INOVIO PHARMACEUTICALS, INC.INO
INOVIO PHARMACEUTICALS, INC. Fair Value Disclosure
Short-term Investments and Fair Value Measurements
The following is a summary of available-for-sale securities as of December 31, 2024 and 2023:
| As of December 31, 2024 | |||||||||||||||||||||||||||||
| Contractual Maturity (in years) | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Market Value | |||||||||||||||||||||||||
| Mutual funds | --- | $ | 25,926,415 | $ | — | $ | (1,445,706) | $ | 24,480,709 | ||||||||||||||||||||
| Certificates of deposit | Less than 1 | 2,980,273 | 9,750 | (281) | 2,989,742 | ||||||||||||||||||||||||
| U.S. agency mortgage-backed securities | * | 1,260,745 | — | (430,964) | 829,781 | ||||||||||||||||||||||||
| $ | 30,167,433 | $ | 9,750 | $ | (1,876,951) | $ | 28,300,232 | ||||||||||||||||||||||
| As of December 31, 2023 | |||||||||||||||||||||||||||||
| Contractual Maturity (in years) | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Market Value | |||||||||||||||||||||||||
| Mutual funds | --- | $ | 55,389,289 | $ | — | $ | (3,522,888) | $ | 51,866,401 | ||||||||||||||||||||
| U.S. treasury securities | Less than 1 | 75,164,782 | 24,938 | — | 75,189,720 | ||||||||||||||||||||||||
| Certificates of deposit | Less than 1 | 2,978,917 | 11,709 | (300) | 2,990,326 | ||||||||||||||||||||||||
| U.S. agency mortgage-backed securities | * | 1,340,439 | — | (403,973) | 936,466 | ||||||||||||||||||||||||
| $ | 134,873,427 | $ | 36,647 | $ | (3,927,161) | $ | 130,982,913 | ||||||||||||||||||||||
*No single maturity date.
During the years ended December 31, 2024 and 2023, the Company recorded gross realized gain on investments of $900 and $1,000, respectively, and gross realized loss on investments of $1.9 million and $4.8 million, respectively. During the years ended December 31, 2024 and 2023, the Company recorded net unrealized gain on available-for-sale equity securities of $2.1 million and $5.9 million, respectively. No material balances were reclassified out of accumulated other comprehensive loss for the years ended December 31, 2024 and 2023. Interest and dividends on investments classified as available-for-sale are included in interest income in the consolidated statements of operations. As of December 31, 2024, the Company had 19 available-for-sale securities with an aggregate total unrealized loss of $1.9 million. All of the securities had been in a loss position for longer than 12 months as of December 31, 2024.
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 December 31, 2024 were primarily due to changes in interest rates, and not due to increased credit risks associated with specific securities. 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 December 31, 2024, the Company did not record an allowance for credit losses related to its available-for-sale debt securities.
The following table presents the Company’s assets and liabilities that were measured at fair value on a recurring basis, determined using the following inputs as of December 31, 2024:
| Fair Value Measurements at | |||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| 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 | $ | 24,480,709 | $ | 24,480,709 | $ | — | $ | — | |||||||||||||||
| Certificates of deposit | 2,989,742 | — | 2,989,742 | — | |||||||||||||||||||
| U.S. agency mortgage-backed securities | 829,781 | — | 829,781 | — | |||||||||||||||||||
| Total short-term investments | 28,300,232 | 24,480,709 | 3,819,523 | — | |||||||||||||||||||
| Investment in affiliated entity | 1,613,844 | 1,613,844 | — | — | |||||||||||||||||||
| Total assets measured at fair value | $ | 29,914,076 | $ | 26,094,553 | $ | 3,819,523 | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Common stock warrant liability | $ | 13,255,188 | $ | — | $ | — | $ | 13,255,188 | |||||||||||||||
| Total liabilities | $ | 13,255,188 | $ | — | $ | — | $ | 13,255,188 | |||||||||||||||
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, 2023:
| Fair Value Measurements at | |||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Total | Quoted Prices in Active Markets (Level 1) | Significant Other Unobservable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Short-term investments | |||||||||||||||||||||||
| Mutual funds | $ | 51,866,401 | $ | 51,866,401 | $ | — | $ | — | |||||||||||||||
| U.S. treasury securities | 75,189,720 | 75,189,720 | — | — | |||||||||||||||||||
| Certificates of deposit | 2,990,326 | — | 2,990,326 | — | |||||||||||||||||||
| U.S. agency mortgage-backed securities | 936,466 | — | 936,466 | — | |||||||||||||||||||
| Total short-term investments | 130,982,913 | 127,056,121 | 3,926,792 | — | |||||||||||||||||||
| Investments in affiliated entity | 2,780,287 | 2,780,287 | — | — | |||||||||||||||||||
| Total assets measured at fair value | $ | 133,763,200 | $ | 129,836,408 | $ | 3,926,792 | $ | — | |||||||||||||||
Level 1 assets at December 31, 2024 consisted of mutual funds and the Company’s investment in its affiliated entity, PLS. Level 1 assets at December 31, 2023 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 consolidated statement of operations as unrealized gain or loss on available-for-sale equity securities or as a gain or loss on investment in affiliated entity.
Level 2 assets at December 31, 2024 and 2023 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 December 31, 2024 or 2023.
Level 3 liabilities held as of December 31, 2024 consisted of liabilities associated with the Warrants to purchase common stock issued in the Company's underwritten public offering that closed in December 2024. See Note 10 for additional information about the liability-classified warrants.
The Company reassesses the fair value of the common stock warrant liability at each reporting date utilizing a Black-Scholes pricing model. The following assumptions were used to estimate the fair value of the warrant liability:
| On Issuance Date | December 31, 2024 | ||||||||||
| Risk-free interest rate | 4.3% | 4.4% | |||||||||
| Expected volatility | 111% | 111% | |||||||||
| Expected life in years | 5 | 5 | |||||||||
| Dividend yield | — | — | |||||||||
Changes in these assumptions as well as fluctuations in the Company's stock price between the valuation dates can have a
significant impact on the fair value of the common stock warrant liability. Expected volatility was based on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term. Expected term is calculated based on the remaining contractual term of the Warrants. The risk-free rate was based on the U.S. Treasury rate that corresponds to the expected term of the Warrants. As a result of these calculations, the Company recorded a decrease in fair value of the liability of $2.8 million on the consolidated statement of operations for the year ended December 31, 2024.
The following table presents the changes in fair value of the Company’s total Level 3 financial liabilities for the year ended December 31, 2024:
| Common Stock Warrant Liability | |||||
| Balance at December 31, 2023 | — | ||||
| Issuance of common stock warrants in December 2024 | 16,063,796 | ||||
| (2,808,608) | |||||
| Balance at December 31, 2024 | $ | 13,255,188 | |||
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.