therapy to generate strong T cell responses in a larger, controlled study. Safety was also assessed (ClinicalTrials.gov NCT01304524).
In July 2014 Inovio released top line efficacy data from this Phase 2 clinical trial (HPV-003) for VGX-3100. The primary endpoint, histologic regression, was evaluated 36 weeks after the first treatment. In the per protocol analysis of this three-immunization regimen, CIN2/3 resolved to CIN1 or no disease in 53 of 107 (49.5%) women treated with VGX-3100 compared to 11 of 36 (30.6%) who received placebo. This difference was statistically significant (p=0.017). Intent to treat results were also statistically significant.
There was also a high level of complete clearance of CIN 2/3. In a post-hoc analysis, CIN 2/3 resolved to no disease in 43 of 107 (40.2%) women treated with VGX-3100 compared to 6 of 36 (16.7%) who received placebo (p=0.006).
This trial also demonstrated virological clearance of HPV 16 or 18 from the cervix in conjunction with histopathological regression of cervical dysplasia to CIN1 or no disease, a secondary endpoint of the trial, in 43 of 107 (40.2%) VGX-3100 recipients compared to 5 of 35 (14.3%) placebo recipients (p=0.001). This is an important outcome as persistence of the virus is associated with recurrence of the disease.
In September 2015 this data was published in
The Lancet
in a paper entitled, “Safety, efficacy, and immunogenicity of VGX-3100, a therapeutic synthetic DNA vaccine targeting human papillomavirus 16 and 18 E6 and E7 proteins for cervical intraepithelial neoplasia 2/3: a randomised, double-blind, placebo-controlled Phase 2b trial.”
This paper reported further details regarding the characteristics of T cells generated and their association with efficacy outcomes. Analyses of patient immune responses showed that overall antigen-specific T cell levels in women treated with VGX-3100 were greater than those treated by placebo at all observation periods. At week 14, levels of CD8 T cells specific to the E6 and E7 HPV antigens in women treated with VGX-3100 were ten times greater than those in the placebo group. This response increased with each of the three immunizations, then declined modestly to a sustained and durable level of T cells (memory T cells) measured through 36 weeks (24 weeks post-treatment).
Patients whose lesions regressed had higher frequencies of HPV-specific CD8+T cells which co-expressed key molecules important in the T cell killing cascade and directly correlated with clinical efficacy. Specifically, we determined that higher levels of CD8+ killer T cells which co-expressed checkpoint molecule CD137 on their surface as well as the cytolytic protein perforin could be a predictive tool for efficacy. As a strong activation marker for CD8+ T cells, stimulation through CD137 has been shown in some systems to confer resistance of CD8+ T cells to the suppressive activity of regulatory T cells and its presence can identify tumor reactive T cells. Perforin is a pore-forming protein deployed by killer T cells to bore holes into the target cell's plasma membrane and destroy the cell. In fact, the difference in frequencies of CD8+ cells expressing CD137 and perforin was greatest in patients who had both regressed their lesions and cleared HPV compared to patients who did not.
This is the first publication to our knowledge that demonstrates the correlation of antigen-specific CD8 T cells generated in vivo directly to clinical efficacy. Inovio has successfully identified several key biomarkers of killer T cells which can be used to predict the clinical efficacy of VGX-3100 as well as other immunotherapies in future clinical studies.
Importantly, this study highlights the ability of a DNA-based immunotherapy to be locally administered in tissue distant from the diseased tissue target, generate robust functional CD8+ killer T cells, traffic those T cells to the diseased tissue, infiltrate a diseased cells displaying the target antigen, and facilitate the elimination of these cells both in “healthy” tissue and in diseased tissue (a lesion) with a statistically significant, clinically relevant outcome. These results have significant
implications in displaying the broad therapeutic and preventive potential of Inovio’s existing and future cancer and infectious disease products.
Preparation and launch of VGX-3100 registration Phase 3 study
Based on the Phase 2 results we have stated our intention to advance VGX-3100 into a Phase 3 study. Following is an update on the steps we are taking toward launching this clinical study.
We completed a one-year follow-up to primarily assess safety.
In preparation for pivotal Phase 3 development and commercialization, we completed a manufacturing technology-transfer to a commercial manufacturing facility and scaled up manufacturing of our VGX-3100 immunotherapy product.
We also designed and manufactured a new electroporation device for commercial use, our CELLECTRA
®
5PSP device, which is fully automated, smaller and more user-friendly compared to our Phase 2 device.
With our submission to start the Phase 3, we obtained alignment with the FDA on the trial design of the pivotal Phase 3 program to support an indication in CIN2/3 as well as for the commercial-scale manufactured DNA product. The FDA requested additional information relating to the new CELLECTRA
®
5PSP device, including stability data for the device’s single-use disposable electrode array and placed us on a clinical hold pending provision of the additional data on the new device.
This clinical hold was not instituted after a safety issue in an already running clinical study. We had only submitted our Phase 3 regulatory package to the FDA for their review. Rather the hold was intended to delay the trial initiation until the FDA’s comments and questions on the new device are addressed.
We received the FDA’s formal letter with their comments and questions in November 2016. They had no hold comments regarding our trial design or the biologic. We are currently generating the necessary device-related data to prepare our response and aim to start the Phase 3 study in the first half of 2017.
While on device-focused clinical hold we cannot ship product or recruit or enroll subjects. We are able to secure and prepare targeted clinical sites and submit document packages to institutional review boards for ethical review, which would in any event be a critical activity in the early stage of the trial since in a larger study all the desired investigational sites would not be immediately up and running. Upon lifting of the clinical hold, we plan to be well positioned with clinical sites that are ready to enroll.
We have conducted additional market research with physicians and patients that have further characterized the unmet medical needs relating to the treatment of high grade cervical dysplasia (CIN 2/3). These include a preference for a non-invasive, non-surgical procedure for removing cervical lesions; a treatment that can clear HPV, the cause of the pre-cancer, throughout the body and not just in the limited area of the lesion; and a treatment that has no risk of causing pre-term births or infertility. CIN 2/3 represents a unique market opportunity for a novel therapy capable of providing a first-line alternative to surgery. This market research will help guide our communication and interaction with the physician, patient, and support communities.
VGX-3100 has the potential to be a less-invasive first-line medical treatment option that is focused on preserving reproductive health.
Inovio also plans to expand VGX-3100 to treat other dysplasia conditions caused by HPV infections such as vulvar and anal intraepithelial neoplasias, with the intent to launch at least one new Phase 2 study in 2017.
In February 2017 we announced that we entered into a License and Collaboration Agreement (the “ApolloBio Agreement”) with ApolloBio Corporation providing ApolloBio with the exclusive right to develop and commercialize VGX-3100 within Greater China (China, Hong Kong, Macao, Taiwan). Details of this ApolloBio Agreement are provided under Corporate Development.
HPV Immunotherapy-INO-3112 (VGX-3100 +DNA-Based IL-12 Cytokine INO-9012)
Head & Neck Cancer
and
Cervical Cancer
HPV is also associated with head and neck cancers, especially those in the oropharynx and larynx but also the oral cavity and nose/nasal passages. The incidence of HPV-caused oropharyngeal cancer has increased significantly within the last 20 years and has been increasing at an epidemic rate. In the US, approximately 12,000 new cases of HPV-associated head and neck cancer are diagnosed annually. The estimated prevalence of HPV-caused oropharyngeal cancer in the U.S. in 2012 was nearly 212,000.
By 2020, scientists estimate that HPV will cause more cases of oropharyngeal cancer than cervical cancer and by 2025 HPV will be the causative factor of 90% of all head & neck cancers (HPV currently causes 63% of head & neck cancers). Greater than 70% of cancers of the oropharynx are linked to HPV, with HPV16 being the most prevalent serotype.
Improvements in primary treatment modalities (surgery and radiation) have produced significant improvements in morbidity but intensive radiation has a profound long-term impact on mortality and quality of life. Based on these factors, we believe there is a significant opportunity for an effective immunotherapy.
In June 2014 we initiated a Phase 1/2a clinical study (ClinicalTrials.gov: NCT02163057) assessing the immunogenicity and safety of INO-3112 (VGX-3100 in combination with a DNA-based IL-12 cytokine (INO-9012)) in head & neck cancer patients. We added our DNA-based IL-12 immune activator to VGX-3100 for this cancer study because our HIV immunotherapy clinical study (HVTN-080) showed that the addition of IL-12 to our DNA immunotherapy can enhance the activation of CD8 T cells.
This open-label Phase 1 study called HPV-005 fully enrolled 22 adults with HPV16 and/or HPV18-positive head & neck squamous cell carcinoma (HNSCC) were treated with INO-3112 and followed for safety, immune and clinical responses. In one part of the study, 6 patients were treated with INO-3112 before and after resection of their tumor. In the second part of the study, 16 patients were treated with INO-3112 after completion of chemotherapy and radiation therapy. Each INO-3112 treatment was administered using Inovio's CELLECTRA
®
delivery system.
In November 2015 we reported interim data showing that INO-3112 generated robust HPV16/18 specific CD8+ T cell responses and antibodies against HPV16/18 in all 10 tested patients for whom data analyses were complete at that time. The treatment was well tolerated in all evaluable patients.
In November 2016 we reported interim immunology results showing that in the group treated before resection (one dose averaging 14 days and ranging 7 to 28 days prior to definitive surgery) and post-surgery (three additional doses), INO-3112 generated robust HPV16/18 specific CD8+ T cell responses in peripheral blood in four of five subjects who also showed increased T cell activation in resected tumor tissue samples. (One subject withdrew consent after surgery, leaving five evaluable subjects in this group.) These four subjects remained disease free in continuing follow-up that ranged from nine to 24 months at the time of analysis. One subject with only minimal increases in T cell immune responses developed progressive disease at 11 months post start of the study. These results were presented November 12
th
at the 2016 Annual Meeting of the Society for Immunotherapy of Cancer (SITC).
CD8+ and FoxP3 T cell expression were evaluated in tumor samples obtained before and after surgery. In addition, ELISpot analysis was performed to determine the number of T cells capable of secreting IFN-ã in response to HPV antigen stimulation. Four of five subjects had robust T cell response as measured by blood ELISpot assay and the same four subjects also showed an average increase of 60% of CD8+ to FoxP3 ratio measured by immunohistochemistry post vaccination, demonstrating increased infiltration of CD8+ T cells as well as reduction of regulatory T cells measured by FoxP3 expression in tumor tissue.
The second treatment group enrolled sixteen subjects who received four doses of INO-3112 after at least two months following completion of definitive chemoradiation or surgery and adjuvant chemoradiation therapy.
Cervical cancer is the most commonly occurring cancer among women in developing countries and is the second most commonly occurring cancer amongst women worldwide. Without consistent HPV vaccination or improvements in screening and treatments, current incidence trends suggest that the incidence of cervical cancer could rise from roughly 530,000 cases per year to approximately 1 million cases per year in 2050. The prognosis for advanced cervical cancer patients is characteristically poor and treatment options are palliative at best.
In June of 2014 we initiated a phase 1/2a clinical study called HPV-004 (ClinicalTrials.gov: NCT02172911) assessing the immunogenicity and safety of INO-3112 (VGX-3100 in combination with INO-9012) in cervical cancer patients. Up to 30 patients with HPV16 and/or HPV18-caused inoperable invasive cervical cancer or recurrent or persistent cervical cancer are being evaluated in an open-label study called HPV-004. Women will receive four treatments of INO-3112 every four weeks after completion of a standard chemoradiation or salvage therapy regimen. Each INO-3112 treatment will be a combination of 6 mg of VGX-3100 and 1 mg of INO-9012 delivered together intramuscularly with the CELLECTRA
®
delivery system. The study team will evaluate clinical responses and assess disease-free survival and disease recurrence up to 18 months after the initial immunotherapy with Inovio's INO-3112. T cell immune responses will be analyzed pre- and post-immunotherapy in the tumor tissue as well as in the periphery blood samples. This study is ongoing.
In August 2015 we formed a strategic partnership with MedImmune, LLC focused on cancer immunotherapies (see Corporate Development). Under this agreement MedImmune licensed INO-3112, which it intends to study in combination with selected immunotherapy molecules within its pipeline in HPV-driven cancers. Emerging evidence suggests that the benefits from immuno-oncology molecules, such as those in MedImmune's portfolio, can be enhanced when they are used in combination with cancer vaccines that generate tumor-specific T-cells. We expect MedImmune to initiate a combination study in humans in 2017.
HPV Immunotherapy-INO-3106 +/- DNA-Based IL-12 Cytokine
Aerodigestive Cancer
In September 2014 we launched a compassionate Phase 1 clinical trial (ClinicalTrials.gov: NCT02241369) in patients with HPV-caused aerodigestive cancer. Aerodigestive cancer is a condition that affects the lips, mouth, tongue, nose, throat, vocal cords, larynx, and parts of the esophagus and windpipe. Current treatment for HPV-associated aerodigestive cancers includes chemotherapy, radiation, and surgery, all of which have negative side effects.
This Phase 1 study was designed to test INO-3106 alone or in combination with INO-9012 (DNA-based IL-12) in subjects with HPV-6 associated invasive aerodigestive malignancies who have exhausted other treatment options (chemotherapy, radiation and surgery). This is a physician initiated Investigational New Drug application (IND) and is open to suitable patients for compassionate use.
Prostate Cancer Immunotherapy-INO-5150
The development of a new treatment for prostate cancer would be a significant medical advance given that present treatment options (surgery, radiation and hormone deprivation), while somewhat effective, all carry deleterious side effects and often do not confer long-term cure. Across the United States, there were 238,000 new cases of prostate cancer and more than 29,000 deaths in 2013.
In January 2011 we announced the publication of a scientific paper in the journal
Human Vaccines
detailing potent immune responses in a pre-clinical study of our SynCon
®
immunotherapy for prostate cancer targeting two antigens, prostate specific antigen (“PSA”) and prostate specific membrane antigen (“PSMA”). While current prostate cancer therapies target single antigens, in this study we tested the hypothesis in mice that a multi-antigen immunotherapy administered with Inovio's electroporation delivery technology would improve the breadth and effectiveness of a prostate cancer immunotherapeutic.
This study, conducted by our scientists and collaborators, is described in the published paper entitled, “Co-delivery of PSA and PSMA DNA vaccines with electroporation induces potent immune responses.” The SynCon
®
immunotherapy evaluated in this study consists of PSA and PSMA synthetic consensus immunogens based on human and macaque amino acid sequences, which enabled the sequences for these antigens to differ slightly from the native proteins associated with prostate cancer in humans. In humans, this difference may help overcome self-tolerance of cancer cells displaying these prostate-related proteins and enable the generation of an anti-tumor immune response. Mice received two immunizations of highly optimized immunotherapy delivered by electroporation. Immunogenicity was evaluated one week after the second immunization. The resultant data showed the induction of strong PSA and PSMA-specific cellular immune responses and also significant antigen specific seroconversion, illustrating that both humoral and cellular immune responses can be generated by this approach.
In July 2015 we initiated a Phase 1 trial
(
ClinicalTrials.gov:
NCT02514213) to evaluate our DNA immunotherapy for prostate cancer, INO-5150, in men with biochemically relapsed prostate cancer. This study is evaluating the safety, tolerability, and immunogenicity of INO-5150 alone or in combination with INO-9012, Inovio's DNA-based IL-12 immune activator. The multi-centered study will also evaluate changes in PSA levels, an important biomarker in prostate cancer. This study is intended to enroll 60 patients across 4 dose cohorts. We intend to report preliminary data in 2017.
hTERT Immunotherapy-INO-1400
Human telomerase reverse transcriptase (hTERT) is a significant cancer immunotherapy target. High levels of hTERT have been detected in more than 85% of all human cancers, including breast, lung, and pancreatic cancers, while normal cells showed undetectable levels of telomerase expression. Immunological analysis indicated that hTERT is a widely applicable target recognized by T-cells and can be potentially used as a universal cancer immunotherapy.
In July 2013, we announced that our hTERT DNA cancer immunotherapy administered with our CELLECTRA
®
electroporation delivery device generated robust and broad immune responses, induced T cells with a tumor-killing function, and increased the rate of survival in pre-clinical studies.
In December 2014 we initiated a Phase 1 clinical trial (ClinicalTrials.gov: NCT02327468) for our hTERT (human telomerase reverse transcriptase) DNA immunotherapy (INO-1400) alone or in combination with our DNA IL-12 immune activator (INO-9012) in adults with breast, lung, or pancreatic cancer at high risk of relapse after surgery and other cancer treatments. This open label, dose escalation study in approximately 54 subjects is evaluating the safety, tolerability, and immunogenicity of INO-1400. We expect to report preliminary data in 2017. We have also stated that INO-1400 will be part of a new product called INO-5401 that will be an immunotherapy comprising three tumor-associated antigens and with which we intend to initiate a clinical study with a checkpoint inhibitor.
Cancer Immunotherapy-INO-5401
We previously reported our intention to initiate in 2017 a clinical study focused on an aggressive cancer with a new immunotherapy product called INO-5401, which would be comprised of three tumor-associated antigens, and that we intended to combine 5401 with a checkpoint inhibitor through a collaborative relationship.
In February 2017 we reported that the three antigens encoded in INO-5401 are WT1, hTERT and PSMA.
We also reported data indicating that our SynCon
®
WT1 cancer antigen was capable of breaking immune tolerance - a major challenge to researchers striving to develop potent cancer therapies -- and induced neo-antigen-like T cell responses to cause tumor regression in pre-clinical studies. The results were published in
Molecular Therapy
in an article entitled, “A novel DNA vaccine platform enhances neo-antigen-like T-cell responses against WT1 to break tolerance and induce anti-tumor immunity.”
Study results revealed that while mice did not mount an immune response to native mouse WT1 antigens, mice immunized with Inovio’s SynCon WT1 antigen broke tolerance and generated robust neo-antigen-like T cells. Furthermore, the immunized mice exhibited smaller tumors and prolonged survival in a tumor challenge study. SynCon WT1 DNA vaccination also broke tolerance and generated neo-antigen-like T cell immune responses in Rhesus monkeys, a species whose immune system closely resembles that of humans. Inovio’s ability to overcome the immune system’s usual tolerance of WT1 antigen suggests the potential of its SynCon WT1 antigen to tackle any WT1-expressing cancer in humans, which include pancreatic, brain, lung, thyroid, breast, testicular, ovarian, and melanoma.
Inovio previously reported such results for its SynCon hTERT and PSMA cancer antigens.
The National Cancer Institute previously highlighted WT1, hTERT and PSMA among a list of attractive cancer antigens, designating them as high priorities for cancer immunotherapy development. WT1 was at the top of the list. The hTERT antigen relates to 85% of cancers and WT1 and PSMA antigens are also widely prevalent in many cancers.
These attributes of breaking tolerance and having broader prevalence across different cancers create the potential for INO-5401 to be a powerful universal cancer immunotherapy in combination with different checkpoint inhibitors.
We intend to advance INO-5401 into a phase 1/2 study in combination with a checkpoint inhibitor in the first half of 2017.
Infectious Disease Vaccines/Immunotherapies
Hepatitis B Virus-INO-1800
Although an effective preventive vaccine against hepatitis B virus (HBV) infection has existed for over three decades, HBV remains a major epidemic, especially among people of Asian and African descent. The World Health Organization estimates that 2 billion people globally have been infected with HBV, with over 350 million people chronically infected with the virus and at risk of developing cirrhosis or liver cancer. It is estimated that upwards of 1.4 million people in the US are infected with the virus. Currently, the only therapies available for chronically infected individuals are interferon-alpha and nucleoside analog treatments, which function by controlling viral replication but unfortunately do not clear infection. Interferon can prevent viral replication in only 30% of patients and does so with undesirable side effects.
Liver cancer is the second most common cause of death from cancer worldwide, killing most patients within five years of diagnosis. About 782,000 new cases arise each year. One of the major causes and risk factors for liver cancer is infection by hepatitis B. Chronically infected individuals may develop a permanent scarring of the liver (a condition called cirrhosis). Liver cirrhosis can evolve into hepatocellular carcinoma, which claims 746,000 lives annually.
In November 2012 we announced data indicating that our HBV immunotherapy generated strong T cell responses that eliminated targeted liver cells in mice. Results from this pre-clinical study appeared in the peer-reviewed journal,
Cancer Gene Therapy,
in an article entitled, "Synthetic DNA immunogen encoding hepatitis B core antigen drives immune response in liver."
INO-1800 is encoded for the HBcAg antigen and represents a consensus of the unique HBcAg DNA sequences of all major HBV genotypes (A through E). When delivered by electroporation, our researchers first demonstrated that this therapy elicited strong HBcAg-specific T cell and antibody responses in the periphery (outside of the liver) by ELISpot, ICS and cell proliferation assays. Researchers observed that the immunization could also induce antigen-specific CD8 and CD4 T cells that produced both IFN-y and TNF-a in the liver, indicating a strong immunotherapy-induced T cell response was also present in the liver.
In the study the antigen-specific T cells exhibited a killing function, and could migrate to and stay in the liver and cause clearance of target cells without any evidence of liver injury. Taken together, this was the first study to provide evidence that intramuscular immunization could induce killer T cells that can migrate to the liver and eliminate target cells.
In September, 2013, Roche exclusively licensed this SynCon
®
immunotherapy in conjunction with the use of Inovio’s CELLECTRA
®
electroporation technology for this immunotherapy (see Corporate Development).
In April 2015 we initiated a Phase 1 trial called HBV-001 (ClinicalTrials.gov: NCT02431312
)
to evaluate INO-1800 in patients chronically infected with hepatitis B. This Phase 1, randomized, open-label, active-controlled, dose escalation study was designed to evaluate the safety, tolerability, and immunogenicity of INO-1800 alone or in combination with INO-9112, Inovio's IL-12-based immune activator. This international study is enrolling patients in the United States and Asia Pacific region with a primary endpoint of safety and tolerability of the therapy. The secondary endpoints will evaluate the cellular and humoral immune response to INO-1800 and investigate the therapy's effect on several viral and antiviral parameters. All trial
subjects are also medicated with standard-of-care antiviral therapies. The study has completed interim safety reviews with a favorable safety profile to date. Immunology analyses are planned after completion of enrollment.
In August 2016 Roche terminated its collaboration with Inovio for the development of INO-1800, Inovio’s hepatitis B immunotherapy. The termination was finalized in January 2017. All of Roche's rights to INO-1800, including the right to license the product to other parties, have been returned. Inovio was already running a Phase 1 study of INO-1800 initiated in April 2015 and expects to complete enrollment in the first half of 2017 and report preliminary results in the second half of 2017.
Inovio anticipates completing enrollment of the HBV-001 Phase 1 study in the first half of 2017 and expects interim results in the second half of 2017.
Hepatitis C Virus (HCV)-INO-8000/VGX-6150
Hepatitis C virus is a major cause of acute hepatitis. HCV is spread primarily by direct contact with human blood, the major causes worldwide being the use of unscreened blood transfusions and re-use of needles and syringes that have not been adequately sterilized. As many as 75 -85% of newly infected patients may progress to develop chronic infection. Of those with chronic liver disease, 5% - 20% may develop cirrhosis. About 1%-5% of infected people may die from the consequences of long term infection (due to liver cancer or cirrhosis). Globally, more than 170 million people are chronically infected with HCV, which represents a reservoir sufficiently large for HCV to persist, and 3 to 4 million people are newly infected each year. People with chronic HCV infection face an increased risk of developing hepatocellular cancer, a difficult-to-treat cancer with a poor prognosis. Approximately 700,000 people die each year from hepatitis C-related liver diseases.
The HCV therapy market has been recently transformed by the launch and rapid adoption of Sovaldi® and other combo drugs in its class. Yet prices for these products remain high and out of reach for most of the patients in the world. Furthermore, there is no immune system stimulating approach that may provide a better solution for many HCV-infected people.
In April, 2010, we announced, along with our collaborators from Drexel University, Cheyney University, and the University of Pennsylvania, that we received a combined $2.8 million grant from the PA Commonwealth Universal Research Enhancement Program (CURE),
to advance our proprietary immunotherapy to treat HCV using our CELLECTRA
®
electroporation delivery system. The grant funded pre-clinical studies using an expanded set of SynCon
®
immunogens to test the safety and effect on the immune system of our novel immunotherapy designed to treat persons who are chronically infected with HCV and have not responded to currently available therapies.
At the end of 2011 we announced positive pre-clinical results from our HCV immunotherapy, INO-8000, which were published in
Molecular Therapy
. This multi-antigen DNA immunotherapy covers hepatitis C virus genotypes 1a and 1b, the most difficult-to-treat genotypes, and targets the antigens NS3/4A, which includes HCV nonstructural proteins 3 (NS3) and 4A (NS4A), as well as NS4B and NS5A proteins. Following immunization, rhesus macaques mounted strong HCV-specific T cell immune responses strikingly similar to those reported in patients who have cleared the virus on their own. The responses included strong NS3-specific interferon-gamma (IFN-g) induction, robust CD4 and CD8 T cell proliferation, and induction of polyfunctional T cells. Importantly, we also observed functional T cells in the liver.
In October 2013 our partner GeneOne (formerly VGX International Inc.) launched a Phase 1 study (ClinicalTrials.gov: NCT02027116
)
of this HCV immunotherapy. Under a 2011 development agreement GeneOne is fully funding IND-enabling, Phase 1, and Phase 2 studies for this immunotherapy. They are currently testing VGX-6150 (INO-8000 with DNA-based IL-28 cytokine) in Phase 1 testing in Korea.
In April 2016 we announced that INO-8000 will be evaluated in a Phase 1 trial in chronically infected patients who are not receiving other HCV treatments. The study will enroll patients who are in the early stages of chronic HCV infection to determine the therapy’s ability to decrease and potentially eliminate HCV viral load, measure HCV specific immune responses and durability of these immune responses, and evaluate safety and tolerability. In this dose-escalation study INO-8000 is being combined with increasing doses of DNA-based IL-12 (INO-9012), an immune activator, which in previous studies has been shown to increase the therapeutic immune response to DNA immunotherapies.
The study is funded by the National Cancer Institute’s Division of Cancer Prevention and will be conducted at the Mayo Clinic and other U.S. sites.
Emerging Infectious Diseases
There is a growing international concern and effort focused on how to better diagnose, prevent and treat emerging infectious diseases that continue to wreak havoc around the world. This concern resulted in 2016 in the formation of the Coalition for Epidemic Preparedness Innovation (CEPI), with the vision to better address epidemic outbreaks of infectious diseases at an early stage to prevent them from becoming public health emergencies that result in loss of life, undermine social and economic development and emerge into humanitarian crises.
Recognizing the impact of these diseases and the potential of DNA-based technology to potentially play a vital role in more rapidly and effectively addressing such diseases, Inovio has been proactively advancing with an array of academic, government, non-government, and private collaborators specific product development initiatives in areas including Zika, Ebola, and MERS.
Zika Virus
First identified in Uganda, Zika virus subsequently spread to equatorial Asia and over the past two years has rapidly spread through the South Pacific, including Hawaii, and to South America, Central America, and the Caribbean. Zika virus is a flavivirus, a family of viruses including yellow fever, dengue, and West Nile virus, which are introduced to people through mosquito bites. Because the Aedes species of mosquitoes that spread Zika virus is found throughout the world there is concern that outbreaks will spread to new countries. There is also concern that Zika can spread sexually, as has been reported for some returning travelers. In February 2016 WHO stated that 39 countries had reported locally acquired circulation of the Zika virus since January 2007. Geographical distribution of the virus has steadily expanded. No vaccine or therapy currently exists for the Zika virus.
The most common symptoms of Zika virus are fever, rash, joint pain, and conjunctivitis. More seriously, health authorities have observed neurological and autoimmune complications potentially associated with Zika virus, including microcephaly in newborn children and Guillain-Barre syndrome. Microcephaly is a rare condition marked by an abnormally small head and incomplete brain development. There may also be a link with Guillain-Barré syndrome, a disease in which the body's immune system mistakenly attacks peripheral nerves. Symptoms start with muscle weakness. In severe cases the person is almost totally paralyzed and the disorder can be life threatening.
In January 2016 Inovio and GeneOne Life Sciences announced a joint research collaboration with academic collaborators of a SynCon
®
Zika virus vaccine (GLS-5700).
In February 2016 Inovio announced that its Zika vaccine administered using Inovio's CELLECTRA
®
electroporation delivery device resulted in seroconversion, or the development of detectable specific antibodies in the blood, in all vaccinated mice. The vaccinations also generated robust and broad T cell responses as analyzed by the standardized T cell ELISPOT assay. Data reported in May showed that
t
wo doses of the Zika DNA vaccine delivered either intramuscularly or intradermally resulted in seroconversion, or the development of detectable specific antibodies in the blood, in all vaccinated non-human pri
mates
and broad T cell responses as analyzed by the standardized T cell ELISPOT assay.
These results were later published in
Nature Partner Journals (npj) Vaccines
in November. Additional data also demonstrated that GLS-5700 protected animals from infection, brain damage and death. All GLS-5700 vaccinated animals were protected from Zika infection after exposure to the virus. In addition, vaccinated mice were protected from degeneration in the cerebral cortex and hippocampal areas of the brain while unvaccinated mice showed significant degeneration of the brain after Zika infection.
Prior preclinical studies have tested potential Zika vaccine candidates in animal models involving normal mice and non-human primates that are naturally resistant to Zika. While providing useful immunology data, they cannot provide relevant evidence of an effective means of controlling the spread or medical impacts of this disease by vaccination. In addition to reporting immunogenicity in such Zika-resistant species, this paper represents the first published research to also analyze a Zika vaccine using the special transgenic murine strain A129 lacking interferon alpha and beta receptors (IFNAR-/-), making them highly susceptible to Zika infection and disease. Taking this extra step provided stronger data on how vaccine-generated immune responses could protect against a lethal viral challenge and demonstrates the benefit a Zika vaccine might provide in people.
In June, Inovio was the first to commence a human Zika trial in healthy adult volunteers, with sites in the U.S. and Canada, with the first subject dosed in July. This Phase 1, open-label, dose-ranging study of 40 healthy adult volunteers was designed to evaluate the safety, tolerability and immunogenicity of GLS-5700 administered with the CELLECTRA
®
-3P device, Inovio’s proprietary intradermal DNA delivery device.
In December Inovio reported that in this fully enrolled Phase 1 trial Zika-naïve subjects in both low dose and high dose vaccine groups demonstrated Zika antigen-specific antibody responses after one or two vaccinations. In addition, the vaccine was well tolerated and no significant safety concerns were noted in any of the 40 subjects out to 14 weeks from initiation of dosing, the latest available data from the study. This study will evaluate safety, tolerability and induction and persistence of Zika specific antibody and T cell responses out to 60 weeks.
In February 2017 we reported that in our fully enrolled 40-subject phase 1 Zika study of GLS-5700, high levels of binding antibodies were measured (ELISA) in 100% (39 of 39) of evaluated subjects after three vaccinations; 82% (32 of 39) after two doses; and 40% (16 of 40) after one dose. The vaccine was well tolerated with no significant safety concerns to date.
In August Inovio and GeneOne announced they initiated a second clinical study of Inovio’s preventive Zika vaccine (GLS-5700), this one designed to enroll 160 subjects in Puerto Rico, where the Zika virus outbreak had been declared a public
health emergency. In this placebo-controlled, double-blind trial involving healthy adult volunteers, 80 subjects will receive vaccine and 80 subjects will receive placebo. The study will evaluate the safety, tolerability and immunogenicity of GLS-5700 administered with Inovio’s CELLECTRA
®
-3P device. The companies will also assess differences in Zika infection rates in participants given either placebo or vaccine as part of an exploratory endpoint.
In December 2016 we also announced the award of a $6.1 million sub-grant to Inovio through The Wistar Institute (total grant value of $8.8 million) to develop a DNA-based monoclonal antibody designed to provide a fast-acting treatment against Zika infection and its debilitating effects. The goal of this program, which is funded by the Bill & Melinda Gates Foundation, is for the researchers to develop a Zika dMAb
®
therapy ready for human clinical trials in less than two years. See the section Synthetic DNA-based Monoclonal Antibodies Products for further information on our DNA-based monoclonal antibody program.
Ebola
The Ebola virus has been described as one of the most virulent viral diseases known to man with lethality rates approaching 90%. Ebola can spread through human-to-human transmission by direct contact with the blood, secretions, organs or bodily fluids of an infected individual and with surfaces or materials that contain the contaminated fluids of an infected person, such as bedding and clothing. It is capable of causing death within two to twenty-one days of exposure. There are no approved preventive vaccines or effective therapeutic treatments for Ebola. In addition, various experimental approaches have already been associated with undesirable side effects and limited ability to scale manufacturing.
According to the CDC, the 2014 Ebola epidemic was the largest in history, resulting in 28,603 suspected and confirmed cases and 11,301 deaths (as of January 31, 2016).
In 2014 we announced our intent to advance our DNA immunotherapy for Ebola into a Phase 1 clinical trial in collaboration with GeneOne Life Science Inc. In the collaboration, Inovio and GeneOne agreed to co-develop Inovio's DNA-based Ebola immunotherapy through a Phase 1 clinical trial. The decision to advance our Ebola immunotherapy was based on positive results achieved in preclinical studies. We observed that 100% of immunized guinea pigs and mice were protected from death after being exposed to the Ebola virus. Unlike the non-immunized animals, immunized animals were also protected from weight loss, a measure of morbidity. Researchers found significant increases in neutralizing antibody titers and strong and broad levels of immunotherapy-induced T-cells, including "killer" T-cells, suggesting that this product could provide both preventive and treatment benefits. This data was published in 2013 in the peer-reviewed journal
Molecular Therapy
in a paper, "Induction of Broad Cytotoxic T Cells by Protective DNA Vaccination Against Marburg and Ebola."
In April 2015 the company received a grant from the Defense Advanced Research Projects Agency (DARPA) to lead a collaborative team to develop multiple treatment and prevention approaches against Ebola. Other collaborators are MedImmune, the global biologics research and development arm of AstraZeneca; GeneOne Life Sciences and its manufacturing subsidiary, VGXI, Inc.; and David B. Weiner, PhD, Inovio board member, executive vice president at the Wistar Institute and retired professor of Pathology and Laboratory Medicine at The Perelman School of Medicine at the University of Pennsylvania, Emory University and Vanderbilt University. The previous collaboration agreement with GeneOne for Ebola was incorporated into this consortium funded by DARPA.
The Inovio-led consortium is taking a multi-faceted approach to develop products to prevent and treat Ebola infection. These programs include development and early clinical testing of:
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A therapeutic DNA-based monoclonal antibody product against the Ebola virus infection. This promising new technology has properties that best fit a response to the outbreak in that they could be designed and manufactured expediently on a large scale using common fermentation technology, are thermal-stable, and may provide more rapid therapeutic benefit.
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A highly potent conventional protein-based therapeutic monoclonal antibody (mAb) product against Ebola virus infection.
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A DNA-based vaccine against Ebola.
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Pathogen specific mAbs have emerged as a viable approach for immunoprophylaxis against Ebola and other pathogens where anti-viral drugs or vaccinations are not currently available. mAbs can be administered either just before or just after exposure to the pathogen and serve to combat the immediate effects of the pathogen. Unlike vaccines, immunoprophylaxis by mAbs does not develop long term immune memory. Therefore an ideal approach would include the administration of a mAb for immediate protection and a vaccine to train the immune system for longer term protection.
Previous Ebola research studies have shown that monoclonal antibodies (such as ZMapp) could be useful in treating patients who have been infected with Ebola virus by selectively binding and neutralizing the virus in the body.
The award covers pre-clinical development costs for the dMAb products and protein mAb candidates as well as GMP manufacturing costs and the Phase 1 clinical study costs with the three product candidates. The academic partners are leading Ebola research and medical centers at the front edge of the discovery efforts for highly potent anti-Ebola mAbs. The funding
period is over two years and covers a base award of $21 million and an option award of $24 million, which was exercised in September 2015 upon the successful completion of certain pre-clinical development milestones. Inovio has completed all of the vaccine development milestones (see below) and is on track to complete the protein Mab and the dMAb milestones in 2017. Inovio has completed the identification, screening, and selection of the protein MAb and dMAb candidates under the award. In February 2017, DARPA awarded Inovio a No Cost Extension by 1-year to enable the completion of cGMP manufacturing of the protein MAb and the dMAb candidates and preparation of the first human clinical study with the dMAb.
In May 2015 the collaborators initiated a Phase 1 trial (EBOV-001, ClinicalTrials.gov: NCT02464670)
for the Ebola DNA vaccine to evaluate safety, tolerability and immune responses in 75 healthy subjects. The study was designed to evaluate INO-4212 and its components INO-4201 and INO-4202, alone or in combination with INO-9012 (DNA-based IL-12), delivered into muscle or skin using Inovio's proprietary DNA delivery technology.
In March 2016 Inovio announced that this fully enrolled Phase 1 study was safe, tolerable, and generated strong T cell and antibody responses.
This initial trial evaluated INO-4212 in five groups of healthy subjects. INO-4212 consists of two optimized SynCon
®
DNA plasmids coding for the Ebola glycoprotein antigen from circulating Ebola strains from 1975 - 2014. These plasmids were tested separately and together in muscle and skin in five study arms, one including Inovio’s DNA-based IL-12 immune activator. Of 69 evaluated subjects, 64 (92.7%) seroconverted and mounted a strong antibody response to the Ebola glycoprotein antigen following the three dose immunization regimen; 48 subjects (69.6%) seroconverted after only two doses.
Significantly, in the study arm using intradermal (skin) administration, 13 of 13 evaluable subjects (100%) generated antigen-specific antibody responses after only two doses and all remained seropositive after three immunizations. Similarly, in the study arm receiving the vaccine with intramuscular administration in combination with plasmid IL-12, and 13 of 13 evaluable subjects (100%) produced strong antibody responses after three immunizations and12 of 13 (92.3%) demonstrated strong antibody responses after only two immunizations.
The Ebola glycoprotein specific geometric mean antibody titers measured in the five cohorts ranged from over 2,000 to greater than 46,000. Significantly, a majority of vaccinated subjects in each of the five cohorts produced strong Ebola antigen specific T-cell responses as measured by interferon gamma ELISpot analysis.
INO-4212 was well tolerated and had not demonstrated systemic serious adverse effects, such as fever, joint pain, and low white blood cell counts, reported in association with some viral vector based Ebola vaccines currently in development. Moreover, unlike the viral vectored vaccines which must be kept frozen, INO-4212 was formulated in a solution which was refrigerated at 2-8 C.
Detailed immunogenicity and safety data is being prepared for peer-reviewed publication.
In August Inovio announced that enrollment of this study was being expanded to 200 subjects to further characterize and identify in humans the most optimal immunization regimen using intradermal (skin) delivery of its preventive Ebola DNA vaccine. Inovio will be enrolling an additional 125 subjects to assess immune response characteristics generated with fewer intradermal administrations, lower doses, and with and without its DNA-based IL-12 immune activator.
Inovio aims to report additional data from these programs in 2017.
Middle East Respiratory Syndrome (MERS)
MERS is a viral respiratory illness first reported in Saudi Arabia in 2012. MERS appears to have been transmitted from an animal reservoir to humans but human to human transmission has been confirmed. The virus has not been shown to spread in a sustained way in communities, but the situation is still evolving. Like the severe acute respiratory syndrome (SARS) outbreak in 2003, which infected 8,000 people and was fatal in nearly 10% of cases, MERS is caused by a coronavirus and appears to cause a severe lung infection. MERS differs in that it also causes rapid kidney failure. Its extremely high death rate has caused serious concern among global health officials.
Despite the continuing threat of MERS outbreaks, there are no licensed vaccines or treatments for MERS. Since the virus was first identified in Saudi Arabia in 2012, the World Health Organization reports almost 1,900 MERS infections and nearly 700 deaths worldwide. Twenty seven countries have reported cases, including Korea where an outbreak in the summer of 2015 resulted in 186 cases and 38 deaths. While a SARS epidemic in 2003 killed 10% of those infected, MERS has killed about 36% of people who contracted this communicable virus.
In November 2013 Inovio announced that preclinical testing of its SynCon
®
MERS vaccine (GLS-5300) induced robust and durable immune responses, demonstrating the potential for such a vaccine to prevent and treat this deadly virus. DNA vaccine constructs targeting multiple MERS antigens were designed using Inovio's SynCon
®
vaccine platform with the goal to universally protect against multiple strains of MERS, which has been shown to have diverse genetic variants. These SynCon
®
constructs were administered via Inovio's CELLECTRA
®
electroporation-based delivery technology.
A consensus MERS "spike" protein vaccine construct was created based on multiple strains of the MERS virus. Inovio's MERS DNA vaccine was immunogenic in mice and seroconversion, or the development of detectable specific antibodies in the blood as a result of immunization, was observed in all animals. Furthermore, the antibodies generated by the vaccine in 100% of mice (20 of 20) were able to neutralize or completely block actual infection of MERS virus in the cells, demonstrating the protective potential of this vaccine. In contrast, none of the unvaccinated mice in the control group (10) generated neutralizing antibodies.
The vaccinations were also highly T-cell immunogenic, generating robust and broad T cell responses as extensively analyzed by the standardized T cell ELISPOT assay. The vaccine produced robust CD8+ and CD4+ T cell responses against multiple epitopes of the MERS spike protein. This increased diversity and magnitude of cellular responses may be critical for effectively mitigating MERS infection.
These findings are vital given the importance of neutralizing antibodies in preventing infection and the role T cells play in clearing infection by killing cells that harbor the virus.
In May 2015 Inovio announced it would advance its MERS vaccine into a Phase 1 clinical trial in healthy volunteers in a collaboration with GeneOne Life Science Inc.
In August 2015 Inovio announced that its MERS vaccine induced 100% protection from a live virus challenge in a preclinical study in mice, camels and monkeys, or non-human primates. In all three species, the vaccine induced robust immune responses capable of preventing the virus from infecting cells. The data from camels is an important finding because camels represent not only a host reservoir of the disease but act as a mode of transmission to humans. In monkeys, all vaccinated animals in the study were protected from symptoms of MERS disease when challenged with a live MERS virus.
The results appeared in the peer-reviewed journal
Science Translational Medicine
in an article entitled, "A synthetic consensus anti-spike protein DNA vaccine induces protective immunity against Middle East Respiratory Syndrome Coronavirus in non-human primates." Inovio's collaborators for this study included researchers from the University of Pennsylvania, Public Health Agency of Canada, NIH, University of Washington, and University of South Florida.
Vaccinations of GLS-5300 in this Phase 1 study of 75 healthy subjects began in February 2016 at the Walter Reed Army Institute of Research (WRAIR) in Maryland, where the trial is being conducted. The primary and secondary goals of this first-in-man Phase 1 trial are to obtain safety and immunogenicity data. This trial represents the first MERS vaccine to be tested in humans for this disease that has no approved vaccines or treatments.
In December 2016 Inovio announced that the International Vaccine Institute (IVI) will provide new funding and support to further advance GLS-5300. IVI will add technical, laboratory and financial support for GLS-5300 clinical trials in Korea with the goal to advance clinical testing toward emergency use authorization by the Korean government as well as authorities of other countries. This collaborative funding is part of a 41 billion Won (USD $34 million) grant publicly pledged in 2015 from the Samsung Foundation to IVI to support the development of a MERS vaccine for emergency use in Korea and internationally.
In February 2017 we reported that in our fully enrolled 75-subject phase 1 study of our MERS DNA vaccine GLS-5300, high levels of binding antibodies were measured (ELISA) in 92% (57 of 62) of evaluated subjects after three vaccinations (84% after two doses; 44% after one dose). The vaccine was well tolerated with no significant safety concerns to date.
HIV Preventive and Therapeutic Immune Therapies-PENNVAX
®
-GP
Since its discovery in 1981, HIV, the virus which causes AIDS, has killed more than 36 million people. In 2011, there were roughly 2.5 million new cases of HIV diagnosed. In 2012, approximately 35 million people were living with HIV worldwide. Each year in the United States, about 50,000 people become newly infected with HIV. At the end of 2010, 1.1 million people in the US were living with HIV.
Effective vaccines have been actively pursued for over 20 years, without success. HIV represents one of the most confounding targets in medicine. The virus' high mutagenicity (ability to mutate) has made effective vaccine development very challenging. Its outer envelope, swathed in sugar molecules, is difficult to attack, and HIV strikes the very cells that the immune system launches to thwart such an infection. Although several drugs (anti-retrovirals) are available to treat the patients once they are infected, vaccines and immunotherapies are necessary to stop the spread of disease and perhaps reduce the need for anti-retroviral treatment.
Noting that many long-term survivors have high counts of killer CD8 T cells, the HIV vaccine and immunotherapy field has turned to stimulating the immune system to generate those cells. Recent HIV vaccine candidates used an adenovirus (a common human cold virus) genetically modified to contain code for HIV antigens to prevent viral replication. These vaccines have proven to not be effective. More recently the RV-144 trial, which employed an ALVAC™ (canary pox) vaccine prime followed by a protein vaccine boost, demonstrated 30% efficacy in preventing acquisition of infection amongst the vaccinated population compared to the control group. Although the efficacy was relatively modest, the finding for the first time showed
that an immunotherapy may be able to combat spread of HIV and has spurred the development of newer immunotherapy candidates. We believe, however, that a different approach is needed to develop an effective vaccine or immunotherapy for HIV.
In October 2009, along with the HIV Vaccines Trial Network (“HVTN”) we initiated a Phase 1 study (HVTN-080) of PENNVAX
®
-B (with and without a DNA cytokine, DNA IL-12) with the CELLECTRA
®
electroporation delivery device in healthy, uninfected individuals. The SynCon®vaccine was encoded for HIV antigens gag, pol, and env from HIV subtype, or clade, B. This randomized, double-blind, multi-center study was sponsored by the NIAID, an agency of the National Institutes of Health (the “NIH”), conducted by the NIAID-funded HVTN, and was designed to assess safety and levels of immune responses.
Of 48 healthy, HIV-negative volunteers, eight received placebo, 10 received a 1 mg dose of PENNVAX
®
-B immunotherapy, and 30 received a 1 mg dose of PENNVAX
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-B along with IL-12 DNA. All volunteers received vaccine or placebo administered with electroporation at months 0, 1, and 3. T-cell immune responses were detected using a validated flow cytometry-based intracellular cytokine staining (ICS) assay.
This data was published in July 2013 in the peer-reviewed
Journal of Infectious Diseases
in the article, “Safety and comparative immunogenicity of an HIV-1 DNA vaccine in combination with plasmid IL-12 and impact of intramuscular electroporation for delivery.” Overall, CD4, CD8 or both T-cell responses were observed against at least one of the immunotherapy antigens in 88.9% (24 of 27) of evaluated subjects after three immunizations with electroporation plus DNA-based IL-12. The magnitude of cellular immune responses were equal to or greater than those reported from vector-based HIV vaccines such as adenovirus. These results represented best-in-class immune responses that had not previously been observed with other platforms.
Other specific results included:
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Antigen-specific CD4 T cell responses were generated in 80.8% of evaluated immunotherapy recipients (21 of 26).
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Significant antigen-specific CD8 T cell responses were generated in 51.9% of evaluated immunotherapy recipients (14 of 27).
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Compared to a previously conducted HVTN 070 Phase 1 study, which assessed PENNVAX
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-B with cytokine adjuvant IL-12 at double the dose, with four immunizations, but without electroporation delivery, response rates in HVTN 080 with electroporation were significantly higher than HVTN 070 CD4 responses (40.7%) and CD8 T cell responses (3.6%). Samples from eight placebo recipients and pre-vaccine samples were negative for both CD4 T cell responses and CD8 T cell responses.
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PENNVAX
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-B delivered using the CELLECTRA
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intramuscular electroporation delivery device with or without IL-12 was safe and generally well tolerated. There were no immunotherapy-related serious adverse events. Reported adverse events and injection site reactions were mild to moderate and required no treatment.
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A second clinical study testing PENNVAX
®
-B in a therapeutic setting was conducted in collaboration with the University of Pennsylvania. The HIV-001 open label, Phase 1 study enrolled 12 adult HIV-positive volunteers to assess safety and levels of immune responses generated by PENNVAX
®
-B delivered with our CELLECTRA
®
electroporation device. Study volunteers were required to be on a highly active antiretroviral therapy (HAART) regimen, have undetectable plasma viral load (<75 copies/mL), and have CD4 T lymphocyte counts above 400 cells/µL with nadirs over 200 cell/µL. Twelve (12) eligible subjects were administered a four dose series (day 0, weeks 4, 8 and 16) of PENNVAX
®
-B containing 3 mg of DNA/dose via intramuscular electroporation.
T cell responses were measured using a validated ELISpot assay. Overall, significant immunotherapy-specific T cell responses were observed in 75% (9 out of 12) of subjects against at least one of the three immunotherapy antigens (gag, pol, or env) following immunization. Fifty percent of the subjects (6 out of 12) had strong immunotherapy induced antigen-specific responses above the pre-immunization levels to at least two of the antigens. Importantly, the responses induced by immunization were predominantly antigen-specific (i.e. gag, pol and env) CD8 T-cells, which are considered to be paramount in clearing chronic viral infections and an important measurement of the performance of an immunotherapeutic. These results are in stark contrast to previously reported studies with other DNA immunotherapies delivered without electroporation that yielded poor overall T cell immune responses.
In December 2014 the results from this clinical study appeared in the peer-reviewed journal
Molecular Therapy
in the article, "Synthetic consensus HIV-1 DNA induces potent cellular immune responses and synthesis of granzyme B, perforin in HIV infected individuals," authored by Inovio researchers and collaborators.
Our HIV immunotherapy was found to have significantly increased antigen-specific CD8+ T-cell responses in all 12 patients. We observed that these activated CD8+ killer T cells produced the cell-killing substances granzyme B and perforin (both necessary to kill targeted cells and viruses) in quantities and with characteristics similar to those of long-term non-progressors (i.e. HIV-infected individuals who, without treatment, do not progress to further stages of the disease). It is
believed that in these extremely rare individuals who self-regulate their HIV infection, part of their ability to control the infection may lie in their unique immune responses.
Another striking result of this HIV study was that PENNVAX
®
-B increased the number of HIV-specific CD8+ killer T cells displaying the receptor integrin, which is associated with the ability to carry T cells to the gastrointestinal tract (GIT), the most important target organ for HIV.
We believe these positive results demonstrate the potency of our immunotherapy technology platform and raise the potential for the development of immunotherapies against HIV.
The valuable proof of concept data achieved with the PENNVAX
®
-B (targeting clade B envelope viruses) clinical studies provided a strong and positive basis with which to advance our HIV immunotherapy development program via an
HIV Vaccine Design and Development Teams
(HVDDT) contract for PENNVAX
®
-GP (discussed below).
In September 2010 the United States Military HIV Research Program (MHRP) initiated a Phase 1 trial (RV262) using one of our prophylactic HIV immunotherapies in a unique prime-boost strategy. This program was developed to protect against diverse subtypes of HIV-1 prevalent in North America, Europe, Africa, and South America. The study is being conducted by the United States MHRP through its clinical research network in the US and East Africa. The prime was a DNA immunotherapy, Inovio's PENNVAX
®
-G, and the boost was delivered using a vaccinia viral vector, Modified Vaccinia Ankara-Chiang Mai Double Recombinant (MVA-CMDR). Together, the vaccines were designed to deliver a diverse mixture of antigens for HIV-1 subtypes A, B, C, D and E. The study tested PENNVAX
®
-G delivered with electroporation in conjunction with the MVA-CMDR boost. The NIAID sponsored the study, which was designed to enroll up to 92 participants and assess safety and immune responses. Interim data presented in October 2014 showed that the vaccine administration was generally safe and well tolerated. Antigen specific T cell responses were detected by interferon gamma ELISpot assay in 12/27 subjects and antibody responses were noted by ELISA in 10/11 subjects whose samples had been analyzed up to that point.
Based on the proof-of-concept established with PENNVAX
®
-B, we were awarded a contract under the NIAID's HIV Vaccine Design and Development Teams program to advance a more optimized preventive HIV DNA vaccine, PENNVAX
®
-GP, delivered using intradermal electroporation delivery. The contract provided for up to $25.3 million of funding over seven years. The funding and development program covered pre-clinical optimization, immunogenicity and challenge studies in animal models, IND-enabling toxicology studies, cGMP (current good manufacturing practices) manufacturing of all components of the immunotherapy and intradermal CELLECTRA
®
electroporation device, and the conduct of a Phase 1 human clinical trial.
In September 2015 the first patient was dosed in a Phase 1 trial (HVTN-098, ClinicalTrials.gov: NCT02431767)
to evaluate safety and tolerability of PENNVAX
®
-GP, Inovio's "universal" DNA vaccine for HIV. This human study is in collaboration with the HIV Vaccine Trials Network (HVTN). The trial will measure immune responses following administration of the vaccine in four groups of healthy subjects receiving the vaccine with and without an immune activator (IL-12) and delivered into muscle or skin using Inovio's CELLECTRA
®
delivery technology.
In 2015 Inovio and its collaborators were awarded an additional $16 million Integrated Preclinical/Clinical AIDS Vaccine Development (IPCAVD) grant from the National Institute of Allergy and Infectious Diseases (NIAID). This new five-year program grant was awarded based on a peer-reviewed meritorious proposal by Dr. David Weiner, executive vice president at the Wistar Institute, Inovio board member and chair of the scientific advisory board, and Inovio. New PENNVAX
®
envelope constructs will be designed and tested with Inovio's DNA-based immune activator encoding novel cytokine genes and will be studied in a prime-boost strategy with recombinant HIV envelope proteins. The collaborators will assess different combinations in preclinical models with the goal of generating high levels of neutralizing antibodies mirroring the robust CD8+ T cell responses generated by Inovio's PENNVAX
®
-B DNA vaccine in previously published clinical studies. The 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 outcomes.
Inovio is working with NIH/DAIDS and collaborators to also launch a Phase 1 clinical study of PENNVAX
®
-GP in a therapeutic setting.
HIV remains a challenging and tremendously important area of medical research, and we value the NIH's support to further evaluate the immunogenicity and efficacy of our electroporation delivery system and novel preventive HIV immunotherapy candidate.
In July 2016 we announced that our DNA-based monoclonal antibody technology will be deployed to develop products which could be used alone and in combination with other immunotherapies in the pursuit of new ways to treat and potentially cure infection from the HIV virus. See the section called Synthetic DNA-based Monoclonal Antibodies Products for more details on this technology.
Avian Influenza Immunotherapies
Influenza is one of the most communicable diseases and typically affects children and elderly most severely. Complications from influenza cause more than 200,000 hospitalizations and cause between 3,000-49,000 deaths each year in the United States alone, according to the Centers for Disease Control. The world is annually subjected to two influenza sessions (one per hemisphere), between three and five million cases of severe illness, and up to 500,000 deaths. A pandemic occurs every ten to twenty years, which infects a large proportion of the world's population and can kill tens of millions of people as the “Spanish Flu” did in just two years (50-100 million deaths during 1918-1919).
New influenza viruses are constantly produced by mutation or reassortment, and can develop resistance to standard antiviral drugs. The H5N1 flu virus spread from Asia despite the belief that it was under control immediately after outbreaks there in 2004. In 2005, there were reports of H5N1 in wild birds in Europe. In 2006, there were reports of an H5N1 strain in wild birds and poultry in Africa and the Near East. According to the World Health Organization, the H5N1 bird flu infected 650 people and resulted in 386 deaths (approximately 60% death rate) in 15 countries since 2003 (WHO, February 2014). While H5N1 has never been passed person-to-person and has not spread widely, one concern is the potential for the lethal H5N1 to “reassort” with another of the influenza sub-types that have been prone to spread more rapidly in humans, possibly creating a more dangerous influenza strain. Through 2006, over 140 million birds had been killed and over $10 billion spent to try to contain H5N1 avian influenza, which has a death rate of 90%-100% in birds.
Our VGX-3400X candidate targets H5N1. The immunotherapy consists of three distinct DNA plasmids coded for a consensus hemagglutinin (HA) antigen derived from different H5N1 virus strains; a consensus neuraminidase (NA) antigen derived from different N1 sequences; and a consensus nucleoprotein (NP) fused to a small portion of the m2 protein (m2E) based on a broader cross-section of influenza viruses in addition to H5N1 and H1N1.
In our first proof of principle study of our universal flu immunotherapy program, VGX-3400X was delivered with intramuscular electroporation using our CELLECTRA
®
electroporation device. The primary objectives of this clinical trial were to assess safety and tolerability. The secondary objective was the measurement of antigen-specific T cell and antibody responses, including binding and hemagglutination inhibition (HAI) responses, i.e. a measure of protection, against multiple strains of H5N1 influenza.
The study assessed a total of 60 healthy volunteers, 30 in the US and 30 in Korea (in a separate, parallel clinical trial sponsored by Inovio affiliate GeneOne. Three dose cohorts of 10 subjects were each given two injections of 0.2 mg, 0.67 mg, or 2.0 mg of each plasmid at months 0 and 1.
In a report in July 2011 of interim data VGX-3400X was found to be generally safe and well tolerated at all dose levels. There were no vaccine-related serious adverse events. Reported adverse events and injection site reactions were mild to moderate and required no treatment.
We tested for antibody responses against the target antigens and observed high levels of binding antibodies in 26 of 27 evaluated subjects (96%). Antibodies were generated against all three antigens, as tested by the enzyme-linked immunosorbent assay (ELISA). Positive antibody responses persisted to seven months, the latest time point tested.
In testing for HAI responses against the Vietnam (A/H5N1/1203/04) strain, 3 of 27 subjects (11%) showed HAI titers greater than 1:40, which is considered to be an indicator of protection against influenza in humans. Two of the three subjects with HAI titers exceeding 1:40 against the Vietnam strain also demonstrated greater than 1:40 titers against the Indonesia (A/H5N1/5/2005) strain, demonstrating cross-reactive responses in these volunteers.
Significantly, antigen-specific cytotoxic T-lymphocyte (CTL) responses were also observed against all three antigens (HA, NA and NP). After two vaccinations, 13 of 18 vaccinated subjects (72%) from the first two cohorts developed strong CTL responses to at least one of the immunotherapy components. After cohort 3 samples were analyzed, 20 of 29 immunized subjects (69%) in all 3 cohorts developed strong CTL responses to at least one of the immunotherapy components. These positive T cell responses were measured up to seven months after the first immunization. Generation of influenza antigen-specific T cell responses is believed to be important for generating universal, long-lasting immunity against influenza as well as to generate a stronger immune response against flu in elderly people.
In another component of the study, participants received a booster vaccination using just the H5 HA immunotherapy component of VGX-3400X delivered using intradermal (rather than intramuscular) electroporation. The intradermal (ID) part of the study was the first flu study using ID electroporation delivery in humans. ID electroporation delivers our SynCon
®
immunotherapies into skin, which contains large amounts of immune cells such as dendritic cells and macrophages considered most important for generating protective antibodies. Our new ID electroporation device uses a patented miniaturized needle array which creates electroporation conditions uniquely optimized for skin delivery. The goal of this booster vaccination was to determine if ID delivery of the H5 HA construct can increase HAI titers beyond those achieved by the initial intramuscular immunizations. Twenty-two participants received the ID booster immunization.
Immune response data measured one month after this boost were reported in November 2011. Ten of 20 subjects (50%) exhibited a four-fold or greater rise in geometric mean titers (GMT) in the HAI assay (ranging from 1:20 to 1:80 HAI
titers) against the Clade 1 A/Vietnam/1203/04 strain. Significantly, a four-fold or greater rise in GMT titers against five other Clade 2 (Clade 2.1, 2.2; 2.3.2; 2.3.4) and Clade 0 H5N1 viruses was also noted in 10-25% of the vaccinated subjects, further demonstrating cross-reactive immune responses in these volunteers. One subject displayed greater than 1:40 HAI titers against all six different H5N1 viruses tested. ID immunization was found to be generally safe and well tolerated.
HAI measurements from the blood of an immunized subject are used to assess the generation of protective antibody responses. A four-fold rise in HAI titers (compared to pre-vaccination) is considered to be an important indicator of immune activation. Generating an HAI titer of 1:20 is generally regarded as a positive vaccine response, with a titer of 1:40 or higher in the blood of immunized subjects generally associated with protection against influenza in humans.
Seventeen subjects boosted with the minimally invasive ID vaccination were subsequently given a second ID booster vaccination. In May 2012 we reported that 100% and 89% of immunized subjects demonstrated high-titer binding antibody responses against the more common Clade 1 A/Vietnam/1203/04 and Clade 2 A/Indo/5/05 strains, respectively, demonstrating vaccine-specific immune activation. We also tested the immunotherapy's ability to generate protective HAI responses against six distinct H5N1 virus strains (Clades 0, 1, 2.1, 2.2, 2.3.2 and 2.3.4), representing all major genetic branches of the H5N1 genetic tree. Of the 17 subjects who completed the full immunization regimen:
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Eight of 17 (47%) immunized subjects had an HAI titer of 1:40 or higher against at least one of the tested H5N1 viruses.
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Twelve of 17 (71%) vaccinated subjects had an HAI titer of 1:20 or higher against at least one H5N1 strain.
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Seven of 17 (41%) had an HAI titer of 1:40 or higher against the Clade 2.2 A/Turkey/1/05 strain.
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Five of 17 immunized subjects (29%) displayed an HAI titer of 1:20 or higher against at least three different H5N1 viruses tested.
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In an unprecedented result, two immunized subjects demonstrated an HAI titer of 1:20 or higher against all six strains tested.
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Hemagglutination inhibition (HAI) measurements from the blood of an immunized subject are used to assess the generation of protective HA antibody responses generated by a vaccine. All HAI titer data are presented in geometric mean titers (GMT). Generating an HAI titer of 1:20 is generally regarded as a positive response to the vaccine; a titer of 1:40 or higher in the blood of immunized subjects is generally associated with protection against seasonal influenza viruses and has been observed in multiple subtypes.
Although a number of companies have well-developed avian influenza programs and lead vaccine candidates have entered into national stockpiles (US and EU), we believe there exists a need for broadly protective and easily scalable technologies to prepare for the as yet unknown target presented by the next form of avian influenza. Our SynCon
®
technology provides protection from known avian influenza viruses (in animal studies) and has also shown the ability to protect against newly emergent, unmatched strains.
Responding to the 2013 H7N9 influenza outbreak, we completed the design, optimization, and manufacturing of an H7N9 DNA immunotherapy within two weeks. A pre-clinical study of this DNA therapy showed that 100% of vaccinated mice were protected against sickness and death when they were challenged with a lethal dose of H7N9 virus. This study further highlights the ability of Inovio's SynCon
®
immunotherapies to create cellular immune responses that could reduce the severity of H7N9 infection in a person that acquires the virus and limit the spread of the virus in a pandemic setting. Data from this study was published in
Vaccine
in a paper titled “Protective immunity to H7N9 influenza viruses elicited by DNA vaccine.”
We are seeking additional grant funding to advance our influenza program further.
Universal Influenza Immunotherapy
Conventional vaccines are strain-specific and have limited ability to protect against genetic shifts in the influenza strains they target. They are therefore modified annually in anticipation of the next flu season’s new strain(s). If a significantly different, unanticipated new strain emerges, such as the 2009 swine-origin pandemic strain, then the current vaccines provide little or no protective capability. In contrast, we believe that our design approach to characterize a broad consensus of antigens across variant strains of each influenza sub-type creates the ability to protect against new strains that have common genetic roots, even though they are not perfectly matched. By formulating a single immunotherapy with some or all of the key sub-types, protection may be achieved against seasonal as well as pandemic strains such as swine flu or pandemic-potential strains such as avian influenza noted above. We are focused on developing DNA-based influenza immunotherapies able to provide broad protection against known as well as newly emerging, unknown seasonal and pandemic influenza strains.
Instead of targeting a specific strain or strains, we developed a universal vaccine strategy to deal with the ever-changing flu threats. Using our SynCon
®
process, our scientists designed immunotherapies targeting an optimal consensus of HA, NA, and NP proteins derived from multiple strains of each of the Type A sub-types H1N1, H2N2, H3N2 (these three influenza sub-types having been responsible for the majority of seasonal and pandemic influenza outbreaks in humans during the last century), as well as H5N1. In theory, consensus HA vaccine constructs from each sub-type, delivered using our electroporation
device, could potentially protect immunized subjects from 90-95% of all human seasonal and pandemic influenza concerns. Additionally, we have also developed an optimal consensus of HA sequences derived from influenza Type B strains. Type B is one of three components of current seasonal influenza vaccinations. Thus, using our SynCon
®
constructs, we have now developed immunotherapy elements that can target both pandemic-risk (H5N1, H7N9, H1N1) as well as seasonal influenza strains (H3N2, H1N1, influenza B).
Moreover, using our approach the immunotherapies might not have to be administered annually after the first few priming sessions. Rather, the same combination could be used to boost the immune system every few years.
In September 2012 we announced that an interim analysis of a SynCon
®
universal H1N1 influenza vaccine showed that it generated protective HAI titers against some of the most prevalent strains of H1N1 influenza from the past 100 years in a Phase 1 clinical trial. The open label Phase 1 study evaluated two H1N1 hemagglutinin (HA) plasmids designed to broadly protect against unmatched influenza strains within different branches of the H1N1 subtype. These plasmids were delivered in healthy adults with Inovio's CELLECTRA
®
intradermal electroporation device up to three times. The delivered immunotherapy was well tolerated; reported adverse events and injection site reactions were mild to moderate and required no treatment.
Researchers exposed blood samples from the vaccinated subjects to each of the nine key H1N1 viruses in circulation over the last 100 years: eight were H1N1 strains used to formulate the seasonal vaccines of the last 25 years; one was the H1N1 strain that caused the 1918 Spanish flu. These unmatched influenza strains were used to assess the generation of hemagglutination inhibition (HAI) titers meeting or exceeding 1:40. Demonstrating Inovio's vaccine's broad cross-reactive coverage, a significant percentage of subjects immunized with Inovio's SynCon
®
immunotherapy had an HAI titer of 1:40 or higher against each of the nine H1N1 strains tested, ranging from a 30% response rate to the A/Brisbane/59/07 strain to a 100% response rate to the A/Beijing/262/95 strain. The benchmark for the current licensed seasonal flu vaccines, which are based on matching the vaccine HA sequence to that of the circulating strain, is to have greater than 65% of vaccinees generate an HAI titer of 1:40 or higher against the matched vaccine strain.
By design, our SynCon
®
universal flu immunotherapy is not matched to any single virus and was not matched to any of the strains tested in this study. The immunotherapy recipients generated protective HAI responses against the H1N1 A/South Carolina/1/18 strain from the 1918 Spanish flu as well as all the H1N1 strains which were part of the annual seasonal trivalent inactivated flu vaccines (TIV) since 1986, including: A/Taiwan/1/86, A/Texas/36/91, A/Bayern/07/95, A/Beijing/262/95, A/New Caledonia/20/99, A/Solomon Islands/03/06, A/Brisbane/59/07, A/California/07/09. The HAI titers in the positive responders ranged from 1:40 to greater than 1:1280.
Compared to the seasonal TIV (trivalent influenza vaccine)-immunized control group, which was matched to the current H1N1 seasonal flu strain (A/California/07/09), those immunized with our immunotherapy generated a higher or similar percentage of positive HAI titer responders against all of the strains except for A/California/07/09. As anticipated, the TIV recipients generated the best HAI titers against the matched strain, but did not generate vaccine-induced response rates against the unmatched strains.
We are conducting optimization studies in animal models to further strengthen our H1N1 immunotherapy's potency against all strains, especially the current circulating strain, A/California/07/09, as well as to reduce the number of injections needed to generate protective responses against multiple strains.
In December 2012 we reported interim results of a Phase 1 trial that showed that a single dose of our H1N1 universal SynCon
®
flu immunotherapy followed with a dose of a seasonal flu vaccine generated protective immune responses in 40% of trial subjects compared with a 20% response rate in elderly patients who received the seasonal flu vaccine alone.
People over 65 years of age represent about 90% of annual influenza deaths in the US. Older people's immune systems typically mount much weaker protective immune responses to seasonal vaccines, often in only 10 to 20% of this population. In younger adults, the same flu vaccines generate protective immune responses in at least 65% of the vaccine recipients. Other approaches, such as the use of higher vaccine doses and novel adjuvants, have not significantly improved the seasonal vaccine's impact in the older population. Thus, there is a significant need for a new approach to provide better protection in this more vulnerable population.
With the vulnerability of the elderly in mind, this Phase 1 study evaluated the ability of Inovio's SynCon
®
immunotherapy alone, as well as in combination with the 2012 seasonal influenza vaccine, to generate protective levels of antigen-specific antibody immune responses in a greater proportion of the elderly population as well as to assess the potential for more universal protection against both matched and unmatched seasonal influenza strains.
In the trial, conducted at the University of Manitoba in Winnipeg, Canada, 50 healthy elderly patients were divided into three groups: one group of 20 subjects received a two-dose regimen of Inovio's H1N1 universal SynCon
®
flu immunotherapy delivered using Inovio's proprietary CELLECTRA
®
intradermal electroporation device 16 weeks apart; a second group of 20 subjects received one dose of Inovio's SynCon
®
immunotherapy delivered using electroporation followed by a dose of
seasonal flu vaccine 16 weeks later; a third group of 10 subjects received placebo delivered by electroporation followed by a dose of the seasonal flu vaccine 16 weeks later. The study's objectives were to assess the tolerability, safety, and immune responses of these different immunization regimens.
Serum samples from the immunized subjects were used to assess the generation of hemagglutination inhibition (HAI) titers meeting or exceeding a dilution of 1:40 to the current H1N1 seasonal flu strain (A/California/07/09). An HAI titer of 1:40 is the level recognized as a protective immune response against influenza in humans. Because of generally high HAI titer background rates to the A/California/07/09 strain, immunotherapy-specific, protective response rates were determined by assessing the number of patients in each group who had HAI titers greater than 1:40 and HAI titers at least 4-fold higher than the background value at the start of the trial. In reported interim data, immunization with the H1N1 universal SynCon
®
flu immunotherapy followed with a dose of a seasonal flu vaccine generated protective immune responses in 40% (8 of 20) of trial subjects compared with a 20% (2 of 10) response rate in elderly patients who received the seasonal flu vaccine alone. We are analyzing the final data with the intent to prepare a paper for submission to a peer-reviewed scientific publication.
Finally, on our path to develop a universal seasonal flu immunotherapy we completed tests in animal models of our immunotherapy constructs for A/H3N2 and Type B influenza. Our goal is to develop immunotherapies that can also generate HAI titers exceeding 1:40 against unmatched strains within the H3N2 and Type B subtypes. In January 2012, we reported that our immunotherapies for influenza Type A H3N2 and Type B achieved protective antibody responses in immunized animals against multiple unmatched strains.
In the study of our SynCon
®
H3N2 immunotherapy, investigators immunized small animals (mice and guinea pigs) with a vaccine designed to produce the influenza hemagglutinin (HA) antigen in the animals. Inovio investigators have to date tested blood samples from the animals for immune responses against unmatched strains from several clades of H3N2. (Like the branches of a tree, there are dozens of distinct strains within each of these clades). The animals immunized with the SynCon
®
H3N2 immunotherapy developed HI titers exceeding the 1:40 level commonly associated with protective immunity against several clades of H3N2 tested. These included strains circulating in the 2000-01, 2006-07, and 2008-09 influenza seasons, which had necessitated a change in the composition of the seasonal flu vaccine for those years. Additional animal testing of the remaining few H3N2 clades continued through 2012 and was to include a new strain, H3N2v (A/Indiana/10/2011 X203), which was selected in January 2012 by the CDC as a pandemic vaccine target.
Similarly, in the study of our SynCon
®
Type B immunotherapy, investigators tested blood samples from immunized mice for immune responses against multiple, unmatched strains of Type B influenza. All the animals immunized with the SynCon
®
Type B immunotherapy developed HI titers exceeding the 1:40 level against all of the strains of Type B tested, including those circulating and consequently a part of the vaccine formulation in 2001-02, 2008-09, and 2011-12. Type B influenza mutates more slowly than Type A, but enough to preclude lasting immunity. Type B influenza can lead to life-threatening complications, including pneumonia, in young children, persons over 50, those with chronic diseases (e.g. diabetes) or suppressed immune systems, and others at risk for complications.
We are seeking additional grant and/or partner funding to advance this program further.
In October 2014 we announced that the Defense Advanced Research Projects Agency (DARPA) awarded $12.2 million to scientists from the Perelman School of Medicine at the University of Pennsylvania, Inovio Pharmaceuticals, and MedImmune to develop and assess dMAb products for influenza and antibiotic resistant bacteria in preclinical studies. This collaboration aims to demonstrate that DNA plasmids can activate sufficient quantities of disease-specific monoclonal antibodies in the body to be protective against a pathogen challenge. See the section Synthetic DNA-based Monoclonal Antibodies Products for more details on our dMAb programs.
Immunotherapies for Biodefense and Biosecurity
A number of infectious agents that are relatively rare today are poised for an upsurge in incidence by either “natural” or terrorism-related means. For example, natural threats are posed by the influenza strains H5N1 and H7N9. At the same time, an engineered influenza virus for intentional release would pose a significant human threat.
Since 2001, the United States government has spent or allocated over a billion dollars in funding to address the threat of biological weapons. United States funding for bioweapons-related activities focuses primarily on research for and acquisition of medicines for defense. Biodefense funding also goes toward stockpiling protective equipment, increased surveillance and detection of biological agents, and improving state and hospital preparedness. The increase in this type of funding is mainly due to the Project BioShield Act adopted in 2004.
There are opportunities to secure development funding and for proof-of principle immunotherapy studies for biowarfare pathogens. Over the past five years, we have been successful at securing funding from the US government for such projects.
The company continues to actively pursue grant and contract funding from the NIH, Department of Defense and other government funding agencies as an important source of non-dilutive funding to support development of specific technologies that are broadly applicable across multiple product development programs in the areas of cancer, infectious diseases and
biodefense. Based on various initiatives and with the support of NIH funding we are an active collaborator with the Department of Defense (U.S. Army) and continue research and development of DNA-based immunotherapies delivered via our proprietary electroporation system. Specifically, our projects are focused on identifying immunotherapy candidates with the potential to provide rapid, robust immunity to protect against bio-warfare and bioterror attacks as well as development of our electroporation devices.
In March 2011 we received a U.S. Department of Defense Small Business Innovation Research (SBIR) grant to test the feasibility of delivering DNA vaccines by intradermal electroporation simultaneously to two or more spatially distinct sites on the body. The purpose of such a prototype device would be to mitigate potential immune interference that may result from combination vaccines that are formulated together. The device design would also facilitate rapid vaccination against multiple emerging infectious disease or pandemic threats and better meet the demands of quickly vaccinating U.S. troops stationed around the world.
In April 2012 we received a U.S. Department of Defense SBIR grant to advance the development of a low-cost, non-invasive surface electroporation delivery device and test its utility in combination with our novel DNA immunotherapies against viruses with bioterrorism potential, including hanta, puumala, arenavirus and pandemic influenza. This project is a continuation of a first-stage DOD grant in 2011 that initiated Inovio's development of this skin delivery system.
In the first phase of this project, Inovio focused on optimizing the device design of our current minimally invasive surface EP device. In this second phase, the objective was to further advance and validate this device and the resulting immune responses in appropriate animal models. We also investigated the development and manufacture of low-cost sterile disposables for the device and the possibility of integrating dermal injection capabilities into a combined inject/EP device platform.
In January 2016 Inovio was selected to receive a $500,000 grant from the U.S. Army’s SBIR program to further advance the development of Inovio’s next generation delivery device capable of simultaneously administering multiple vaccines via a skin-surface, needle-free electroporation delivery. The primary goal of this effort is to further advance and commercialize a needle and pain-free electroporation device to deliver products from Inovio’s portfolio of biodefense and commercial infectious disease vaccines including those for MERS, Ebola, HIV, influenza, and RSV, particularly for prophylactic vaccination. Such a device could facilitate rapid vaccination of U.S. troops stationed around the world against multiple infectious diseases and protect civilian populations from pandemic threats. Initial testing of a prototype design has already yielded excellent antigen expression and immunogenicity from the dermal tissue being accessed using this novel non-invasive electroporation delivery concept.
Synthetic DNA-based Monoclonal Antibodies Products
Monoclonal antibodies (mAb) have become one of the most valuable therapeutic technologies of recent years. In 2012, global sales of monoclonal antibodies exceeded $50 billion. Among the top 10 best-selling drugs in 2012, six of them were monoclonal antibodies, each with annual sales exceeding $5 billion.
Monoclonal antibodies (mAbs) are designed to enhance the immune system's ability to regulate cell functions. They are designed to bind to a very specific epitope (area) of an antigen or cell surface target and can bind to almost any selected target. They have the unique ability to alert the immune system to attack and kill specific cancer cells (as in the case of Yervoy®) or block certain biochemical pathways (such as those leading to rheumatoid arthritis, as in the case of Remicade
®
). However, mAb technology has limitations. As a passive immunotherapy, meaning they are manufactured outside the body, mAbs require costly large-scale laboratory development and production. Additional limitations include high cost to develop and manufacture, their limited duration of in vivo potency, and a pharmacokinetic profile that can result in toxicity. We have created DNA based monoclonal antibodies that overcome many of the limitations associated with conventional mAb technology.
Using our core platform technology, we encode the DNA sequence for a specific monoclonal antibody in a DNA plasmid. We deliver the plasmid directly into cells of the body using electroporation, enabling these cells to manufacture the mAbs in vivo - not outside of the body like conventional mAb technology. This approach provides potentially significant production costs advantages. More importantly, we believe our dMAb products can target a pharmacokinetic profile that provides significant control and advantages in terms of dosing regimen, peak responses, duration of responses, and toxicity.
We expect to design dMAb products not only for new disease targets not currently addressable with conventional mAbs; we can also target existing, commercially successful mAb products. This new application of our core technology platform represents another potentially paradigm-shifting transformation in the immunotherapy field with very significant business potential. We have already designed and produced dMAb products targeting cancer mechanisms including checkpoint inhibition, anti-cancer pathways, e.g. like Herceptin, and anti-Tregs, as well as prophylactic and therapeutic dMAb products for infectious diseases including Ebola, influenza, antibiotic resistant bacteria, dengue and Chikungunya. When the mAb binds to an infectious disease receptor, the immune system then generates natural killer cells and macrophages to clear the virus or bacteria-bound mAbs.
Proof of Concept
Our first published research on a DNA-based on monoclonal antibody was presented in October 2013 in
Human Vaccines & Immunotherapeutics
in a paper entitled, “Optimized and enhanced DNA plasmid vector based in vivo construction of a neutralizing anti-HIV-1 envelope glycoprotein Fab.” The results demonstrated that a single administration in mice of a highly optimized dMAb
®
HIV immunotherapy generated antibody molecules in the bloodstream that possessed desirable functional activity including high antigen-binding and HIV-neutralization capabilities against diverse strains of HIV viruses.Importantly, this delivery strategy resulted in a rapid increase (i.e., in as little as 48 h) in Fab levels when compared with protein-based immunization.
A second paper was published in July 2015 in
Scientific Reports,
a Nature Publishing Group journal, in the paper, "Protection against dengue disease by synthetic nucleic acid antibody prophylaxis/immunotherapy." In this study, a single intramuscular injection of a DNA plasmid encoding a monoclonal antibody targeting dengue protected mice subsequently exposed to the dengue virus. The protection conferred by the monoclonal antibodies expressed by these dMAb products was very rapid, with 100% survival in mice challenged with lethal enhanced dengue disease less than a week after dMAb product administration. While conventional vaccine and monoclonal antibody technologies have shown limited ability to provide an effective solution to dengue to date, the unique attributes and data generated by dMAb products show their potential to provide a needed solution. Furthermore, this short time frame to achieve full protection is significantly more rapid than vaccine-driven protection, which can take weeks to months to reach peak efficacy levels.
A paper published in March 2016 in
The Journal of Infectious Diseases
, “Rapid and long-term immunity elicited by DNA encoded antibody prophylaxis and DNA vaccination against Chikungunya virus,” discussed our results demonstrating animals transfected with our DNA-based mAb targeting Chikungunya virus (CHIKV) exhibited the specific ability to bind to the CHIKV envelope antigen and this serum possessed CHIKV-neutralizing activity. The treatment of the animals with anti-CHIKV mAb plasmids protected 100% of the treated animals from a lethal injection of CHIKV virus while 100% of the control animals died. The treated animals were also spared virus-related morbidity, as measured by dramatic weight loss and lethargy.
Chikungunya virus (CHIKV) is a serious mosquito-borne alpha-virus responsible for several recent epidemics in tropical Africa and Asia. In mid-2015 the CDC reported that suspected or confirmed cases of Chikungunya had reached 1.74 million in 45 countries or territories in the Americas. There is currently no vaccine or therapeutic against this virus.
Next Steps
In October 2014 we announced that the Defense Advanced Research Projects Agency (DARPA) awarded $12.2 million to scientists from the Perelman School of Medicine at the University of Pennsylvania, Inovio Pharmaceuticals, and MedImmune to develop and assess dMAb products in preclinical studies.
This collaboration aims to demonstrate that DNA plasmids can activate sufficient quantities of disease-specific monoclonal antibodies in the body to be protective against a pathogen challenge. Using the capabilities and advantages of DNA plasmids delivered using electroporation, the team is constructing and evaluating multiple dMAb products focused on influenza virus and antibiotic resistant bacteria (Pseudomonas aeruginosa and Staphylococcus aureus).
In 2016 we expanded the collaboration to include The Wistar Institute after the collaborating investigator Dr. David Weiner moved to the Institute. Successful completion of the initial preclinical activities under the DARPA grant would lead to clinical studies on selected product candidates under suitable future funding from government or non-government organizations.
In April 2015 the company received a grant from DARPA to lead a collaborative team to develop multiple treatment and prevention approaches against Ebola. Other collaborators are MedImmune, the global biologics research and development arm of AstraZeneca; GeneOne Life Sciences and its manufacturing subsidiary, VGXI, Inc.; and David B. Weiner, PhD, Emory University and Vanderbilt University.
The consortium is taking a multi-faceted approach to develop products to prevent and treat Ebola infection. These programs include development and early clinical testing of:
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A therapeutic DNA-based monoclonal antibody product dMAb
™
against the Ebola virus infection. This promising new technology has properties that best fit a response to the outbreak in that they could be designed and manufactured expediently on a large scale using common fermentation technology, are thermal-stable, and may provide more rapid therapeutic benefit.
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A highly potent conventional protein-based therapeutic monoclonal antibody (mAb) product against Ebola virus infection.
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A DNA-based vaccine against Ebola.
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The aim of this research is to compare combinations of a DNA vaccine with conventional or DNA-based monoclonal antibodies.
In July 2016 we announced that our DNA-based monoclonal antibody technology will be deployed to develop products which could be used alone and in combination with other immunotherapies in the pursuit of new ways to treat and potentially cure infection from the HIV virus.
Funding for this research is part of a $23 million grant from the National Institutes of Health to The Wistar Institute, an Inovio collaborator. This grant brings together Inovio and more than 30 of the nation's leading HIV investigators to work on finding a cure for the virus. The grant, called BEAT-HIV: Delaney Collaboratory to Cure HIV-1 Infection by Combination Immunotherapy, was one of six awarded by the NIH as part of the Martin Delaney Collaboratories for HIV Cure Research.
In December 2016 we announced the award of a $6.1 million sub-grant through The Wistar Institute to develop a DNA-based monoclonal antibody designed to provide a fast-acting treatment against Zika infection and its debilitating effects. The goal of this program, which is funded by the Bill & Melinda Gates Foundation, is for the researchers to develop a Zika dMAb
®
therapy ready for human clinical trials in less than two years.
Electroporation Delivery Technology
The essence of our platform is to design and inject a DNA plasmid encoded for a target antigen or monoclonal antibody into tissue of the body and most pertinently, into cells, to enable the intracellular machinery that normally produces useful proteins for the functioning of the body to temporarily produce the target antigen or monoclonal antibody. An antigen will then induce the immune system to produce polyclonal antibodies or T cells with the ability to perform their preventive or therapeutic functions. Monoclonal antibodies generated in this manner can bind to targeted cells and enable the immune system to clear these cells. Fundamental to this mechanism functioning well and providing clinical utility is that there be significant cellular uptake of the DNA plasmids.
Inovio is the leader in refining the methods and conditions for using in vivo electroporation to enable cellular transfection and significant uptake of a locally injected biologic material. Our electroporation technology has shown a preeminent ability to safely and effectively deliver DNA-based immunotherapies. Numerous human studies have to date demonstrated best-in-class immune responses from DNA immunotherapies delivered using electroporation.
Electroporation uses controlled, millisecond electrical pulses to create temporary pores in the cell membrane and allow significant cellular uptake of a synthetic DNA immunotherapy previously injected into muscle or skin. The uptake is up to 1000 fold greater than the injection of a DNA plasmid alone without other delivery mechanisms (“Electroporation delivery of DNA vaccines: prospects for success,”
Current Opinion in Immunology
, June 2011, Niranjan Y Sardesai and David B Weiner). The cellular machinery then uses the DNA’s instructions to produce the encoded antigen or monoclonal antibody.
The combination of Inovio's synthetic DNA immunotherapies delivered using its electroporation devices has to date shown a favorable safety profile, without serious adverse events and only mild local injection-related side effects such as redness and swelling; it is tolerable without anesthetic; and because it does not induce unwanted immune responses, it can be repeatedly administered for booster vaccinations.
Choice of Tissue for DNA Delivery
Skeletal muscle has been a core focus for delivery of DNA-based immunotherapies via electroporation because it is mainly composed of large elongated cells with multiple nuclei. Muscle cells are non-dividing, hence longer-term expression can be obtained without integration of the gene of interest into the genome. Muscle cells have been shown to have a capacity for secretion of proteins into the blood stream. Secreted therapeutic proteins may therefore act systemically and produce therapeutic effects in distant tissues of the body. In this respect, the muscle functions as a factory for the production of the biopharmaceutical needed by the body. As observed in our Phase 2 study (HPV-related cervical dysplasia), intramuscular delivery by electroporation of DNA encoded antigens has been shown to induce both humoral (antibody) and cellular (T cell) immune responses. We envision that delivery of DNA by electroporation to muscle cells will circumvent the costly and complicated production procedures of viral gene delivery vectors, bacterial gene delivery vectors protein-based drugs, conventional vaccines and monoclonal antibodies. This approach may provide long-term stable expression of a therapeutic protein or monoclonal antibody at a sustained level.
While we have generated pre-clinical and clinical evidence that intramuscular electroporation-based DNA delivery will be effective for a number of immunotherapies, electroporation of the skin may also be a relevant route of administration. Skin or intradermal administration is important and is becoming an attractive site for immunization given its high density of antigen presenting cells (APCs). Unlike muscle, skin is the first line of defense against most pathogens and is therefore very rich in immune cells and molecules. Skin specifically contains certain cells that are known to help in generating a robust immune response. With intradermal administration of electroporation, we may be able to demonstrate a comparable immune response to muscle delivery. Drug delivery into skin, or dermal tissue, is attractive given that the skin is the largest, most accessible, and most easily monitored organ of the human body, and it is highly immuno-competent (able to recognize antigens and mount an immune response to them).
Our CELLECTRA
®
Electroporation Systems
There are several configurations in the CELLECTRA
®
device family. The first configuration covers intramuscular (IM) delivery of DNA; the second covers intradermal/subcutaneous delivery (ID) of DNA. Devices with these configurations have been validated, manufactured under Current Good Manufacturing Practices (cGMP) and are being used in human clinical trials. We have filed a device master file (MAF) with the FDA covering the use of the CELLECTRA
®
-IM EP device in human clinical trials. These devices are intended to be used in combination with a DNA plasmid-based immunotherapy.
Our past electroporation systems consisted of an electrical pulse generator box the size of a large laptop attached by a cord to a separate needle-electrode applicator. More recently we designed and have completed engineering, manufacturing, quality control, and regulatory steps to introduce a new series of devices. Bringing together groundbreaking advancements, the new CELLECTRA
®
-
SP products combine the functionality of our current generation of skin and intramuscular electroporation devices in clinical testing with enhanced form, design, and portability. All components of the pulse generator and applicator are integrated into a cordless, rechargeable device. The rechargeable battery can enable immunization of several hundred subjects, making the device highly amenable to mass vaccination. The devices are designed to accommodate different electrode arrays to meet the requirements of the particular immunotherapy and targeted tissue for delivery (ie skin or muscle).
The new CELLECTRA
®
-5PSP device has been designed and developed to support our planned VGX-3100 Phase 3 study, which we expect to start in 2017, and commercial use upon product approval. On October 24, 2016, we announced that the U.S. Food and Drug Administration (FDA) placed a clinical hold on our Phase 3 clinical program. A clinical hold is a notification issued by the FDA to a trial sponsor to delay a proposed clinical trial or suspend an ongoing clinical trial. This study has not yet been initiated and has not enrolled or dosed subjects. Additionally, the hold does not pertain to any of our other ongoing clinical studies.
Preparing for our Phase 3 study, we designed and manufactured a new electroporation device for commercial use, our CELLECTRA
®
5PSP, which is fully automated, smaller and more user-friendly compared to our Phase 2 device. With our submission to start the Phase 3, the FDA requested additional information relating to this new device such as stability data for the device’s single-use disposable electrode array and placed us on a device-focused clinical hold. We are currently generating the necessary device-related data to prepare our response and aim to start the Phase 3 study in the first half of 2017. The clinical hold is discussed in more detail in the section called
HPV Immunotherapy-VGX-3100, High Grade Cervical Dysplasia (CIN 2/3).
While on a clinical hold we cannot ship product, nor recruit or enroll subjects. We are able to secure and prepare targeted clinical sites and submit document packages to institutional review boards for ethical review, which would in any event be a critical activity in the early stage of the trial since in a larger study all the desired investigational sites would not be immediately up and running. Upon lifting of the clinical hold, we plan to be well positioned with clinical sites that are ready to enroll.
Next Generation Electroporation Research and Devices
All of our electroporation delivery systems noted above can increase levels of gene expression (i.e. production of the immune-stimulating protein the immunotherapy was coded to produce) of DNA immunotherapies by 1000-fold or more compared to delivery of DNA immunotherapies via conventional injection alone. Delivery of our SynCon
®
immunotherapies into muscle or skin tissue with our electroporation systems have generated robust immune responses in humans using different SynCon immunotherapy products for HPV-related precancers (also generating statistically significant efficacy in a controlled Phase 2 study) and cancers, Zika, Ebola, influenza (H5N1 and H1N1), and HIV, as well as against other diseases in animal models.
While our current intramuscular (IM) delivery technologies are well tolerated, we are also advancing next generation, minimally invasive intradermal electroporation delivery devices. One intradermal (ID) device penetrates no more than 3 mm into the target tissue, compared to intramuscular devices that go deeper. The positive immunological effects in preclinical animal models of the optimized electroporation parameters of this minimally invasive ID EP delivery device were highlighted in September 2012 in
Human Gene Therapy
in a paper entitled, “Intradermal DNA vaccination enhanced by low-current electroporation improves antigen expression and induces robust cellular and humoral immune responses.” The optimized conditions decreased required immunotherapy dose levels, increased tolerability of the vaccination, and increased the breadth of viable vaccine targets. This research was funded in part by a $25 million HIV vaccine development contract from the National Institute of Allergy and Infectious Diseases and a $3.1 million National Institutes of Health Director's Transformative Research Award for universal flu vaccine development.
In March 2011 we received a U.S. Department of Defense Small Business Innovation Research Grant to test the feasibility of delivering unique DNA vaccines by intradermal electroporation simultaneously to two or more spatially distinct sites on the body. Results from this research revealed that this device could allow for the delivery of multi-plasmid formulations without the risk of interference of immune responses from combination vaccines that are formulated together. This could be useful for combination immunotherapies that are rapidly formulated such as in response to emerging infectious
disease threats or pandemics and could overcome the issue of limited dosing often associated with intradermal delivery. Results from this study were published in
Human Vaccines Immunotherapeutics
in a paper titled, “A multi-head intradermal electroporation device allows for tailored and increased dose DNA immunotherapy delivery to the skin.”
A second ID approach is surface electroporation (SEP) using a device that sits on the skin and uses a virtually undetectable scratch to facilitate electroporation and intracellular delivery of the immunotherapy.
In October 2010 research on this minimally-invasive DNA vaccine delivery device was published in
Gene Therapy
in the paper, "Prototype development and preclinical immunogenicity analysis of a novel minimally invasive electroporation device." Using voltages averaging roughly seven times less than our current devices, this very low voltage device, which does not penetrate the skin, further enhances the previously established tolerability of Inovio's electroporation devices. DNA vaccines delivered using this device produced strong antibody and T-cell immune responses and achieved protection from lethal challenge in multiple animal models including non-human primates.
In April 2012 we received an SBIR grant to advance the development of a low-cost, non-invasive surface electroporation delivery device and test its utility in combination with Inovio's novel synthetic DNA vaccines against viruses with bioterrorism potential, including hanta, puumala, arenavirus and pandemic influenza. This project was a continuation of the DOD grant awarded in 201l. The objective was to further advance and validate this device and the resulting immune responses in appropriate animal models. The research also investigated the development and manufacture of low-cost sterile disposables for the device and the possibility of integrating dermal injection capabilities into a combined inject/EP device platform.
Subsequent to year end, in January 2016 we received a $500,000 grant from the U.S. Army’s Small Business Innovation Research (SBIR) program to further advance the development of a device capable of simultaneously administering multiple vaccines via skin-surface, needle-free electroporation delivery.
We have also been researching other avenues for needle-free, contactless electroporation technology for immunotherapy delivery. In February 2011
Human Vaccines
published our paper entitled, “Piezoelectric permeabilization of mammalian dermal tissue for in vivo DNA delivery leads to enhanced protein expression and increased immunogenicity.” This innovative electroporation method is based on the generation of an electric field or electric potential by certain materials in response to applied mechanical stress.
With the advancement of these devices our aim is to make electroporation delivery amenable to mass prophylactic vaccination by decreasing dose levels, increasing tolerability of the vaccination, increasing the breadth of viable immunotherapy targets, and enhancing portability. Our data related to influenza, HIV, malaria, and smallpox antigens demonstrate that DNA delivery with this newer generation of ID delivery including SEP devices yields levels of immunogenicity in terms of both antibody and T cell responses and/or efficacy against a virus challenge that is comparable to intramuscular electroporation devices currently in the clinic.
In March 2016 Inovio announced the acquisition of pioneering needle-free jet injection technology, devices, and intellectual property from Bioject Medical Technologies Inc. Inovio’s is developing an integrated non-invasive delivery device combining needle-free Bioject’s jet injection technology with Inovio’s needle-free, skin-surface electroporation technology. Bioject’s needle-free devices, which use high pressure gas or springs to propel liquid medicine into skin, have demonstrated desirable utility, safety, and tolerability attributes in animals and humans. Under a prior research agreement, Inovio assessed this technology with its new EP delivery system and generated compelling antigen expression and immune responses in animals.
Corporate Development
We have entered into various arrangements with corporate, academic, and government collaborators, licensors, licensees and others. These arrangements are summarized below and elsewhere in this annual report. In addition, we conduct ongoing discussions with potential collaborators, licensors and licensees.
Strategic Partnerships and Collaborations
In August 2015 we entered into a strategic cancer vaccine collaboration and license agreement with MedImmune, the global biologics research and development arm of AstraZeneca. Under the agreement, MedImmune acquired exclusive rights to Inovio's INO-3112 immunotherapy, which targets cancers caused by human papillomavirus (HPV) types 16 and 18. MedImmune intends to study INO-3112 in combination with selected immunotherapy molecules within its pipeline in HPV-driven cancers.
Under the terms of the agreement, MedImmune made an upfront payment of $27.5 million to us in the third quarter of 2015. MedImmune will fund all development costs. The agreement also calls for potential future payments totaling up to $700 million upon reaching development and commercial milestones. We are entitled to receive up to double-digit tiered royalties on INO-3112 product sales.
Within the broader collaboration, we and MedImmune will develop up to two new, additional DNA-based cancer vaccine products not included in Inovio's current product pipeline, which MedImmune will have the exclusive rights to develop and commercialize. We will receive development, regulatory and commercialization milestone payments and will be eligible to receive royalties on worldwide net sales for these additional cancer vaccine products.
This partnership represents an important step in executing our immuno-oncology combination strategy and advancing Inovio's cancer vaccine R&D pipeline. This agreement builds on the existing partnership between us and MedImmune on two research and development collaborations funded by DARPA focused on developing DNA-based monoclonal antibodies for Ebola, influenza, and bacterial infections.
In September 2013 we entered into an exclusive worldwide license agreement with Roche to research, develop and commercialize our multi-antigen DNA immunotherapies targeting prostate cancer (INO-5150) and hepatitis B (INO-1800). Under the terms of the agreement, Roche made an upfront payment of $10 million to Inovio and agreed to pay for all ongoing development costs and certain development, regulatory and commercial event based payments. Roche also agreed to potentially pay additional development event based payments if Roche pursues other indications with INO-5150 or INO-1800.
In November 2014 Roche terminated the agreement to co-develop INO-5150, our prostate cancer immunotherapy. All of Roche's rights to INO-5150, including the right to license the product to other parties, were returned to us. We independently initiated a Phase 1 clinical trial of INO-5150 in July 2015.
In July 2016 Roche terminated its collaboration with us for the development of INO-1800, our hepatitis B immunotherapy. The termination was effective in October 2016. All of Roche's rights to INO-1800, including the right to license the product to other parties, have been returned. We were already running a Phase 1 study of INO-1800 initiated in April 2015 and expect to complete enrollment in the first half of 2017 and report preliminary results in the second half of 2017.
In March 2010 we entered into a Collaboration and License Agreement (the “Agreement”) with GeneOne Life Science Inc. (formerly VGX International Inc.). Under the Agreement, we granted GeneOne an exclusive license to our SynCon
®
universal influenza vaccine (the “Product”) delivered with electroporation to be developed in certain countries in Asia.
As consideration for this license we have received a research and development initiation fee, as well as research support and annual license maintenance fees, and will receive royalties on net product sales. In addition, contingent upon achievement of clinical and regulatory milestones, we will receive development payments over the term of the Agreement. The Agreement also provides us with exclusive rights to supply devices for clinical and commercial purposes (including single use components) to GeneOne for use in the Product.
The term of the Agreement commenced upon execution and will extend on a country by country basis until the last to expire of all Royalty Periods for the territory (as such term is defined in the Agreement) for any Product in that country, unless the Agreement is terminated earlier in accordance with its provisions as a result of breach, by mutual agreement, or by GeneOne's right to terminate without cause upon prior written notice.
In October 2011, we entered into a product development collaboration agreement with GeneOne to co-develop our SynCon
®
immunotherapies for hepatitis B and C infections. Under the terms of the agreement, GeneOne received marketing rights for these immunotherapies in Asia, excluding Japan, and in return was to fully fund IND-enabling and initial Phase 1 and 2 clinical studies. We will receive payments based on the achievement of clinical milestones and royalties based on sales in the licensed territories and will retain all commercial rights in all other territories.
In conjunction with our announcement of our Roche partnership, we also announced that we reacquired the rights, title and interest to the SynCon
®
hepatitis B immunotherapy in Asia from GeneOne.
In September 2014 we and GeneOne announced a collaboration in which the companies will co-develop our DNA-based Ebola vaccine through a Phase 1 clinical trial. In April 2015 the collaborators received an award from DARPA to further advance the Ebola project. The previous collaboration agreement with GeneOne for Ebola vacine was incorporated into this consortium funded by DARPA. In May 2015, a Phase 1 study of the DNA vaccine part of the project was initiated. Enrollment of this study has been completed. Details of this project are provided under Ebola above.
In May 2015, we announced we will advance its DNA vaccine for MERS (Middle East Respiratory Syndrome) into a Phase 1 clinical trial in healthy volunteers in a collaboration with GeneOne. Under the terms of the agreement, GeneOne will be responsible for funding all preclinical and clinical studies through Phase 1. In return, GeneOne will receive up to 35% milestone-based ownership interest in the MERS immunotherapy upon achievement of the last milestone event of completion of the Phase 1 safety and immunogenicity study. In January 2016 the collaborators announced the initiation of recruitment for the Phase 1 study in partnership with the Walter Reed Army Institute of Research (WRAIR) in Maryland, where the trial is being conducted.
In January 2016, we and Gene One entered into a First Amendment to the May 2015 Collaborative Development Agreement to expand the agreement to test and advance the Company's DNA-based vaccine for preventing and treating Zika virus.
In February 2017, we announced that we had entered into a License and Collaboration Agreement with ApolloBio. While the Agreement has been executed by the parties, the Agreement by its terms will become effective on the date that the ApolloBio board of directors and stockholders approve the Agreement, which is anticipated to occur in the next few weeks. Under this Agreement, ApolloBio licensed INO-3100, providing ApolloBio with the exclusive right to develop and commercialize VGX-3100 within Greater China (China, Hong Kong, Macao, Taiwan). This collaboration on VGX-3100 encompasses the treatment and/or prevention of pre-cancerous HPV infections and HPV-driven dysplasias, and excludes HPV-driven cancers and all combinations of VGX-3100 with other immunostimulants.
Under the collaboration and license agreement, we will receive $15 million in upfront and near term payments comprised of an initial $3 million signing fee and a $12 million milestone upon lifting of the VGX-3100 phase 3 pre-initiation clinical hold by the FDA. Under a separate stock purchase agreement, ApolloBio will invest in our common stock subsequent to lifting of the clinical hold at a volume weighted average price encompassing a trading period prior to and following the lifting of the clinical hold. The stock purchase agreement will become effective at the same time the Agreement becomes effective. The aggregate investment under the stock purchase agreement, which is expected to be completed in the first half of 2017, will not exceed $35 million and may be a lower amount such that ApolloBio will not be our largest shareholder.
ApolloBio will fund all clinical development costs within the licensed territory, and will pay us up to $20 million based upon the achievement of certain regulatory milestones in the United States, China and Korea, and double digit royalties on net sales of VGX-3100. The agreements are subject to People’s Republic of China (PRC) corporate and regulatory approvals, and payments are subject to PRC currency approvals.
Core DNA Immunotherapy Technology and Product License
In March 2016 Inovio signed collaborative research agreements with the Wistar Institute for preventive and therapeutic DNA-based immunotherapy applications and products for cancers and infectious diseases developed by David B. Weiner, Ph.D., and his Wistar laboratory. We will have the exclusive right to in-license new intellectual property developed in this collaboration.
Prior to his recent move to Wistar, the underlying technology for Inovio’s DNA-based products was first developed at Dr. Weiner’s laboratory at the University of Pennsylvania (UPenn). We have license agreements for intellectual property relating to DNA-based immunotherapy technology and multiple products developed at UPenn. The core license agreement with UPenn continues to be in effect.
Under the terms of the original license agreement with UPenn completed in 2007 and amendments in 2010, 2011, 2012, and 2014, we obtained exclusive worldwide rights to develop multiple DNA plasmids and constructs with the potential to treat and/or prevent cancer therapeutic vaccines targeting Wilms' tumor gene or WT1, prostate cancer, other undisclosed cancer antigen targets, HPV, HBV, HCV, HIV, influenza, RSV (respiratory syncytial virus), cytomegalovirus, Chikungunya, dengue fever, malaria, herpes viruses, Middle East Respiratory Syndrome (MERS), Ebola and the family of Filovirus such as Marburg, tuberculosis, foot-and-mouth disease, intestinal infections including Clostridium difficile, and MRSA (methicillin-resistant staphylococcus aureus). In addition, the amended agreement provides global rights to DNA based monoclonal antibodies and new chemokine and cytokine molecular adjuvant technologies.
This agreement and subsequent amendments provide for royalty payments, based on future sales, to UPenn.
Other Collaborations and Grants
We have been successful in securing many different collaborations and grants to assist the research and advancement of its DNA based immunotherapies in multiple disease.
In 2014 we acquired worldwide rights (excluding China) for early preclinical therapies addressing Alzheimer's disease and multiple sclerosis based on the academic research of Dr. Bin Wang, a professor at Fudan University's Shanghai Medical College. These newly licensed technologies are based on patent-protected and published discoveries from Dr. Wang and his collaborator, who found a novel way to generate inducible regulatory T cells, or iTregs. These novel approaches could be used to develop therapies targeting major inflammatory diseases.
In 2014 we along with the Perelman School of Medicine at the University of Pennsylvania and MedImmune were awarded $12.2 million from the Defense Advanced Research Projects Agency (DARPA) to develop DNA-based monoclonal antibodies for infectious disease treatment. Together we will develop and assess the dMAb products in preclinical studies using technology developed by Penn and licensed by us. The collaboration will focus on influenza virus, Pseudomonas aeruginosa and Staphylococcus aureus. Successful completion of the initial preclinical activities under the DARPA grant aims to lead to clinical studies on selected product candidates to be funded under a future increment to the award.
In 2014, VGX Animal Health, Inc. (VAH), our 85% owned subsidiary, concluded an agreement for the sale of its animal health assets to Plumbline Life Sciences, Inc. (PLS) of Korea. The assets transferred included an exclusive license with Inovio for animal applications of our growth hormone-releasing hormone (GHRH) technology and animal DNA vaccines plus a non-exclusive license to our electroporation delivery systems. In return, VAH received $2.0 million in cash, of which $1.0 million was received in May 2015 and the remainder in May 2016, and 465,364 shares of PLS, of which we received 395,758 shares or approximately 16.8% of PLS common stock. We will receive milestone payments and royalties on product sales as well as retain the human applications of our GHRH technology.
In March 2015 we and our academic collaborators, including the University of Pennsylvania, were awarded a new five-year $16 million Integrated Preclinical/Clinical AIDS Vaccine Development Program grant from the National Institute of Allergy and Infectious Diseases (NIAID). The grant will fund research to expand PENNVAX
®
coverage of HIV strains as well as to further enhance antibody responses generated by the vaccine. We will couple our expertise in constructing, developing and manufacturing HIV vaccines with researchers from four world-leading academic institutions (University of Pennsylvania, Emory University, Duke University and the University of Massachusetts) along with VGXi, a contract DNA plasmid manufacturer, and Waisman Biomanufacturing, a contract protein manufacturer. (See the above section, HIV Preventive and Therapeutic Immune Therapies, for more details.)
In April 2015, we received a grant from the Defense Advanced Research Projects Agency (DARPA) to lead a collaborative team to develop multiple treatment and prevention approaches against Ebola. Other collaborators are MedImmune, the global biologics research and development arm of AstraZeneca; GeneOne Life Sciences and its manufacturing subsidiary, VGXI, Inc.; and Professor David B. Weiner, PhD, executive vice president at the Wistar Institute, Inovio board member and chairman of the scientific advisory board, Emory University and Vanderbilt University. (See the above section, Ebola, for more details.)
In July 2015, we established a collaboration with the European Organization for Research and Treatment of Cancer (EORTC) to evaluate Inovio's immunotherapy, INO-3112, in combination with traditional chemo-radiotherapy for the treatment of patients with locally advanced stage cervical cancer. This collaboration was terminated by us at the request of MedImmune following the formation of the partnership and license agreement between MedImmune and us.
In March 2016, we announced the acquisition of all needle-free jet injection technology, device, and intellectual property assets from Bioject Medical Technologies Inc. for $5.5 million in cash and stock. We will develop an integrated non-invasive delivery device combining Bioject’s needle-free jet injection technology with our new needle-free, skin-surface electroporation (EP) technology. Our goal is to facilitate preventive immunization using its DNA vaccines against critical infectious diseases with unmet needs in large populations.
In August 2016, we licensed a veterinary vaccine for foot and mouth disease (FMD) to Plumbline Life Sciences (KONEX: 222670), an animal health company headquartered in South Korea. Plumbline will fund all development activities for this FMD vaccine. We will receive milestone payments as well as royalties on product sales from Plumbline for commercial rights to this FMD synthetic vaccine in Asia, excluding Japan.
In December 2016, we were awarded a $6.1 million sub-grant through The Wistar Institute to develop a DNA-based monoclonal antibody designed to provide a fast-acting treatment against Zika infection and its debilitating effects. The goal of this program, funded by a grant to The Wistar Institute from the Bill & Melinda Gates Foundation, is to develop a Zika dMAb
®
therapy ready for human clinical trials in less than two years.
Also in December, we announced that the International Vaccine Institute (IVI) will provide funding and support to further advance GLS-5300, its vaccine to prevent Middle East Respiratory Syndrome virus infection. We are co-developing this vaccine with GeneOne Life Science. IVI will add technical, laboratory and financial support for GLS-5300 clinical trials in Korea.
Various additional grants that have been awarded to us to advance research for next-generation electroporation delivery technology are described in the above section, Electroporation Delivery Technology.
Competition
We face competition at two levels. At the highest level we face competition by an array of existing or development-stage drug and immunotherapy approaches targeting diseases we are pursuing. We are aware of various established enterprises, including major pharmaceutical companies, which are broadly engaged in vaccine/immunotherapy research and development. These include Janssen Pharmaceuticals (part of J&J), Sanofi-Aventis, GlaxoSmithKline plc (and its acquisition of Novartis Vaccines), Merck, Pfizer, and MedImmune, Inc., a wholly owned subsidiary of AstraZeneca, Inc. There are also various development stage biotechnology companies involved in different vaccine and immunotherapy technologies including Novavax, Moderna, BioNTech, Curevac, Advaxis, and Kite. As these companies develop their technologies, they may develop proprietary technologies that may materially and adversely affect our business.
A number of companies are developing products to specifically address diseases we are also targeting. Merck and GlaxoSmithKline have commercialized preventive vaccines against HPV to protect against cervical cancer; some companies are seeking to treat early HPV infections or low grade cervical dysplasias; LEEP is the current standard of care for treating high grade cervical dysplasia; Advaxis and Kite have therapeutic cervical cancer product candidates under development. Many companies are pursuing different approaches to prostate, breast, lung and other cancers we are targeting.
At another level, we compete more specifically with companies seeking to utilize antigen-encoding DNA delivered with electroporation or other DNA delivery technologies such as viral vectors or lipid vectors to induce in vivo generated antigen production and immune responses to prevent or treat various diseases. These competitive technologies have shown promise but they each also have their unique obstacles to overcome. We believe our electroporation system is strongly positioned to succeed as the dominant delivery method for DNA-based immunotherapies.
Viral DNA Delivery
This technology utilizes a virus as a carrier to deliver genetic material into target cells. The method is very efficient for delivering immunotherapy antigens and has the advantage of mimicking real viral infection so that the recipient will mount a broad immune response against the immunotherapy. The greatest limitation of the technology stems from problems with unwanted immune responses against the viral vector, limiting its use to patients who have not been previously exposed to the viral vector and making repeated administration difficult. In addition, complexity and safety concerns increase their cost and complicate regulatory approval.
Lipid DNA Delivery
A number of lipid formulations have been developed that increase the effect of DNA/RNA immunotherapies. These work by either increasing uptake of the DNA/RNA into cells or by acting as an adjuvant, alerting the immune system. While there has been progress in this field, lipid delivery tends to be less efficient than viral vectors and is hampered by concerns regarding toxicity and increased complexity.
DNA Immunotherapy Delivery With Electroporation
There are other companies with electroporation intellectual property and devices. We believe we have significant competitive advantages over other companies focused on electroporation for multiple reasons:
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We have an extensive history and experience in developing the methods and devices that optimize the use of electroporation in conjunction with DNA-based agents. This experience has been validated with multiple sets of interim data from multiple clinical studies assessing DNA-based immunotherapies and vaccines against cancers and infectious disease. Together with our partners and collaborators, we have been the leader in establishing proof-of-principle of electroporation-delivered immunotherapies.
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We have a broad product line of electroporation instruments designed to enable DNA delivery in tumors, muscle, and skin.
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We have been very proactive in filing for patents, as well as acquiring and licensing additional patents, to expand our global patent estate.
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If any of our competitors develop products with efficacy or safety profiles significantly better than our products, we may not be able to commercialize our products, and sales of any of our commercialized products could be harmed. Some of our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we do. Competitors may develop products earlier, obtain FDA approvals for products more rapidly, or develop products that are more effective than those under development by us. We will seek to expand our technological capabilities to remain competitive; however, research and development by others may render our technologies or products obsolete or noncompetitive, or result in treatments or cures superior to ours.
Our competitive position will be affected by the disease indications addressed by our product candidates and those of our competitors, the timing of market introduction for these products and the stage of development of other technologies to address these disease indications. For us and our competitors, proprietary technologies, the ability to complete clinical trials on a timely basis and with the desired results, and the ability to obtain timely regulatory approvals to market these product candidates are likely to be significant competitive factors. Other important competitive factors will include the efficacy, safety, ease of use, reliability, availability and price of products and the ability to fund operations during the period between technological conception and commercial sales.
The FDA and other regulatory agencies may expand current requirements for public disclosure of DNA-based product development data, which may harm our competitive position with foreign and United States companies developing DNA-based products for similar indications.
Government Regulation
DNA Vaccine Product Regulation
Any pharmaceutical products we develop will require regulatory clearances prior to clinical trials and additional regulatory approvals prior to commercialization. New gene-based products for vaccine or therapeutic applications are subject to extensive regulation by the FDA and comparable agencies in other countries. Our potential products will be regulated as biological products that are used to treat or prevent disease. In the United States, drugs are subject to regulation under the Federal Food, Drug and Cosmetic Act, or the FDC Act. Biological products, in addition to being subject to provisions of the FDC Act, are regulated in the United States under the Public Health Service Act. Both statutes and related regulations govern, among other things, testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising, and other promotional practices.
Obtaining FDA approval or comparable approval from similar agencies in other countries is a costly and time-consuming process. Generally, FDA approval requires that pre-clinical studies be conducted in the laboratory and in animal model systems to gain preliminary information on efficacy and to identify any major safety concerns. In the United States, the results of these studies are submitted as a part of an IND application which the FDA must review and allow before human clinical trials can start. The IND application includes a detailed description of the proposed clinical investigations.
A company must submit an IND application or equivalent application in other countries for each proposed product and must conduct clinical studies to demonstrate the safety and efficacy of the product necessary to obtain FDA approval or comparable approval from similar agencies in other countries. For example, in the United States, the FDA receives reports on the progress of each phase of clinical testing and may require the modification, suspension, or termination of clinical trials if an unwarranted risk is presented to patients.
To obtain FDA approval prior to marketing a pharmaceutical product in the United States typically requires several phases of clinical trials to demonstrate the safety and efficacy of the product candidate. Clinical trials are the means by which experimental treatments are tested in humans, and are conducted following pre-clinical testing. Clinical trials may be conducted within the United States or in foreign countries. If clinical trials are conducted in foreign countries, the products under development as well as the trials are subject to regulations of the FDA and/or its counterparts in the other countries. Upon successful completion of clinical trials, approval to market the treatment for a particular patient population may be requested from the FDA in the United States and/or its counterparts in other countries.
Clinical trials for therapeutic products are normally done in three phases. Phase 1 clinical trials are typically conducted with a small number of patients or healthy subjects to evaluate safety, determine a safe dosage range, identify side effects, and, if possible, gain early evidence of effectiveness. Phase 2 clinical trials are conducted with a larger group of patients to evaluate effectiveness of an investigational product for a defined patient population, and to determine common short-term side effects and risks associated with the drug. Phase 3 clinical trials involve large scale, multi-center, comparative trials that are conducted to evaluate the overall benefit-risk relationship of the investigational product and to provide an adequate basis for product labeling. In some special cases where the efficacy testing of a product may present a special challenge to testing in humans, such as in the case of a vaccine to protect healthy humans from a life-threatening disease that is not a naturally occurring threat, effectiveness testing may be required in animals.
After completion of clinical trials of a new product, FDA marketing approval must be obtained or equivalent approval in comparable agencies in other countries. For the FDA, if the product is regulated as a biologic, a Biologics License Application, or BLA, is required. The BLA must include results of product development activities, pre-clinical studies, and clinical trials in addition to detailed chemistry, manufacturing and control information.
Applications submitted to the FDA are subject to an unpredictable and potentially prolonged approval process. Despite good-faith communication and collaboration between the applicant and the FDA during the development process, the FDA may ultimately decide, upon final review of the data, that the application does not satisfy its criteria for approval or requires additional product development or further pre-clinical or clinical studies. Even if FDA regulatory clearances are obtained, a marketed product is subject to continual review, and later discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions.
Before marketing clearance for a product can be secured, the facility in which the product is manufactured must be inspected by the FDA and must comply with cGMP regulations. In addition, after marketing clearance is secured, the manufacturing facility must be inspected periodically for cGMP compliance by FDA inspectors.
In addition to the FDA requirements, the NIH has established guidelines for research involving human genetic materials, including recombinant DNA molecules. The FDA cooperates in the enforcement of these guidelines, which apply to all recombinant DNA research that is conducted at facilities supported by the NIH, including proposals to conduct clinical research involving gene therapies. The NIH review of clinical trial proposals and safety information is a public process and often involves review and approval by the Recombinant DNA Advisory Committee, of the NIH.
Sponsors of clinical trials are required to register and report results for all controlled clinical investigations, other than Phase 1 investigations, of a product subject to FDA regulation. Trial registration may require public disclosure of confidential commercial development data resulting in the loss of competitive secrets, which could be commercially detrimental.
Medical Device Manufacturing Regulation
In addition, we are subject to regulation as a medical device manufacturer. We must comply with a variety of manufacturing, product development and quality regulations in order to be able to distribute our electroporation devices commercially around the world. In Europe, we must comply with the Medical Device Directives. We have a Quality System certified by its international Notified Body to be in compliance with the international Quality System Standard, ISO13485, and meeting the Annex II Quality System requirements of the MDD. We completed Annex II Conformity Assessment procedures to allow for the CE Mark of our electroporation devices.
In the United States, we are required to maintain facilities, equipment, processes and procedures that are in compliance with quality systems regulations. Our systems have been constructed to be in compliance with these regulations and our ongoing operations are conducted within these systems. Commercially distributed devices within the United States must be developed under formal design controls and be submitted to the FDA for clearance or approval. All development activity is performed according to formal procedures to ensure compliance with all design control regulations.
We employ modern manufacturing methods and controls to optimize performance and control costs. Internal capabilities and core competencies are strategically determined to optimize our manufacturing efficiency. We utilize contract manufacturers for key operations, such as clean room assembly and sterilization, which are not economically conducted in-house. We outsource significant sub-assemblies, such as populated printed circuit boards, for which capital requirements or manufacturing volumes do not justify vertical integration.
Other Regulations
We also are subject to various federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research. The extent of government regulation that might result from any future legislation or administrative action cannot be accurately predicted.
Commercialization and Manufacturing
Because of the broad potential applications of our technologies, we intend to develop and commercialize products both on our own and through our collaborators and licensees. We intend to develop and commercialize products in well-defined specialty markets, such as infectious diseases and cancer. Where appropriate, we intend to rely on strategic marketing and distribution alliances.
We believe our plasmids can be produced in commercial quantities through uniform methods of fermentation and processing that are applicable to all plasmids. We believe we will be able to obtain sufficient supplies of plasmids for all foreseeable clinical investigations.
Relationship with GeneOne
In March 2014, our affiliated entity VGX International Inc. changed its name to GeneOne Life Sciences
("GeneOne").
We acquired an equity interest in GeneOne in 2005. As of December 31, 2016, we owned 10.2% of the outstanding capital stock of GeneOne and GeneOne owned 73,590 shares of our common stock. To our knowledge, none of our current officers, directors, or key employees beneficially owns, directly or indirectly, any securities of GeneOne.
In 2008, we sold our manufacturing operations (including patent rights to certain manufacturing technology) to VGXI, Inc., a wholly-owned United States subsidiary of GeneOne. In connection with this transfer we entered into a Supply Agreement pursuant to which VGXI, Inc., a cGMP contract manufacturer, produces and supplies the DNA plasmids for all of our research and early clinical trials. The price of the plasmids we purchase from VGXI, Inc. is determined by us and GeneOne at the time of order placement or, with respect to product supplied in connection with a grant contract, based on the contracted bid provided by the applicable agency. We agreed to treat GeneOne and its subsidiary as our most favored supplier for DNA plasmids and GeneOne and its subsidiary agreed to treat us as their most favored customer. Before we can manufacture DNA plasmids on our own behalf or engage a third party other than GeneOne or its subsidiary to manufacture DNA plasmids for us, we must first offer such manufacturing work to GeneOne or its subsidiary.
We have also entered into license and collaboration agreements pursuant to which we have granted GeneOne exclusive rights to certain of our product candidates in certain jurisdictions. For example, GeneOne has exclusive rights in countries in Asia including Korea to our VGX-3400X and INO-3510 for treatment of flu and our hepatitis C program. In exchange for
these rights, GeneOne shares the development costs for some of our product candidates. Prior to signing the Roche Agreement, we reacquired the rights, title and interest to hepatitis B in Asia previously licensed to GeneOne. As a result, we paid $300,000 to GeneOne as of December 31, 2013 based on the up-front payment received from Roche.
On September 23, 2014, we entered into a Collaborative Development Agreement with GeneOne to co-develop an Ebola vaccine through Phase 1 clinical trials. In July 2015, we amended the Agreement with an effective date of April 2015 to change control of development in return for the payment of certain development fees.
On May 26, 2015, we entered into a Collaborative Development Agreement with GeneOne to co-develop a DNA vaccine for MERS (Middle East Respiratory Syndrome) through phase 1 clinical trials. Under the terms of the agreement, GeneOne will be responsible for funding all preclinical and clinical studies through Phase 1. In return, GeneOne will receive up to 35% milestone-based ownership interest in the MERS immunotherapy upon achievement of the last milestone event of completion of the Phase 1 safety and immunogenicity study. The collaborative research program shall terminate upon the completion of activities under the development plan, unless sooner terminated.
In January 2016 Inovio and GeneOne entered into a First Amendment to the May 2015 Collaborative Development Agreement to expand the agreement to test and advance the Company's DNA-based vaccine for preventing and treating Zika virus. GeneOne will be responsible for funding all preclinical and clinical studies through Phase 1. In return, GeneOne will receive up to
35%
milestone-based ownership interest in the Zika immunotherapy upon achievement of the last milestone event of the completion of the Phase 1 safety and immunogenicity study. All other agreement terms remain the same.
For the years ended December 31, 2016 and 2015, we recognized revenue from GeneOne of
$1.2
million and
$450,000
, respectively, which consisted of licensing and other fees from the influenza and Zika collaborations. Operating expenses related to GeneOne for the years ended December 31, 2016 and 2015 were
$2.8 million
and
$6.9
million, respectively, primarily related to biologics manufacturing. At December 31,
2016
and
2015
, we had an accounts receivable balance of
$441,000
and
$4,000
, respectively, and an accounts payable and accrued liability balance of
$379,000
and
$165,000
, respectively, related to GeneOne and its subsidiaries. At December 31,
2016
and 2015,
$571,000
and
$373,000
of prepayments made to GeneOne were classified as long-term other assets on the consolidated balance sheet.
Intellectual Property
Patents and other proprietary rights are essential to our business. We file patent applications to protect our technologies, inventions and improvements to our inventions that we consider important to the development of our business. We file for patent registration extensively in the United States and in key foreign markets. Although our patent filings include claims covering various features of our products and product candidates, including composition, methods of manufacture and use, our patents do not provide us with complete protection, or guarantee, against the development of competing products. In addition, some of our know-how and technology are not patentable. We thus also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We also require employees, consultants, advisors and collaborators to enter into confidentiality agreements, but such agreements may provide limited protection for our trade secrets, know-how or other proprietary information.
Our intellectual property portfolio covers our proprietary technologies, including electroporation delivery and vaccine related technologies. As of December 31, 2016, our patent portfolio included over 130 issued United States patents and 490 issued foreign counterpart patents.
Key vaccine related technology patents and published patent applications include the following:
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US Pat. No. 6,733,994, entitled, “Highly expressible genes” including claims directed to IgE signal leader
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US Pat. No. 8,133,723, entitled, “Novel Vaccines Against Multiple Subtypes Of Influenza”
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US Pat. No. 8,168,769, entitled, “Improved Vaccines and Methods for Using the Same,” with claims directed to HPV vaccine products.
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US Pat. No. 8,178,660, entitled, "Vaccines And Immunotherapeutics Using Codon Optimized IL-15 And Methods For Using The Same"
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US Pat. No. 8,535,687, entitled, "Smallpox DNA Vaccine And The Antigens Therein That Elicit An Immune Response"
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US Pat. No. 8,697,084, and 9,376,471, entitled, "HIV Consensus Envelop Sequences And Methods For Using The Same"
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US Pat. No. 8,835,620, “Novel Vaccines Against Multiple Subtypes Of Influenza Virus”
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US Pat. No. 8,852,609, entitled, “Consensus Sequences of Chikungunya Viral Proteins, Nucleic Acid Molecules Encoding the Same and Compositions and Methods for Using the Same”
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US Pat. No. 8,927,692, and 9,399,056, entitled, “Consensus Prostate Antigens, Nucleic Acid Molecule Encoding The Same And Vaccine And Uses Comprising The Same"
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US Pat. No. 8,961,994, entitled, “DNA CONSTRUCTS ELICITING IMMUNE RESPONSE AGAINST FLAVIVIRUS AND EFFECTIVE ADJUVANTS”
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US Pat. No. 9,034,313, entitled, “Nucleic Acid Molecules Encoding Rantes, and Compositions and Methods of Using The Same”
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US Pat. Nos. 9,050,287 and 8,389,706, entitled, “Vaccines for Human Papilloma Virus and Methods for Using the Same”
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US Pat. Nos. 9,156,891, 9,156,890, 8,921,536, and 8,829,174, "Improved HCV Vaccines And Methods For Using The Same"
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US Pat. No. 9,192,660 and 8,298,820, entitled, “Influenza Nucleic Acid Molecules and Vaccines Made Therefrom”
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US Pat. No. 9,238,679, and 9,403,879, entitled, “Nucleic acid molecule encoding hepatitis B virus core protein and vaccine comprising the same”
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US Pat. No. 9,243,041, entitled, “Nucleic acid molecule encoding novel herpes antigens, vaccine comprising the same, and methods of use thereof”
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US Pat. No. 9,272,024 entitled, “Compositions, comprising improved IL-12 genetic constructs and vaccines, immunotherapeutics and methods of using the same”
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US Pat. No. 9,290,546 entitled, “hTERT sequences and methods for using the same”
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US Pat. No. 9,446,112 entitled, “Clostridium difficile DNA vaccine”
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US Pat. No. 9,446,114 entitled, “Cross-protective arenavirus vaccines and their method of use.”
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Key electroporation related patents covering range of field strengths and novel processes include the following:
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US Pat. No. 6,110,161, entitled, “Method for introducing pharmaceutical drugs and nucleic acids into skeletal muscle”
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US Pat. No. 6,261,281, entitled, “Method for genetic immunization and introduction of molecules into skeletal muscle and immune cells”
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US Pat. No. 6,697,669, entitled, “Skin and muscle-targeted gene therapy by pulsed electrical field”
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US Pat. No. 6,752,780, entitled, “Intradermal injection system for injecting DNA-based injectables into humans”
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US Pat. No. 6,752,781, entitled, “Durable hypodermic jet injector apparatus and method”
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US Pat. No. 6,939,862, entitled, “Method for transferring nucleic acid into striated muscles”
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US Pat. No. 6,958,060, entitled, “Method for muscle delivery of drugs, nucleic acids and other compounds”
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US Pat. No. 7,245,963, entitled, “Electrode assembly for constant-current electroporation and use”
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US Pat. No. 7,328,064, entitled, “Electroporation device and injection apparatus,” with claims directed to methods of delivering an agent plus electroporation.
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US Pat. No. 7,442,182, entitled, “Spring powered needle-free injection system”
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US Pat. No. 7,547,293, entitled, “Triggering mechanism for needle-free injector”
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US Pat. No. 7,664,545, entitled, “Electrode assembly for constant-current electroporation and use”
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US Pat. No. 7,717,874, entitled, “Needle-free injection system”
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US Pat. No. 7,922,709, entitled, “Enhanced delivery of naked DNA to skin by non-invasive in vivo electroporation.”
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US Pat. No. 7,942,845, entitled, “Needle-free injector and process for providing serial injections”
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US Pat. No. 8,209,006, entitled, “Constant current electroporation device and methods of use.”
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US Pat. No. 8,617,099, entitled, “Injection device plunger auto-disable”
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US Pat. No. 9,452,285, entitled, “Electroporation devices and methods of using same for electroporation of cells in mammals.”
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If we fail to protect our intellectual property rights adequately our competitors might gain access to our technology and our business would thus be harmed. In addition, defending our intellectual property rights might entail significant expense. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation through the courts. In addition, our patents, or any other patents that may be issued to us in the future, may not provide us with any competitive advantages, or may be challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective patent, trademark, copyright and trade secret protection may not be available to us in each country where we operate. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and domestic and international mechanisms for enforcement of intellectual property rights in those countries may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property or otherwise gaining access to our technology. We may be required to expend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any such litigation, whether or not it is ultimately resolved in our favor, would result in significant expense to us and divert the efforts of our technical and management personnel.
There may be rights we are not aware of, including applications that have been filed but not published that, when issued, could be asserted against us. These third-parties could bring claims against us, and that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or biologic drug candidate that is the subject of the suit. As a result of patent infringement claims, or in order to avoid potential claims, we may choose or be required to seek a license from the third-party. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be non-exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. All of the issues described above could also impact our collaborators, which would also impact the success of the collaboration and therefore us.
Important legal issues remain to be resolved as to the extent and scope of available patent protection for biologic products, including vaccines, and processes in the United States and other important markets outside the United States, such as Europe and Japan. Foreign markets may not provide the same level of patent protection as provided under the United States patent system. We recognize that litigation or administrative proceedings may be necessary to determine the validity and scope of certain of our and others’ proprietary rights. Any such litigation or proceeding may result in a significant commitment of resources in the future and could force us to interrupt our operations, redesign our products or processes, or negotiate a license agreement, all of which would adversely affect our revenue. Furthermore, changes in, or different interpretations of, patent laws in the United States and other countries may result in patent laws that allow others to use our discoveries or develop and commercialize our products.
We cannot guarantee that the patents we obtain or the unpatented technology we hold will afford us significant commercial protection.
Significant Customers and Research and Development
During the years ended December 31, 2016 and 2015, we derived 75% and 28% of our revenue from DARPA, and 14% and 27% of our revenue from Roche, respectively. Since our inception, virtually all of our activities have consisted of research and development efforts related to developing our electroporation technologies and immunotherapies. Research and development expense consists of expenses incurred in performing research and development activities including salaries and benefits, facilities and other overhead expenses, clinical trials, contract services and other outside expenses. Our research and development expense was $
88.7 million
in 2016 and
$57.8 million
in 2015.
Corporate History and Headquarters
We have been a leader in advancing the capabilities of DNA-based immunotherapies to treat infectious diseases and cancers going back to the original incorporation of Viral Genomix, Inc. under the laws of Delaware on April 17, 2000. We were renamed VGX Pharmaceuticals, Inc. on May 31, 2006. On February 21, 2007, VGX Pharmaceuticals acquired Advisys, Inc., a company possessing DNA and electroporation technology, through an asset purchase agreement. On April 14, 2007, VGX Pharmaceuticals entered into an exclusive license agreement with the Trustees of the University of Pennsylvania related
to therapeutic and prophylactic DNA vaccines developed by Professor David B. Weiner at the University of Pennsylvania School of Medicine.
Recognizing the value of electroporation delivery technology, devices, and patents in advancing DNA-based immunotherapy products, on June 1, 2009, VGX Pharmaceuticals, completed a merger with Inovio Biomedical Corporation, a publicly listed company focused on electroporation delivery technology. Inovio Biomedical Corporation was incorporated in Delaware on June 15, 2001. This merger was pursuant to the terms of an Amended and Restated Agreement and Plan of Merger dated December 5, 2008, as further amended on March 31, 2009.
On May 14, 2010, the entity changed its corporate name to Inovio Pharmaceuticals, Inc. We conduct our business through our United States wholly-owned subsidiaries, VGX Pharmaceuticals, LLC and Genetronics, Inc.
Our corporate headquarters is located at 660 W. Germantown Pike, Suite 110, Plymouth Meeting, Pennsylvania 19462, and the telephone number is (267) 440-4200. Inovio Pharmaceuticals (NASDAQ: INO) is focused on advancing products based on its integrated technology platform consisting of its SynCon
®
DNA immunotherapies and vaccines delivered with its CELLECTRA
®
electroporation delivery devices.
The device-focused Inovio Biomedical Corporation started as Biotechnologies & Experimental Research, Inc. and was incorporated on June 29, 1983 in California to create products for the research marketplace. The company changed its corporate name to BTX, Inc. on December 10, 1991, and to Genetronics, Inc. on February 8, 1994. On April 14, 1994, Genetronics, Inc. became a public company through a share exchange agreement with Consolidated United Safety Technologies, Inc., a company listed on the Vancouver Stock Exchange under the laws of British Columbia, Canada. The company changed its name to Genetronics Biomedical Ltd. on September 29, 1994. Genetronics, Inc. remained as a wholly owned operating subsidiary. On September 2, 1997, the company listed on the Toronto Stock Exchange. On December 8, 1998, the company listed on the American Stock Exchange (NYSE MKT) and voluntarily de-listed from the Toronto Stock Exchange on January 17, 2003. On June 15, 2001, Genetronics Biomedical Ltd. completed a change in jurisdiction of incorporation from British Columbia, Canada, to the state of Delaware and became Genetronics Biomedical Corporation. On January 25, 2005, Genetronics Biomedical Corporation acquired Inovio AS, a gene delivery technology company located in Norway. On March 31, 2005, Genetronics Biomedical Corporation was renamed Inovio Biomedical Corporation.
Available Information
Our Internet website address is
www.inovio.com
. We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 filed on behalf of directors and executive officers, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
Information regarding our corporate governance, including the charters of our audit committee, our nomination and corporate governance committee and our compensation committee, our Code of Business Conduct and Ethics, our Corporate Governance Policy and information for contacting our board of directors is available on our Internet site (www.inovio.com). We will provide any of the foregoing information without charge upon request to Peter Kies, 10480 Wateridge Circle, San Diego, CA, 92121.
Our Code of Business Conduct and Ethics includes our Code of Ethics applicable to our Chief Executive Officer and Chief Financial Officer, who also serves as our principal accounting officer. Any amendments to or waivers of the Code of Ethics will be promptly posted on our Internet site (www.inovio.com) or in a report on Form 8-K, as required by applicable law.
Employees
As of March 14, 2017, we employed 239 people on a full-time basis and 14 people under consulting and project employment agreements. Of the combined total, 205 were in product research, which includes research and development, quality assurance, clinical, engineering, and manufacturing, and 48 were in general and administrative, which includes corporate development, information technology, legal, investor relations, finance, and corporate administration. None of our employees are subject to collective bargaining agreements.
ITEM 1A. RISK FACTORS
You should carefully consider the following factors regarding information included in this Annual Report. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business, financial condition and operating results could be materially adversely affected.
Risks Related to Our Business and Industry
We have incurred losses since inception, expect to incur significant net losses in the foreseeable future and may never become profitable.
We have experienced significant operating losses to date. As of
December 31, 2016
our accumulated deficit was approximately $
434.8 million
. We have generated limited revenues, primarily consisting of license and grant revenue, and interest income. We expect to continue to incur substantial additional operating losses for at least the next several years as we advance our clinical trials and research and development activities. We may never successfully commercialize our vaccine product candidates or electroporation-based synthetic vaccine delivery technology and thus may never have any significant future revenues or achieve and sustain profitability.
We have limited sources of revenue and our success is dependent on our ability to develop our vaccine and immunotherapies and other product candidates and electroporation equipment.
We do not sell any products and may not have any other products commercially available for several years, if at all. Our ability to generate future revenues depends heavily on our success in:
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developing and securing United States and/or foreign regulatory approvals for our product candidates, including securing regulatory approval for conducting clinical trials with product candidates;
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developing our electroporation-based DNA delivery technology; and
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commercializing any products for which we receive approval from the FDA and foreign regulatory authorities.
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Our electroporation equipment and product candidates will require extensive additional clinical study and evaluation, regulatory approval in multiple jurisdictions, substantial investment and significant marketing efforts before we generate any revenues from product sales. We are not permitted to market or promote our electroporation equipment and product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities. If we do not receive regulatory approval for and successfully commercialize any products, we will not generate any revenues from sales of electroporation equipment and products, and we may not be able to continue our operations.
None of our human vaccine and immunotherapy product candidates have been approved for sale, and we may not develop commercially successful vaccine products.
Our human vaccine programs are in the early stages of research and development, and currently include vaccine product candidates in discovery, pre-clinical studies and Phase 1 and 2 clinical studies. There is limited data regarding the efficiency of synthetic vaccines compared with conventional vaccines, and we must conduct a substantial amount of additional research and development before any regulatory authority will approve any of our vaccine product candidates. The success of our efforts to develop and commercialize our vaccine product candidates could fail for a number of reasons. For example, we could experience delays in product development and clinical trials. Our vaccine product candidates could be found to be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances. The products, if safe and effective, could be difficult to manufacture on a large scale or uneconomical to market, or our competitors could develop superior vaccine products more quickly and efficiently or more effectively market their competing products.
In addition, adverse events, or the perception of adverse events, relating to vaccines and vaccine delivery technologies may negatively impact our ability to develop commercially successful vaccine products. For example, pharmaceutical companies have been subject to claims that the use of some pediatric vaccines has caused personal injuries, including brain damage, central nervous system damage and autism. These and other claims may influence public perception of the use of vaccine products and could result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approval of our potential products.
We will need substantial additional capital to develop our synthetic vaccine and electroporation delivery technology and other product candidates and for our future operations.
Conducting the costly and time consuming research, pre-clinical and clinical testing necessary to obtain regulatory approvals and bring our vaccine delivery technology and product candidates to market will require a commitment of substantial funds in excess of our current capital. Our future capital requirements will depend on many factors, including, among others:
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the progress of our current and new product development programs;
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the progress, scope and results of our pre-clinical and clinical testing;
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the time and cost involved in obtaining regulatory approvals;
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the cost of manufacturing our products and product candidates;
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the cost of prosecuting, enforcing and defending against patent infringement claims and other intellectual property rights;
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competing technological and market developments; and
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our ability and costs to establish and maintain collaborative and other arrangements with third parties to assist in potentially bringing our products to market.
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Additional financing may not be available on acceptable terms, or at all. Domestic and international capital markets have been experiencing heightened volatility and turmoil, making it more difficult to raise capital through the issuance of equity securities. Furthermore, as a result of the recent volatility in the capital markets, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases cease to provide, funding to borrowers. To the extent we are able to raise additional capital through the sale of equity securities or we issue securities in connection with another transaction, the ownership position of existing stockholders could be substantially diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock and may involve significant fees, interest expense, restrictive covenants and the granting of security interests in our assets. Fluctuating interest rates could also increase the costs of any debt financing we may obtain. Raising capital through a licensing or other transaction involving our intellectual property could require us to relinquish valuable intellectual property rights and thereby sacrifice long-term value for short-term liquidity.
Our failure to successfully address ongoing liquidity requirements would have a substantially negative impact on our business. If we are unable to obtain additional capital on acceptable terms when needed, we may need to take actions that adversely affect our business, our stock price and our ability to achieve cash flow in the future, including possibly surrendering our rights to some technologies or product opportunities, delaying our clinical trials or curtailing or ceasing operations.
We depend upon key personnel who may terminate their employment with us at any time and we may need to hire additional qualified personnel in order to obtain financing, pursue collaborations or develop or market our product candidates.
The success of our business strategy will depend to a significant degree upon the continued services of key management, technical and scientific personnel and our ability to attract and retain additional qualified personnel and managers, including personnel with expertise in clinical trials, government regulation, manufacturing, marketing and other areas. Competition for qualified personnel is intense among companies, academic institutions and other organizations. If we are unable to attract and retain key personnel and advisors, it may negatively affect our ability to successfully develop, test, commercialize and market our products and product candidates.
We face intense and increasing competition and many of our competitors have significantly greater resources and experience.
If any of our competitors develop products with efficacy or safety profiles significantly better than our products, we may not be able to commercialize our products, and sales of any of our commercialized products could be harmed. Some of our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we do. Competitors may develop products earlier, obtain FDA approvals for products more rapidly, or develop products that are more effective than those under development by us. We will seek to expand our technological capabilities to remain competitive; however, research and development by others may render our technologies or products obsolete or noncompetitive, or result in treatments or cures superior to ours.
Many other companies are pursuing other forms of treatment or prevention for diseases that we target. For example, many of our competitors are working on developing and testing H5N1, H1N1 and universal influenza vaccines, and several H1N1 vaccines developed by our competitors have been approved for human use. Our competitors and potential competitors include
large pharmaceutical and medical device companies and more established biotechnology companies. These companies have significantly greater financial and other resources and greater expertise than us in research and development, securing government contracts and grants to support research and development efforts, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and marketing. This may make it easier for them to respond more quickly than us to new or changing opportunities, technologies or market needs. Many of these competitors operate large, well-funded research and development programs and have significant products approved or in development. Small companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical companies or through acquisition or development of intellectual property rights. Our potential competitors also include academic institutions, governmental agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for product and clinical development and marketing. Research and development by others may seek to render our technologies or products obsolete or noncompetitive.
If we lose or are unable to secure collaborators or partners, or if our collaborators or partners do not apply adequate resources to their relationships with us, our product development and potential for profitability will suffer.
We have entered into, or may enter into, distribution, co-promotion, partnership, sponsored research and other arrangements for development, manufacturing, sales, marketing and other commercialization activities relating to our products. For example, in the past we have entered into license and collaboration agreements. The amount and timing of resources applied by our collaborators are largely outside of our control.
If any of our current or future collaborators breaches or terminates our agreements, or fails to conduct our collaborative activities in a timely manner, our commercialization of products could be diminished or blocked completely. We may not receive any event-based payments, milestone payments or royalty payments under our collaborative agreements if our collaborative partners fail to develop products in a timely manner or at all. It is possible that collaborators will change their strategic focus, pursue alternative technologies or develop alternative products, either on their own or in collaboration with others. Further, we may be forced to fund programs that were previously funded by our collaborators, and we may not have, or be able to access, the necessary funding. The effectiveness of our partners, if any, in marketing our products will also affect our revenues and earnings.
We desire to enter into new collaborative agreements. However, we may not be able to successfully negotiate any additional collaborative arrangements and, if established, these relationships may not be scientifically or commercially successful. Our success in the future depends in part on our ability to enter into agreements with other highly-regarded organizations. This can be difficult due to internal and external constraints placed on these organizations. Some organizations may have insufficient administrative and related infrastructure to enable collaborations with many companies at once, which can extend the time it takes to develop, negotiate and implement a collaboration. Once news of discussions regarding possible collaborations are known in the medical community, regardless of whether the news is accurate, failure to announce a collaborative agreement or the entity's announcement of a collaboration with another entity may result in adverse speculation about us, resulting in harm to our reputation and our business.
Disputes could also arise between us and our existing or future collaborators, as to a variety of matters, including financial and intellectual property matters or other obligations under our agreements. These disputes could be both expensive and time-consuming and may result in delays in the development and commercialization of our products or could damage our relationship with a collaborator.
A small number of licensing partners and government contracts account for a substantial portion of our revenue.
We currently derive, and in the past we have derived, a significant portion of our revenue from a limited number of licensing partners and government grants and contracts. Revenue can fluctuate significantly depending on the timing of up-front and event-based payments and work performed. If we fail to sign additional future contracts with major licensing partners and the government, if a contract is delayed or deferred, or if an existing contract expires or is canceled and we fail to replace the contract with new business, our revenue would be adversely affected.
We have agreements with government agencies, which are subject to termination and uncertain future funding.
We have entered into agreements with government agencies, such as the NIAID and DARPA, and we intend to continue entering into these agreements in the future. Our business is partially dependent on the continued performance by these government agencies of their responsibilities under these agreements, including adequate continued funding of the agencies and their programs. We have no control over the resources and funding that government agencies may devote to these agreements, which may be subject to annual renewal and which generally may be terminated by the government agencies at any time.
Government agencies may fail to perform their responsibilities under these agreements, which may cause them to be terminated by the government agencies. In addition, we may fail to perform our responsibilities under these agreements. Many
of our government agreements are subject to audits, which may occur several years after the period to which the audit relates. If an audit identifies significant unallowable costs, we could incur a material charge to our earnings or reduction in our cash position. As a result, we may be unsuccessful entering, or ineligible to enter, into future government agreements.
Our quarterly operating results may fluctuate significantly.
We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
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variations in the level of expenses related to our electroporation equipment, product candidates or future development programs;
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expenses related to corporate transactions, including ones not fully completed;
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addition or termination of clinical trials or funding support;
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any intellectual property infringement lawsuit in which we may become involved;
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any legal claims that may be asserted against us or any of our officers;
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regulatory developments affecting our electroporation equipment and product candidates or those of our competitors;
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our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements; and
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if any of our products receives regulatory approval, the levels of underlying demand for our products.
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If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
If we are unable to obtain FDA approval of our products, we will not be able to commercialize them in the United States.
We need FDA approval prior to marketing our electroporation equipment and products in the United States. If we fail to obtain FDA approval to market our electroporation equipment and product candidates, we will be unable to sell our products in the United States, which will significantly impair our ability to generate any revenues.
This regulatory review and approval process, which includes evaluation of pre-clinical studies and clinical trials of our products as well as the evaluation of our manufacturing processes and our third-party contract manufacturers' facilities, is lengthy, expensive and uncertain. To receive approval, we must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that our electroporation equipment and product candidates are both safe and effective for each indication for which approval is sought. Satisfaction of the approval requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the product. We do not know if or when we might receive regulatory approvals for our electroporation equipment and any of our product candidates currently under development. Moreover, any approvals that we obtain may not cover all of the clinical indications for which we are seeking approval, or could contain significant limitations in the form of narrow indications, warnings, precautions or contra-indications with respect to conditions of use. In such event, our ability to generate revenues from such products would be greatly reduced and our business would be harmed.
The FDA has substantial discretion in the approval process and may either refuse to consider our application for substantive review or may form the opinion after review of our data that our application is insufficient to allow approval of our electroporation equipment and product candidates. If the FDA does not consider or approve our application, it may require that we conduct additional clinical, pre-clinical or manufacturing validation studies and submit that data before it will reconsider our application. Depending on the extent of these or any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable. If any of these outcomes occur, we may be forced to abandon one or more of our applications for approval, which might significantly harm our business and prospects.
It is possible that none of our products or any product we may seek to develop in the future will ever obtain the appropriate regulatory approvals necessary for us or our collaborators to commence product sales. Any delay in obtaining, or an inability to obtain, applicable regulatory approvals would prevent us from commercializing our products, generating revenues and achieving and sustaining profitability.
Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
Clinical testing is expensive and can take many years to complete, and its outcome is uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials of our products may not be predictive of the results of later-stage clinical trials. Results from one study may not be reflected or supported by the results of similar studies. Results of an animal study may not be indicative of results achievable in human studies. Human-use equipment and product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical testing. The time required to obtain approval by the FDA and similar foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials, depending upon numerous factors. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change. We have not obtained regulatory approval for any human-use products.
Our products could fail to complete the clinical trial process for many reasons, including the following:
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we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our electroporation equipment and a product candidate are safe and effective for any indication;
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the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
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we may not be successful in having the FDA remove the clinical hold on our proposed Phase 3 clinical program for VGX-3100;
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we may not be successful in enrolling a sufficient number of participants in clinical trials;
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we may be unable to demonstrate that our electroporation equipment and a product candidate's clinical and other benefits outweigh its safety risks;
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we may be unable to demonstrate that our electroporation equipment and a product candidate presents an advantage over existing therapies, or over placebo in any indications for which the FDA requires a placebo-controlled trial;
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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from pre-clinical studies or clinical trials;
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the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a new drug application or other submission or to obtain regulatory approval in the United States or elsewhere;
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the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of us or third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies; and
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the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
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Delays in the commencement or completion of clinical testing could result in increased costs to us and delay or limit our ability to generate revenues.
Delays in the commencement or completion of clinical testing could significantly affect our product development costs. We do not know whether planned clinical trials will begin on time or be completed on schedule, if at all. In addition, ongoing clinical trials may not be completed on schedule, or at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:
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obtaining regulatory approval to commence a clinical trial;
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adverse results from third party clinical trials involving gene based therapies and the regulatory response thereto;
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reaching agreement on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
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future bans or stricter standards imposed on gene based therapy clinical trials;
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manufacturing sufficient quantities of our electroporation equipment and product candidates for use in clinical trials;
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obtaining institutional review board, or IRB, approval to conduct a clinical trial at a prospective site;
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slower than expected recruitment and enrollment of patients to participate in clinical trials for a variety of reasons, including competition from other clinical trial programs for similar indications;
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conducting clinical trials with sites internationally due to regulatory approvals and meeting international standards;
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retaining patients who have initiated a clinical trial but may be prone to withdraw due to side effects from the therapy, lack of efficacy or personal issues, or who are lost to further follow-up;
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collecting, reviewing and analyzing our clinical trial data; and
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global unrest, terrorist activities, and economic and other external factors.
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Clinical trials may also be delayed as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA, the IRB overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site, or other regulatory authorities due to a number of factors, including:
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failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
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inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
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unforeseen safety issues; and
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lack of adequate funding to continue the clinical trial.
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If we experience delays in completion of, or if we terminate, any of our clinical trials, the commercial prospects for our electroporation equipment and our product candidates may be harmed and our ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Further, delays in the commencement or completion of clinical trials may adversely affect the trading price of our common stock.
We and our collaborators rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we and our collaborators may not be able to obtain regulatory approval for or commercialize our product candidates.
We and our collaborators have entered into agreements with CROs to provide monitors for and to manage data for our on-going clinical programs. We and the CROs conducting clinical trials for our electroporation equipment and product candidates are required to comply with current good clinical practices, or GCPs, regulations and guidelines enforced by the FDA for all of our products in clinical development. The FDA enforces GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or the CROs conducting clinical trials of our product candidates fail to comply with applicable GCPs, the clinical data generated in the clinical trials may be deemed unreliable and the FDA may require additional clinical trials before approving any marketing applications.
If any relationships with CROs terminate, we or our collaborators may not be able to enter into arrangements with alternative CROs. In addition, these third-party CROs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our on-going clinical programs or perform trials efficiently. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could harm our competitive position. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. Cost overruns by or disputes with our CROs may significantly increase our expenses.
Even if our products receive regulatory approval, they may still face future development and regulatory difficulties.
Even if United States regulatory approval is obtained, the FDA may still impose significant restrictions on a product's indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. This governmental oversight may be particularly strict with respect to gene based therapies. Our products will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, record keeping and submission of safety and other post-market information. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices, or cGMP, regulations. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a
regulatory agency may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:
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issue Warning Letters or untitled letters;
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impose civil or criminal penalties;
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suspend regulatory approval;
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suspend any ongoing clinical trials;
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refuse to approve pending applications or supplements to applications filed by us;
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impose restrictions on operations, including costly new manufacturing requirements; or
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seize or detain products or require us to initiate a product recall.
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Even if our products receive regulatory approval in the United States, we may never receive approval or commercialize our products outside of the United States.
In order to market any electroporation equipment and product candidates outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA approval in the United States. Such effects include the risks that our product candidates may not be approved for all indications requested, which could limit the uses of our product candidates and have an adverse effect on their commercial potential or require costly, post-marketing follow-up studies.
We face potential product liability exposure and, if successful claims are brought against us, we may incur substantial liability.
The use of our electroporation equipment and synthetic vaccine candidates in clinical trials and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. For example, pharmaceutical companies have been subject to claims that the use of some pediatric vaccines has caused personal injuries, including brain damage, central nervous system damage and autism, and these companies have incurred material costs to defend these claims. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:
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decreased demand for our product candidates;
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impairment of our business reputation;
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withdrawal of clinical trial participants;
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costs of related litigation;
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distraction of management's attention from our primary business;
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substantial monetary awards to patients or other claimants;
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inability to commercialize our products.
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We have obtained product liability insurance coverage for our clinical trials, but our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our business.
We currently have no marketing and sales organization. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate product revenues.
We currently do not have a sales organization for the marketing, sales and distribution of our electroporation equipment and product candidates. In order to commercialize any products, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We contemplate establishing our own sales force or seeking third-party partners to sell our products. The establishment and development of our own sales force to market any products we may develop will be expensive and time consuming and could delay any product launch, and we may not be able to successfully develop this capability. We will also have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. To the extent we rely on third parties to commercialize our approved products, if any, we will receive lower revenues than if we commercialized these products ourselves. In addition, we may have little or no control over the sales efforts of third parties involved in our commercialization efforts. In the event we are unable to develop our own marketing and sales force or collaborate with a third-party marketing and sales organization, we would not be able to commercialize our product candidates which would negatively impact our ability to generate product revenues.
If any of our products for which we receive regulatory approval does not achieve broad market acceptance, the revenues that we generate from their sales will be limited.
The commercial success of our electroporation equipment and product candidates for which we obtain marketing approval from the FDA or other regulatory authorities will depend upon the acceptance of these products by both the medical community and patient population. Coverage and reimbursement of our product candidates by third-party payors, including government payors, generally is also necessary for optimal commercial success. The degree of market acceptance of any of our approved products will depend on a number of factors, including:
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our ability to provide acceptable evidence of safety and efficacy;
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the relative convenience and ease of administration;
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the prevalence and severity of any actual or perceived adverse side effects;
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limitations or warnings contained in a product's FDA-approved labeling, including, for example, potential “black box” warnings
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availability of alternative treatments;
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pricing and cost effectiveness;
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the effectiveness of our or any future collaborators' sales and marketing strategies;
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our ability to obtain sufficient third-party coverage or reimbursement; and
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the willingness of patients to pay out of pocket in the absence of third-party coverage.
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If our electroporation equipment and product candidates are approved but do not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate sufficient revenue from these products, and we may not become or remain profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.
We are subject to uncertainty relating to reimbursement policies which, if not favorable to our product candidates, could hinder or prevent our products' commercial success.
Our ability to commercialize our electroporation equipment and product candidates successfully will depend in part on the extent to which governmental authorities, private health insurers and other third-party payors establish appropriate coverage and reimbursement levels for our product candidates and related treatments. As a threshold for coverage and reimbursement, third-party payors generally require that drug products have been approved for marketing by the FDA. Third-party payors also are increasingly challenging the effectiveness of and prices charged for medical products and services. We may not be able to obtain third-party coverage or reimbursement for our products in whole or in part.
Healthcare reform measures could hinder or prevent our products' commercial success.
In both the United States and certain foreign jurisdictions there have been, and we anticipate there will continue to be, a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell any of our products profitably. In the United States, the Federal government enacted healthcare reform legislation, the Patient Protection and Affordable Care Act, or the ACA. We believe there could be continuing trends towards expanding coverage to more individuals, containing health care costs and improving quality. At the same time, the rebates, discounts, taxes and other costs associated with the ACA are expected to be a significant cost to the pharmaceutical industry.
The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to make and implement healthcare reforms may adversely affect:
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our ability to set a price we believe is fair for our products;
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our ability to generate revenues and achieve or maintain profitability;
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the availability of capital; and
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our ability to obtain timely approval of our products.
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If we fail to comply with applicable healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
Certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients' rights may be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business, without limitation. The laws that may affect our ability to operate include:
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the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, people from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;
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federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;
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the ACA expands the government's investigative and enforcement authority and increases the penalties for fraud and abuse, including amendments to both the False Claims Act and the Anti-Kickback Statute to make it easier to bring suit under those statutes;
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;
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the Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples;
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the U.S. Foreign Corrupt Practices Act, which, among other things, prohibits companies issuing stock in the U.S. from bribing foreign officials for government contracts and other business; and
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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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Additionally, the compliance environment is changing, with more states, such as California and Massachusetts, mandating implementation of compliance programs, compliance with industry ethics codes, and spending limits, and other states, such as Vermont, Maine, and Minnesota requiring reporting to state governments of gifts, compensation, and other remuneration to physicians. Under the ACA, pharmaceutical companies are required to record any transfers of value made to doctors and teaching hospitals and to disclose such data to HHS. These laws all provide for penalties for non-compliance. The shifting regulatory environment, along with the requirement to comply with multiple jurisdictions with different compliance and/or reporting requirements, increases the possibility that a company may run afoul of one or more laws.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.
If we and the contract manufacturers upon whom we rely fail to produce our systems and product candidates in the volumes that we require on a timely basis, or fail to comply with stringent regulations, we may face delays in the development and commercialization of our electroporation equipment and product candidates.
We manufacture some components of our electroporation systems and utilize the services of contract manufacturers to manufacture the remaining components of these systems and our product supplies for clinical trials. The manufacture of our systems and product supplies requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers often encounter difficulties in production, particularly in scaling up for commercial production. These problems include difficulties with production costs and yields, quality control, including stability of the equipment and product candidates and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. If we or our manufacturers were to encounter any of these difficulties or our manufacturers otherwise fail to comply with their obligations to us, our ability to provide our electroporation equipment to our partners and products to patients in our clinical trials or to commercially launch a product would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of our clinical trials, increase the costs associated with maintaining our clinical trial program and, depending upon the period of delay, require us to commence new trials at significant additional expense or terminate the trials completely.
In addition, all manufacturers of our products must comply with cGMP requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the generation and maintenance of records and documentation. Manufacturers of our products may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. We have little control over our manufacturers' compliance with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any product is compromised due to our or our manufacturers' failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products, and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of our products, entail higher costs or result in our being unable to effectively commercialize our products. Furthermore, if our manufacturers fail to deliver the required commercial quantities on a timely basis, pursuant to provided specifications and at commercially reasonable prices, we may be unable to meet demand for our products and would lose potential revenues.
Our failure to successfully acquire, develop and market additional product candidates or approved products would impair our ability to grow.
We may acquire, in-license, develop and/or market additional products and product candidates. The success of these actions depends partly upon our ability to identify, select and acquire promising product candidates and products.
The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for the license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms that we find acceptable, or at all.
In addition, future acquisitions may entail numerous operational and financial risks, including:
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exposure to unknown liabilities;
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disruption of our business and diversion of our management's time and attention to develop acquired products or technologies;
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incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions;
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higher than expected acquisition and integration costs;
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increased amortization expenses;
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difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
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impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and
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inability to retain key employees of any acquired businesses.
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Further, any product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities.
Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.
Our and our third-party manufacturers' activities involve the controlled storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds. We and our manufacturers are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In the event of an accident, state or federal authorities may curtail the use of these materials and interrupt our business operations. If we are subject to any liability as a result of our or our third-party manufacturers' activities involving hazardous materials, our business and financial condition may be adversely affected.
We may be subject to stockholder litigation, which would harm our business and financial condition.
We may have actions brought against us by stockholders relating to past transactions, changes in our stock price or other matters. Any such actions could give rise to substantial damages, and thereby have a material adverse effect on our consolidated financial position, liquidity, or results of operations. Even if an action is not resolved against us, the uncertainty and expense associated with stockholder actions could harm our business, financial condition and reputation. Litigation can be costly, time-consuming and disruptive to business operations. The defense of lawsuits could also result in diversion of our management's time and attention away from business operations, which could harm our business.
Our results of operations and liquidity needs could be materially affected by market fluctuations and general economic conditions.
Our results of operations could be materially affected by economic conditions generally, both in the United States and elsewhere around the world. Concerns over inflation, energy costs, geopolitical issues and the availability and cost of credit have contributed to increased volatility and diminished expectations for the economy and the markets going forward. These factors, combined with volatile oil prices, declining business and consumer confidence and increased unemployment, have precipitated an economic recession. Domestic and international capital markets have also been experiencing heightened volatility and turmoil. These events and the continuing market upheavals may have an adverse effect on us. In the event of a continuing market downturn, our results of operations could be adversely affected. Our future cost of equity or debt capital and access to the capital markets could be adversely affected, and our stock price could decline. There may be disruption in or delay in the performance of our third-party contractors and suppliers. If our contractors, suppliers and partners are unable to satisfy their contractual commitments, our business could suffer. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. Given the current instability of financial institutions, we may experience losses on these deposits.
We are dependent on information technology and our systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage.
We rely to a large extent upon sophisticated information technology systems to operate our businesses, some of which are managed, hosted provided and/or used for third-parties or their vendors. We collect, store and transmit large amounts of confidential information, and we deploy and operate an array of technical and procedural controls to maintain the confidentiality and integrity of such confidential information. A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact operations. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in our or our third-party providers' systems, portable media or storage devices. We could also experience a business interruption, theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Any such interruption or breach of our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us.
Risks Related to Our Intellectual Property
It is difficult and costly to generate and protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection.
Our commercial success will depend in part on obtaining and maintaining patent, trademark, trade secret, and other intellectual property protection relating to our electroporation equipment and product candidates, as well as successfully defending these intellectual property rights against third-party challenges.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. The laws and regulations regarding the breadth of claims allowed in biotechnology patents has evolved over recent years and continues to undergo review and revision, both in the United States. The biotechnology patent situation outside the United States can be even more uncertain depending on the country. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our licensed patents, our patents or in third-party patents, nor can we predict the likelihood of our patents surviving a patent validity challenge.
The degree of future protection for our intellectual property rights is uncertain, because legal decision-making can be unpredictable, thereby often times resulting in limited protection, which may not adequately protect our rights or permit us to gain or keep our competitive advantage, or resulting in an invalid or unenforceable patent. For example:
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we, or the parties from whom we have acquired or licensed patent rights, may not have been the first to file the underlying patent applications or the first to make the inventions covered by such patents;
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the named inventors or co-inventors of patents or patent applications that we have licensed or acquired may be incorrect, which may give rise to inventorship and ownership challenges;
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others may develop similar or alternative technologies, or duplicate any of our products or technologies that may not be covered by our patents, including design-arounds;
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pending patent applications may not result in issued patents;
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the issued patents covering our products and technologies may not provide us with any competitive advantages or have any commercial value;
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the issued patents may be challenged and invalidated, or rendered unenforceable;
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the issued patents may be subject to reexamination, which could result in a narrowing of the scope of claims or cancellation of claims found unpatentable;
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we may not develop or acquire additional proprietary technologies that are patentable;
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our trademarks may be invalid or subject to a third party's prior use; or
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our ability to enforce our patent rights will depend on our ability to detect infringement, and litigation to enforce patent rights may not be pursued due to significant financial costs, diversion of resources, and unpredictability of a favorable result or ruling.
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We depend, in part, on our licensors and collaborators to protect a portion of our intellectual property rights. In such cases, our licensors and collaborators may be primarily or wholly responsible for the maintenance of patents and prosecution of patent applications relating to important areas of our business. If any of these parties fail to adequately protect these products with issued patents, our business and prospects would be harmed significantly.
We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our trade secrets to competitors. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.
If we or our licensors fail to obtain or maintain patent protection or trade secret protection for our product candidates or our technologies, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and attain profitability.
From time to time, U.S. and other policymakers have proposed reforming the patent laws and regulations of their countries. In September 2011 the America Invents Act (the Act) was signed into law. The Act changed the current “first-to-invent” system to a system that awards a patent to the “first-inventor-to-file” for an application for a patentable invention. The
Act also created a procedure to challenge newly issued patents in the patent office via post-grant proceedings and new inter parties reexamination proceedings. These changes may make it easier for competitors to challenge our patents, which could result in increased competition and have a material adverse effect on our product sales, business and results of operations. The changes may also make it harder to challenge third-party patents and place greater importance on being the first inventor to file a patent application on an invention.
If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.
Other companies may have or may acquire intellectual property rights that could be enforced against us. If they do so, we may be required to alter our technologies, pay licensing fees or cease activities. If our products or technologies infringe the intellectual property rights of others, they could bring legal action against us or our licensors or collaborators claiming damages and seeking to enjoin any activities that they believe infringe their intellectual property rights.
Because patent applications can take many years to issue, and there is a period when the application remains undisclosed to the public, there may be currently pending applications unknown to us or reissue applications that may later result in issued patents upon which our products or technologies may infringe. There could also be existing patents of which we are unaware that our products or technologies may infringe. In addition, if third parties file patent applications or obtain patents claiming products or technologies also claimed by us in pending applications or issued patents, we may have to participate in interference or derivation proceedings in the United States Patent and Trademark Office to determine priority or derivation of the invention. If third parties file oppositions in foreign countries, we may also have to participate in opposition proceedings in foreign tribunals to defend the patentability of our filed foreign patent applications.
If a third party claims that we infringe its intellectual property rights, it could cause our business to suffer in a number of ways, including:
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we may become involved in time-consuming and expensive litigation, even if the claim is without merit, the third party's patent is invalid or we have not infringed;
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we may become liable for substantial damages for past infringement if a court decides that our technologies infringe upon a third party's patent;
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we may be enjoined by a court to stop making, selling or licensing our products or technologies without a license from a patent holder, which may not be available on commercially acceptable terms, if at all, or which may require us to pay substantial royalties or grant cross-licenses to our patents; and
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we may have to redesign our products so that they do not infringe upon others' patent rights, which may not be possible or could require substantial investment or time.
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If any of these events occur, our business could suffer and the market price of our common stock may decline.
Risks Related to Our Common Stock
The price of our common stock is expected to be volatile and an investment in our common stock could decline substantially in value.
In light of our small size and limited resources, as well as the uncertainties and risks that can affect our business and industry, our stock price is expected to be highly volatile and can be subject to substantial drops, with or even in the absence of news affecting our business. Period to period comparisons are not indicative of future performance. The following factors, in addition to the other risk factors described in this annual report, and the potentially low volume of trades in our common stock, may have a significant impact on the market price of our common stock, some of which are beyond our control:
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developments concerning any research and development, clinical trials, manufacturing, and marketing efforts or collaborations;
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fluctuating public or scientific interest in the potential for influenza pandemic or other applications for our vaccine or other product candidates;
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our announcement of significant acquisitions, strategic collaborations, joint ventures or capital commitments;
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fluctuations in our operating results
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announcements of technological innovations;
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new products or services that we or our competitors offer;
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the initiation, conduct and/or outcome of intellectual property and/or litigation matters;
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changes in financial or other estimates by securities analysts or other reviewers or evaluators of our business;
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conditions or trends in bio-pharmaceutical or other healthcare industries;
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regulatory developments in the United States and other countries;
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negative perception of gene based therapy;
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changes in the economic performance and/or market valuations of other biotechnology and medical device companies;
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additions or departures of key personnel;
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sales or other transactions involving our common stock;
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changes in our capital structure;
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sales or other transactions by executive officers or directors involving our common stock;
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changes in accounting principles;
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global unrest, terrorist activities, and economic and other external factors; and
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catastrophic weather and/or global disease pandemics.
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The stock market in general has recently experienced relatively large price and volume fluctuations. In particular, the market prices of securities of smaller biotechnology and medical device companies have experienced dramatic fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of the common stock, which could cause a decline in the value of the common stock. In addition, price volatility may increase if the trading volume of our common stock remains limited or declines.
Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price of our common stock.
Our amended and restated certificate of incorporation contains provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:
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the authority of our board of directors to issue shares of undesignated preferred stock and to determine the rights, preferences and privileges of these shares, without stockholder approval;
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all stockholder actions must be effected at a duly called meeting of stockholders and not by written consent; and
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the elimination of cumulative voting.
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In addition, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, including to delay or impede a merger, tender offer or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.
We have never paid cash dividends on our common stock and we do not anticipate paying dividends in the foreseeable future.
We have paid no cash dividends on our common stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt or credit facility may preclude or limit our ability to pay any dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of potential gain for the foreseeable future.
The market price for our shares may not maintain their pre-reverse stock split market price.
On June 5, 2014, we effectuated a 4-for-1 reverse split of the Company's outstanding common stock. We cannot be certain that the reverse split will have a long-term positive effect on the market price of our common stock, or increase our ability to consummate financing arrangements in the future. The market price of our common stock is based on factors that may be unrelated to the number of shares outstanding. These factors include our performance, general economic and market conditions and other factors, many of which are beyond our control. The market price for our post-reverse stock split shares may not rise or remain constant in proportion to the reduction in the number of pre-split shares outstanding before the reverse
split. Accordingly, the total market capitalization of our common stock after the reverse split may be lower than the total market capitalization before the reverse split.