Wall Street's Interest In OncoSec, Inovio And Electroporation Spikes

Aug. 6.13 | About: Inovio Pharmaceuticals, (INO)

Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.

This is a follow-up note to one put on Bio-Wire on July 16th, 2013 (link), which contains a few extra details on the science of these two companies and their lead products.

OncoSec Medical (NASDAQ:ONCS) and Inovio Pharmaceuticals (NYSE: INO) have been exceptional performers in recent trading due to investor excitement over electroporation technology and recent data that was presented that supports this process of drug delivery enhancement. In the last month alone, OncoSec moved up 44%. Inovio has moved up 213% on substantial volume. Since my last note, Oncosec has move about 15% higher while Inovio has doubled.

While the action in Inovio in particular has been mysterious (due to exaggerated volatility), the overall bullish investor sentiment that is being gathered around these two companies is explainable. The market seems to be "digesting" the clinical data that the companies presented earlier in the summer, while waiting for more that is scheduled to arrive in the next few months. Recent data presented includes:

-Oncosec presented the anticipated Phase II data for ImmunoPulse at the 8th World Congress of Melanoma on July 22nd 2013 (link)

-Inovio data for CELLECTRA/PENNVAX-B was published in the Journal of Infectious Diseases on July 10th, showing a robust T-Cell Response to the Therapy (link)

-Inovio preclinical data for hTERT DNA Cancer Vaccine published in Cancer Immunology Research Journal on July 24th, 2013 (link)

Biotech investors naturally chase positive data, which implies that new investor money may be entering Inovio/OncoSec stock for future volatility. But also, many questions arise regarding the market valuation of these companies next to other cancer therapy developers.

The problem with the modeling of companies like OncoSec and Inovio comes with the uncertainty of FDA approval of their pipeline assets and the unpredictability of their commercial success. Despite the clinical data that has been gathered so far, doctors are often hesitant toward newer technology until studies comparing new treatments with well-established treatments are performed. However, by the time these data are released, investors will miss enormous potential for wealth creation since the asset/company will already be multiples higher than its original value.

This is generally how the risk/reward factors into investments into oncology assets during the development stage.

Upcoming Catalysts

Like explained in the note from a few weeks ago, there are more data releases that have the potential to send shares higher.

Inovio will have cervical dysplasia data for the VGX-3100 development program in Q1 2014.

The link between human papillomavirus (HPV) and cervical cancer has been well established with past research, although significant unmet demand still remains for more effective vaccines to prevent cervical dysplasia caused by HPV in patients that already contracted the virus. Current treatment is limited to HPV prevention. The VGX-3100 program aims to prevent cervical cancer by inducing a strong immune response against precancerous cells that have been mutated by a HPV infection.

The VGX-3100 DNA construct and the CELLECTRA electroporation device is expected to cause widespread activation of T-cells, which should induce a regression of the cervical cancer.

Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.

OncoSec will have melanoma data for ImmunoPulse in Q4 2013 or Q1 2014.

Oncosec has already presented the interim response data from the Phase II melanoma study, and full data is expected before the end of the year or in the first quarter of 2014. In particular, investors are looking for significant responses in malignant melanoma tumors that are distant from the electroporation and IL-12 injection sites, which would imply that ImmunoPulse is generating a systemic (rather than local) immune response. Individual patient data are also yearning to be scrutinized.

Notes on Biotech Risk:

Investors should realize that unprofitable biotechnology companies in the development stage experience particularly high volatility, are speculative, and do hold significant risk for loss of wealth. Investors believe that the company's valuation will increase more over time than the rate at which the company will burn cash, which is why the high risks are taken.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.