Update: Inovio Earnings

Aug.14.14 | About: Inovio Pharmaceuticals, (INO)


Inovio announces Phase III for VGX-3100.

No partnership and extended time frame causes further sell-off.

CEO Dr. Kim shifts sentiment by making massive share purchase.

On August 11, Inovio (NYSEMKT:INO) reported its second quarter financial results, announcing $10.8 million in losses ($0.18 per share), in line with expectations, as well as a better-than-expected $3.8 million in revenues. Inovio's cash position remains strong, with $109 million in cash, cash equivalents and short-term investments, enough to finance operations throughout 2017. Admittedly, investors were not paying much attention to the financial data, rather focusing on the following conference call providing corporate updates as well as announcements regarding Inovio's pipeline.

Inovio did not disappoint, announcing right off the bat a Phase III for its VGX-3100 DNA-based immunotherapy treatment, following the positive Phase II results reported on July 23. Inovio announced that it plans on advancing towards Phase III independently, although "it will consider partnering opportunities," in addition to providing an updated timeframe for the clinical program: end-of-phase II meeting with the FDA in 2015 and initiation of Phase III in 2016. Investors were expecting Inovio to release some further data from the Phase II study, but CEO Dr. Joseph Kim was reluctant to provide additional information, claiming that detailed findings from the study would be submitted for publication in a peer-reviewed scientific journal and would be published in the coming months. Dr. Kim, however, hinted that once the full data set was available, final results may be better than what had been released so far.

Despite the obvious positive that a Phase III announcement represented, investors were spooked by the lack of a partner and the likely dilution that would cause, as well as by the extended timeline provided by the company, causing an immediate sell-off. Retail sentiment turned extremely negative and, again, many investors exited their positions, often at a loss, considering that the new time frame represented that Inovio would be "dead money" for quite some time amid a lack of immediate catalysts. Dr. Kim changed that with one bold move, by purchasing 250,000 shares in the open market on August 12. Almost immediately, sentiment turned bullish, as such a massive insider buy was seen as proof that results will likely beat expectations when published.

I wrote just last week that Inovio presents a good buying opportunity at the current level, as the sell-off following the positive Phase II results was not justified. The immediate announcement of a Phase III does nothing but confirm this notion, and following the drop occurred after the earnings call, price is even at a more attractive level than it was only a few days ago. I stated that an investor considering INO will have to be able to withstand some strong volatility and, admittedly, trading INO is becoming increasingly difficult and stressful amid the extreme shifts in sentiment. However, as the science is validated, insider purchases and accumulation by institutional investors reinforce my view that Inovio is a very attractive buy at the current levels.

Disclosure: The author is long INO. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.