Inovio: The Right Place At The Right Time

| About: Inovio Pharmaceuticals, (INO)

If you're up to date with the current state of the healthcare industry, you will quickly notice big pharma's renewed interest and R&D focus in the vaccine sector. According to Markets and Markets, a global market research and consulting company based in the U.S., the vaccine market is expected to grow from $32.05 billion in 2013 to $84 billion by 2022.

DNA vaccines are one of the new technologies currently taking center stage. Trials for DNA vaccines have been problematic in the past due to poor immune responses in human trials, possibly attributed to poor delivery methods. Uptake of the vaccine into the cell has been much more difficult than first anticipated by the pioneers of this science. Experts in this technology believe that this new generation of DNA vaccines will actually make it to market due to newly optimized genomic sequencing and innovations in delivery methods. Inovio Pharmaceuticals (NYSEMKT:INO), a mid-stage company with various treatments in clinical testing, plans on addressing these early setbacks in DNA vaccines.

Company Profile

Inovio is a company developing synthetic DNA vaccines and electroporation technologies. Under the Syncon platform Inovio has vaccine candidates for cervical dysplasia/cancer, prostate cancer, hepatitis C virus, HIV, influenza, malaria and tropical diseases. The pipeline is led by their flagship product, a vaccine targeting cervical dysplasia, which is expecting Phase 2 results mid 2014.

Improvements In Vaccine Design

To increase vaccine immunogenicity, Inovio has integrated the technique of codon/RNA optimization and leader sequence utilization. If you're not a PhD who has studied in related fields, or savvy in biotechnology, you're probably wondering what this means. How does Inovio's approach differ from DNA vaccines of the past? How does this new technique help the vaccine garner the immune responses needed to improve potency? To help answer these questions, I turned to Dr. Philip Scumpia M.D. PhD., a dermatologist and immunologist at UCLA Dermatology whose primary research interest is how an organism develops a protective, innate, and adaptive immune response during infections.

DNA Plasmids and Vaccines

The following is taken from direct correspondence with Dr. Scumpia:

To help understand what the above technology means, a more in depth understanding of DNA vaccines is needed. DNA vaccines use a bacterial-based technology, a plasmid system, to encode a particular protein that we want to be made. A DNA plasmid is a circular piece of DNA that can use the cell's machinery to make a protein once it goes inside the cell's nucleus. This "technology," although simple, has taken billions of years to evolve, as bacteria used plasmid systems to survive the harsh environments of earth, by transferring DNA encoding important proteins from one bacteria to another, or to pass to their progeny during cellular division. This same plasmid based system is used by many bacteria to gain resistance to antibiotics. So we know this technology works, but it has taken some time to get a good grasp for how we can use it in people.

In 1992, scientists first attempted to use these plasmids for DNA vaccination so that a host's own body can produce proteins for the purpose of vaccination. Although promising, initially, it has taken many years for this technology to get to the point that the vaccinated person can make enough of the target proteins to be an effective vaccine. Other challenges include 1) getting the host's immune system to respond to the vaccine, 2) preventing too much immunity, causing the body to eliminate the cells producing the target proteins to be rapidly eliminated from the body. 3) generating enough immunity to have an effective vaccine. New research by scientists at Inovio and other scientists are answering these questions, thereby increasing the effectiveness of this DNA vaccine approach.

Challenges with DNA Vaccines and Vaccine Design Improvements

The first challenge is getting the cells to make enough protein, which will be discussed in the Enhanced Delivery Methods section, but other obstacles also present in addition to getting the DNA into the cells. The main limitation of DNA vaccines was the inability to get the DNA plasmid into the cells. With electroporation, this obstacle has largely been solved (see next section). The cells that take up the DNA plasmid then need to make the protein. After getting into the cell, the plasmid goes to the nucleus, where the host machinery (RNA polymerase and other such proteins) makes mRNA from the plasmid. This mRNA goes into the cytoplasm where the cell converts it into protein. If a cell makes too much of a protein, and if the protein can't get out of the cell, the protein may become toxic inside the cell and the cell may die by apoptosis or necrosis. In fact, in early iterations of DNA vaccine technology, recognition of the dead cells that made too much protein and died, was thought to be the main mechanism of getting the immune system to respond to the vaccine proteins. Getting the cell to make the right amount of protein while getting the cell to export protein outside of the cell is important to not build up toxic amounts of the protein inside the cell. This will allow for the proteins of interest in the vaccine to be produced by the body for a longer period of time. Producing the protein for a longer period of time is important for generating immune responses to the vaccine.

This is where the codon/RNA optimization and leader sequence utilization comes into play. Every mRNA must begin with a sequence of nucleotide bases "ATG" that encodes methionine for the protein to be made. There is also a sequence before this ATG called the leader sequence. This tells the cell's nuclear machinery where to ship and package the mRNA to get it to the right place. By placing an optimized sequence in front of the ATG, it can tell the cell to make that particular protein go to a ribosome that will allow it to rapidly produce that protein. It can also tell the cell where to place that protein. For instance, the sequence can tell the cell to go to the mitochondria or outside the cell, or to the cell membrane by using a different leader sequence. If you want a vaccine to be optimized to make antibodies, you put a sequence on the plasmid that says "ship me outside of the cell;" this will allow B cells to respond to the secreted protein. If you want to make a vaccine that generates CD4+ helper T cell responses, you tell the cell to ship the protein to "phagosomes/endosomes" where major histocompatibility (MHC) II molecules combine with peptides, and then these go to the cell surface to be recognized by CD4+ helper T cells.

Additionally, although not a DNA vaccine, a new technology that Inovio developed has recently been published where the DNA plasmids directly encode antibody fragments or whole antibodies, basically allowing any cell that expresses the plasmid to do the job of B cells, which is to produce effective antibodies. This can allow any cell to produce any antibody for a temporary period of time. As many targeted therapies are antibody based for the treatment of many diseases, including psoriasis, rheumatoid arthritis, inflammatory bowel disease, and now cancers (under development), there is a huge potential for this therapy. But again, optimizing the production of the protein through using the optimized plasmid vectors encoding the correct leader sequences to prevent accumulation of the proteins inside the cells and allow the secretion of the correct amount of targeted antibodies is very important so that the cells that produce the protein do not prematurely die due to the toxic build up of protein inside the cells.

The second challenge to ensuring the vaccine is effective is preventing the vaccine from being too immunogenic. It sounds like an oxymoron, but if the cells are producing so much of a protein, and if it builds up too much in cells, the innate immune system will eliminate the cells making the protein of interest prior to the cells of the adaptive immune system (T and B cells) being able to generate the specific immune response. Couple an immune response that is too vigorous with the fact that cells were making too much protein that was building up intracellularly leading to their cell death on their own, and this could lead to a very ineffective vaccine. The optimization of the plasmids as described above largely prevents these from being issues now.

The last challenge for DNA vaccines is developing enough of an immune response. Luckily, Inovio vaccines have two things on their side. The first is that every cell has an inflammatory response when something isn't right. In the case of a DNA plasmid, the cell, after making the protein encoded in the plasmid for some time, recognizes that something isn't right and that the cell is being "hijacked" into producing something it shouldn't. There are various DNA and RNA sensors that are activated when cells "see" a DNA or RNA in a place that they normally aren't encountered. This triggers an anti-viral response as viruses are the usual culprits of "hijacking" cells to make more virus. This "natural" recognition of the plasmid as foreign DNA (as DNA in humans does not exist in circles) is what makes DNA vaccines a good option to treat infection by viruses or intracellular bacteria, as well as cancer, since immunity to all of these agents are similar and requires activation of CD4+ T helper cells and CD8+ cytotoxic T cells.

Another method Inovio has employed to boost immune responses is to include as part of the plasmids a human immune protein such as interleukin-12. This protein gets secreted by the same cells making the protein of interest, which can activate cells of the adaptive immune system into generating a protective immune response.

Please note, that even with these technological breakthroughs, DNA vaccines are still in their infancy and work needs to continue for optimal effectiveness. Inovio has not been stagnant, and in fact have been pioneers in the field of DNA vaccines. They are continuing to improve plasmid design until they get the optimal immune response. Thus far, the immune responses generated have been unparalleled compared to other, more conventional vaccine technology, and will only continue to improve. Furthermore, DNA vaccines take away some inherent risks of other types of vaccines. For instance, vaccination with live attenuated virus can lead to disease in immunocompromised patients. DNA vaccination only results in the production of proteins or small, immunogenic portions of proteins, and never results in an infectious agent being produced. Another aspect of conventional vaccines is stability, need for refrigeration, etc. DNA is stable at room temperature and even in heat, even without preservatives. Conventional vaccines need to be refrigerated and many have preservatives which can cause allergic or hypersensitivity reactions. Certain vaccines, such as the flu vaccine also contain egg albumin for stabilization, which cannot be given to people with known egg allergies. With Inovio's DNA vaccines, DNA, water, and electricity are the only three components needed for an effective vaccine.

Enhanced Delivery Methods

Intramuscular (IM) Delivery

Electroporation (EP) is a non-viral vaccine cell delivery technique employed by millisecond electrical pulses that create temporary pores in the cell membrane. The temporary pores allow cellular uptake of the vaccine when injected into muscle or skin. Intramuscular electroporation has been repeatedly tested in clinical trials. This method of administration is widely accepted as a means of delivering robust immune responses. A recent report testing the safety and tolerability of Inovio's Cellectra delivery device was found to be well-tolerated and without any significant safety concerns. Pain was reported highest immediately after administration and diminished by about 50% within 5 minutes, depending on the amount of energy delivered and depth of needle insertion.

Intradermal (ID) Delivery

Inovio's innovation in electroporation delivery has given rise to minimally invasive surface and contactless EP devices, which enhance DNA vaccine delivery to dermal tissue. Dermal EP devices are potentially much less invasive since they can be administered to the skin rather than skeletal muscle- a contributing factor to the increased focus on advancing this method of delivery. Inovio's recent breakthroughs in design and delivery have shown that ID electroporation can generate antibody and cellular responses equally well. This discovery breaks down old barriers that have plagued the non-viral delivery of DNA vaccines. Intradermal electroporation offers a solution to overcome past hurdles in the delivery of DNA vaccines and have recently been implemented in clinical trials for a prostate DNA vaccine, a colorectal cancer DNA vaccine and a multi-strain influenza DNA vaccine. In April of 2013, the Department of Defense awarded Inovio a grant to develop a low-cost, non-invasive surface electroporation delivery device. Researchers will test its utility in combination with Inovio's novel synthetic DNA vaccines against viruses with bioterrorism potential including hanta, puumala, arenavirus and pandemic influenza. A cost efficient, easy to use and tolerable device for the delivery of synthetic DNA vaccines would have direct applications by the military and healthcare sectors for mass vaccination, which has been a highly coveted goal of governments around the world.

SP-3P Intradermal Electroporation Handpiece

Recent Noteworthy Developments yet to make headlines

A collaborative study published August 22, 2013, between Novartis & Inovio (Enhanced Delivery and Potency of Self-Amplifying mRNA Vaccines by Electroporation in Situ) was kept quiet and not accompanied by PR from either company. The study explored the utility of EP for in vivo delivery of large self-amplifying mRNA, measured by reporter gene expression and immunogenicity of genes encoding HIV envelope protein. These studies demonstrated that EP delivery of self-amplifying mRNA elicit strong and broad immune responses in mice, which were comparable to those induced by EP delivery of plasmid DNA (pDNA). Electroporation was reported as an efficient non-viral delivery method for self-amplifying mRNA vaccines and is an effective means of increasing vaccine potency, which has been well documented for pDNA. Substantial enhancements of RNA gene expression in situ, antigen-specific antibody titers and T cell responses (CD4+ and CD8+) were observed. In summary, the study shows evidence that delivery technologies such as EP are critical to improve potency of nucleic acid vaccines in humans. Inovio Pharmaceuticals' Elgen 1000 EP device was used in this study.

An interesting article published in the journal Retrovirology (September 2013) titled "Live Attenuated Rubella Vectors Expressing SIV and HIV Vaccine Antigens Replicate and Elicit Durable Immune Responses in Rhesus Macaques," reports the first successful trial of rubella vectors in rhesus macaques combined with DNA vaccines in a prime and boost strategy. Groups involved in the research include the Lab of Immunoregulation Division of Viral Products, Office of Vaccines Center for Biologics, Division of Veterinary Services Center for Biologics, National Cancer Institute at Frederick, National Cancer Institute Counter-Terrorism and Emergency Coordination (OCTEC), Center for Drug Evaluation and Research (CDER) and the Lab of Immunoregulation, Division of Viral Products Office of Vaccines Center for Biologics FDA NIH Campus. The delivery device used in this study was provided by Inovio. This research was supported in part by the NIH Intramural AIDS Targeted Research Program.

Vaccine is an international peer-reviewed open access journal focused on laboratory and clinical vaccine research, utilization and immunization. Volume 1 issue 3 from the September 2013 issue featured two papers from Inovio:

1) Enhanced Efficacy of a Codon-Optimized DNA Vaccine Encoding the Glycoprotein Precursor Gene of Lassa Virus in a Guinea Pig Disease Model When Delivered by Dermal Electroporation

(This study reveals the latest insight into the collaboration on the Lassa Virus between Inovio and United States Army Medical Research Institute of Infectious Diseases)

2) Elucidating the Kinetics of Expression and Immune Cell Infiltration Resulting from Plasmid Gene Delivery Enhanced by Surface Dermal Electroporation

(The latest insight into the electroporation methods being researched by Inovio)

Dr. Philip Scumpia on EP study:

Demonstrating effective production of target proteins by cells in the dermis following subcutaneous administration of the plasmid, is a necessary first step to determine if subcutaneous delivery, rather than intramuscular delivery, is a viable way to administer DNA vaccines. This study scientifically validates the approach outlined in the Intradermal Delivery section of the article; that intradermal delivery of plasmids with electroporation can result in the production of the target protein. This approach, if it can be validated in humans, is what the US military is interested for vaccination of troops on front lines who may be exposed to biologic warfare.

Final Thoughts

Investing in a company with a lens towards the future is imperative. Inovio has been on the offensive end in progressing design and delivery technologies for DNA vaccines- two critical components in the advancement of the field, and proving fruitful in clinical testing. Roche Pharmaceuticals felt so strongly about what Inovio's developments mean for the future, that they assumed the possible risk of partnering with Inovio in two preclinical trials this past September. Roche also obtained an option to license additional vaccine opportunities in oncology. This agreement is valued at $412.5 million, contingent on developmental and commercial milestones being met. With shares currently trading between the $1.90-$2.10 range, the price per share is trading below where it was before the Roche partnership only a month ago. Due to the recent pull back and volatility, opportunity has come for investors looking to initiate, or add to their positions. Inovio and its investors might find themselves at the right place at the right time, as the medical industry shifts its focus on innovating design and delivery of vaccines. I would like to thank Dr. Philips Scumpia M.D. PhD for his contributions to the article. Dr. Scumpia's background, as a dermatologist and immunologist, provide much needed critical insight to the science fueling Inovio's technology.

Competitive Landscape of the Vaccine Industry

With major players competing in the vaccine industry, such as Sanofi (NYSE:SNY), GlaxoSmithKline (NYSE:GSK), Merck (NYSE:MRK), Pfizer (NYSE:PFE) and Novartis (NYSE:NVS), a much smaller company like Inovio faces strong competition in the vaccine sector. Inovio's CEO, Joseph Kim, has stated the company's strategy is to license out their technology, and advance discussions for targeted partnerships. With such big players honing in on the vaccine market, Inovio is relevant now more than ever. Investors should consider Inovio's potential for long-term sustainable growth.

Money Matters

At the end of the second quarter, it was reported that Inovio has a cash balance of $23.6 million. With some warrant exercises and team sales adding another 11.4 million, additionally, the Roche deal netted Inovio a $10 million payment upfront. A strong cash runway and zero debt leave Inovio with a better balance sheet and financial position today than any other time in the company's history. The cash on hand is sufficient to fund the company till the 3rd qtr 2015.

Shares outstanding -$190.8M

Market capitalization-$444.6M

Avg. daily vol. (3 mo.)-$10.2M

Cash, cash equivalents

& short-term investments-$23.6M

Additional cash raised-$11.4M

Roche up-front payment-$10M

Cash runway 3Q 2015


Company Outlook

Investors can expect elderly flu data to come before year's end with the final Phase 1 data being collected now, as stated by the clinical trials website. PennvaxGP, Inovio's universal HIV vaccine, which is both preventive and therapeutic will be launched in the next few weeks. The company's flagship product, VGX-3100, will report Phase 2 results by midyear 2014. Phase 2 results for VGX-3100 set out to prove efficacy and is being viewed as the largest catalyst coming for the company by investors. Inovio has a deep pipeline (pre-clinical and clinical), along with multiple biodefense projects.

Risk Involved

Like any biotech in the developmental stage the risk of failed trials can significantly reduce the company's value. This will be extremely apparent if Inovio's Phase 2 VGX-3100 results are sub-par and fail to show clinical significance. Please do your own due diligence when investing. Biotech investments tend to be viewed as the riskiest investments in the market due to the uncertainty surrounding clinical trial outcomes.

Disclosure: I am long INO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.