Inovio Pharmaceuticals (INO) is a promising pharmaceutical company that has revolutionizing vaccine candidates in its pipeline. The company also has proprietary technology used in the development of its candidates and has also been licensed. The company has the cash, collaborations and innovative candidates to drive valuations higher.
The shares of the company are up 16% in pre-market trading today due to the positive results of MERS vaccine trials. According to the company, the MERS vaccine 'induced robust and durable immune responses' and 'vaccine constructs were observed to induce strong neutralizing antibodies and broad CD8+ T cells in mice'.
Inovio Pharmaceuticals Inc. is a development stage company focused on discovering and developing synthetic vaccines for cancers and infectious diseases. The synthetic vaccines stimulate the body's immune system to treat the diseases. The company has twelve vaccines in its pipeline, developing internally and with collaborations with Roche, VGX International, University of Pennsylvania, National Institute of Allergy and Infectious Diseases, Drexel University, U.S. Military HIV research program among others. The company also has proprietary technology SynCon® and GeneSwitch® which it has licensed to Genzyme, Pfizer (PFE), GlaxoSmithKline (GSK), and Synomyx.
The company's CEO Dr. Kim recently received Achievement in Drug Discovery and Development Award from the Korean American Society in Biotech and Pharmaceuticals. Other awards include Best Therapeutic Vaccine 2013, Best Mid-Stage Product Development Company 2012, and Life Sciences Company of the Year 2012, among other.
Inovio has proprietary technology that focuses on stimulating the body's immune response. The technology includes synthetic vaccine technology that prevents and treats diseases; and electroporation vaccine delivery technology to facilitate the immune response from the synthetic vaccines.
The SynCon® vaccine is aimed at overcoming the shortfalls of conventional vaccine, by treating the diseases as well as preventing them. They also provide protection against various viruses, and also to break the tolerance for cancer cells. The technology designs and selects appropriate antigen targets for a specified disease, a DNA fragment that enable the cells to only produce targeted antigen for a pathogen or cancer, and the ability to protect against varied multiple strains existing along with changing virus strains.
The electroporation delivery technology effectively and safely delivers DNA-based vaccines, which has demonstrated immune responses. The technology creates temporary pores in the cell membrane through milliseconds electric pulses, which allows the uptake of synthetic DNA vaccine; which than produces proteins for the associated targeted disease, which mimics the actual pathogen and induces an immune response.
Inovio produces DNA plasmids that are part of the DNA vaccines, using well proven manufacturing techniques that include bacterial fermentation, tangential flow flirtation, alkaline lysis and membrane/column chromatography. These plasmids are produced by VGX Inc., a Texas-based pharmaceutical company.
Other technologies outside Inovio's primary focus, which are open for partnership or licensing include anti-inflammatory drug VGXTM-1027 against Type 1 Diabetes, rheumatoid arthritis, Crohn's disease and colitis; animal health products; and GeneSwitch® gene regulation technology.
The company has partnered with pharmaceutical companies, government agencies and academic institutes for the development of synthetic vaccines. The company entered into a partnership with Roche (OTC:RHHBY) in 2013, which gave Roche the exclusive rights for the development and commercialization of Inovio's hepatitis-B (INO-1800) and prostate cancer (INO-5150) immunotherapies and future candidates in these disease areas, resulting from collaboration. The deal entails a $10 million upfront payment, approximately $412.5 million in milestone payments and royalty payments from product sales.
The company's major research and development on synthetic vaccines comes from the partnership with University of Pennsylvania. The company updated the partnership from 2007 through 2012 to expand the worldwide rights and research areas. The clinical studies for the HIV DNA vaccine Pennvax-B were also conducted in the University.
Merck & Co. uses Inovio's electroporation technology, under worldwide non-exclusive rights agreement entered into 2004. Inovio is entitled to receive milestone payments, fees, and royalties from the commercialized products under the agreement.
University of Southampton (U.K.) is using the company's technology to advance investigator sponsored clinical study for leukemia DNA vaccine.
Furthermore, the company has partnered with VGX International, HIV vaccine trial network (HVTN), National institute of Allergy and infectious Disease (NIAID), U.S. Military HIV Research Program (MHRP), and National Cancer Institute in connection with its HIV vaccines.
The company has also partnered with PATH Malaria Vaccine Initiative (MVI) and U.S. Department of Homeland Security, for funding preclinical development of SynCon® for malaria, and evaluation of SynCon® for foot and mouth disease respectively.
Inovio has a rich pipeline, with twelve candidates, focused on cancer vaccines and infectious diseases. The pipeline includes a Phase II leukemia candidate for acute myeloid leukemia (AML) and chronic myeloid leukemia (CML), owned and funded by University of Southampton using Inovio's electroporation technology.
The lead Phase II internally funded candidate of Inovio is VGX-3100 SynCon® vaccine for cervical dysplasia. It includes plasmids targeting E6 and E7 proteins of the human papillomavirus (HPV) type 16 and 18 that cause cervical intraepithelial neoplasias (CIN). The Phase I trial demonstrated a strong immune response along with the ability to kill the cells changed by HPV into precancerous dysplasia. The other VGX-3100 candidates are in Phase I for cervical cancer and for head & neck cancer.
Another internally funded candidate of Inovio is INO-1400, in the preclinical Phase. It's a vaccine developed to target cancers expressing human telomerase reverse transcriptase (hTERT), found in more than 85% of human cancers. The vaccine is targeting multiple cancers with hTERT that include melanoma, prostate cancer, non-small cell lung carcinoma and breast cancer. The vaccine showed 18-fold higher immune responses when delivered with electroporation, as compared to a similar peer's vaccine.
INO-5150 is a prostate cancer vaccine in the preclinical Phase, under collaboration with Roche. The vaccine targets the prostate specific membrane antigen (PSMA) and prostate specific antigen (PSA), with the intent to help break body's tolerance of self-made prostate cancer cells. Roche is also developing INO-1800 for hepatitis B in the preclinical Phase, targeting clade A & C surface antigens and HBV core antigens.
Pennvax®, HIV vaccine candidate is being studied for three different targets, with different collaborators. The Pennvax®-B, in Phase I, for HIV clade B achieved proof of principle in causing immune responses. It's being developed in sponsorship with HIV Vaccines Trials Network. The results were incorporated in Pennvax®-GP, in preclinical Phase, for multiple clades, which is now a lead therapeutic and preventive vaccine. It's being developed in collaboration with HVTN. The Pennvax®-G, in preclinical Phase, is targeting clades A, C and D; sponsored by NIAID, NIH and MHRP.
Other candidates include INO-8000, a Phase I candidate for Hepatitis C, developed in collaboration with VGX International; the universal influenza vaccines in Phase I of study for pandemic and seasonal programs including H5N1 and H1N1 targets; and preclinical study for Malaria prevention in collaboration with MVI/PATH.
The year to date performance of the company is 300.4% as compared to 217.58% of S&P 500. The company shares remained volatile over the year, but it has performed well. Insiders have also shown confidence in the future of Inovio with the Director of Inovio, Collins Morton, buying in at $1.82 on November 14, giving a 10.32% boost to the shares.
The mean price target by analysts is set at $2.80, with a high of $3.50 and low of $2.00. The current price as of November 15 is $2.00, which is trading at its low price target. The mean recommendation by the analysts is a Buy.
Inovio will be participating in the Brean Capital Life Science Summit on November 25; Piper Jaffray Healthcare Conference from December 3-4, 2013; and LD Micro Conference from December 3-5, 2013. The news from these events will have an impact on the stock prices.
The company expects top-line data from Phase II study of VGX-3100 for cervical dysplasia in mid-2014. It also expects to initiate Phase I/IIa of INO-5150 in the first half of 2014; Phase I clinical trial for cancer therapeutics in 2014; Phase I clinical trial of Pennvax®-GP vaccine in first half of 2014; and Phase I/IIa clinical study in 2014 for malaria prevention. It will also prepare for the HBV Phase I/IIa study in 2014, with Roche. These events are expected to have a catalytic impact on the stock prices.
Fundamentals and Potential Risks
The company reported $9.5 million revenue for the third quarter, a substantial increase from the $0.85 million in the comparable quarter of 2012. The net loss for the third quarter of $30.9 million is worrying, and was primarily attributed to the change in fair value of common stock warrants. The operating expenses of the quarter $8.7 million, increased due to the research and development expenses. The company has cash and equivalents of $46.3 million, which the company believes will see it into the first quarter of 2013.
The company has incurred losses since its inception and is expected to do so, until they market a product and the sales compensate for these losses. The company largely depends on the success of its DNA-based vaccines, and subsequent FDA approval, since there are no other FDA approved DNA vaccines.
The funding for the DNA vaccine for Leukemia has been interrupted by the University of Southampton, which has caused to hold the study. The efforts are currently underway for refunding.
The company's pipeline does indeed have promise, and their success could prove to be a major hope for the patients suffering from the indicated diseases. The company has the right collaborations to develop its pipeline, the strongest one being with Roche, among others. The revenue increase of almost 1010% YOY is also a positive factor for the company, beating the analysts' estimates by $6.61 million.
The share prices are expected to rise following any positive outcomes from the upcoming events. However, the most important catalyst is the mid-stage trial results from VGX-3100 for HPV in March next year. Until then there are no major catalyst that could give a major rally to the stock prices and it is highly likely shares will remain range bound. Overall, the stock is a buy because the company does indeed have long term potential as the trial results have till now been positive.