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Inovio Pharmaceuticals closes $4 mln public offering

US-based vaccine developer Inovio Pharmaceuticals (AMEX:INO) said earlier this week it closed an underwritten public offering for gross proceeds of $4.0 million.

The offering consisted of around 7.7 million shares of its common stock, plus warrants for an additional 5.8 million shares, including the partial exercise of the underwriter's over-allotment option, the company said. Net proceeds to Inovio, after deducting the underwriter's discounts and other expenses, were roughly $3.7 million.

These securities were sold in units, comprised of one share and three quarters of one warrant, at a price of 51.95 cents per unit.

The warrants have a term of five years and an exercise price of 65 cents per share, the company said.

Importantly, the shares and warrants in the offering were placed with five new institutional investors. Concurrent with the placement though, an existing shareholder, hedge fund Special Situations Fund, sold Inovio stock. As of December 6, Special Situations Fund held 11.9 million shares, having sold 9.2 million shares of the original 21 million it purchased in January.

The persistent sale of shares, however, appears unrelated to the company's fundamentals, with Inovio having made significant operational progress in the last year.

President and CEO of Inovio, Dr. J. Joseph Kim, said: "We're pleased to see the institutional investors that participated in this financing support our strategy to develop Inovio's synthetic vaccines.  In 2011 we achieved multiple important milestones toward our goal of revolutionizing vaccine technology and we look forward to the clinical outcomes ahead of us in 2012."

During the third quarter, the company said strong immune and safety responses were seen from the first US cohort of subjects in a phase I study assessing its PENNVAX(NYSE:TM)-G HIV vaccine, in combination with a virus vector vaccine, in a prime-boost preventive HIV vaccination strategy. Enrollment is continuing at three sites in Africa for the next phase of the study.

Meanwhile, the PENNVAX(TM)-B vaccine, the company's product in development for the subtype of HIV prevalent in the US and Europe, showed immune responses equal to or better than the current vector-based HIV vaccines in final data from a phase one clinical study.

Also during the latest quarter, Inovio announced it expanded its licensing agreement with the University of Pennsylvania, adding exclusive worldwide licenses for technology and intellectual property covering DNA vaccines against prostate cancer, malaria, hepatitis B, MRSA and other diseases.

The company also entered into a research and development agreement with the US Department of Homeland Security to study the efficacy of Inovio's synthetic vaccines for foot and mouth disease in animal models.

In addition, Inovio established a product development agreement with its affiliate, VGX International, to co-develop its SynCon(NYSE:R) therapeutic vaccines for hepatitis B and C infections.

Moreover, the company's main vaccine candidate for treating cervical dysplasia (pre-cancerous lesions) and cancer caused by human papillomavirus (HPV) is advancing well. In a fourth phase one vaccination of the vaccine, called VGX-3100, long-term T cell immune responses were seen of up to two years (the longest period measured). Inovio continues to set up sites and enroll patients for its phase two clinical trial, designed to test the vaccine in women with stages of abnormal cells preceding cervical cancer.

The company expects to enroll 148 patients in 25 study centres in the U.S., South Korea, South Africa, Australia, and Canada, with data anticipated in the second half of 2013, Inovio said.

Other development programs for Inovio vaccines for various other indications are ongoing. For example, Inovio said that significant T cell and antibody responses were seen in a phase one clinical study of the company's preventive avian flu vaccine, VGX-3400X. The vaccine, delivered using the company's proprietary electroporation system designed to enhance cellular uptake, was seen as generally safe and well tolerated at all dose levels, with no vaccine-related serious adverse events.

The company also launched a second phase one clinical study as part of its universal flu vaccine program, INO-3510, using Inovio's skin-targeted delivery device. Preliminary safety and immune response data is expected in the first quarter of next year.

With all the operational and development progress, Inovio's operating expenses have risen over the past year, coming in at $9.0 million for the latest quarter, versus $5.8 million in the year-ago period. Higher expenses were a result of higher clinical trial costs, as R&D expenses more than doubled, partially offset by lower general and administrative expenses.

As at the end of the third quarter, the company had cash and equivalents of $31.1 million. Inovio said that with the latest raise of about $3.7 million, it has enough cash to meet its planned working capital requirements through the third quarter of 2013.

The proceeds from the latest offering will be used for general corporate purposes, said the company, including clinical trial and research and development expenses.