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Commitments and Contingencies | 6 Months Ended
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Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies 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, 2023 of 0.4 to 6.5 ye ars, 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, 2023, the maturities of the Company's operating lease liabilities were as follows:
Remainder of 2023 | $ | 2,098,000 |
2024 | 3,050,000 |
2025 | 3,063,000 |
2026 | 3,139,000 |
2027 | 2,526,000 |
Thereafter | 4,223,000 |
Total remaining lease payments | 18,099,000 |
Less: present value adjustment | (4,046,000) |
Total operating lease liabilities | 14,053,000 |
Less: current portion | (2,351,000) |
Long-term operating lease liabilities | $ | 11,702,000 |
Weighted-average remaining lease term | 5.6 years
Weighted-average discount rate | 8.6%
Lease costs included in operating expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2023 were $856,000 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, 2022 were $851,000 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 with one period through March 31, 2025 and the other month-to-month after December 31, 2022. 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. 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 the Company and its former President and Chief Executive Officer as defendants. The lawsuit alleged that the Company made materially false and misleading statements in violation of certain federal securities laws. The plaintiffs sought unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including reasonable attorneys’ fees. The plaintiffs’ complaint was later amended to include certain of the Company’s other officers as defendants. After additional motions were filed in the case, in June 2022 the parties negotiated an agreement in principle to settle the shareholder class action complaint, which was approved by the court in January 2023. Under the settlement, the Company agreed to pay $30.0 million in cash and $14.0 million in shares of its common stock to settle all outstanding claims. The Company's insurance carriers paid the $30.0 million cash component of the settlement. During the three months ended March 31, 2023, the Company issued 9,121,000 shares of common stock pursuant to the securities class action settlement. Shareholder Derivative Litigation 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 of the Company as defendants. The lawsuit asserted state and federal claims and was based on the same alleged misstatements as the shareholder class action complaint described above. The lawsuit accused the Company’s board of directors of failing to exercise reasonable and prudent supervision over the Company’s management, policies, practices, and internal controls. The plaintiff sought unspecified monetary damages on behalf of the Company as well as governance reforms. On June 5, 2020, the court stayed the Beheshti action. On June 12, 2020 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 asserted substantially similar claims as the Beheshti action and named the Company’s current directors as defendants. The Devarakonda complaint also named one of the Company’s 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. 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 of the Company as defendants. The complaint asserted substantially similar claims as those in the consolidated derivative action. On August 27, 2020, the Fettig action was consolidated with the other derivative cases. On March 28, 2022, a fifth shareholder derivative complaint, Schumacher v. Benito et al., was filed in the Delaware Court of Chancery, naming eight current and former directors as defendants. The complaint asserted substantially similar claims as those in the consolidated derivative action. On May 4, 2022, the Delaware Court of Chancery entered a stay of the litigation. On March 17, 2023, the parties submitted a joint status report to the Court of Chancery reporting that the parties agreed to a settlement in principle, which also provided for the resolution of the consolidated derivative action and certain stockholder demands. On April 19, 2023, the plaintiffs in the consolidated derivative action filed a motion for preliminary approval of settlement with the United States District Court for the Eastern District of Pennsylvania. The proposed settlement provides for resolution of the consolidated derivative action, the derivative action pending in the Delaware Court of Chancery, and certain stockholder demands. On June 14, 2023, the court entered an order preliminarily approving the proposed settlement of the derivative claims, in accordance with a Stipulation of Settlement dated March 31, 2023. The order also approved the form and manner of the notice of the Settlement and set October 11, 2023 as the date for a settlement hearing to determine, among other things, whether the terms of the Stipulation should be approved as fair, reasonable and adequate. The Stipulation of Settlement contemplates that, following the settlement hearing and the final approval of the settlement by the court, the Company will implement certain corporate governance reforms described in the Stipulation of Settlement. In addition, as part of the Settlement, subsequent to June 30, 2023, the Company paid $1.2 million to plaintiffs’ counsel for their fees and expenses, which amount remains subject to final court approval. VGXI Litigation On June 3, 2020, the Company 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 the Company’s 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, the Company filed a petition for preliminary injunction, which was denied on June 25, 2020. On June 26, 2020, the Company 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 the Company, alleging that the Company 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 the Company. Also, on July 7, 2020, VGXI filed a third-party complaint against Ology Bioservices, Inc., a contract manufacturing organization that the Company had engaged to provide services similar to those that were being provided by VGXI. On July 27, 2020, the Company filed an answer to VGXI’s counterclaims, disputing the allegations and the claims raised in VGXI’s filing. On October 1, 2020, the Company filed a notice of discontinuance of appeal with the Pennsylvania Superior Court. A trial date for the litigation has not been set. The Company intends to aggressively prosecute the claims set forth in its complaint against VGXI and to vigorously defend itself against VGXI’s counterclaims. GeneOne Litigation On December 7, 2020, GeneOne filed a complaint in the Court of Common Pleas of Montgomery County, Pennsylvania against the Company, alleging that the Company had breached the CELLECTRA Device License Agreement, or the Agreement, between the Company and GeneOne. The Company terminated the Agreement on October 9, 2020. The complaint asserts claims for breach of contract, declaratory judgment, unfair competition, and unjust enrichment. The complaint seeks injunctive relief, an accounting, damages, disgorgement of profits, attorneys’ fees, interest, and other relief from the Company. On January 29, 2021, the Company filed preliminary objections to the complaint. On August 23, 2021, the court overruled the Company’s preliminary objections to the complaint. On September 13, 2021, the Company filed an answer to the complaint, new matter, and counterclaims. The Company’s counterclaims allege that GeneOne breached the Agreement and assert claims for breach of contract and declaratory judgment. The counterclaims seek damages, interest, expenses, attorney’s fees, and costs. On October 18, 2021, GeneOne filed its answer to the Company’s counterclaims and new matter. On November 8, 2021, we filed our answer to GeneOne’s new matter. A trial date for this litigation has not been set. The Company intends to aggressively prosecute the claims set forth in its counterclaims against GeneOne and to vigorously defend itself against the claims in GeneOne’s complaint. Other Matters From time to time, the Company may be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of its business. Any of these claims could subject the Company to costly legal expenses and, while the Company generally believes that it has adequate insurance to cover many different types of liabilities, its insurance carriers may deny coverage or its policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on the Company's consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage the Company's reputation and business. Except as described above, the Company is not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would be reasonably expected to have a material adverse effect on the Company’s consolidated results of operations or financial position.

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