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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                     TO                     
COMMISSION FILE NO. 001-14888
INO-20210630_G1.JPG
 INOVIO PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware   33-0969592
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

660 W. GERMANTOWN PIKE, SUITE 110
PLYMOUTH MEETING, PA 19462
(Address of principal executive offices)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (267) 440-4200

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
COMMON STOCK, $0.001 PAR VALUE INO Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No    
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes    No  

The number of shares outstanding of the Registrant’s Common Stock, $0.001 par value, was 210,356,896 as of August 6, 2021.



INOVIO PHARMACEUTICALS, INC.
FORM 10-Q

For the Quarterly Period Ended June 30, 2021

INDEX
 
1
1
2
3
4
5
7
9
31
36
36
38
38
39
59
59
59
59
59
61























SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. These risks are discussed more fully in Item 1A. Risk Factors herein. These risks include, but are not limited to, the following:

Our business could be adversely affected by the effects of health epidemics, including the global COVID-19 pandemic.
We have incurred significant losses in recent years, expect to incur significant net losses in the foreseeable future and may never become profitable.
We are currently subject to litigation and may become subject to additional litigation, which could harm our business, financial condition and reputation.
Our planned Phase 3 clinical trial of INO-4800 in the United States as a potential COVID-19 vaccine has been placed on partial clinical hold by the U.S. FDA, which may cause delays in our ability to conduct a Phase 3 clinical trial in the United States.
There can be no assurance that the product we are developing for COVID-19 would be granted an Emergency Use Authorization by the FDA or similar authorization by regulatory authorities outside of the United States if we were to decide to apply for such an authorization. The option of seeking an Emergency Use Authorization may no longer exist if the public health emergency has expired or if a sufficient supply of COVID-19 vaccines have obtained full Biologics License Approval, or foreign equivalent, by the time we are ready to submit an application. If we do not timely apply for such an emergency use authorization or, if we do apply and no authorization is granted or, once granted, it is terminated, we will be unable to sell our product in the near future and instead, will be required to pursue the biologic licensure process in order to sell our product, which is lengthy and expensive.
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.
None of our human vaccine candidates, including INO-4800, or our immunotherapy and DNA encoded monoclonal antibody product candidates have been approved for sale, and we may never develop commercially successful vaccine, immunotherapy or monoclonal antibody products.
We will need substantial additional capital to develop our DNA vaccines, DNA immunotherapies and dMAb programs and electroporation delivery technology.
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.
A small number of licensing partners and government contracts account for a substantial portion of our revenue.
We have agreements with government agencies, which are subject to termination and uncertain future funding.
We face intense and increasing competition and many of our competitors have significantly greater resources and experience.
If we and the contract manufacturers upon whom we rely fail to produce our electroporation devices and product candidates in the volumes that we require on a timely basis, or at all, or fail to comply with their obligations to us or with stringent regulations, we may face delays in the development and commercialization of our electroporation equipment and product candidates.
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.
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.





Part I. Financial Information
Item 1.    Financial Statements
1


INOVIO PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
  June 30,
2021
December 31,
2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 58,925,302  $ 250,728,118 
Short-term investments 384,752,382  160,914,935 
Accounts receivable 13,128,330  18,559,967 
Accounts receivable from affiliated entities 722,941  503,782 
Prepaid expenses and other current assets 84,592,179  40,357,456 
Prepaid expenses and other current assets from affiliated entities 303,491  106,432 
Total current assets 542,424,625  471,170,690 
Fixed assets, net 18,111,288  11,348,144 
Investment in affiliated entity 3,908,709  4,460,366 
Investment in Geneos —  434,387 
Intangible assets, net 2,879,896  3,146,770 
Goodwill 10,513,371  10,513,371 
Operating lease right-of-use assets 12,173,414  12,741,296 
Other assets 1,830,866  25,957,448 
Total assets $ 591,842,169  $ 539,772,472 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 30,095,578  $ 21,203,808 
Accounts payable and accrued expenses due to affiliated entities 1,773,846  642,969 
Accrued clinical trial expenses 10,416,164  9,950,345 
Deferred revenue 109,128  46,628 
Operating lease liability 2,463,878  2,329,394 
Grant funding liability 6,859,155  7,474,310 
Grant funding liability from affiliated entities 31,250  58,500 
Total current liabilities 51,748,999  41,705,954 
Deferred revenue, net of current portion 71,788  79,214 
Convertible senior notes 14,536,448  14,139,988 
Convertible bonds —  4,515,834 
Operating lease liability, net of current portion 16,797,476  18,063,515 
Deferred tax liabilities 32,046  32,046 
Grant funding liability from affiliated entity, net of current portion 37,500  37,500 
Other liabilities 64,141  57,663 
Total liabilities 83,288,398  78,631,714 
Stockholders’ equity:
Preferred stock —  — 
Common stock 210,146  186,851 
Additional paid-in capital 1,551,348,435  1,367,406,869 
Accumulated deficit (1,042,738,901) (906,196,812)
Accumulated other comprehensive loss (265,909) (256,150)
Total Inovio Pharmaceuticals, Inc. stockholders’ equity 508,553,771  461,140,758 
Total liabilities and stockholders’ equity $ 591,842,169  $ 539,772,472 

See accompanying notes to unaudited condensed consolidated financial statements.
2


INOVIO PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
  Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 2021 2020
Revenues:
Revenue under collaborative research and development arrangements $ 82,923  $ 74,102  $ 122,538  $ 145,602 
Revenue under collaborative research and development arrangements with affiliated entities 74,787  95,146  124,736  1,267,272 
Other revenue 115,114  97,939  396,671  181,587 
Total revenues 272,824  267,187  643,945  1,594,461 
Operating expenses:
Research and development 70,808,418  22,376,575  109,852,836  41,487,763 
General and administrative 12,666,341  11,071,510  26,547,535  18,519,864 
Total operating expenses 83,474,759  33,448,085  136,400,371  60,007,627 
Loss from operations (83,201,935) (33,180,898) (135,756,426) (58,413,166)
Other income (expense):
Interest income 928,111  1,067,399  1,697,347  1,483,968 
Interest expense (466,726) (2,846,641) (979,760) (5,650,396)
Change in fair value of derivative liability —  (97,755,000) —  (110,976,977)
Gain (loss) on investment in affiliated entities 278,818  (3,883,176) (551,657) 9,298,443 
Net unrealized gain (loss) on available-for-sale equity securities 136,493  4,358,634  (711,465) (691,458)
Other income (expense), net 185,281  (152,102) 194,259  (577,602)
Gain on deconsolidation of Geneos —  4,121,075  —  4,121,075 
Net loss before share in net loss of Geneos (82,139,958) (128,270,709) (136,107,702) (161,406,113)
Share in net loss of Geneos —  (901,757) (434,387) (901,757)
Net loss (82,139,958) (129,172,466) (136,542,089) (162,307,870)
Net loss attributable to non-controlling interest —  469,407  —  1,063,757 
Net loss attributable to Inovio Pharmaceuticals, Inc. $ (82,139,958) $ (128,703,059) $ (136,542,089) $ (161,244,113)
Net loss per share attributable to Inovio Pharmaceuticals, Inc. stockholders
          Basic and diluted $ (0.39) $ (0.83) $ (0.66) $ (1.15)
Weighted average number of common shares outstanding
          Basic and diluted 209,561,064  155,807,054  206,007,497  140,215,158 

See accompanying notes to unaudited condensed consolidated financial statements.


3



INOVIO PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 
  Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 2021 2020
Net loss $ (82,139,958) $ (129,172,466) $ (136,542,089) $ (162,307,870)
Other comprehensive income (loss):
     Foreign currency translation 2,478  —  (11,941) — 
     Unrealized gain (loss) on short-term investments, net of tax (2,679) 846,900  2,182  (1,082,638)
Comprehensive loss (82,140,159) (128,325,566) (136,551,848) (163,390,508)
     Comprehensive loss attributable to non-controlling interest —  469,407  —  1,063,757 
Comprehensive loss attributable to Inovio Pharmaceuticals, Inc. $ (82,140,159) $ (127,856,159) $ (136,551,848) $ (162,326,751)

See accompanying notes to unaudited condensed consolidated financial statements.



4


INOVIO PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Three and Six Months Ended June 30, 2021
Preferred stock Common stock
Number
of shares
Amount Number
of shares
Amount Additional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
income (loss)
Total
stockholders’
equity
Balance at December 31, 2020 $ —  186,851,493  $ 186,851  $ 1,367,406,869  $ (906,196,812) $ (256,150) $ 461,140,758 
Issuance of common stock for cash, net of financing costs of $531,000
—  20,355,000  20,355  162,084,675  —  —  162,105,030 
Conversion of December 2019 Bonds to common stock —  —  1,009,450  1,009  4,376,883  —  —  4,377,892 
Exercise of stock options for cash and vesting of RSUs, net of tax payments —  —  1,118,093  1,118  (1,202,907) —  —  (1,201,789)
Stock-based compensation —  —  —  —  9,595,947  —  —  9,595,947 
Net loss attributable to common stockholders —  —  —  —  —  (54,402,131) —  (54,402,131)
Unrealized gain on short-term investments —  —  —  —  —  —  4,861  4,861 
Foreign currency translation —  —  —  —  —  —  (14,419) (14,419)
Balance at March 31, 2021 $ —  209,334,036  $ 209,333  $ 1,542,261,467  $ (960,598,943) $ (265,708) $ 581,606,149 
Exercise of stock options for cash and vesting of RSUs, net of tax payments —  —  812,844  813  3,440,610  —  —  3,441,423 
Stock-based compensation —  —  —  —  5,646,358  —  —  5,646,358 
Net loss attributable to common stockholders —  —  —  —  —  (82,139,958) —  (82,139,958)
Unrealized loss on short-term investments —  —  —  —  —  —  (2,679) (2,679)
Foreign currency translation —  —  —  —  —  —  2,478  2,478 
Balance at June 30, 2021 $ —  210,146,880  $ 210,146  $ 1,551,348,435  $ (1,042,738,901) $ (265,909) $ 508,553,771 
5


Three and Six Months Ended June 30, 2020
Preferred stock Common stock
Number
of shares
Amount Number
of shares
Amount Additional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
income (loss)
Non-
controlling
interest
Total
stockholders’
equity
Balance at December 31, 2019 23  $ —  101,361,034  $ 101,361  $ 742,646,785  $ (739,785,655) $ 472,608  $ 1,969,759  $ 5,404,858 
Issuance of common stock for cash —  —  43,148,952  43,149  208,198,784  —  —  —  208,241,933 
Exercise of stock options for cash and vesting of RSUs, net of tax payments —  —  1,405,114  1,405  3,099,298  —  —  —  3,100,703 
Stock-based compensation —  —  —  —  4,017,761  —  —  (16,208) 4,001,553 
Acquisition of non-controlling interest in Geneos —  —  —  —  —  —  —  2,169,998  2,169,998 
Net loss attributable to common stockholders —  —  —  —  —  (32,541,054) —  (594,350) (33,135,404)
Unrealized loss on short-term investments —  —  —  —  —  —  (1,929,538) —  (1,929,538)
Balance at March 31, 2020 23  $ —  145,915,100  $ 145,915  $ 957,962,628  $ (772,326,709) $ (1,456,930) $ 3,529,199  $ 187,854,103 
Issuance of common stock for cash —  —  12,041,178  12,041  121,706,881  —  —  —  121,718,922 
Conversion of preferred stock to common stock (14) —  5,147  (5) —  —  —  — 
Exercise of stock options for cash and vesting of RSUs, net of tax payments —  —  794,986  795  4,421,449  —  —  —  4,422,244 
Stock-based compensation —  —  —  —  3,654,289  —  —  8,146  3,662,435 
Acquisition of non-controlling interest in Geneos —  —  —  —  —  —  —  209,971  209,971 
Deconsolidation of Geneos —  —  —  —  —  —  —  (3,181,640) (3,181,640)
Net loss attributable to common stockholders —  —  —  —  —  (128,703,059) —  (469,407) (129,172,466)
Unrealized gain on short-term investments —  —  —  —  —  —  846,900  —  846,900 
Balance at June 30, 2020 $ —  158,756,411  $ 158,756  $ 1,087,745,242  $ (901,029,768) $ (610,030) $ 96,269  $ 186,360,469 

See accompanying notes to unaudited condensed consolidated financial statements.

6


INOVIO PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Six Months Ended June 30,
  2021 2020
Cash flows from operating activities:
Net loss $ (136,542,089) $ (162,307,870)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 1,361,595  1,608,060 
Amortization of intangible assets 266,874  273,540 
Change in fair value of derivative liability —  110,976,977 
Stock-based compensation 15,242,305  7,663,988 
Non-cash interest expense 435,445  3,013,942 
(Gain) loss on short-term investments (153,252) 576,001 
Settlement of receivable with shares of common stock from affiliated entity (PLS) —  (1,713,770)
Gain on deconsolidation of Geneos —  (4,121,075)
Gain (loss) on equity investment in affiliated entities 551,657  (9,298,443)
Share of net loss in Geneos 434,387  901,757 
Net unrealized loss on available-for-sale equity securities 711,465  691,458 
Non-cash lease expense 567,882  517,865 
Unrealized transaction gain on foreign-currency denominated debt (176,927) (474,071)
Changes in operating assets and liabilities:
Accounts receivable 5,431,637  (2,813,086)
Accounts receivable from affiliated entities (219,159) 865,832 
Prepaid expenses and other current assets (51,944,060) (3,084,082)
Prepaid expenses and other current assets from affiliated entities (197,059) (1,330,601)
Other assets 24,126,582  116,242 
Accounts payable and accrued expenses 8,891,770  (732,774)
Accrued clinical trial expenses 465,819  2,882,486 
Accounts payable and accrued expenses due to affiliated entities 1,130,877  4,634 
Deferred revenue 55,074  (92,426)
Deferred revenue from affiliated entities (6,250) 62,500 
Operating lease right-of-use assets and liabilities, net (1,131,555) (1,022,951)
Grant funding liability (615,155) 4,265,023 
Grant funding liability from affiliated entities (21,000) (63,050)
Other liabilities 6,478  29,686 
Net cash used in operating activities (131,326,659) (52,604,208)
Cash flows from investing activities:
Purchases of investments (307,857,113) (138,698,249)
Proceeds from sale or maturity of investments 83,466,967  47,455,067 
Purchases of capital assets (418,734) (176,534)
Decrease in cash resulting from the deconsolidation of Geneos —  (2,774,851)
Net cash used in investing activities (224,808,880) (94,194,567)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs 162,105,030  329,960,855 
Proceeds from stock option exercises 6,154,794  9,599,514 
Taxes paid related to net share settlement of equity awards (3,915,160) (2,076,567)
Acquisition of non-controlling interest —  2,379,969 
Proceeds from Geneos issuance of note payable —  171,620 
Net cash provided by financing activities 164,344,664  340,035,391 
Effect of exchange rate changes on cash and cash equivalents (11,941) — 
7


(Decrease) Increase in cash and cash equivalents (191,802,816) 193,236,616 
Cash and cash equivalents, beginning of period 250,728,118  22,196,097 
Cash and cash equivalents, end of period $ 58,925,302  $ 215,432,713 
Supplemental disclosures:
Amounts accrued for purchases of property and equipment $ —  $ 1,620 
Interest paid $ 544,315  $ 2,636,454 
See accompanying notes to unaudited condensed consolidated financial statements.
8


INOVIO PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Operations
Inovio Pharmaceuticals, Inc. (the “Company” or “INOVIO”), is a biotechnology company focused on rapidly bringing to market precisely designed DNA medicines to treat and protect people from infectious diseases, cancer, and diseases associated with human papillomavirus ("HPV"). INOVIO's DNA medicines pipeline is comprised of three types of product candidates: DNA vaccines, DNA immunotherapies and DNA encoded monoclonal antibodies ("dMAbs"). In clinical trials, INOVIO has demonstrated that DNA medicines can be delivered directly into cells in the body through its proprietary smart device to consistently activate robust and fully functional T cell and antibody responses against targeted pathogens and cancers.
The Company's novel DNA medicine candidates are made using its proprietary SynCon® technology that creates optimized plasmids, which are circular strands of DNA that instruct a cell to produce antigens to help the person’s immune system recognize and destroy cancerous or virally infected cells.
INOVIO's patented CELLECTRA® smart delivery devices provide optimized uptake of its DNA medicines within the cell, overcoming a key limitation of other DNA-based technology approaches.
Human clinical trial data to date have shown a favorable safety profile of INOVIO's DNA medicines delivered directly into cells in the body using the CELLECTRA® smart device in more than 7,000 administrations across more than 3,000 patients.
INOVIO's corporate strategy is to advance, protect and, once approved, commercialize its novel DNA medicines to meet urgent and emerging global health needs. The Company continues to advance and clinically validate an array of DNA medicine candidates that target HPV-associated diseases, cancer, and infectious diseases, such as COVID-19. The Company aims to advance these candidates through commercialization and continue to leverage third-party resources through collaborations and partnerships, including product license agreements.
The Company's partners and collaborators include ApolloBio Corporation., AstraZeneca, Beijing Advaccine, The Bill & Melinda Gates Foundation, Coalition for Epidemic Preparedness Innovations ("CEPI"), The U.S. Department of Defense ("DoD"), Defense Advanced Research Projects Agency ("DARPA"), GeneOne Life Science, HIV Vaccines Trial Network, the U.S. Defense Threat Reduction Agency’s Medical CBRN Defense Consortium ("MCDC"), International Vaccine Institute ("IVI"), National Cancer Institute, National Institutes of Health, National Institute of Allergy and Infectious Diseases, Ology Bioservices, the Parker Institute for Cancer Immunotherapy, Plumbline Life Sciences, Regeneron Pharmaceuticals, Inc., Richter-Helm BioLogics, Thermo Fisher Scientific, the University of Pennsylvania, the Walter Reed Army Institute of Research, and The Wistar Institute.
The Company and its collaborators are currently conducting or planning clinical studies of its DNA medicines for COVID-19; Middle East Respiratory Syndrome, or MERS; Lassa fever; HIV; Ebola; as well as HPV-associated precancers, including cervical, vulvar, and anal dysplasia; HPV-associated cancers, including head & neck, cervical, anal, penile, vulvar, and vaginal; other HPV-associated disorders, such as recurrent respiratory papillomatosis, or RRP; glioblastoma multiforme, or GBM; and prostate cancer.
INOVIO was incorporated in Delaware in June 2001 and has its principal executive offices in Plymouth Meeting, Pennsylvania.

 
2. Basis of Presentation, Liquidity and Risks and Uncertainties
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Inovio have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) as contained in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of stockholders' equity for the three and six months ended June 30, 2021 and 2020 and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited, but include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial position, results of operations, cash flows and changes in stockholders' equity for the periods presented. The results of operations for the three and six months ended June 30, 2021 shown herein are not necessarily indicative of the results that may be expected for the year ending December 31, 2021, or for any other period. These unaudited financial statements, and notes thereto, should be read in
9

conjunction with the audited consolidated financial statements for the year ended December 31, 2020, included in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 1, 2021. The balance sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
In June 2020, the Company formed a wholly-owned subsidiary, Inovio Asia LLC, under the laws of South Korea, through which the Company intends to advance its corporate development projects and other functions in South Korea and other Asian countries.
These unaudited condensed consolidated financial statements include the accounts of Inovio Pharmaceuticals, Inc. and its subsidiaries. As of June 30, 2021, the Company consolidated its wholly-owned subsidiary Inovio Asia LLC. On December 31, 2020, former wholly-owned subsidiaries Genetronics, Inc. and VGX Pharmaceuticals Inc. and former majority-owned subsidiary VGX Animal Health, Inc. were merged into Inovio Pharmaceuticals, Inc. All intercompany accounts and transactions were eliminated upon consolidation. As of June 1, 2020, the Company deconsolidated its former subsidiary Geneos Therapeutics, Inc. ("Geneos"), as the Company no longer held a controlling financial interest. Refer to Footnote 17 for further discussion.
Liquidity
The Company incurred a net loss attributable to common stockholders of $82.1 million and $136.5 million for the three and six months ended June 30, 2021, respectively. The Company had working capital of $490.7 million and an accumulated deficit of $1.0 billion as of June 30, 2021. The Company has incurred losses in each year since its inception and expects to continue to incur significant expenses and operating losses for the foreseeable future in connection with the research and preclinical and clinical development of its product candidates. The Company’s cash, cash equivalents and short-term investments of $443.7 million as of June 30, 2021 are sufficient to support the Company's operations for a period of at least 12 months from the date of issuance of these financial statements.
In order to continue to fund future research and development activities, the Company will need to seek additional capital. This may occur through strategic alliance and licensing arrangements, grant agreements and/or future public or private debt or equity financings including use of potential future At-the-Market Equity Offering Sales Agreements (“Sales Agreements”). The Company has a history of conducting debt and equity financings, including the receipt of net proceeds of $162.1 million from a January 2021 underwritten public offering and net proceeds of $454.5 million under past Sales Agreements for the year ended December 31, 2020. However, sufficient funding may not be available in the future, or if available, may be on terms that significantly dilute or otherwise adversely affect the rights of existing stockholders. If adequate funds are not available, the Company may need to delay, reduce the scope of or put on hold one or more of its clinical and/or preclinical programs.
The Company’s ability to continue its operations is dependent upon its ability to obtain additional capital in the future and achieve profitable operations. The Company expects to continue to rely on outside sources of financing to meet its capital needs and the Company may never achieve positive cash flow. These condensed consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should Inovio be unable to continue as a going concern. The Company's condensed consolidated financial statements as of and for the three and six months ended June 30, 2021 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business for the foreseeable future. The Company has evaluated subsequent events after the balance sheet date through the date it issued these condensed consolidated financial statements.
The Company is and, from time to time, may in the future be subject to various legal proceedings and claims arising in the ordinary course of business. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its consolidated financial statements. An estimated loss contingency is accrued in the consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal proceedings, including litigation, government investigations and enforcement actions, could result in material costs, occupy significant management resources and entail civil and criminal penalties, even if the Company ultimately prevails. Any of the foregoing consequences could result in serious harm to the Company’s business, results of operations and financial condition.
Risks and Uncertainties
The global pandemic resulting from COVID-19, caused by a novel strain of coronavirus, SARS-CoV-2, has caused national and global economic and financial market disruptions. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will continue to cause significant disruptions to the global economy, as well as businesses and capital markets around the world.
The Company continues to closely monitor the impact of the COVID-19 pandemic on its employees, collaborators and service providers. The extent to which the pandemic will continue to impact the Company's business and operations will depend on future developments, including travel restrictions and social distancing in the United States and other countries, and the
10

effectiveness of actions taken in the United States and other countries to contain and treat the disease, including mass vaccination efforts, that are highly uncertain as of the date the Company is issuing these financial statements.

3. Critical Accounting Policies
Collaboration Agreements
The Company assesses whether its collaboration agreements are subject to ASC Topic 808: Collaborative Arrangements (“Topic 808”) based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of Topic 808 and the Company concludes that its collaboration partner is not a customer, the Company presents such payments as a reduction of research and development expense. If payments from the collaboration partner to the Company represent consideration from a customer, then the Company accounts for those payments within the scope of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“Topic 606”).
Revenue Recognition
The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligations. At contract inception, the Company assesses the goods or services agreed upon within each contract and assess whether each good or service is distinct and determine those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Collaborative Arrangements
The Company enters into collaborative arrangements with partners that typically include payment of one or more of the following: (i) license fees; (ii) product supply services; (iii) milestone payments related to the achievement of developmental, regulatory, or commercial goals; and (iv) royalties on net sales of licensed products. Where a portion of non-refundable, upfront fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as revenue when (or as) the underlying performance obligation is satisfied.
As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment of management to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligation. The standalone selling price may include items such as forecasted revenues, development timelines, discount rates and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.
License Fees
If a license to intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company will utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
Product Supply Services
Arrangements that include a promise for future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company will assess if these options provide a material right to the licensee and if so, they will be accounted for as separate performance obligations. The Company evaluates whether it is the principal or agent in the arrangement. The Company had determined that it is the principal in the current arrangements as the Company controls the product supply before it is transferred to the customer.
11

Milestone Payments
At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company's or its collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achieving such milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration or other revenues and earnings in the period of adjustment.
Royalties
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its collaborative arrangements.
Grants
The Company accounts for various grant agreements under the contributions guidance under Subtopic 958-605, Not-for-Profit Entities-Revenue Recognition, which is outside the scope of Topic 606, as the government agencies granting the Company funds are not receiving reciprocal value for their contributions. All contributions received from current grant agreements are recorded as a contra-expense as opposed to revenue on the condensed consolidated statement of operations.
Leases
For its long-term operating leases, the Company recognizes an operating lease right-of-use asset and an operating lease liability on its condensed consolidated balance sheets. The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent. The Company determines the lease term at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise.
Fixed rent expense for the Company's operating leases is recognized on a straight-line basis over the term of the lease and is included in operating expenses on the condensed consolidated statements of operations. Variable lease payments including lease operating expenses are recorded as incurred.
Research and Development Expenses
The Company’s activities have largely consisted of research and development efforts related to developing electroporation delivery technologies, DNA vaccines, DNA immunotherapies and dMABs. Research and development expenses consist 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. Research and development expenses are charged to operations as they are incurred. These expenses result from the Company's independent research and development efforts as well as efforts associated with collaborations and licensing arrangements. The Company reviews and accrues clinical trial expense based on work performed, which relies on estimates of total costs incurred based on patient enrollment, completion of studies and other events. Accrued clinical trial costs are subject to revisions as trials progress. Revisions are charged to expense in the period in which the facts that give rise to the revision become known. Historically, revisions have not resulted in material changes to research and development expense; however, a modification in the protocol of a clinical trial or cancellation of a trial could result in a charge to the Company's results of operations.
Advance payments for goods or services to be rendered in the future for use in research and development activities are deferred and included in prepaid expenses and other assets. The deferred amounts are expensed as the related goods are delivered or the services are performed.
Valuation of Intangible Assets and Goodwill
Intangible assets are amortized over their estimated useful lives ranging from two to 18 years. Acquired intangible assets are continuously being developed for the future economic viability contemplated at the time of acquisition. The Company is concurrently conducting preclinical studies and clinical trials using the acquired intangibles and has entered into licensing agreements for the use of these acquired intangibles.
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License costs are recorded based on the fair value of consideration paid and are amortized using the straight-line method over the shorter of the expected useful life of the underlying patents or the term of the related license agreement to the extent the license has an alternative future use. As of June 30, 2021 and December 31, 2020, the Company’s intangible assets resulting from the acquisition of Inovio AS and Bioject Medical Technologies, Inc. ("Bioject"), and additional intangibles including license costs, net of accumulated amortization, totaled $2.9 million and $3.1 million, respectively.
The determination of the value of intangible assets requires management to make estimates and assumptions that affect the Company’s condensed consolidated financial statements. The Company assesses potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The Company’s judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of its acquired businesses, market conditions and other factors. If impairment is indicated, the Company will reduce the carrying value of the intangible asset to fair value. While current and historical operating and cash flow losses are potential indicators of impairment, the Company believes the future cash flows to be received from its intangible assets will exceed the intangible assets’ carrying value, and accordingly, the Company has not recognized any impairment losses through June 30, 2021.
Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired businesses. Goodwill is reviewed for impairment at least annually at November 30, or more frequently if an event occurs indicating the potential for impairment. During its goodwill impairment review, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance of the Company. If, after assessing the totality of these qualitative factors, the Company determines that it is not likely that the fair value of its reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, the Company will proceed to perform the impairment test in which the fair value of the reporting unit is compared with its carrying amount, and an impairment charge will be recorded for the amount by which the carrying amount exceeds the reporting unit's fair value, if any. The Company performed its annual assessment for goodwill impairment as of November 30, 2020, identifying no impairment.
Although there are inherent uncertainties in this assessment process, the estimates and assumptions the Company is using are consistent with its internal planning. If these estimates or their related assumptions change in the future, the Company may be required to record an impairment charge on all or a portion of its goodwill and intangible assets. Furthermore, the Company cannot predict the occurrence of future impairment triggering events nor the impact such events might have on its reported asset values. Future events could cause the Company to conclude that impairment indicators exist and that goodwill or other intangible assets associated with its acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on the Company’s results of operations. See Note 8 for further discussion of the Company’s goodwill and intangible assets.
Foreign Currency Translation
The functional and presentation currency of the Company is the U.S. dollar. Transactions denominated in a currency other than the functional currency are recorded on the initial recognition at the exchange rate at the date of the transaction. After initial recognition monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate at that date. The cumulative translation adjustment is included in the accumulated other comprehensive income (loss) within the statement of stockholders' equity. Exchange differences are included in general and administrative expenses in the condensed consolidated statement of operations. Non- monetary assets and liabilities measured at cost are translated at the exchange rate at the date of the transaction.
Variable Interest Entities (VIE)
The Company evaluates its ownership, contractual and other interests in entities that are not wholly-owned to determine if these entities are VIEs, and, if so, whether the Company is the primary beneficiary of the VIE. In determining whether the Company is the primary beneficiary of a VIE and therefore required to consolidate the VIE, the Company applies a qualitative approach that determines whether it has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the rights to receive benefits from, the VIE that could potentially be significant to that VIE. The Company will continuously perform this assessment, as changes to existing relationships or future transactions may result in the consolidation or deconsolidation of a VIE.
Equity Investments
Under ASC Topic 321, Investments - Equity Securities, the Company must measure equity investments (except those accounted for under the equity method, those that result in consolidation of the investee and certain other investments) at fair value and recognize any changes in fair value in the condensed consolidated statement of operations. The Company can elect a measurement alternative for equity investments that do not have readily determinable fair values and do not qualify for the practical expedient in ASC 820, Fair Value Measurement, to estimate fair value using the net asset value per share (or its
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equivalent). The Company's equity investments that do not have readily determinable fair values and do not qualify for the net asset value practical expedient for estimating fair value are measured at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identifiable or similar investments of the same issuer. 

4. Impact of Recently Issued Accounting Standards
The recent accounting pronouncements below may have a significant effect on the Company's financial statements. Recent accounting pronouncements that are not anticipated to have an impact on or are unrelated to the Company's financial condition, results of operations, or related disclosures are not discussed.
Accounting Standards Pending Adoption
ASU No. 2020-06. In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the guidance on an issuer’s accounting for convertible instruments and contracts in its own equity. The standard is effective for the Company beginning in the first quarter of 2022, with early adoption permitted in the first quarter of 2021. The Company did not elect to early adopt the standard and does not expect ASU 2020-06 to have a material impact to its condensed consolidated financial statements.
5. Revenue Recognition
During the three and six months ended June 30, 2021, the Company recognized total revenue under collaborative research and development arrangements of $75,000 and $125,000, respectively, from its affiliated entity Plumbline Life Sciences, Inc. ("PLS") and $198,000 and $519,000, respectively, from various other contracts as a result of performance obligations being satisfied. Of the total revenue recognized during the three and six months ended June 30, 2021, $35,000 and $39,000, respectively, were in deferred revenue as of December 31, 2020.

6. Short-term Investments
Short-term investments at June 30, 2021 consisted of mutual funds, U.S. treasury securities, certificates of deposit and U.S. agency mortgage-backed securities. Short-term investments at December 31, 2020 consisted of mutual funds, certificates of deposit and U.S. agency mortgage-backed securities. Short-term investments are recorded at fair value, based on current market valuations. Unrealized gains and losses on the Company's short-term debt investments are excluded from earnings and reported as a separate component of other comprehensive loss until realized. Realized gains and losses and unrealized gains and losses on available-for-sale equity securities are included in non-operating other income (expense) on the condensed consolidated statements of operations and are derived using the specific identification method for determining the cost of the securities sold.
During the three and six months ended June 30, 2021, the Company recorded gross realized gain on investments of $358,000 and $358,000, respectively, and gross realized loss on investments of $194,000 and $204,000, respectively. During the three and six months ended June 30, 2020, the Company recorded gross realized gain on investments of $585,000 and $635,000, respectively, and gross realized loss on investments of $686,000 and $1.2 million, respectively. During the three and six months ended June 30, 2021, the Company recorded net unrealized gain (loss) on available-for-sale equity securities of $136,000 and $(711,000), respectively. During the three and six months ended June 30, 2020, the Company recorded net unrealized gain (loss) on available-for-sale equity securities of $4.4 million and $(691,000), respectively. No material balances were reclassified out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020. Interest and dividends on investments classified as available-for-sale are included in interest income in the condensed consolidated statements of operations. As of June 30, 2021, the Company had 22 available-for-sale securities in an unrealized loss position, of which four with an aggregate total unrealized loss of $211,000 were in such position for longer than 12 months.
The following is a summary of available-for-sale securities as of June 30, 2021 and December 31, 2020:

  As of June 30, 2021
  Contractual
Maturity (in years)
Cost Gross Unrealized
Gains
Gross Unrealized
Losses
Fair Market Value
Mutual funds --- $ 207,475,699  $ 1,563,089  $ (579,056) $ 208,459,732 
U.S. treasury securities
Less than 1
170,203,940  10,943  (4,754) 170,210,129 
Certificates of deposit
Less than 1
2,972,816  25,684  —  2,998,500 
U.S. agency mortgage-backed securities * 3,130,877  2,782  (49,638) 3,084,021 
$ 383,783,332  $ 1,602,498  $ (633,448) $ 384,752,382 
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  As of December 31, 2020
  Contractual
Maturity (in years)
Cost Gross Unrealized
Gains
Gross Unrealized
Losses
Fair Market Value
Mutual funds --- $ 153,177,675  $ 2,339,639  $ (644,140) $ 154,873,174 
Certificates of deposit
Less than 1
3,000,000  26,260  (10,000) 3,016,260 
U.S. agency mortgage-backed securities * 3,062,256  —  (36,755) 3,025,501 
Total investments $ 159,239,931  $ 2,365,899  $ (690,895) $ 160,914,935 

*No single maturity date.

The Company periodically reviews its portfolio of available-for-sale debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For the debt securities where the fair value of the investment is less than the amortized cost basis, the Company has assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on available-for-sale debt securities as of June 30, 2021 were primarily due to changes in interest rates, and not due to increased credit risks associated with specific securities. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. Based on the credit quality of the available-for-sale debt securities that are in an unrealized loss position, and the Company’s estimates of future cash flows to be collected from those securities, the Company believes the unrealized losses are not credit losses. Accordingly, at June 30, 2021, the Company has not recorded an allowance for credit losses related to its available-for-sale debt securities.

7. Fair Value Measurements
The guidance regarding fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets that are accessible at the measurement date; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Assets are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company does not have any liabilities measured at fair value on a recurring basis and did not have any transfer of assets or liabilities between Level 1, Level 2 and Level 3 of the fair value hierarchy during the six months ended June 30, 2021 or 2020.
The following table presents the Company’s assets that were measured at fair value on a recurring basis, determined using the following inputs as of June 30, 2021:
 
Fair Value Measurements at
  June 30, 2021
  Total Quoted Prices
in Active Markets
(Level 1)
Significant
Other Unobservable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Short-term investments
     Mutual funds $ 208,459,732  $ 208,459,732  $ —  $ — 
     U.S. treasury securities 170,210,129  170,210,129  —  — 
     Certificates of deposit 2,998,500  —  2,998,500  — 
     U.S. agency mortgage-backed securities 3,084,021  —  3,084,021  — 
Total short-term investments 384,752,382  378,669,861  6,082,521  — 
Investment in affiliated entity 3,908,709  3,908,709  —  — 
Total assets measured at fair value $ 388,661,091  $ 382,578,570  $ 6,082,521  $ — 

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The following table presents the Company’s assets that were measured at fair value on a recurring basis, determined using the following inputs as of December 31, 2020:
 
Fair Value Measurements at
  December 31, 2020
  Total Quoted Prices
in Active Markets
(Level 1)
Significant
Other Unobservable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash and cash equivalents
     U.S. treasury securities $ 59,996,800  $ 59,996,800  $ —  $ — 
Short-term investments
     Mutual funds 154,873,174  154,873,174  —  — 
     Certificates of deposit 3,016,260  3,016,260  — 
     U.S. agency mortgage-backed securities 3,025,501  —  3,025,501  — 
Total short-term investments 160,914,935  154,873,174  6,041,761  — 
Investment in affiliated entity 4,460,366  4,460,366  —  — 
Total assets measured at fair value $ 225,372,101  $ 219,330,340  $ 6,041,761  $ — 

Level 1 assets at June 30, 2021 consisted of mutual funds and U.S. treasury securities held by the Company that are valued at quoted market prices, as well as the Company’s investment in its affiliated entity, PLS. The Company accounts for its investment in 597,808 common shares of PLS based on the closing price of the shares on the Korea New Exchange Market on the applicable balance sheet date. Unrealized gains and losses on the Company's equity securities are reported in the condensed consolidated statement of operations as unrealized gain (loss) on available-for-sale equity securities or as a gain (loss) on investment in affiliated entities.
Level 2 assets at June 30, 2021 consisted of certificates of deposit and U.S. agency mortgage-backed securities held by the Company that are initially valued at the transaction price and subsequently valued, at the end of each reporting period, typically utilizing market observable data. The Company obtains the fair value of its Level 2 assets from a professional pricing service, which may use quoted market prices for identical or comparable instruments, or inputs other than quoted prices that are observable either directly or indirectly. The professional pricing service gathers quoted market prices and observable inputs from a variety of industry data providers. The valuation techniques used to measure the fair value of the Company's Level 2 financial instruments were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models such as discounted cash flow techniques. The Company validates the quoted market prices provided by the primary pricing service by comparing the service's assessment of the fair values of the Company's investment portfolio balance against the fair values of the Company's investment portfolio balance obtained from an independent source.
There were no Level 3 assets held as of June 30, 2021.
8. Goodwill and Intangible Assets
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The following sets forth the goodwill and intangible assets by major asset class:
 
  June 30, 2021 December 31, 2020
  Weighted Average Useful
Life
(Yrs)
Gross Accumulated
Amortization
Net Book
Value
Gross Accumulated
Amortization
Net Book
Value
Indefinite lived:
Goodwill $ 10,513,371  $ —  $ 10,513,371  $ 10,513,371  $ —  $ 10,513,371 
Definite lived:
Licenses 10 1,323,761  (1,291,226) 32,535  1,323,761  (1,276,852) 46,909 
Bioject(a) 12 5,100,000  (2,608,889) 2,491,111  5,100,000  (2,468,889) 2,631,111 
Other(b) 18 4,050,000  (3,693,750) 356,250  4,050,000  (3,581,250) 468,750 
Total intangible assets 11 10,473,761  (7,593,865) 2,879,896  10,473,761  (7,326,991) 3,146,770 
Total goodwill and intangible assets $ 20,987,132  $ (7,593,865) $ 13,393,267  $ 20,987,132  $ (7,326,991) $ 13,660,141 

(a)Bioject intangible assets represent the estimated fair value of developed technology and intellectual property which were recorded from an asset acquisition.
(b)Other intangible assets represent the estimated fair value of acquired intellectual property.
Aggregate amortization expense on intangible assets for the three and six months ended June 30, 2021 was $130,000 and $267,000, respectively. Aggregate amortization expense on intangible assets for the three and six months ended June 30, 2020 was $137,000 and $274,000, respectively. Estimated aggregate amortization expense is $254,000 for the remainder of fiscal year 2021, $493,000 for 2022, $276,000 for 2023, $253,000 for 2024, $253,000 for 2025 and $1.4 million for 2026 and subsequent years combined.

9. Convertible Debt
Convertible Senior Notes
On February 19, 2019 and March 1, 2019, the Company completed a private placement of $78.5 million aggregate principal amount of its 6.50% convertible senior notes due 2024 (the “Notes”). The Notes were sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Net proceeds from the offering were approximately $75.7 million.
The Notes are senior unsecured obligations of the Company and accrue interest payable in cash semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2019, at a rate of 6.50% per annum. The Notes will mature on March 1, 2024, unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding November 1, 2023, the Notes will be convertible at the option of the holders only upon the satisfaction of certain circumstances. Thereafter, the Notes will be convertible at the option of the holders at any time until the close of business on the scheduled trading day immediately before the maturity date. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. The initial conversion rate will be 185.8045 shares per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $5.38 per share), subject to adjustment upon the occurrence of specified events.
The Company may not redeem the Notes prior to March 1, 2022. On or after March 1, 2022, the Company may redeem all, or any portion, of the Notes for cash if the last reported sale price per share of the Company's common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such redemption notice. The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The Company evaluated the accounting for the issuance of the Notes and concluded that the embedded conversion features meet the requirements for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its condensed consolidated balance sheet, and that the cash conversion guidance applies. Therefore, the Notes issuance proceeds of $78.5 million are allocated first to the liability component based on the fair
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value of non-convertible debt with otherwise identical residual terms with the residual proceeds allocated to equity for the conversion features. The Company determined that the fair value of the non-convertible debt upon issuance of the Notes was $62.2 million and recorded this amount as a liability and the offsetting amount as a debt discount as a reduction to the carrying value of the Notes on the closing date. The debt issuance costs associated with the Notes of $2.8 million are allocated to the liability and equity component in the same proportion as the issuance proceeds.
The Company determined that all other features of the Notes were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's condensed consolidated financial statements.
The Company determined that the expected life of the Notes was equal to the period through November 1, 2023 as this represents the point at which the Notes are initially subject to repurchase by the Company at the option of the holders. Accordingly, the total debt discount of $18.6 million, inclusive of the fair value of the embedded conversion feature derivative at issuance, is being amortized using the effective interest method through November 1, 2023. The effective interest rate of the liability component is 13.1%.
During the year ended December 31, 2020, the Company received notices for the conversion of $62.1 million of principal amount of the Notes, which were settled for an aggregate of 11,535,660 shares of the Company's common stock. The fair value of the Notes at the date of conversion was $43.7 million compared to the carrying value of $52.5 million, resulting in a $8.8 million gain on extinguishment of debt. This gain was recorded in the condensed consolidated statement of operations. To measure the fair value of the converted Notes as of the conversion dates, the Company engaged a third-party valuation expert and utilized a binomial lattice model.
The balance of the Notes at June 30, 2021 is as follows:
Original principal amount $ 78,500,000 
Principal amount converted into common shares (62,085,000)
Unamortized debt discount on the liability component (1,963,908)
Unamortized debt issuance cost (270,302)
Accrued interest 355,658 
     Net carrying amount $ 14,536,448 

For the three and six months ended June 30, 2021, the Company recognized $467,000 and $930,000, respectively, of interest expense related to the Notes, of which $267,000 and $533,000, respectively, related to the contractual interest coupon. For the three and six months ended June 30, 2020, the Company recognized $2.1 million and $4.2 million, respectively, of interest expense related to the Notes, of which $1.3 million and $2.6 million, respectively, related to the contractual interest coupon.
As of June 30, 2021, future minimum payments due under the Notes, representing contractual amounts due, including interest based on the fixed rate of 6.5% per annum, are as follows:
Remainder of 2021 $ 534,000 
2022 1,067,000 
2023 1,067,000 
2024 16,948,000 
Total $ 19,616,000 


August 2019 Convertible Bonds
On August 1, 2019, the Company closed a private placement of the August 2019 Bonds with an aggregate principal amount of 18 billion Korean Won (KRW) (approximately USD $15.0 million based on the exchange rate on the date of issuance) issued to institutional investors led by Korea Investment Partners (KIP), a global venture capital and private equity firm based in Seoul, Korea. Net proceeds from the offering were approximately $14.5 million.
The August 2019 Bonds, which were unsecured obligations of the Company, were issued on August 1, 2019 and accrued interest at a coupon rate of 1.00% per annum, payable quarterly. The August 2019 Bonds were scheduled to mature on July 31, 2024, unless earlier converted or repurchased. On August 3, 2020 the August 2019 Bonds were converted in full into an aggregate of 4,962,364 shares of the Company's common stock, leaving no further August 2019 Bonds outstanding. The initial conversion rate was 211.0595 shares per KRW1,000,000 in principal amount (equivalent to an initial conversion price of
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approximately USD $4.00 per share based on the exchange rate as of July 30, 2019), subject to adjustment upon the occurrence of specified events. The conversion rate was reset on January 2, 2020 and was subject to reset quarterly thereafter if the current market price was lower than the conversion price then in effect. The conversion rate as of the date of conversion on August 1, 2020 was 275.69 shares per KRW 1,000,000 in principal amount (equivalent to a conversion price of approximately USD $3.14 per share).
The Company evaluated the accounting for the issuance of the August 2019 Bonds and concluded that the embedded conversion feature was considered a derivative requiring bifurcation from the August 2019 Bonds as it did not meet the equity scope exception due to the fact that it was denominated in a currency other than the Company's functional currency. The fair value of the conversion feature at August 1, 2019 was $7.1 million, which was recorded as a reduction to the carrying value of the debt. This debt discount was being amortized to interest expense over the term of the debt using the effective interest method. The conversion option was accounted for as a derivative liability, which was revalued each reporting period with the resulting change in fair value reflected in other income (expense), net, in the condensed consolidated statements of operations.
The Company determined that all other features of the August 2019 Bonds were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's condensed consolidated financial statements.
At their issuance, the Company determined that the expected life of the August 2019 Bonds was equal to the period through August 1, 2022 as this represented the point at which the August 2019 Bonds were initially subject to repurchase by the Company at the option of the holders. Accordingly, the total debt discount of $7.3 million, inclusive of the fair value of the embedded conversion feature derivative at issuance, was being amortized using the effective interest method through August 1, 2022. For the three and six months ended June 30, 2020, the Company recognized $672,000 and $1.3 million, respectively, of interest expense related to the August 2019 Bonds, of which $37,000 and $75,000, respectively, related to the contractual interest coupon.
Immediately prior to the August 2020 conversion in full of the August 2019 Bonds, the derivative liability associated with the August 2019 Bonds was revalued at $84.5 million. The change in fair value of the derivative liability was an increase of $75.7 million, which was recorded on the consolidated statement of operations for the year ended December 31, 2020. To measure the fair value of the derivative liability as of the conversion date, the Company engaged a third-party valuation expert.
Upon conversion, a loss on extinguishment of $8.2 million was recorded on the consolidated statement of operations for the year ended December 31, 2020. This loss represents the difference between (a) the calculated fair value of the derivative liability immediately prior to its derecognition plus the carrying amount of the debt component including any unamortized debt discount and issuance costs and (b) the fair value of the 4,692,364 shares of the Company's common stock issued upon conversion.
December 2019 Convertible Bonds
On December 26, 2019, the Company closed a private placement of convertible promissory notes (the “December 2019 Bonds”) with an aggregate principal amount of 4.7 billion KRW (approximately USD $4.1 million based on the exchange rate on the date of issuance) issued to a Korea-based institutional investor. Net proceeds from the offering were approximately $4.0 million.
The December 2019 Bonds, which were unsecured obligations of the Company, were issued on December 31, 2019 and accrued interest at a coupon rate of 1.00% per annum, payable quarterly. The December 2019 Bonds were scheduled to mature on December 31, 2024, unless earlier converted or repurchased. On March 17, 2021, the December 2019 Bonds were converted in full into an aggregate of 1,009,450 shares of the Company's common stock, leaving no further December 2019 Bonds outstanding. The initial conversion rate was 214.7766 shares per KRW1,000,000 principal amount of Bonds (equivalent to an initial conversion price of approximately USD $4.00 per share based on the exchange rate as of December 19, 2019), subject to adjustment upon the occurrence of certain events. As of the conversion date of March 17, 2021, the conversion rate had not been reset from the initial conversion rate.
The Company evaluated the accounting for the issuance of the December 2019 Bonds and concluded that the embedded conversion feature does not require bifurcation from the December 2019 Bonds. Although the embedded conversion feature meets the definition of a derivative, it qualifies for the equity scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its consolidated balance sheet. The December 2019 Bonds were denominated in a foreign currency other than the Company’s functional currency, which would typically violate the settlement provision criteria when analyzing whether the conversion option is indexed to an entity’s own stock. However, per the terms of the agreement, the functional currency rate required to be used in a conversion scenario was fixed as of the date preceding the date of issuance of the Bonds. Therefore, the fluctuation in functional currency did not impact the settlement of the conversion option. Further, as there was no cash conversion feature or beneficial conversion feature on the date of issuance, and the Bonds were not issued at a substantial premium, all of the proceeds were recorded as a liability.
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The Company determined that all other features of the December 2019 Bonds were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's condensed consolidated financial statements.
At their issuance, the Company determined that the expected life of the December 2019 Bonds was equal to the period through December 31, 2022 as this represented the point at which the December 2019 Bonds were initially subject to repurchase by the Company at the option of the holders. The effective interest rate of the December 2019 Bonds was 6.2%. For the six months ended June 30, 2021, the Company recognized $50,000 of interest expense related to the December 2019 Bonds, of which $9,000 related to the contractual interest coupon. For the three and six months ended June 30, 2020, the Company recognized $60,000 and $122,000, respectively, of interest expense related to the December 2019 Bonds, of which $10,000 and $20,000, respectively, related to the contractual interest coupon.
As of June 30, 2021, all outstanding December 2019 Bonds were converted into 1,009,450 shares of the Company's common stock. Upon conversion, the $4.4 million carrying value of the December 2019 Bonds was reclassified to stockholders' equity.

10. Stockholders’ Equity
The following is a summary of the Company's authorized and issued common and preferred stock as of June 30, 2021 and December 31, 2020:
      Outstanding as of
  Authorized Issued June 30, 2021 December 31, 2020
Common Stock, par value $0.001 per share
600,000,000  210,146,880  210,146,880  186,851,493 
Series C Preferred Stock, par value $0.001 per share
1,091  1,091 

Preferred Stock
In June 2020, 14 shares of the Company’s Series C preferred stock were converted into an aggregate of 5,147 shares of the Company’s common stock.
Common Stock
On January 25, 2021, the Company closed an underwritten public offering of 20,355,000 shares of common stock at a public offering price of $8.50 per share. The net proceeds to the Company, after deducting the underwriters' discounts and commissions and other estimated offering expenses, were $162.1 million.
In May 2018, the Company entered into a Sales Agreement with an outside placement agent (the “Placement Agent”) to sell shares of its common stock with aggregate gross proceeds of up to $100.0 million, from time to time, through an “at-the-market” equity offering program under which the Placement Agent acted as sales agent. During the first quarter of 2020, the Company and the Placement Agent entered into a first and second amendment to the Sales Agreement (the "Prior Sales Agreement") to increase the amount of common stock that may be sold under the Sales Agreement from $100.0 million to $250.0 million. As of March 31, 2020, there was no remaining capacity under the Prior Sales Agreement. On April 3, 2020, the Company and the Placement Agent entered into a new Sales Agreement (the "New Sales Agreement") to sell shares of its common stock. On April 3, 2020 and May 12, 2020, the Company filed prospectus supplements pursuant to the New Sales Agreement for the offer and sale of its Common Stock for aggregate gross proceeds of up to an aggregate of $250.0 million.
During the three months ended March 31, 2020, the Company sold 43,148,952 shares of its common stock under the Prior Sales Agreement. The sales were made at a weighted average price of $4.92 per share, resulting in aggregate net proceeds of $208.2 million. As of March 31, 2020, there was no remaining capacity under the Prior Sales Agreement.
During the year ended December 31, 2020, the Company sold a total of 22,919,934 shares of its common stock under the New Sales Agreement. The sales were made at a weighted average price of $10.91 per share resulting in aggregate net proceeds of $246.2 million. As of December 31, 2020, there was no remaining capacity under the New Sales Agreement.
Stock Options and Restricted Stock Units
The Company has a stock-based incentive plan, the 2016 Omnibus Incentive Plan (as amended to date, the "2016 Incentive Plan"), pursuant to which the Company may grant stock options, restricted stock awards, restricted stock units and other stock-based awards or short-term cash incentive awards to employees, directors and consultants.
The 2016 Incentive Plan was originally approved by the Company's stockholders on May 13, 2016, and an amendment to the plan to increase the number of shares available for issuance was approved by the stockholders on May 8, 2019. As of June 30, 2021, the maximum number of shares of the Company’s common stock available for issuance over the term of the
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2016 Incentive Plan was 20,000,000 shares. On the first business day of each calendar year, such maximum number of shares is further increased by 2,000,000 shares of common stock unless the Board determines, prior to January 1 for any such calendar year, to increase such maximum amount by a fewer number of shares or not to increase the maximum amount at all for such year. On January 1, 2021, the maximum number of shares increased by 2,000,000. At June 30, 2021, the Company had 4,998,253 shares of common stock available for future grant under the 2016 Incentive Plan, 2,516,102 shares underlying outstanding but unvested restricted stock units and options outstanding to purchase 7,814,677 shares of common stock under the 2016 Incentive Plan. The awards granted and available for future grant under the 2016 Incentive Plan generally vest over three years and have a maximum contractual term of ten years. The 2016 Incentive Plan terminates by its terms on March 9, 2026.
The Amended and Restated 2007 Omnibus Incentive Plan (the "2007 Incentive Plan") was adopted on March 31, 2007 and terminated by its terms on March 31, 2017. At June 30, 2021, the Company had options outstanding to purchase 2,516,141 shares of common stock under the 2007 Incentive Plan. The awards granted under the 2007 Incentive Plan generally vest over three years and have a maximum contractual term of ten years.

11. Net Loss Per Share
Basic net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated in accordance with the treasury stock method for the outstanding stock options and restricted stock units and reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock. The dilutive impact of the outstanding Notes and Bonds issued by the Company (discussed in Note 9) has been considered using the "if-converted" method. The calculation of diluted net loss per share requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the options or other securities and the presumed exercise of such securities are dilutive to net loss per share for the period, an adjustment to the net loss used in the calculation is required to remove the change in fair value of such securities from the numerator for the period. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any. For the three and six months ended June 30, 2021 and 2020, basic and diluted net loss per share were the same, as the assumed exercise or settlement of stock options and restricted stock units and the potentially dilutive shares issuable upon conversion of the Notes and Bonds would have been anti-dilutive.
The following table summarizes potential shares of common stock that were excluded from the diluted net loss per share calculation because of their anti-dilutive effect for the three and six months ended June 30, 2021 and 2020:
Common Stock Equivalents 2021 2020
Options to purchase common stock 10,330,818  9,193,096 
Service-based restricted stock units 2,516,102  2,868,665 
Performance-based restricted stock units 663,353  — 
Convertible preferred stock 3,309  3,309 
Convertible notes 3,049,980  14,585,653 
August 2019 Bonds —  4,962,364 
December 2019 Bonds —  1,009,450 
Total 16,563,562  32,622,537 
12. Stock-Based Compensation
The Company incurs stock-based compensation expense related to restricted stock units ("RSUs") and stock options. The fair value of restricted stock is determined by the closing price of the Company's common stock reported on the Nasdaq Global Select Market on the date of grant. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of subjective assumptions, including the expected stock price volatility and expected option life. The Company amortizes the fair value of the awards on a straight-line basis over the requisite vesting period of the awards. Expected volatility is based on historical volatility. The expected life of options granted is based on historical expected life. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant. The dividend yield is based on the fact that no dividends have been paid historically and none are currently expected to be paid in the foreseeable future. The Company recognizes forfeitures as they occur.
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The weighted average assumptions used in the Black-Scholes model for option grants to employees and directors are presented below:
  Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 2021 2020
Risk-free interest rate 0.99% 0.40% 0.90% 0.67%
Expected volatility 93% 80% 92% 77%
Expected life in years 5.7 5.9 5.8 5.9
Dividend yield

Total employee and director stock-based compensation expense recognized in the condensed consolidated statements of operations for the three and six months ended June 30, 2021 was $5.3 million and $14.5 million, respectively, of which $2.7 million and $7.9 million, respectively, was included in research and development expenses, and $2.6 million and $6.6 million, respectively, was included in general and administrative expenses.
Total employee and director stock-based compensation expense recognized in the condensed consolidated statements of operations for the three and six months ended June 30, 2020 was $3.4 million and $7.1 million, respectively, of which $1.8 million and $4.1 million, respectively, was included in research and development expenses, and $1.6 million and $3.0 million, respectively, was included in general and administrative expenses.
At June 30, 2021, there was $19.8 million of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.3 years.
The weighted average grant date fair value per share, calculated using the Black-Scholes option pricing model, was $5.25 and $7.91 for employee and director stock options granted during the three and six months ended June 30, 2021, respectively, and $9.52 and $6.19 for the three and six months ended June 30, 2020, respectively.
At June 30, 2021, there was $16.8 million of total unrecognized compensation expense related to unvested service-based RSUs, which is expected to be recognized over a weighted-average period of 2.1 years.
The weighted average grant date fair value per share was $6.81 and $10.64 for service-based RSUs granted during the three and six months ended June 30, 2021, respectively, and $14.50 and $9.12 for the three and six months ended June 30, 2020, respectively.
The fair value of stock options granted to non-employees was estimated using the Black-Scholes pricing model. Total stock-based compensation expense for stock options and RSUs granted to non-employees for the three and six months ended June 30, 2021 was $308,000 and $737,000, respectively. Total stock-based compensation expense for stock options and RSUs granted to non-employees for the three and six months ended June 30, 2020 was $224,000 and $607,000, respectively.
On August 28, 2020, the Company granted 663,353 performance-based RSUs to executives under the 2016 Incentive Plan. The RSUs will vest in two tranches as follows: 50% of the shares in each tranche will vest upon achievement of the predetermined performance milestones and the remaining 50% of the shares in each tranche will vest upon subsequent completion of a one-year service period. The total grant date fair value of the performance-based RSUs was $8.0 million based on the grant date closing price per share of $12.06. As of June 30, 2021, the underlying performance milestones of the RSUs were not probable of achievement, and no stock-based compensation expense was recognized for the performance-based RSUs for the six months then ended.

13. Related Party Transactions
Plumbline Life Sciences, Inc.
The Company owned 597,808 shares of common stock in PLS as of June 30, 2021, representing a 19.7% ownership interest, and one of the Company's directors, Dr. David B. Weiner, acts as a consultant to PLS.
Revenue recognized from PLS consists of milestone, license and patent fees. For the three and six months ended June 30, 2021, the Company recognized revenue from PLS of $75,000 and $125,000, respectively, and $64,000 and $1.2 million, for the three and six months ended June 30, 2020, respectively. At June 30, 2021 and December 31, 2020, the Company had an accounts receivable balance of $99,000 and $67,000, respectively, related to PLS.
The Wistar Institute
The Company's director Dr. David B. Weiner is a director of the Vaccine Center of The Wistar Institute ("Wistar"). Dr. Weiner is also the Executive Vice President of Wistar.
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In March 2016, the Company entered into collaborative research agreements with Wistar for preventive and therapeutic DNA-based immunotherapy applications and products developed by Dr. Weiner and Wistar for the treatment of cancers and infectious diseases. Under the terms of the agreement, the Company reimbursed Wistar for all direct and indirect costs incurred in the conduct of the collaborative research, not to exceed $3.1 million during the five-year term of the agreements. In March 2021, upon expiration of the March 2016 agreements, the Company entered into new collaborative research agreements with Wistar with the same terms. The Company has the exclusive right to in-license new intellectual property developed under the agreements.
In November 2016, the Company received a $6.1 million sub-grant through Wistar to develop a dMAb against the Zika infection, with funding extended through December 2021.
The Company is also a collaborator with Wistar on an Integrated Preclinical/Clinical AIDS Vaccine Development grant from the NIAID, with funding through February 2022.
In 2020, the Company received a $10.7 million sub-grant through Wistar for the preclinical development and translational studies of dMAbs as countermeasures for COVID-19, with funding through September 2022. The sub-grant also includes an option for an additional $6.0 million in funding through September 2024.
Deferred grant funding recognized from Wistar and recorded as contra-research and development expense is related to work performed by the Company on the research sub-contract agreements. For the three and six months ended June 30, 2021, the Company recorded $381,000 and $610,000, respectively, and for the three and six months ended June 30, 2020 the Company recorded $73,000 and $691,000, respectively, as contra-research and development expense from Wistar.
Research and development expenses recorded from Wistar relate primarily to the collaborative research agreements and sub-contract agreements related to the Bill & Melinda Gates Foundation and CEPI (see Note 15). Research and development expenses recorded from Wistar for the three and six months ended June 30, 2021 were $1.2 million and $1.6 million, respectively. Research and development expenses recorded from Wistar for the three and six months ended June 30, 2020 were $408,000 and $770,000, respectively. At June 30, 2021 and December 31, 2020, the Company had an accounts receivable balance of $617,000 and $425,000, respectively, and an accounts payable and accrued liability balance of $1.8 million and $643,000, respectively, related to Wistar. As of June 30, 2021, the Company had a prepaid expense balance of $303,000 and recorded $69,000 as deferred grant funding on the condensed consolidated balance sheet related to Wistar.

14. Leases
The Company leases approximately 82,200 square feet of office, laboratory, and manufacturing space in San Diego, California and 57,360 square feet of office space in Plymouth Meeting, Pennsylvania under various non-cancellable operating lease agreements with remaining lease terms as of June 30, 2021 of 2.4 to 8.5 years, which represent the non-cancellable periods of the leases. The Company has excluded the extension options from its lease terms in the calculation of future lease payments as they are not reasonably certain to be exercised. The Company's lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms as well as payments for common area maintenance and administrative services. The Company has received customary incentives from its landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases.
The Company performed an evaluation of its contracts with customers and suppliers in accordance with ASC Topic 842 and determined that, except for the real estate leases described above and various copier leases, none of its other contracts contain a right-of-use asset.
Operating lease right-of-use assets and liabilities on the condensed consolidated balance sheet represents the present value of the remaining lease payments over the remaining lease terms. Payments for additional monthly fees to cover the Company's share of certain facility expenses are not included in operating lease right-of-use assets and liabilities. The Company uses its incremental borrowing rate to calculate the present value of its lease payments, as the implicit rates in the leases are not readily determinable.
As of June 30, 2021, the maturities of the Company's operating lease liabilities were as follows:
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Remainder of 2021 $ 1,994,000 
2022 4,045,000 
2023 4,023,000 
2024 3,001,000 
2025 3,063,000 
Thereafter 9,888,000 
   Total remaining lease payments 26,014,000 
Less: present value adjustment (6,753,000)
   Total operating lease liabilities 19,261,000 
Less: current portion (2,464,000)
Long-term operating lease liabilities $ 16,797,000 
Weighted-average remaining lease term 7.0 years
Weighted-average discount rate 8.5%
Lease costs included in operating expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2021 were $827,000 and $1.7 million, respectively. Lease costs included in operating expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2020 were $814,000 and $1.7 million, respectively. Operating lease costs consisting of the fixed lease payments included in operating lease liabilities are recorded on a straight-line basis over the lease terms. Variable lease costs are recorded as incurred.
In the fourth quarter of 2019, the Company entered into two agreements to sublease a total of approximately 13,500 square feet in its Plymouth Meeting headquarters through periods between December 31, 2022 and March 31, 2025.
In the normal course of business, the Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party. It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of the Company's obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these types of agreements have not had a material effect on its business, consolidated results of operations or financial condition.

15. Collaborative Agreements
Advaccine Biopharmaceuticals Suzhou Co., Ltd.
On December 31, 2020, the Company entered into a Collaboration and License Agreement with Advaccine Biopharmaceuticals Suzhou Co., Ltd. (“Advaccine”), which was amended and restated on June 7, 2021 (as amended and restated, the “Advaccine Agreement”). Under the terms of the Advaccine Agreement, the Company granted to Advaccine the exclusive right to develop, manufacture and commercialize the Company’s vaccine candidate INO-4800 within the territories of China, Taiwan, Hong Kong and Macau (referred to collectively as “Greater China”) and 33 additional countries in Asia. Advaccine does not have the right to grant sublicenses, other than to affiliated entities, without the Company’s express prior written consent. As part of the collaboration, Advaccine also granted to the Company a non-exclusive license to certain DNA vaccine manufacturing processes.
The June 2021 amendment relates to the collaboration between the Company and Advaccine to jointly conduct the global Phase 3 segment of the Company’s ongoing Phase 2/3 trial of INO-4800 and expand the existing collaboration to include the planned global Phase 3 trial. The parties will jointly participate in the trial and will equally share the global development costs for the trial, including the Company’s manufacturing costs to supply INO-4800. In certain instances, the Company will have the right to convert the exclusive license to a non-exclusive license in the licensed territories, other than Greater China, unless Advaccine agrees to pay the Company its full share of development costs in excess of a specified maximum. Notwithstanding the foregoing, Advaccine will be fully responsible for conducting the trial in Greater China, including its costs and expenses incurred in conducting the trial in Greater China. The Company will be fully responsible for its costs and expenses, if any, incurred solely as a result of its activities in connection with the performance of the trial in the United States. The parties may continue to conduct clinical trials of INO-4800 outside of the territories covered by the Advaccine Agreement.
In the event that a global purchasing entity desires to enter into a purchase agreement for INO-4800 in both parties’ territories, the parties will enter into good faith negotiations for an arrangement to supply INO-4800 to such entity. In addition, the Company is permitted to enter into an agreement with a global purchasing entity to authorize the entity to conduct a portion of the global Phase 3 trial in the licensed territory outside of Greater China.
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Under the Advaccine Agreement, Advaccine made an upfront payment to the Company of $3.0 million in January 2021. In addition to the upfront payment, the Company is entitled to receive up to an aggregate of $206.0 million upon the achievement of specified milestones related to the development, regulatory approval and commercialization of INO-4800, including the achievement of specified net sales thresholds for INO-4800 in Greater China and the additional covered territories, if approved. As of December 31, 2020 the Company had earned a $2.0 million milestone payment based on the enrollment of the first subject in the Phase 2 clinical trial for the product in the Advaccine territory. The Company will also be entitled to receive a royalty equal to a high single-digit percentage of annual net sales in each region within the licensed territory, subject to reduction in the event of competition from biosimilar products in a particular region and in other specified circumstances. Advaccine’s obligation to pay royalties will continue, on a licensed product-by-licensed product basis and region-by-region basis, for ten years after the first commercial sale in a particular region within Greater China or, if later, until the expiration of the last-to-expire patent covering a given licensed product in a given region.
Beginning in the first calendar year following the first commercial sale of INO-4800 in the licensed territory outside of Greater China, Advaccine will pay the Company an annual maintenance fee of $1.5 million for a period of five years, which fee will be creditable against any royalties payable by Advaccine with respect to sales outside of Greater China.
Under the Advaccine Agreement, the Company will supply Advaccine’s clinical requirements of INO-4800 and devices, although Advaccine may manufacture INO-4800 for its clinical use and may procure alternate suppliers. Advaccine is responsible for the manufacture and supply of INO-4800 itself or through a contract manufacturer for commercial use. Upon Advaccine’s reasonable request, the parties may negotiate a separate clinical and/or commercial supply agreement.
The Advaccine Agreement will continue in force on a region-by-region basis until Advaccine has no remaining royalty obligations in such region. Either party may terminate the Advaccine Agreement (i) in the event the other party shall have materially breached its obligations thereunder and such default shall have continued for a specified period after written notice thereof or (ii) upon the bankruptcy or insolvency of the other party. In addition, the Company may terminate the agreement, upon prior written notice, if Advaccine (i) ceases all development or commercialization activities for at least nine months, subject to certain exceptions, or (ii) challenges the validity, enforceability or scope of any of the patents licensed by the Company to Advaccine under the Advaccine Agreement, subject to certain conditions. Advaccine may terminate the Advaccine Agreement at any time for convenience upon nine months’ written notice to the Company, if such notice is provided before the first commercial sale of INO-4800 in the licensed territory, or 18 months’ written notice thereafter; provided that the Company may accelerate the effectiveness of such termination to the extent permitted by law.
The Company evaluated the terms of the Advaccine Agreement under ASC Topics 606 and 808 at inception and determined that the contract was with a customer and therefore should be accounted for under ASC Topic 606. The license to INO-4800 in the territories was identified as the only distinct performance obligation on a standalone basis as of the inception of the Advaccine Agreement. The Company concluded that the license was distinct from potential future manufacturing and supply obligations. The Company further determined that the transaction price under the Advaccine Agreement consisted of the $3.0 million upfront payment plus the initial $2.0 million milestone payment which was achieved upon contract signing. The future potential milestone amounts were not included in the transaction price, as they were all determined to be fully constrained. As part of the evaluation of the development and regulatory milestones constraint, the Company determined that the achievement of such milestones is contingent upon success in future clinical trials and regulatory approvals, each of which is uncertain. Future potential milestone amounts may be recognized as revenue under the Advaccine Agreement, as well as under other collaborative research and development arrangements, if unconstrained. Reimbursable program costs will be recognized proportionately with the performance of the underlying services or delivery of drug supply and are excluded from the transaction price.
Under Topic 606, the entire transaction price of $5.0 million was allocated to the license performance obligation. The Company determined that as of December 31, 2020, the transfer of technology has occurred for the use and benefit of the license and accordingly, the performance obligation was fully satisfied. The Company accordingly recognized $5.0 million in revenue under collaborative research and development arrangements on the consolidated statement of operations during the year ended December 31, 2020. For the six months ended June 30, 2021, no revenue was recognized from Advaccine. As of June 30, 2021 and December 31, 2020, the Company had an accounts receivable balance of $0 and $7.1 million, respectively, from Advaccine.
The Company reevaluated the Advaccine Agreement under ASC Topics 606 and 808 as of the date of the June 2021 amendments and determined that the Global Phase 3 trial component of the agreement is a collaboration and not a contract with a customer and therefore should be accounted for under ASC Topic 808. Reimbursements from Advaccine will be recognized as contra-research development expense on the condensed consolidated statement of operations once earned and collectibility is assured. As of June 30, 2021, no contra-research and development expense has been recorded from Advaccine.
ApolloBio Corporation
On December 29, 2017, the Company entered into an Amended and Restated License and Collaboration Agreement (the
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"ApolloBio Agreement"), with ApolloBio Corporation ("ApolloBio"), with an effective date of March 20, 2018. Under the terms of the ApolloBio Agreement, the Company has granted to ApolloBio the exclusive right to develop and commercialize VGX-3100, its DNA immunotherapy product candidate designed to treat pre-cancers caused by HPV, within the territories of China, Hong Kong, Macao, Taiwan, and potentially Korea in the event that no patent covering VGX-3100 is issued in China within the three years following the effective date of the ApolloBio Agreement.
Under the ApolloBio Agreement, the Company received proceeds of $19.4 million in March 2018 which comprised the upfront payment of $23.0 million less $2.2 million in foreign income taxes and $1.4 million in certain foreign non-income taxes. The foreign income taxes were recorded as a provision for income taxes and the foreign non-income taxes were recorded as a general and administrative expense, on the condensed consolidated statement of operations. The Company also incurred advisory fees of $960,000 in connection with receiving the upfront payment from ApolloBio. These fees were determined to be incremental costs of obtaining the contract. The Company applied the practical expedient that permits a company to expense incremental costs to obtain a contract when the expected amortization period is one year or less and recorded the fees in general and administrative expense during the quarter ended March 31, 2018. No additional advisory fees are due related to the ApolloBio Agreement.
In addition to the upfront payment, the Company is entitled to receive up to an aggregate of $20.0 million, less required income, withholding or other taxes, upon the achievement of specified milestones related to the regulatory approval of VGX-3100 in the United States, China and Korea. In the event that VGX-3100 is approved for marketing, the Company will be entitled to receive royalty payments based on a tiered percentage of annual net sales, with such percentage being in the low- to mid-teens, subject to reduction in the event of generic competition in a particular territory. ApolloBio’s obligation to pay royalties will continue for 10 years after the first commercial sale in a particular territory or, if later, until the expiration of the last-to-expire patent covering the licensed products in the specified territory.
The ApolloBio Agreement will continue in force until ApolloBio has no remaining royalty obligations. Either party may terminate the ApolloBio Agreement in the event the other party shall materially breach or default in the performance of its material obligations thereunder and such default continues for a specified period after written notice thereof. In addition, ApolloBio may terminate the ApolloBio Agreement at any time beginning one year after the effective date for any reason upon 90 days written notice to the Company.
The Company evaluated the terms of the ApolloBio Agreement under ASC Topic 606, and the license to VGX-3100 in the territories was identified as the only distinct performance obligation on a standalone basis as of the inception of the agreement. The Company concluded that the license was distinct from potential future manufacturing and supply obligations. The Company further determined that the transaction price under the agreement consisted of the $23.0 million upfront payment. The future potential milestone amounts were not included in the transaction price, as they were all determined to be fully constrained. As part of the evaluation of the development and regulatory milestones constraint, the Company determined that the achievement of such milestones is contingent upon success in future clinical trials and regulatory approvals, each of which is uncertain at this time. Future potential milestone amounts may be recognized as revenue under the ApolloBio Agreement, as well as under other collaborative research and development arrangements, if unconstrained. Reimbursable program costs will be recognized proportionately with the performance of the underlying services or delivery of drug supply and are excluded from the transaction price. As of June 30, 2021 there have been no significant reimbursable program costs under the ApolloBio Agreement.
Under Topic 606, the entire transaction price of $23.0 million was allocated to the license performance obligation. The Company determined that during the quarter ended June 30, 2018, the transfer of technology occurred and accordingly, the performance obligation was fully satisfied.
AstraZeneca
On August 7, 2015, the Company entered into a license and collaboration agreement with MedImmune, the global biologics research and development arm of AstraZeneca ("AstraZeneca"). Under the agreement, AstraZeneca acquired exclusive rights to the Company's INO-3112 immunotherapy, renamed as MEDI0457, which targets cancers caused by human papillomavirus (HPV) types 16 and 18, with the ability to sublicense those license rights. AstraZeneca made an upfront payment of $27.5 million to the Company in September 2015. AstraZeneca may be obligated to make potential future development and regulatory event-based payments to the Company totaling up to $125 million and potential future commercial event-based payments totaling up to $115 million, in each case upon the achievement of specified milestones related to MEDI0457 set forth in the license and collaboration agreement. AstraZeneca will fund all development costs associated with MEDI0457 immunotherapy. The Company is entitled to receive up to mid-single to double-digit tiered royalties on MEDI0457 product sales. Under the agreement, AstraZeneca can also request the Company to provide certain clinical manufacturing at an agreed upon price. The Company determined these options did not represent material rights at the inception of the agreement.
As of December 31, 2017, the Company had recognized all of the $27.5 million upfront payment as revenue, as all identified material performance obligations had been met with respect to that payment. In both December 2018 and March
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2019, the Company recognized as revenue $2.0 million in milestone payments from AstraZeneca triggered by AstraZeneca’s initiation of the Phase 2 portion of ongoing clinical trials in the second and third major indication, respectively, under the agreement.
Coalition for Epidemic Preparedness Innovations
In April 2018, the Company entered into agreements with CEPI, pursuant to which the Company intends to develop vaccine candidates against Lassa fever and MERS. The goal of the collaboration between the Company and CEPI is to conduct research and development so that investigational stockpiles will be ready for clinical efficacy trial testing during potential disease outbreaks. The agreements with CEPI contemplate preclinical studies, as well as Phase 1 and Phase 2 clinical trials, occurring over multiple years. As part of the arrangement between the parties, CEPI has agreed to fund up to an aggregate of $56 million of costs over a five-year period for preclinical studies, as well as planned Phase 1 and Phase 2 clinical trials, to be conducted by the Company and collaborators, with funding from CEPI based on the achievement of identified milestones. During the three and six months ended June 30, 2021, the Company received funding of $2.1 million and $4.4 million, respectively, related to these grants and recorded those payments as contra-research and development expense. During the three and six months ended June 30, 2020, the Company received funding of $1.8 million and $2.9 million, respectively, related to these grants and recorded those payments as contra-research and development expense. As of June 30, 2021, the Company had $316,000 recorded as grant funding liability on the condensed consolidated balance sheet related to these CEPI grants.
In January 2020, CEPI awarded the Company a grant of up to $9.0 million to support preclinical and clinical development of INO-4800 through Phase 1 human testing in the United States. In April 2020, CEPI awarded the Company a grant of $6.9 million to work with the International Vaccine Institute ("IVI") and the Korea National Institute of Health ("KNIH") to conduct clinical trials of INO-4800 in South Korea, a grant of $5.0 million to accelerate development of the Company's next-generation intradermal electroporation device, known as CELLECTRA® 3PSP, for the intradermal delivery of INO-4800, and a grant of $1.3 million to support large-scale manufacturing of INO-4800. During the three and six months ended June 30, 2021, the Company received funding of $1.1 million and $3.5 million, respectively, from CEPI related to these grants for INO-4800 and recorded such amounts as contra-research and development expense. During the three and six months ended June 30, 2020, the Company received funding of $5.8 million and $8.1 million, respectively, from CEPI related to these grants for INO-4800 and recorded such amounts as contra-research and development expense. As of June 30, 2021, the Company had $2.9 million recorded as deferred grant funding on the condensed consolidated balance sheet from the CEPI grants related to INO-4800.
Bill & Melinda Gates Foundation
In October 2018, the Bill & Melinda Gates Foundation (“Gates”) awarded and funded the Company a grant of $2.2 million to advance the development of dMAbs to address issues in infectious disease prevention and therapy. This technology has high relevance for the control of influenza and HIV. This next-generation approach to the delivery of monoclonal antibodies would make the technology accessible to low and middle-income countries. In August 2019, Gates funded an additional $1.1 million for the project. During the three and six months ended June 30, 2020, the Company recorded $36,000 and $170,000, respectively, as contra-research and development expense related to the Gates dMAb grant. During the three and six months ended June 30, 2021, the amounts recorded were minimal. As of June 30, 2021, the Company had $575,000 recorded as deferred grant funding on the condensed consolidated balance sheet related to the grant.
In March 2020, Gates awarded and funded the Company a grant of $5.0 million to accelerate the development of the CELLECTRA® 3PSP device for the intradermal delivery of INO-4800. During the three and six months ended June 30, 2021, the Company recorded $0 and $893,000, respectively, and during the three and six months ended June 30, 2020 recorded $850,000 and $913,000, respectively, as contra-research and development expense related to this Gates grant.
Department of Defense (DoD)
In June 2020, the Company entered into an Other Transaction Authority for Prototype Agreement (the “OTA Agreement”) with the DoD to fund the Company’s efforts in developing the CELLECTRA® 3PSP device and associated arrays to be used for delivery of INO-4800 against COVID-19. Under the OTA Agreement, the Company intends to develop the CELLECTRA® 3PSP device and arrays for use in the U.S. military population and the U.S. population as a whole, subject to approval of the device by the U.S. Food and Drug Administration (the “FDA”). The OTA Agreement is also expected to support large-scale manufacturing of the CELLECTRA® 3PSP device, as well as large-scale DNA plasmid production for manufacture and supply of a specified number of doses of INO-4800 in support of FDA approval of the device. The total amount of funding being made available to the Company under the OTA Agreement is approximately $54.5 million. The Company has determined that the OTA Agreement should be considered under Subtopic 958-605, Not-for-Profit Entities Revenue Recognition, which is outside the scope of Topic 606, as the government agency granting the Company funds is not receiving reciprocal value for their contributions. The Company will record contra-research development expense on the condensed consolidated statement of operations in the same period that the underlying expenses are incurred.
Additionally, in June 2020, the Company was awarded a fixed-price contract (the “Procurement Contract”) from the DoD for the purchase of the Company’s intradermal CELLECTRA® 2000 device and accessories. The CELLECTRA® 2000
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devices will be used to inject INO-4800 in the Company’s planned later-stage clinical trials. The total purchase price under the Procurement Contract is approximately $16.6 million. The Company has determined that the Procurement Contract does not currently fall under the scope of ASC 606 as contingencies remain regarding INO-4800 which does not give the Company the ability to satisfy its obligations under the arrangement.
During the three and six months ended June 30, 2021, the Company recorded $13.4 million and $21.2 million, respectively, as contra-research and development expense related to the OTA Agreement. During the three and six months ended June 30, 2020, there was no contra-research and development expense recorded related to the OTA Agreement. As of June 30, 2021 and December 31, 2020, the Company had an accounts receivable balance of $12.9 million and $11.4 million, respectively, on the condensed consolidated balance sheet from the DoD. As of June 30, 2021, the Company had $3.0 million recorded as deferred grant funding on the condensed consolidated balance sheet related to the Procurement Contract.
In April 2021, the Company announced that the DoD had notified the Company that it will discontinue funding for the Phase 3 segment of the Company's clinical trial of INO-4800 in the United States, while continuing to fund the completion of the ongoing Phase 2 segment.

16. Income Taxes
The Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. Due to the adoption of ASU 2019-12 which removes the exception under ASC 740-20-45-7 to consider all sources of income in order to determine the tax benefit resulting from a loss from continuing operations, ASC 740-20-45-7 no longer applies.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).  The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19. The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic; some of the more significant provisions are removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. For the three and six months ended June 30, 2021, the Company has not recorded any income tax provision/(benefit) due to the Company’s history of net operating losses generated and the maintenance of a full valuation allowance against its net deferred tax assets.

17. Geneos Therapeutics, Inc.
In August 2016, the Company formed Geneos to develop and commercialize neoantigen-based personalized cancer therapies. Geneos was considered a variable interest entity (VIE) for which the Company was the primary beneficiary. In February 2019, Geneos completed the initial closing of a Series A preferred stock financing. The Company invested $1.2 million in the Series A preferred stock financing, which was led by an outside investor. Following this transaction, the Company held 61% of the outstanding equity, on an as-converted to common stock basis, of Geneos and continued to consolidate its investment in Geneos under ASC 810, Consolidation.
In January 2020, Geneos completed the second closing of the Series A preferred stock financing, in which the Company invested $800,000. Following this transaction, as of March 31, 2020, the Company held 52% of the outstanding equity, on an as-converted to common stock basis, of Geneos and continued to consolidate its investment in Geneos.
In June 2020, Geneos closed an additional Series A preferred stock financing round, in which the Company invested $800,000. Following this transaction, the Company owned 47% of the outstanding equity of Geneos on an as-converted to common stock basis. This transaction triggered a VIE reconsideration, as the Company no longer held a controlling financial interest. Based on the Company’s assessment, Geneos continued to be a VIE as it did not have sufficient equity at risk to finance its activities without additional subordinated financial support. However, the Company was not the primary beneficiary of Geneos, as it did not have the power to direct the activities that most significantly impact Geneos’ economic performance. Accordingly, the Company deconsolidated its investment in Geneos as of June 1, 2020, resulting in a gain of $4.1 million, of which $2.4 million related to the remeasurement of the retained noncontrolling interest investment to fair value. The gain has been recorded separately on the Company's condensed consolidated statement of operations. The following table shows the amounts related to the deconsolidation accounting:
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Working capital (excluding cash) $ (59,992)
Note payable 171,620 
Fixed assets, net of accumulated depreciation (16,340)
Carrying value of noncontrolling interest 3,181,640 
Fair value of investment in Geneos retained 3,618,998 
Gain on deconsolidation of Geneos (4,121,075)
Decrease in cash resulting from the deconsolidation of Geneos $ 2,774,851 

The details of the Company’s 47% retained equity investment in Geneos is shown in the table below, with fair values calculated as of June 1, 2020, the date of deconsolidation.
Geneos Share Class Shares Price per Share Fair Value
Common 3,000,000  $ 0.273  $ 819,000 
Preferred 2,113,206  $ 1.325  $ 2,799,998 
Total 5,113,206  $ 3,618,998 

The fair value of Geneos Series A preferred stock was based on the per share price paid by third-party investors in connection with the most recent closing of the Series A preferred stock financing for Geneos on June 1, 2020. The fair value of Geneos common stock was determined by a third-party valuation, as there is no public market for such stock. Geneos’ enterprise value, which was estimated using a market approach that derived an implied total equity value from a transaction involving its own securities, was allocated to all classes of equity using the option pricing method. Under the option pricing method, each equity class was modeled as having a call option with a distinct claim on the total value of Geneos. Each option’s exercise price was based on the total value available for each participating security holder. The characteristics of each class of ownership determined the claim on the total value for that class of ownership.
The estimated value allocated to common stock included assumptions related to the fair value of the enterprise, expected volatility, expected term, and risk-free interest rate. Expected volatility was based on historical asset volatilities derived from daily stock price changes of guideline public companies. The estimated expected term was based on a weighted average of the estimated time to Geneos's next financing and successful exit timing assumption. The risk-free interest rate was based on the yield of U.S. Treasury with a comparable term. Geneos’s common stock is classified as a Level 3 financial instrument. The assumptions used in the fair value calculation as of June 1, 2020 are presented below:
Expected term (years) 2.92
Volatility 70%
Risk-free interest rate 2.46%
Geneos enterprise value $4,966,531
The Company applies the equity method to investments in common stock and to other investments in entities that have risk and reward characteristics that are substantially similar to an investment in the investee’s common stock. Since the Company’s Series A preferred stock investment in Geneos has a substantive liquidation preference, it is not substantially similar to the Company’s common stock investment and will therefore be recorded as an equity security under ASC 321.
As of June 1, 2020, the Company accounts for its common stock investment in Geneos, in which the Company lacks control but does have the ability to exercise significant influence over operating and financial policies, using the equity method. Generally, the ability to exercise significant influence is presumed when the investor possesses more than 20% of the voting interests of the investee. This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted. In applying the equity method, the Company records the investment at cost unless the initial recognition is the result of the deconsolidation of a subsidiary, in which case it is recorded at fair value. The Company's proportionate share of net loss of Geneos is recorded in equity in net earnings of Geneos in the Company's condensed consolidated statements of operations. The Company's equity method investments are reviewed for indicators of impairment at each reporting period and are written down to fair value if there is evidence of a loss in value that is other-than-temporary. Any difference between the carrying amount of the Company’s investment and the amount of underlying equity in Geneos’ net assets is amortized into income or expense accordingly. There were no basis differences identified as of the deconsolidation date that would need to be amortized.
Upon deconsolidation, the Company recorded its Series A preferred stock investment at fair value based on the per share price paid by third party investors in connection with the preferred stock financing on June 1, 2020. The Company has determined that its Series A preferred stock investment in Geneos does not have a readily determinable fair value and has
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therefore elected the measurement alternative in ASC 321 to subsequently record the investment at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. When fair value becomes determinable, from observable price changes in orderly transactions, the Company’s investment will be marked to fair value.  There have been no observable price changes or impairments identified since the deconsolidation date.
In November 2020, Geneos completed the closing of a Series A-1 preferred stock financing. The Company invested $1.4 million in the Series A-1 preferred stock financing, which was led by outside investors. The closing date of this transaction was determined to be a VIE reconsideration event; based on the Company’s assessment, Geneos continues to be a VIE as it does not have sufficient equity at risk to finance its activities without additional subordinated financial support. The Company continues to not be the primary beneficiary of Geneos, as it does not have the power to direct the activities that most significantly impact Geneos’s economic performance and should not consolidate Geneos. Following this transaction, the Company held approximately 36% of the outstanding equity, on an as-converted to common stock basis. Accordingly, the Company continues to account for its common stock investment in Geneos as an equity method investment under ASC 323 and its preferred stock investments as equity securities under ASC 321.
The fair value of Geneos’s Series A-1 preferred stock was based on the per share price paid by third-party investors in connection with the closing on November 12, 2020. The Company has concluded that its Series A-1 preferred stock investment is not similar to its prior Series A preferred stock investment due to certain material rights held solely by Series A preferred stockholders. Therefore, the Company will continue to record its Series A preferred stock investment in Geneos at cost, as there have been no observable price changes or impairments identified since the deconsolidation date.
The Company’s share of net losses of Geneos for the period from June 1, 2020 through December 31, 2020 was $4.6 million and for the three months ended March 31, 2021 was $1.5 million; however, only $434,000 was recorded, reducing the Company's total investment in Geneos to $0. Of the total amount, $819,000 has been allocated to the equity method investment, thereby reducing the balance to $0 as of March 31, 2021. The remaining $4.2 million loss has been allocated to the Company’s Series A and Series A-1 preferred stock investment in Geneos, on a ratable basis, thereby reducing the balance to $0 as of March 31, 2021 as shown in the table below:
Investment in Geneos upon deconsolidation $ 3,618,998 
Investment in Geneos Series A-1 preferred stock 1,399,999 
Share in net loss of Geneos from June 1, 2020 - December 31, 2020 (4,584,610)
Share in net loss of Geneos for the three months ended March 31, 2021 (434,387)
Investment in Geneos as of March 31, 2021 $ — 

The Company will not reduce its investment below $0 and will not record its share of further net losses of Geneos as the Company has no obligation to fund Geneos.
In February 2021, Geneos completed a second closing of the Series A-1 preferred stock financing, in which the Company did not participate. Following this transaction, the Company held approximately 35% of the outstanding equity, on an as-converted to common stock basis.
The Company continues to exclusively license its SynCon® immunotherapy and CELLECTRA® technology platform to Geneos to be used in the field of personalized, neoantigen-based therapy for cancer. The license agreement provides for potential royalty payments to the Company in the event that Geneos commercializes any products using the licensed technology. The Company is not obligated to use any of its assets to fund the future operations of Geneos.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report contains forward-looking statements, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
Although we believe that the expectations reflected in the forward-looking statements are reasonable based on our current expectations and projections, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report to conform such statements to actual results or to changes in our expectations.
The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report and our audited consolidated financial statements and related notes for the year ended December 31, 2020 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or SEC, on March 1, 2021 (our 2020 Annual Report). Readers are also urged to carefully review and consider the various disclosures made by us that attempt to advise interested parties of the factors that affect our business, including without limitation the disclosures made in Item 1A of Part II of this Quarterly Report under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and the disclosures made in our 2020 Annual Report under the caption “Risk Factors” and in our audited consolidated financial statements and related notes.
Risk factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited to: our history of losses; our lack of products that have received regulatory approval; uncertainties inherent in clinical trials and product development programs, including but not limited to the fact that preclinical and clinical results may not be indicative of results achievable in other trials or for other indications, that the studies or trials may not be successful or achieve desired results, that preclinical studies and clinical trials may not commence, have sufficient enrollment or be completed in the time periods anticipated, that results from one study may not necessarily be reflected or supported by the results of other similar studies, that results from an animal study may not be indicative of results achievable in human studies, that clinical testing is expensive and can take many years to complete, that the outcome of any clinical trial is uncertain and failure can occur at any time during the clinical trial process, and that our electroporation technology and product candidates may fail to show the desired safety and efficacy traits in clinical trials; the availability of funding; the ability to manufacture our product candidates; the availability or potential availability of alternative therapies or treatments for the conditions targeted by us or our collaborators, including alternatives that may be more efficacious or cost-effective than any therapy or treatment that we and our collaborators hope to develop; our ability to receive development, regulatory and commercialization event-based payments under our collaborative agreements; whether our proprietary rights are enforceable or defensible or infringe or allegedly infringe on rights of others or can withstand claims of invalidity; the impact of government healthcare laws and proposals; and the impact of COVID-19 on us and our third-party contractors and suppliers.

Overview
We are a biotechnology company focused on rapidly bringing to market precisely designed DNA medicines to treat and protect people from infectious diseases, cancer, and diseases associated with human papillomavirus ("HPV"). Our DNA medicines pipeline is comprised of three types of product candidates: DNA vaccines, DNA immunotherapies and DNA encoded monoclonal antibodies ("dMAbs"). In clinical trials, we have demonstrated that DNA medicines can be delivered directly into cells in the body through our proprietary smart device to consistently activate robust and fully functional T cell and antibody responses against targeted pathogens and cancers.
Our novel DNA medicine candidates are made using our proprietary SynCon® technology that creates optimized plasmids, which are circular strands of DNA that instruct a cell to produce antigens to help the person’s immune system recognize and destroy cancerous or virally infected cells.
Our patented CELLECTRA® smart delivery devices provide optimized uptake of our DNA medicines within the cell, overcoming a key limitation of other DNA-based technology approaches, namely cellular uptake.
Human clinical trial data to date have shown a favorable safety profile of our DNA medicines delivered directly into cells in the body using the CELLECTRA® smart device in more than 7,000 administrations across more than 3,000 patients.
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Our corporate strategy is to advance, protect and, once approved, commercialize our novel DNA medicines to meet urgent and emerging global health needs. We continue to advance and clinically validate an array of DNA medicine candidates that target infectious diseases, such as COVID-19, as well as HPV-associated diseases and cancer. We aim to advance these candidates through commercialization and continue to leverage third-party resources through collaborations and partnerships, including product license agreements.
Our partners and collaborators include ApolloBio Corp., AstraZeneca, Advaccine, The Bill & Melinda Gates Foundation (Gates), Coalition for Epidemic Preparedness Innovations ("CEPI"), Defense Advanced Research Projects Agency ("DARPA"), The U.S. Department of Defense ("DoD"), GeneOne Life Science, HIV Vaccines Trial Network, the U.S. Defense Threat Reduction Agency’s Medical CBRN Defense Consortium ("MCDC"), International Vaccine Institute ("IVI"), National Cancer Institute, National Institutes of Health, National Institute of Allergy and Infectious Diseases, Ology Bioservices, the Parker Institute for Cancer Immunotherapy, Plumbline Life Sciences, Regeneron Pharmaceuticals, Richter-Helm BioLogics, Thermo Fisher Scientific, the University of Pennsylvania, the Walter Reed Army Institute of Research, and The Wistar Institute.
We or our collaborators are currently conducting or planning clinical studies of our DNA medicines for COVID-19; Middle East Respiratory Syndrome, or MERS; Lassa fever; HIV; Ebola; as well as HPV-associated precancers, including cervical, vulvar, and anal dysplasia; HPV-associated cancers, including head & neck, cervical, anal, penile, vulvar, and vaginal; other HPV-associated disorders, such as recurrent respiratory papillomatosis, or RRP; glioblastoma multiforme, or GBM; and prostate cancer.
All of our product candidates are in the research and development phase. We have not generated any revenues from the sale of any products, and we do not expect to generate any such revenues for at least the next several years. We earn revenue from license fees and milestone revenue and collaborative research and development agreements. Our product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All product candidates that we advance to clinical testing will require regulatory approval prior to commercial use, and will require significant costs for commercialization. We may not be successful in our research and development efforts, and we may never generate sufficient product revenue to be profitable.
As of June 30, 2021, we had an accumulated deficit of $1.0 billion. We expect to continue to incur substantial operating losses in the future due to our commitment to our research and development programs, the funding of preclinical studies, clinical trials and regulatory activities and the costs of general and administrative activities.
Impacts of COVID-19 On Our Business
Operationally, we have experienced some disruptions as a result of the COVID-19 pandemic. Our clinical trial operations have been adversely affected, including our ability to initiate and conduct our planned trials on our expected timelines and our ability to recruit and retain patients in our trials. Our data collection timelines have also been impacted, as an increasing number of trial participants are either not able or do not feel safe going into healthcare facilities, which is necessary for the collection and completion of data samples. As a result, it is taking longer than anticipated to complete the data collection process.
In response to the outbreak, a number of governmental orders and other public health guidance measures were implemented across much of the United States, including in the locations of our offices, laboratories, clinical trial sites and third parties on whom we rely. We have implemented a work from home policy allowing employees who can work from home to do so, while those needing to work in laboratory facilities work in shifts to reduce the number of people gathered together at one time. We have also implemented a mask-wearing mandate for all on-site activities. Non-essential business travel has been suspended, and online and teleconference technology is used to meet virtually rather than in person. We have taken measures to secure our research and development project activities, while work in laboratories has been organized to reduce risk of COVID-19 transmission.
Our liquidity has not been negatively impacted to date by the pandemic. During the year ended December 31, 2020, we raised $454.5 million in net proceeds from the sale of shares of our common stock through our "at-the-market" equity offering program and in January 2021 we closed an underwritten public offering with net proceeds to us of $162.1 million, which further enhanced our liquidity and capital resources. As of June 30, 2021, our cash and cash equivalents and short-term investments were $443.7 million.
We are continuing to closely monitor the impact of the COVID-19 pandemic on our employees, collaborators and service providers. The extent to which the pandemic will impact our business and operations will depend on future developments, including travel restrictions in the United States and other countries, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, including mass vaccination efforts, that are highly uncertain. For additional information on the potential effects of the COVID-19 pandemic on our business, financial condition and results of operations, see the “Risk Factors” section below in Part II, Item 1A of this Form 10-Q.

Critical Accounting Policies
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There have been no significant changes to our critical accounting policies since December 31, 2020. For a description of our critical accounting policies that affect our significant judgments and estimates used in the preparation of our condensed consolidated financial statements, refer to Note 3 to our Condensed Consolidated Financial Statements included in this Quarterly Report, as well as Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report and Note 2 to our audited Consolidated Financial Statements contained in our 2020 Annual Report.

Adoption of Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is contained in Note 4 to the Condensed Consolidated Financial Statements, included in this Quarterly Report.

Results of Operations
Revenue. Total revenue was $273,000 and $644,000, respectively, for the three and six months ended June 30, 2021, as compared to $267,000 and $1.6 million, respectively, for the three and six months ended June 30, 2020. Revenue primarily consisted of revenues under collaborative research and development arrangements, including arrangements with affiliated entities, for the three and six months ended June 30, 2021 and 2020. The decrease in revenue for the six-month period year over year was primarily due to less milestone revenue earned from our affiliated entity PLS.
Research and development expenses. Research and development expenses for the three and six months ended June 30, 2021 were $70.8 million and $109.9 million, respectively, as compared to $22.4 million and $41.5 million, respectively, for the three and six months ended June 30, 2020. In each case, the significant increase was primarily attributable to manufacturing scale-up activities for INO-4800 in 2021. These INO-4800 activities included:
expenses related to the acquisition and installation of manufacturing equipment, which increased by $21.9 million for each of the three-month and six-month periods; and
drug manufacturing, outside services and clinical study expenses, which increased by $16.2 million and $27.9 million for the three-month and six-month periods, respectively.
Other increases for the three-month and six-month periods year over year included:
$7.9 million and $10.5 million, respectively, in engineering services and expensed equipment related to our CELLECTRA® 3PSP device array automation project;
$3.5 million and $8.3 million, respectively in employee and contractor compensation;
$3.0 million and $3.7 million, respectively, in drug manufacturing expenses related to our RRP study; and
$894,000 and $3.8 million, respectively, in employee stock-based compensation.
These increases were offset by increases in contra-research and development expense recorded from grant agreements of $8.1 million and $16.9 million for the three-month and six-month periods, respectively, among other variances.
Contributions received from current grant agreements and recorded as contra-research and development expense were $17.2 million and $31.0 million, respectively, for the three and six months ended June 30, 2021 as compared to $9.1 million and $14.1 million, respectively, for the three and six months ended June 30, 2020. The increase for the three-month period year over year was primarily due to an increase of $13.4 million earned under the DoD grant, offset by decreases of $4.6 million and $850,000 earned under the grants from CEPI and Gates, respectively, related to INO-4800 and device development activities, among other variances. The increase for the six-month period year over year was primarily due to increases of $21.2 million and $1.5 million earned under the DoD grant and CEPI grants related to our Lassa fever and MERS vaccine candidates, respectively. These increases were offset by decreases of $4.6 million and $1.1 million from our CEPI grants related to INO-4800 and device development and the MCDC grant, respectively, among other variances.
General and administrative expenses. General and administrative expenses, which include business development expenses, the amortization of intangible assets and patent expenses, were $12.7 million and $26.5 million, respectively, for the three and six months ended June 30, 2021, as compared to $11.1 million and $18.5 million, respectively, for the three and six months ended June 30, 2020. Increases for the three-month and six-month periods year over year included:
$1.1 million and $3.8 million, respectively, in employee and consultant stock-based compensation;
$1.0 million and $1.4 million, respectively, in employee compensation;
$84,000 and $2.0 million, respectively, in legal and accounting expenses; and
$588,000 and $1.0 million, respectively, in insurance expenses.
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These increases were partially offset by lower expenses for work performed related to corporate marketing and communications of $640,000 and $1.3 million, respectively, among other variances.
Stock-based compensation. Stock-based compensation expense is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite vesting period. Total employee and director stock-based compensation expense for the three and six months ended June 30, 2021 was $5.3 million and $14.5 million, respectively. Of these amounts, $2.7 million and $7.9 million, respectively, was included in research and development expenses, and $2.6 million and $6.6 million, respectively, was included in general and administrative expenses. Total employee and director stock-based compensation expense for the three and six months ended June 30, 2020 was $3.4 million and $7.1 million, respectively. Of these amounts, $1.8 million and $4.1 million, respectively, was included in research and development expenses, and $1.6 million and $3.0 million, respectively, was included in general and administrative expenses. The year over year increase was primarily related to a higher weighted average grant date fair value for the awards granted in the first quarter 2021 and grants vesting during the period.
Interest income. Interest income for the three and six months ended June 30, 2021 was $928,000 and $1.7 million, respectively, as compared to $1.1 million and $1.5 million, respectively, for the three and six months ended June 30, 2020.
Interest expense. Interest expense for the three and six months ended June 30, 2021 was $467,000 and $980,000, respectively, as compared to $2.8 million and $5.7 million, respectively, for the three and six months ended June 30, 2020. The decrease for the three and six-month periods year over year was due to less interest expense recorded for our convertible senior notes, or the Notes, due to the partial conversions of the Notes into shares of our common stock in the third and fourth quarters of 2020 and full conversion of December 2021 Bonds in March 2021, as well as no interest expense recorded on our August 2019 Bonds due to their full conversion into shares of our common stock in August 2020.
Change in fair value of derivative liability. The change in fair value of derivative liability for the three and six months ended June 30, 2020 was $97.8 million and $111.0 million, respectively. We determined that our August 2019 Bonds included an embedded conversion feature that was considered to be a derivative liability requiring bifurcation from the debt instrument and separate recognition in our financial statements. The conversion feature was revalued at the end of each reporting period and immediately prior to the conversion of the August 2019 Bonds in August 2020, with the resulting changes in fair value reflected in the condensed consolidated statements of operations. There was no change in fair value for the three and six months ended June 30, 2021, as the derivative liability was derecognized upon the conversion in full of the August 2019 Bonds in August 2020.
Gain (loss) on investment in affiliated entities. The gain (loss) results from the change in the fair market value of our investment in PLS for a gain of $279,000 and a loss of $552,000, respectively, for the three and six months ended June 30, 2021 as compared to the change in the fair market value of the investments in PLS and GeneOne for a loss of $3.9 million and gain of $9.3 million, respectively, for the three and six months ended June 30, 2020. During the third quarter of 2020, we sold our full equity interest in GeneOne. We record our investment in PLS at its market value based on the closing price of the shares on the Korea New Exchange Market at each balance sheet date, with changes in fair value reflected in the condensed consolidated statements of operations.
Net unrealized gain (loss) on available-for-sale equity securities. The net unrealized gain (loss) on available-for-sale equity securities for the three and six months ended June 30, 2021 of $136,000 and $(711,000), respectively, as compared to $4.4 million and $(691,000), respectively, for the three and six months ended June 30, 2020, resulted from a change in the fair market value of the investments.
Gain on deconsolidation of Geneos. The gain recorded represents the excess of the fair value of our retained noncontrolling investment in Geneos and the carrying amount of the noncontrolling interest over the carrying amount of Geneos' assets and liabilities as of June 1, 2020, the date of deconsolidation.
Share in net loss of Geneos. The share in net loss of Geneos represents our share of Geneos' losses during the period after deconsolidation in June 2020.

Liquidity and Capital Resources
Historically, our primary uses of cash have been to finance research and development activities including clinical trial activities in the oncology, DNA vaccines and other immunotherapy areas of our business. Since inception, we have satisfied our cash requirements principally from proceeds from the sale of equity securities, indebtedness and grants and government contracts.
Working Capital and Liquidity
As of June 30, 2021, we had cash, cash equivalents and short-term investments of $443.7 million and working capital of $490.7 million, as compared to $411.6 million and $429.5 million, respectively, as of December 31, 2020. The increase in cash and short-term investments during the six months ended June 30, 2021 was primarily due to the net proceeds from the sale of
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our common stock in an underwritten public offering in January 2021, offset by expenditures related to our research and development activities, clinical trials and various general and administrative expenses related to legal, consultants, accounting and audit, and corporate development.
Cash Flows
Net cash used in operating activities was $131.3 million and $52.6 million for the six months ended June 30, 2021 and 2020, respectively. Net cash used in operating activities for the six months ended June 30, 2021 consisted of net loss of $136.5 million, less use of net cash in operating assets and liabilities of $14.0 million partially offset by net non-cash adjustments of $19.2 million. The net cash used in operating activities included a $27.8 million increase in prepaid expenses and other assets, primarily made up of prepayments for facilities, equipment and manufacturing related to INO-4800. The primary non-cash adjustments to net loss included stock-based compensation of $15.2 million, depreciation and amortization of $1.6 million, and net unrealized loss on available-for-sale equity securities of $711,000, among other items.
Net cash used in operating activities for the six months ended June 30, 2020 consisted of net loss of $162.3 million, less use of net cash in operating assets and liabilities of $913,000, partially offset by net non-cash adjustments of $110.6 million. The primary non-cash expenses added back to net loss included the increase in fair value of derivative liability of $111.0 million, stock-based compensation of $7.7 million, interest expense of $3.0 million and depreciation and amortization of $1.9 million. These non-cash expenses were offset by non-cash gain on investment in affiliated entities of $9.3 million, gain on deconsolidation of Geneos of $4.1 million and the acquisition of investment in our affiliated entity PLS of $1.7 million through the settlement of accounts receivable with additional shares of PLS common stock.
Net cash used in investing activities was $224.8 million and $94.2 million for the six months ended June 30, 2021 and 2020, respectively. The variance was primarily the result of timing differences in short-term investment purchases, sales and maturities.
Net cash provided by financing activities was $164.3 million and $340.0 million for the six months ended June 30, 2021 and 2020, respectively. The variance was primarily due to the proceeds from the sale of common stock under the ATM sales agreement in 2020, offset by the net proceeds from the January 2021 underwritten public offering.
Issuances of Common Stock
On January 25, 2021, we closed an underwritten public offering of 20,355,000 shares of our common stock at a public offering price of $8.50 per share. The net proceeds, after deducting the underwriters' discounts and commissions and other estimated offering expenses payable by us, were $162.1 million.
In May 2018, we entered into an At-the-Market Equity Offering Sales Agreement, or the Sales Agreement, with an outside placement agent, or the Placement Agent, to sell shares of our common stock with aggregate gross proceeds of up to $100.0 million, from time to time, through an “at-the-market” equity offering program under which the Placement Agent would act as sales agent. In the first quarter of 2020, we entered into amendments to the Sales Agreement to increase the amount of our common stock that could be sold through the Placement Agent under the Sales Agreement to an aggregate offering price of up to $250.0 million. During the three months ended March 31, 2020, we sold 43,148,952 shares of common stock under the Sales Agreement for aggregate net proceeds of $208.2 million. Following these sales, there was no remaining capacity under this Sales Agreement.
On April 3, 2020, we entered into a new sales agreement, or the New Sales Agreement, with the same Placement Agent to sell shares of our common stock. On that same day, we filed a prospectus supplement pursuant to the New Sales Agreement for the offer and sale of our common stock for aggregate gross proceeds of up to $150.0 million. On May 12, 2020 we filed an additional prospectus supplement pursuant to the New Sales Agreement for the offer and sale of our common stock for an additional $100.0 million of gross proceeds, bringing the maximum gross proceeds of sales under the New Sales Agreement to $250.0 million. Through December 31, 2020, we sold 22,915,934 shares of common stock under the New Sales Agreement for aggregate net proceeds of $246.2 million. As of December 31, 2020, there was no remaining capacity under the New Sales Agreement.
During the six months ended June 30, 2021, stock options to purchase 1,194,696 shares of common stock were exercised for aggregate net proceeds to us of $6.2 million, which proceeds were offset by tax payments made related to net share settlement of RSU awards of $3.9 million. During the six months ended June 30, 2020, stock options to purchase 1,649,874 shares of common stock were exercised for aggregate net proceeds to us of $9.6 million, which proceeds were offset by tax payments made related to net share settlement of RSU awards of $2.1 million.
As of June 30, 2021, we had an accumulated deficit of $1.0 billion and we expect to continue to operate at a loss for some time. The amount of the accumulated deficit will continue to increase, as it will be expensive to continue research and development efforts. These activities will require additional financing. If these activities are successful and if we receive approval from the FDA to market our product candidates, then we will need to raise additional funding to market and sell the approved products and equipment. We cannot predict the outcome of the above matters at this time. We are evaluating potential
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collaborations as an additional way to fund operations. We believe that our current cash and short-term investments are sufficient to meet our planned working capital requirements for at least the next twelve months from the date of this report.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Contractual Obligations
During the three months ended March 31, 2021, all outstanding December 2019 Bonds were converted into 1,009,450 shares of our common stock. There were no other significant changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 3.    QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Market risk represents the risk of loss that may impact our consolidated financial position, results of operations or cash flows due to adverse changes in financial and commodity market prices and rates. We are exposed to market risk primarily in the area of changes in United States interest rates and conditions in the credit markets, and the recent fluctuations in interest rates and availability of funding in the credit markets primarily impact the performance of our investments. We do not have any material foreign currency or other derivative financial instruments. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We attempt to increase the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments at June 30, 2021, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents.
The interest rate on our indebtedness, consisting of the Notes, is fixed and not subject to fluctuations in interest rates.

Fair Value Measurements
The investment in affiliated entity at June 30, 2021 represents our ownership interest in the Korean-based company PLS. We report this investment at fair value on the condensed consolidated balance sheet using the closing price of PLS shares of common stock as reported on the date of determination on the Korea New Exchange Market.
Foreign Currency Risk
We have operated primarily in the United States and most transactions during the three and six months ended June 30, 2021 were made in United States dollars. Accordingly, we have not had any material exposure to foreign currency rate fluctuations, with the exception of certain cash and cash equivalents held in South Korea that are denominated in South Korean Won and the valuation of our equity investment in PLS, which is denominated in South Korean Won and then translated into United States dollars. We do not have any foreign currency hedging instruments in place.
Certain transactions are denominated primarily in foreign currencies, including South Korean Won, Euros, British Pounds and Canadian Dollars. These transactions give rise to monetary assets and liabilities that are denominated in currencies other than the U.S. dollar. The value of these monetary assets and liabilities are subject to changes in currency exchange rates from the time the transactions are originated until settlement in cash. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets where we conduct business.
We do not use derivative financial instruments for speculative purposes and do not engage in exchange rate hedging or hold or issue foreign exchange contracts for trading purposes.
 
ITEM 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosures.
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In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Based on an evaluation carried out as of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our management, including our CEO and CFO, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of June 30, 2021 at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information
 
ITEM 1.    LEGAL PROCEEDINGS
Securities Litigation
On March 12, 2020, a purported shareholder class action complaint, McDermid v. Inovio Pharmaceuticals, Inc. and J. Joseph Kim, was filed in the United States District Court for the Eastern District of Pennsylvania, naming us and J. Joseph Kim, our Chief Executive Officer, as defendants. The lawsuit alleges that we made materially false and misleading statements regarding our development of a vaccine for COVID-19 in our public disclosures in violation of certain federal securities laws. The plaintiff seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including reasonable attorneys’ fees. On June 18, 2020, the court appointed Manuel Williams to serve as lead plaintiff. On August 3, 2020, Mr. Williams filed a consolidated complaint, naming us and three of our officers as defendants. On September 21, 2020, Mr. Williams and another purported stockholder, Andrew Zenoff filed a first amended complaint, naming us and three of our officers as defendants. Defendants filed a motion to dismiss plaintiff’s first amended complaint on November 5, 2020. On February 16, 2021, the court issued an order granting in part, and denying in part, Defendants’ motion to dismiss. The court granted Defendants’ motion to dismiss, and dismissed with prejudice, the claims premised on the April 30 and June 30, 2020 statements. The court denied Defendants’ motion to dismiss as to the remaining statements. On March 9, 2021, Defendants filed their answer to the complaint. On July 29, 2021, Plaintiffs moved to certify the class action. The case is now in discovery.
On April 20, 2020, a purported shareholder derivative complaint, Behesti v. Kim, et al., was filed in the United States District Court for the Eastern District of Pennsylvania, naming eight current and former directors as defendants. The lawsuit asserts state and federal claims and is based on the same alleged misstatements as the shareholder class action complaint. The lawsuit accuses our board of directors of failing to exercise reasonable and prudent supervision over our management, policies, practices, and internal controls. The plaintiff seeks unspecified monetary damages on behalf of us as well as governance reforms. On June 5, 2020, the court stayed the Beheshti action pending resolution of a forthcoming motion to dismiss the McDermid securities class action or until any party provides notice that they no longer consent to the stay. On June 12 and June 15, 2020, two additional shareholder derivative complaints were filed in the United States District Court for the Eastern District of Pennsylvania, captioned Isman v. Benito, et al. and Devarakonda et al. v Kim, et. al. The complaints assert substantially similar claims as the Beheshti action and name our current directors as defendants. The Devarakonda complaint also names one of our former directors as a defendant. On July 21, 2020, the court consolidated the three derivative cases under the caption In re Inovio Pharmaceuticals, Inc. Derivative Litigation. The consolidated action is stayed pending resolution of a forthcoming motion to dismiss the McDermid securities class action or until any party provides notice that they no longer consent to the stay.
On July 7, 2020, a fourth shareholder derivative complaint, Fettig v. Kim et al., was filed in the United States District Court for the Eastern District of Pennsylvania, naming eight current and former directors as defendants. The complaint asserts substantially similar claims as those in the consolidated derivative action. On August 27, 2020, the Fettig action was consolidated with the other derivative cases, which remain stayed as explained above.
We intend to defend these actions vigorously.
VGXI Litigation
On June 3, 2020, we filed a complaint in the Court of Common Pleas of Montgomery County, Pennsylvania against VGXI, Inc. and GeneOne Life Science, Inc., or GeneOne, and together with VGXI, Inc. collectively referred to as VGXI, alleging that VGXI had materially breached our supply agreement with them. The complaint seeks declaratory judgments, specific performance of the agreement, injunctive relief, an accounting, damages, attorneys’ fees, interest, costs and other relief from VGXI. On June 3, 2020, we filed a petition for preliminary injunction, which was denied on June 25, 2020. On June 26, 2020, we filed notice of appeal of the denial of the petition with the Pennsylvania Superior Court.
On July 7, 2020, VGXI filed an answer, new matter and counterclaims against us, alleging that we had breached the supply agreement, as well as misappropriation of trade secrets and unjust enrichment. The counterclaims seek injunctive relief, damages, attorneys’ fees, interest, costs and other relief from us. Also, on July 7, 2020, VGXI filed a third-party complaint against Ology Bioservices, Inc., a contract manufacturing organization that we had engaged to provide services similar to those that were being provided by VGXI. On July 27, 2020, we filed an answer to VGXI’s counterclaims, disputing the allegations and the claims raised in VGXI’s filing. On October 1, 2020, we filed a notice of discontinuance of appeal with the Pennsylvania Superior Court. A trial date for the litigation has not been set.
We intend to aggressively prosecute the claims set forth in our complaint against VGXI and to vigorously defend ourselves against VGXI’s counterclaims.
On December 7, 2020, GeneOne filed a complaint in the Court of Common Pleas of Montgomery County, Pennsylvania against us, alleging that we had breached the CELLECTRA Device License Agreement, or the Agreement, between us and GeneOne. We terminated the Agreement on October 9, 2020. The complaint asserts claims for breach of contract, declaratory
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judgment, unfair competition, and unjust enrichment. The complaint seeks injunctive relief, an accounting, damages, disgorgement of profits, attorneys’ fees, interest, and other relief from us. We intend to vigorously defend ourselves against GeneOne’s claims. On January 29, 2021, we filed preliminary objections to the complaint.

ITEM 1A.     RISK FACTORS
Our business is subject to numerous risks. You should carefully consider and evaluate each of the following factors as well as the other information in this Quarterly Report on Form 10-Q, including our financial statements and the related notes, the risk factors discussed in our 2020 Annual Report, which we filed with the SEC on March 1, 2021, in evaluating our business and prospects. 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 consider immaterial may also impair our business operations. If any of the following risks actually occur, our business and financial results could be harmed. In that case, the trading price of our common stock could decline. You should also consider the more detailed description of our business contained in our 2020 Annual Report.
Risks Related to Our Financial Position and Need for Additional Capital
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 June 30, 2021, our accumulated deficit was approximately $1.0 billion. We have generated limited revenues, primarily consisting of license revenue, grant funding 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 DNA vaccine, DNA immunotherapy and dMAB 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 DNA vaccines, DNA immunotherapies, dMAbs 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:
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;
developing our electroporation-based DNA delivery technology; and
commercializing any products for which we receive approval from the FDA and foreign regulatory authorities.
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.
We will need substantial additional capital to develop our DNA vaccines, DNA immunotherapies and dMAb programs and electroporation delivery technology.
Conducting the costly and time-consuming research, pre-clinical studies and clinical testing necessary to obtain regulatory approvals and bring our product candidates and delivery technology 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:
the progress of our current and new product development programs;
the progress, scope and results of our pre-clinical and clinical testing;
the time and cost involved in obtaining regulatory approvals;
the cost of manufacturing our products and product candidates;
the cost of prosecuting, enforcing and defending against patent infringement claims and other intellectual property rights;
debt service obligations;
competing technological and market developments; and
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 from time to time experienced heightened volatility and turmoil, particularly in light of the COVID-19 pandemic, making it more difficult in many cases to raise capital through the issuance of equity securities. Volatility in the capital markets can also negatively impact the cost and availability of credit, creating 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 in the future, 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.
Risks Related to Product Development, Manufacturing and Regulatory Approval
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 product candidates 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 preclinical 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. To the extent that our product candidates are manufactured at multiple sites or using different processes, we will also need to demonstrate comparability across the manufacturing batches in order to obtain regulatory approval. 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, preclinical 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 preclinical 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
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progressed through preclinical 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:
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our electroporation equipment or product candidate is safe and effective for any indication;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
we may not be successful in enrolling a sufficient number of participants in clinical trials;
we may be unable to demonstrate that our electroporation equipment or product candidates' clinical and other benefits outweigh its safety risks;
we may be unable to demonstrate that our electroporation equipment or product candidate presents an advantage over existing therapies, or over placebo in any indications for which the FDA requires a placebo-controlled trial;
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
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;
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
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.

Our product candidates are combination products regulated under both the biologic and device regulations of the Public Health Service Act and Federal Food, Drug, and Cosmetic Act. Third-party manufacturers may not be able to comply with cGMP regulations, regulations applicable to biologic/device combination products, including applicable provisions of the FDA’s drug cGMP regulations, device cGMP requirements embodied in the QSR or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates, operating restrictions and criminal prosecutions, any of which could significantly affect supplies of our product candidates.
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:
failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
unforeseen safety issues; and
lack of adequate funding to continue the clinical trial.
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.
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, and could be placed on a hold by the regulators for various reasons. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:
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;
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;
future bans or stricter standards imposed on clinical trials of gene-based therapy;
manufacturing sufficient quantities of our electroporation equipment and product candidates for use in clinical trials;
obtaining institutional review board, or IRB, approval to conduct a clinical trial at a prospective site;
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 or, with respect to our clinical trials for INO-4800, mass vaccination efforts;
conducting clinical trials with sites internationally due to regulatory approvals and meeting international standards;
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;
collecting, reviewing and analyzing our clinical trial data; and
global unrest, global pathogen outbreaks or pandemics, terrorist activities, and economic and other external factors.
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:
failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
unforeseen safety issues; and
lack of adequate funding to continue the clinical trial.
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.
None of our human vaccine candidates, including INO-4800, or our immunotherapy and DNA encoded monoclonal antibody product candidates have been approved for sale, and we may never develop commercially successful vaccine, immunotherapy or DNA encoded monoclonal antibody products.
Our human vaccine programs, which includes our COVID-19 vaccine candidate INO-4800, our immunotherapy programs and our DNA encoded monoclonal antibodies program are in various stages of research and development, and currently include product candidates in discovery, preclinical studies and Phase 1, 2 and 3 clinical trials. There are limited data regarding the efficacy of synthetic vaccine candidates and immunotherapy candidates compared with conventional vaccines, and we must conduct a substantial amount of additional research and development before the FDA or any comparable foreign regulatory authority will approve any of our vaccine product candidates, including INO-4800. The success of our efforts to develop and commercialize our product candidates, including INO-4800, could be delayed or fail for a number of reasons. For example, we could experience delays in product development and clinical trials. Our product candidates could be found to be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances to proceed with further clinical development or to be approved for marketing. Our products, even if they are deemed to be safe and effective by regulatory authorities, could be difficult to manufacture on a large scale or uneconomical to market, or our competitors could develop superior products more quickly and efficiently or more effectively market their competing products. The ability to manufacture sufficient quantities of INO-4800 on a large scale is particularly challenging and will require substantial resources and the engagement of third parties, which we may not be able to obtain on a timely basis, or at all.
In addition, adverse events, or the perception of adverse events, relating to vaccine and immunotherapy candidates and delivery technologies may negatively impact our ability to develop commercially successful 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 and immunotherapy products and could result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approval of our potential products.
Our planned Phase 3 clinical trial of INO-4800 in the United States as a potential COVID-19 vaccine has been placed on partial clinical hold by the U.S. FDA, which may cause delays in our ability to conduct clinical trials in the United States.

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Our planned clinical development of INO-4800 in the United States as a potential COVID-19 vaccine has been placed on partial clinical hold by the U.S. FDA, which means that we cannot commence a Phase 3 clinical trial in the United States. Although the partial clinical hold does not necessarily prevent us from starting our planned Phase 3 clinical trials outside of the United States, foreign regulatory authorities may require that we satisfactorily resolve the FDA’s remaining questions relating to the CELLECTRA 2000 device, or such foreign regulatory authorities may impose similar requirements, before we can commence or complete the portion of our Phase 3 clinical trial to be conducted in foreign countries. We are actively working to address the FDA’s questions. There can be no assurance, however, regarding the timing of the FDA’s agreement to lift the partial clinical hold or whether we will ultimately be successful in obtaining any such determination from the FDA to do so.
Delays in the commencement of our Phase 3 clinical trial or completion of ongoing clinical testing for INO-4800 could significantly affect our product development costs. We do not know whether our planned Phase 3 clinical trial will begin on time or be completed on schedule, if at all. In addition, our ongoing clinical trials for INO-4800 may not be completed on schedule, or at all, and could be placed on additional holds by regulators either in the United States or in foreign jurisdictions for reasons unrelated to our current hold. If we experience delays in completion of, or if we terminate, any of our clinical trials relating to INO-4800, the commercial prospects for our product candidate 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.
Newly emerging SARS-CoV-2 variants could reduce the immunogenicity and effectiveness of INO-4800 as a potential COVID-19 vaccine.
Multiple variants of the virus that causes COVID-19 have been documented in the United States and globally during this pandemic. The new SARS-CoV-2 variants could be less affected by the immune responses generated by INO-4800 in the vaccine recipients and therefore could reduce the overall efficacy of the vaccine in controlling severe COVID-19 disease.
There can be no assurance that the product we are developing for COVID-19 would be granted an Emergency Use Authorization by the FDA or similar authorization by regulatory authorities outside of the United States if we were to decide to apply for such an authorization. The option of seeking an Emergency Use Authorization may no longer exist if the public health emergency has expired or if a sufficient supply of COVID-19 vaccines have obtained full Biologics License Approval, or foreign equivalent, by the time we are ready to submit an application. If we do not timely apply for such an emergency use authorization or, if we do apply and no authorization is granted or, once granted, it is terminated, we will be unable to sell our product in the near future and instead, will be required to pursue the biologic licensure process in order to sell our product, which is lengthy and expensive.
We may seek an Emergency Use Authorization, or EUA, from the FDA or similar authorization from regulatory authorities outside of the United States, such as conditional marketing authorization from the EMA. If we apply for an EUA and it is granted, an EUA will authorize us to market and sell our COVID-19 vaccine under certain conditions of authorization as long as the public health emergency exists. The FDA expects that companies which receive an EUA for COVID-19 vaccines will proceed to licensure of their vaccine products under a full Biologics License Application. The FDA may issue an EUA during a Public Health Emergency if the agency determines that the potential benefits of a product outweigh the potential risks and if other regulatory criteria are met. There is no guarantee that we will apply for an EUA or other similar authorization or, if we do apply, that we will be able to obtain such authorization. If an EUA or other authorization is granted, we will rely on the FDA or other applicable regulatory authority policies and guidance governing vaccines authorized in this manner in connection with the marketing and sale of our product. If these policies and guidance change unexpectedly and/or materially or if we misinterpret them, potential sales of our product could be adversely impacted. An EUA authorizing the marketing and sale of our product will terminate upon expiration of the Public Health Emergency, which is a determination made by the Secretary of Health and Human Services. The FDA may also terminate an EUA if safety issues or other concerns about our product arise or if we fail to comply with the conditions of authorization. If our competitors obtain full biologics licensure, the FDA or foreign regulatory authorities may no longer grant EUAs for COVID-19 vaccines if the medical need has been met, thereby forcing us to seek full biologics licensure. If we apply for an EUA or similar authorization from regulatory authorities outside of the United States, the failure to obtain such authorization or the termination of such an authorization, if obtained, would adversely impact our ability to market and sell our COVID-19 vaccine, which could adversely impact our business, financial condition and results of operations.
If we and the contract manufacturers upon whom we rely fail to produce our electroporation devices and product candidates in the volumes that we require on a timely basis, or at all, or fail to comply with their obligations to us or 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 devices and utilize the services of contract manufacturers to manufacture the remaining components of these devices. We also rely on third party contract manufacturers to produce our product candidates for use in our clinical trials and potentially for commercial distribution, if any product candidate is approved by regulatory authorities. The manufacture of these devices and our product candidates requires significant expertise and capital
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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 to supply product candidates for clinical trials or to commercially launch a product would be jeopardized. For example, we previously relied on VGXI to manufacture DNA plasmids for our product candidates, including INO-4800. In 2020, VGXI notified us that they would be unable to produce the necessary plasmids to meet this timeline due to a lack of manufacturing capacity. As a result, we have engaged several additional third-party contract manufacturers to support the planned large-scale manufacturing of INO-4800. However, there can be no assurance that we will be able to secure adequate additional manufacturing capacity on commercially reasonable terms. Our inability to secured sufficient manufacturing capacity, or our inability to transfer necessary manufacturing know-how to third parties, would adversely affect our commercialization plans and could also harm our reputation.
Furthermore, any delay or interruption in the supply of clinical trial supplies for INO-4800 or any of our other product candidates 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.
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. For example, the FDA strictly regulates the promotional claims that may be made about medical products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. Physicians, on the other hand, may prescribe products for off-label uses. Although the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance has not been issued. However, companies may in certain circumstances share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling. 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:
issue Warning Letters or untitled letters;
impose civil or criminal penalties;
suspend regulatory approval;
suspend any ongoing clinical trials;
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refuse to approve pending applications or supplements to applications filed by us;
impose restrictions on operations, including costly new manufacturing requirements; or
seize or detain products or require us to initiate a product recall.
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, and 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. For example, in connection with our planned Phase 3 clinical trials of INO-4800 to be conducted outside of the United States, some regulatory authorities have indicated concerns with placebo-controlled efficacy trials of a COVID-19 vaccine, which means that we would not be able to open clinical trial sites in those countries. Furthermore, 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 have obtained Orphan Drug Designation for one of our product candidates. As part of our business strategy, we may continue to seek Orphan Drug Designation for additional product candidates, and we may be unsuccessful in obtaining new designations or may be unable to obtain or maintain the benefits associated with Orphan Drug Designation, including the potential for orphan drug exclusivity.
We have obtained Orphan Drug Designation from the FDA for INO-3107 for the treatment of for the treatment of recurrent respiratory papillomatosis. We have sought and may continue to seek Orphan Drug Designation for one or more of our other product candidates, including but not limited to VGX-3100 for the treatment of HPV-16-/18-associated anal dysplasia, although we may be unsuccessful in doing so. Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the United States, Orphan Drug Designation entitles a party to financial incentives such as tax advantages and user fee waivers. Opportunities for grant funding toward clinical trial costs may also be available for clinical trials of drugs for rare diseases, regardless of whether the drugs are designated for the orphan use. In addition, if a product that has Orphan Drug Designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same product for the same indication for seven years, except in limited circumstances.
Although we have obtained Orphan Drug Designation for INO-3107 for the treatment of for the treatment of recurrent respiratory papillomatosis, and even if we obtain Orphan Drug Designation for our other product candidates in specific indications, we may not be the first to obtain marketing approval of these product candidates for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. If a competitor with a product that is determined by the FDA to be the same as one of our product candidates obtains marketing approval before us for the same indication we are pursuing and obtains orphan drug exclusivity, our product candidate may not be approved until the period of exclusivity ends unless we are able to demonstrate that our product candidate is clinically superior. Even after obtaining approval, we may be limited in our ability to market our product. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different principal molecular structural features can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same drug with the same principal molecular structural features for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. Orphan Drug Designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we may seek Orphan Drug Designation for some of our product candidates, we may never receive such designations.
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Tax reform legislation enacted in 2017 reduced the amount of the qualified clinical research costs for a designated orphan product that a sponsor may claim as a credit from 50% to 25%. This reduction could further limit the advantage of, and may impact our future business strategy with respect to, seeking the Orphan Drug Designation.
Risks Related to Reliance on Third Parties
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, and may continue to 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 to develop, obtain regulatory approval for and commercialize our product candidates for specified indications, including in jurisdictions outside of the United States. 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 upfront 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, DARPA and the DoD, and we intend to continue entering into these types of 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. For example, in April 2021 we were notified by the DoD that they will discontinue funding for the Phase 3 segment of our INNOVATE trial.
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.
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.
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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.
Risks Related to Commercialization of Our Product Candidates
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 products for which we receive regulatory approval do 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:
our ability to provide acceptable evidence of safety and efficacy;
the relative convenience and ease of administration;
the prevalence and severity of any actual or perceived adverse side effects;
limitations or warnings contained in a product's FDA-approved labeling, including, for example, potential “black box” warnings
availability of alternative treatments;
pricing and cost effectiveness;
the effectiveness of our or any future collaborators' sales and marketing strategies;
the public perception of new therapies and the reputational challenges that the vaccine industry is facing related to the growing momentum of the anti-vaccine movement, including with respect to COVID-19 vaccines;
our ability to obtain sufficient third-party coverage and adequate reimbursement; and
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, healthcare 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 coverage and reimbursement policies which, if not favorable to our product candidates, could hinder or prevent our products' commercial success.
Patients in the United States and elsewhere generally rely on third-party payors to reimburse part or all of the costs associated with their prescription drugs and medical treatments. Accordingly, our ability to commercialize our electroporation equipment and product candidates successfully will depend in part on the extent to which governmental authorities, including Medicare and Medicaid, 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.
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. Coverage decisions may not favor new products when more established or lower cost therapeutic alternatives are already available. Even if we obtain coverage for a given product, the associated reimbursement rate may not be adequate to cover our costs, including research, development, intellectual property, manufacture, sale and distribution expenses, or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless reimbursement is adequate to cover all or a significant portion of the cost of our drug products.
Additionally, some of our products, if approved, will be provided under the supervision of a physician. When used in connection with medical procedures, our product candidates may not be reimbursed separately but their cost may instead be bundled as part of the payment received by the provider for the procedure only. Separate reimbursement for the product itself or the treatment or procedure in which our product is used may not be available. A decision by a third-party payor not to cover or separately reimburse for our product candidates or procedures using our product candidates, could reduce physician utilization of our products once approved.
Coverage and reimbursement policies for drug products can differ significantly from payor to payor as there is no uniform policy of coverage and reimbursement for drug products among third-party payors in the United States. There may be significant delays in obtaining coverage and reimbursement as the process of determining coverage and reimbursement is often time consuming and costly which will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage or adequate reimbursement will be obtained. It is difficult to predict at this time what government authorities and third-party payors will decide with respect to coverage and reimbursement for our products.
A significant trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular products and services. Third-party payors are increasingly challenging the effectiveness of and prices charged for medical products and services. Moreover, the U.S. government, state legislatures and foreign governmental entities have shown significant interest in implementing cost containment programs to limit the growth of government paid healthcare costs, including price controls, restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs. We may not be able to obtain third-party payor coverage or reimbursement for our products in whole or in part.
Risks Related to Managing Our Growth and Employee and Operational Matters
We are currently subject to litigation and may become subject to additional litigation, which could harm our business, financial condition and reputation.
We may have actions brought against us by stockholders relating to past transactions, changes in our stock price or other matters. For example, during 2020, numerous purported shareholder class action complaints have been filed against us, naming us and our directors and executive officers as defendants, and alleging that we made materially false and misleading statements regarding the development of our INO-4800 vaccine candidate against COVID-19 in violation of certain federal securities laws. We may also become party to litigation with third parties as a result of our business activities. In 2020, we filed a lawsuit against one of our contract manufacturers, who then filed a counterclaim against us alleging that we had breached our contract with them, among other claims. These litigation matters, described in this report, are ongoing, and even though we intend to vigorously defend ourselves in these actions, there can be no assurance that we will ultimately prevail. These and any potential future actions against us could give rise to substantial damages, which could have a material adverse effect on our financial position, liquidity or results of operations. Even if an action is not resolved against us, the uncertainty and expense associated with litigation could harm our business, financial condition and reputation, as litigation is often costly, time-consuming and disruptive to business operations. The defense of our existing and potential future lawsuits could also result in diversion of our management's time and attention away from business operations, which could harm our business.
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Our business could be adversely affected by the effects of health epidemics, including the global COVID-19 pandemic.
In December 2019, a novel strain of coronavirus, since named SARS-CoV-2, causing the disease known as COVID-19, was reported in China. Since then, COVID-19 has spread globally, resulting in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic” in March 2020 and United States also declaring a national emergency. In response to the COVID-19 pandemic, a number of governmental orders and other public health guidance measures were implemented across much of the United States, including in the locations of our offices, laboratories, clinical trial sites and third parties on whom we rely. As a result, our expected clinical development timelines could be negatively affected by COVID-19, which could then materially and adversely affect our business, financial condition and results of operations. Further, we have implemented a work from home policy allowing employees who can work from home to do so, while those needing to work in laboratory facilities work in shifts to reduce the number of people gathered together at one time. We have also implemented a mask-wearing mandate for all on-site activities. Non-essential business travel has been suspended and online and teleconference technology is used to meet virtually rather than in person. We have taken measures to secure our research and development project activities, while work in laboratories has been organized to reduce risk of COVID-19 transmission. Our increased reliance on personnel working from home may negatively impact our productivity, or could disrupt, delay or otherwise adversely impact our business. For example, with our personnel working from home, some of our research activities that require our personnel to be in our laboratories could be delayed.
In addition, as local jurisdictions continue to put restrictions in place or reinstitute restrictions they had previously lifted, our ability to continue to conduct and enroll patients in our clinical trials, manufacture our product candidates and pursue collaborations may also be limited. Such events may result in business and manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations.
The spread of COVID-19, which has caused a broad impact globally, could also affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, it has resulted in significant disruption of global financial markets, which could reduce our ability to access capital. Although we have raised significant funds from the sale of our common stock in the public markets during the pandemic, there can be no guarantee that we will be able to continue to so, which could negative affect our future liquidity. In addition, if a global economic recession results following the spread of COVID-19, including newly emerging SARS-CoV-2 variants, its impact could materially affect our business and the value of our common stock.
The continued spread of COVID-19, including newly emerging SARS-CoV-2 variants, globally has and could continue to adversely affect our clinical trial operations, including our ability to initiate and conduct our planned trials on their expected timelines and to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. For example, COVID-19 has adversely impacted the timeline for data collection for our VGX-3100 program. An increasing number of trial participants are either not able or do not feel safe going into healthcare facilities, which is necessary for the collection and completion of data samples for this trial. As a result, it is taking longer than anticipated to complete the data collection process. Further, the COVID-19 outbreak could result in delays in our clinical trials due to prioritization of hospital resources toward the outbreak, restrictions in travel, potential unwillingness of patients to enroll in trials, patients withdrawing from trials following enrollment as a result of contracting COVID-19 or other health conditions, or the inability of patients to comply with clinical trial protocols as quarantines and travel restrictions impede patient movement or interrupt healthcare services. In addition, we rely on independent clinical investigators, contract research organizations and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, and the outbreak may affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us. These restrictions may delay the conduct of multiple clinical trials including our Phase 1 through 3 clinical trials.
Additionally, COVID-19 may also result in delays in receiving approvals from local and foreign regulatory authorities, delays in necessary interactions with local and foreign regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees, and refusals to accept data from clinical trials conducted in these affected geographies.
The global outbreak of COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact our business, operations and clinical trials will depend on future developments, including travel restrictions in the United States and other countries, the effectiveness of actions taken in the United States and other countries to contain and treat the disease, including mass vaccination efforts, and whether the United States and additional countries are required to move to complete lock-down status. The ultimate long-term impact of COVID-19 is highly uncertain.
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
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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 COVID-19 vaccines, cancer vaccines and immunotherapies, and several products such as the CAR-Ts developed by our competitors have been approved for human use. Some of our competitors have already received regulatory approval for their COVID-19 vaccines and have mass vaccination efforts underway in our target markets. The earlier market entry of these other vaccines, and their actual or perceived efficacious or success relative to our own, has led to and may continue to lead to diversion of funding away from us, decreased demand for INO-4800, if approved, and difficulty in finding participants for our clinical trials. All of these factors could substantially impact our ability to complete the development of, commercialize and generate revenues from INO-4800.
In addition, our competitors and potential competitors include large pharmaceutical 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, preclinical 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.
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:
exposure to unknown liabilities;
disruption of our business and diversion of our management's time and attention to develop acquired products or technologies;
incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions;
higher than expected acquisition and integration costs;
increased amortization expenses;
difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and
inability to retain key employees of any acquired businesses.
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.
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.
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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.
Changes in funding for the FDA and other government agencies could hinder our ability to hire and retain key leadership and other personnel, or otherwise prevent new products from being developed or commercialized in a timely manner, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days from December 2018 to January 2019, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
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 (including personal information and pseudonymized 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, interruption, or unavailability of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact operations. Hardware, software, or applications we develop or obtain from third parties may contain defects in design or manufacture or other supply chain problems that could unexpectedly compromise our information and network security. 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 (including ransomware), 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. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs.
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 DNA vaccine, DNA immunotherapy and dMAb 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, healthcare 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:
decreased demand for our product candidates;
impairment of our business reputation;
withdrawal of clinical trial participants;
costs of related litigation;
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distraction of management's attention from our primary business;
substantial monetary awards to patients or other claimants;
loss of revenues; and
inability to commercialize our products.
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.
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, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA. Among the ACA’s provisions of importance to the pharmaceutical industry are that it:
imposed an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions, although the effective rate paid may be lower. However, the 2020 federal spending package permanently eliminated, effective January 1, 2020, this ACA-mandated medical device tax;
created an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs;
increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or AMP;
created new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics that are inhaled, infused, instilled, implanted or injected;
expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
expanded the entities eligible for discounts under the Public Health program;
created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
established a Center for Medicare & Medicaid Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending that began on January 1, 2011; and
created a licensure framework for follow on biologic products.

There remain judicial and Congressional challenges to certain aspects of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry qualifying health insurance coverage for all or part of a year. In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage, and, effective January 1, 2021, also eliminated the health insurer tax. On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges, and the healthcare reform measures of the Biden administration will impact the ACA and our business.
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In addition, other legislative changes have been proposed and adopted since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute will remain in effect through 2030 with the exception of a temporary suspension from May 1, 2020 through December 31, 2021 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Further there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. The Department of Health and Human Services, or HHS, has solicited feedback on some of these measures and implemented others under its existing authority. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. As a result, the FDA released a final rule on September 24, 2020, effective November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021. On November 20, 2020, CMS issued an interim final rule implementing the Trump administration’s Most Favored Nation (MFN) executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction against implementation of the interim final rule. On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Model interim final rule shall not commence earlier than sixty (60) days after publication of that regulation in the Federal Register. Based on a recent executive order, the Biden administration expressed its intent to pursue certain policy initiatives to reduce drug prices. Further, at the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. It is also possible that additional governmental action is taken in response to the COVID-19 pandemic.
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:
our ability to set a price we believe is fair for our products;
our ability to generate revenues and achieve or maintain profitability;
the availability of capital; and
our ability to obtain timely approval of our products.
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, state, local and foreign healthcare laws and regulations pertaining to fraud and abuse, transparency, patients' rights, and privacy are applicable to our business. The laws that may affect our ability to operate include:
the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, people from soliciting, receiving or providing remuneration, directly or indirectly, to induce or reward either the referral of an individual, or ordering, or leasing of an item, good, facility or service, for which payment may be made by a federal healthcare program such as Medicare or Medicaid. The intent standard under the federal healthcare program Anti-Kickback Statute was amended by the ACA to a stricter standard such that a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Further, the ACA codified case law that a claim including items or services resulting from a violation of the federal healthcare program Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
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federal civil and criminal false claims laws, including the civil False Claims Act, 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;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal healthcare program Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain individuals and entities;
the Physician Payments Sunshine Act, created under the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members, and which, beginning in 2022, will require applicable manufacturers to report information regarding payments and other transfers of value provided during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants, and certified nurse-midwives;
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;
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;
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, state and local laws requiring the registration of pharmaceutical sales and medical representatives, 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; and
additional state and local laws such as laws in California and Massachusetts, which mandate implementation of compliance programs, compliance with industry ethics codes, and spending limits, and other state and local laws, such as laws in Vermont, Maine, and Minnesota which require reporting to state governments of gifts, compensation, and other remuneration to physicians.
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.
We will be required to spend substantial time and money to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, which require strict compliance in order to offer protection, it is possible that governmental authorities may conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable healthcare 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 significant penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, imprisonment, integrity and/or other oversight obligations, contractual damages, reputational harm, and the curtailment or restructuring of our operations. Any such penalties 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.
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.
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We have entered into collaborations with Chinese companies and conduct certain research and development activities in China. Uncertainties regarding the interpretation and enforcement of Chinese laws, rules and regulations, a trade war or political unrest in China could materially adversely affect our business, financial condition and results of operations.
We conduct research and development activities in China through our collaboration with Advaccine, which is conducting and funding the Phase 2 trial of INO-4800 in China. In addition, we are party to a license and collaboration agreement with China-based company ApolloBio, pursuant to which ApolloBio has the exclusive right to develop and commercialize VGX-3100 in China, Hong Kong, Macao and Taiwan. The Chinese legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value. In addition, the Chinese legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since Chinese administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, we are exposed to the possibility of disruption of our research and development activities in the event of changes in the policies of the United States or Chinese governments, political unrest or unstable economic conditions in China. For example, a trade war could lead to increased costs for clinical materials that are manufactured in China. These interruptions or failures could also impede commercialization of our product candidates and impair our competitive position. Further, we may be exposed to fluctuations in the value of the local currency in China. These uncertainties may impede our ability to enforce the contracts we have entered into and our ability to continue our research and development activities and could materially and adversely affect our business, financial condition and results of operations.
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 have evolved over recent years and continues to undergo review and revision, both in the United States and abroad. 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:
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;
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;
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;
pending patent applications may not result in issued patents;
the issued patents covering our products and technologies may not provide us with any competitive advantages or have any commercial value;
the issued patents may be challenged and invalidated, or rendered unenforceable;
given the nature of the COVID-19 pandemic, governments in the United States or abroad may prevent us from enforcing patents on our vaccines, which could prevent us from excluding competitors from those markets;
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;
we may not develop or acquire additional proprietary technologies that are patentable;
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.
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:
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;
we may become liable for substantial damages for past infringement if a court decides that our technologies infringe upon a third party's patent;
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
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.
If any of these events occur, our business could suffer and the market price of our common stock may decline.
Risks Related to an Investment in Our Common Stock
An active trading market for our common stock may not be sustained.
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Although our common stock is listed on the Nasdaq Global Select Market, we cannot assure you that an active trading market for our shares will continue to be sustained. If an active market for our common stock is not sustained, it may be difficult for investors in our common stock to sell shares without depressing the market price for the shares or to sell the shares at all.
The price of our common stock has been and may continue 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 has been and may continue to be highly volatile and has been and may in the future 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 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:
developments concerning any research and development, clinical trials, manufacturing, and marketing efforts or collaborations, particularly developments concerning the prospects of INO-4800 as a potential vaccine candidate against COVID-19;
fluctuating public or scientific interest in the potential for our vaccines or other product candidates to address COVID-19 or other diseases;
our announcement of significant acquisitions, strategic collaborations, joint ventures or capital commitments;
fluctuations in our operating results;
announcements of technological innovations;
new products or services that we or our competitors offer;
changes in the structure of healthcare payment systems;
the initiation, conduct and/or outcome of intellectual property and/or litigation matters;
changes in financial or other estimates by securities analysts or other reviewers or evaluators of our business;
conditions or trends in bio-pharmaceutical or other healthcare industries;
regulatory developments in the United States and other countries;
negative perception of gene-based therapy;
changes in the economic performance and/or market valuations of other biotechnology and medical device companies;
additions or departures of key personnel;
sales or other transactions involving our common stock;
changes in our capital structure;
sales or other transactions by executive officers or directors involving our common stock;
changes in accounting principles;
global unrest, terrorist activities, and economic and other external factors; and
catastrophic weather and/or global disease pandemics, including COVID-19.
The stock market in general has recently experienced relatively large price and volume fluctuations, particularly in response to the COVID-19 outbreak. 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 our common stock, which could cause a decline in the value of our 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:
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;
all stockholder actions must be effected at a duly called meeting of stockholders and not by written consent; and
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 the sole source of potential gain for the foreseeable future.
General Risk Factors
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:
variations in the level of expenses related to our electroporation equipment, product candidates or future development programs;
expenses related to corporate transactions, including ones not fully completed;
addition or termination of clinical trials or funding support;
any intellectual property infringement lawsuit in which we may become involved;
any legal claims that may be asserted against us or any of our officers;
regulatory developments affecting our electroporation equipment and product candidates or those of our competitors;
debt service obligations on the Notes;
changes in the fair value of our investments, including investments in affiliated entities;
our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements; and
if any of our products receives regulatory approval, the levels of underlying demand for our products.
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.
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, global pathogen outbreaks or pandemics, including COVID-19, and the availability and cost of credit have in the past and may continue to contribute to increased volatility and diminished expectations for the economy and the markets going forward. Market upheavals may have an adverse effect on us. In the event of a 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, and we may experience losses on these deposits.
If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that equity research analysts publish about us and our business, and we have limited research coverage by equity research analysts. Equity research analysts may elect not to initiate or continue to provide research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock. Even if we have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our stock could decline if one or
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more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.
The issuance of additional stock in connection with financings, acquisitions, investments, our stock incentive plans or otherwise will dilute all other stockholders.
Our certificate of incorporation authorizes us to issue up to 600,000,000 shares of common stock and up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue our shares of common stock or securities convertible into our common stock from time to time in connection with a financing, acquisition, investment, our stock incentive plans or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.
We incur significant costs and demands upon management as a result of being a public company.
As a public company listed in the United States, we incur significant legal, accounting and other costs that could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and stock exchanges, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.
Changes in tax laws could adversely affect our business and financial condition.
In December 2017, the Tax Cuts and Jobs Act of 2017 was enacted, which significantly revised the Internal Revenue Code of 1986, as amended, or the Code. The new federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35 percent to a flat rate of 21 percent, limitation of the tax deduction for interest expense to 30 percent of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80 percent of current-year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the federal tax law.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
Not applicable.

ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5.    OTHER INFORMATION
Not applicable.

ITEM 6.    EXHIBITS
59

(a)    Exhibits

Exhibit
Number
Description of Document
3.1
3.2
32.1 *
101.INS XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Certain confidential portions of this exhibit (indicated by asterisks) were omitted pursuant to applicable regulations.

*
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Inovio Pharmaceuticals, Inc.
Date: August 9, 2021 By /s/    J. JOSEPH KIM        
J. Joseph Kim
President, Chief Executive Officer and Director (On Behalf of the Registrant)
Date: August 9, 2021 By /s/    PETER KIES      
Peter Kies
Chief Financial Officer (Principal Financial and Accounting Officer)

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