According to the American Social Health Association, up to 80 percent of women will contract the human papilloma virus (HPV) - the causative organism for cervical cancer - in their lifetime. Cervical cancer is one of the most-dreaded cancers for women, and is associated, although not exclusively, with factors like having early sex and having multiple partners. Every woman is at risk, as HPV is easily transmitted. In most cases, HPV is naturally cleared by the immune system, however, persistence of the infection increases with age, according to the Journal of Infectious Diseases, and the sad reality is that because cervical cancer has no specific defining signs and symptoms during the early stage, most women do not know they have it until it's too late.
Merck (MRK) and GlaxoSmithKline (GSK) have each developed vaccines that protect women from HPV. These products, called Guardasil and Cervarix respectively, had combined worldwide sales of more than $2 billion last year (per their annual reports), and these vaccines continue to grow as more girls and women opt to become vaccinated against the virus. Despite sales in the 'blockbuster' range, the products have not been as successful as initially expected, due to (A) some parents avoiding the vaccine for their daughters for moral reasons; as well as (B) nervousness over the vaccine's safety in girls. Merck's Guardasil has also been approved for boys - the thinking is that boys and men can be carriers of the virus. However, Centers for Disease Control (CDC) recently reported that coverage rates in 2011 for the HPV vaccine among adolescent girls aged 13 through 17 years stood at just 53.0% for one or more doses, and only 34.8% for three or more doses (the full recommended dosing schedule). Given that the HPV vaccine covers only 70% of HPV strains anyway; that vaccination rates remain relatively low; and that many patients don't get the full regimen; the chance to eradicate HPV, like other viruses that have been targeted by vaccines, appears to be out of reach.
Thus today, cervical cancer remains an unmet medical need with 11,000 women per year in the U.S. being diagnosed, and over 4,000 women dying from the disease, based on data from the National Cancer Institute. Because no drug therapies have been approved for cervical cancer, treatment is limited to surgery and older chemotherapies. However, Inovio Pharmaceuticals (INO) is developing a treatment for cervical cancer called 'VGX-3100' to be used therapeutically, as opposed to being used preventatively, once a woman is diagnosed with the condition.
A typical vaccine is unlikely to stimulate the immune response needed to attack and clear cervical cancer cells from the body, but Inovio's technology has demonstrated otherwise. This company has found a way to deliver DNA-based vaccines in the most potent way to stimulate and recruit the immune system. Using a patented 'electroporation' delivery method, it becomes possible to circumvent the cell membrane using millisecond electrical pulses that create pores in the cell barrier (otherwise the cell membrane resists the entry of foreign material and the vaccine is unable to reach its intended target). The diagram (below), taken from Inovio's website, shows how the delivery mechanism creates a clear pathway for any given vaccine.
Particularly important, VGX-3100 demonstrated best-in-class immune response (highest T-cell response seen for any vaccine in its class) in prior clinical studies, suggesting it could truly benefit patients with cervical cancer. The data that demonstrated these results has, and continues to be, a popular topic of dialect among field researchers, and, perhaps to the benefit of investors, less so among traders. VGX-3100 is currently undergoing a Phase II clinical trial, with results expected in the latter half of 2013. Though analysts view this product-candidate as a substantial driver of value for Inovio, in the interim there are at least two major sets of data (from concurrent studies of other vaccines) that could spur shares of this company onward:
- A vaccine dubbed 'WT1' is being developed to treat acute and chronic myeloid leukemia (AML and CML); interim results from the ongoing Phase II study are expected in Q4 2012.
- 'ChronVac-C' [developed with ChronTech Pharma], targeting chronic hepatitis caused by the hepatitis C virus (HCV), genotype 1, should deliver interim results from a respective Phase II study, also in Q4 2012.
Whilst investors await results from a very important VGX-3100 study in cervical cancer, Inovio will announce results from two concurrent studies in relatively late stages of clinical development (as outlined, above). This is important, mainly as it relates to the valuation assigned to Inovio in the market. As the company has by and large avoided the 'momentum' crowd, shares of the company have traded almost entirely (save a margin for speculation, even among long-term investors) in line with fundamental performance within the company itself. There's hidden, deep value in the company's pipeline, and these events may unlock some of this value, assuming, of course, that results are positive. Management continues to have a large vested interest in their company, as do institutional investors, according to data compiled by NASDAQ. Note that interest among institutional investors in a company the size of Inovio is atypical. Their interest validates the thesis that the company's pipeline is of deep value to sophisticated investors.
Merck and Glaxo offer growing exposure to preventative treatment of HPV, and by consequence, cervical cancer. Inovio is developing a therapy to address the unmet need in treating patients already diagnosed with this condition. The decision of allocating capital is left to the determination of risk propensity on the part of each investor. Our thesis, as outlined in this report, is that Inovio addresses a large, and growing, unmet medical need. To this point we'll return once more. Further, we believe Inovio's pipeline of vaccines has been validated as encouraging data has been reported across the board. Inevitably, risk exists first and foremost in further development of each and every product, and secondly, the company's ability to successfully commercialize these products. However, our view is that over the next 12 months, these risks are unlikely to materialize (or, will be mitigated by positive developments). The company has carefully managed expenditures, with current cash levels sufficient to carry the company through FY2013 (per 10Q filing). This largely evades a capital raise risk that plagues every small life sciences company. On the topic of valuation and addressing an unmet medical need, Inovio's lead product should be viewed with no less interest than rare-disease drugs such as Sarepta Therapeutics' (SRPT) 'Eteplirsen', or Synageva BioPharma's (GEVA) 'SBC-102'. These drugs, in similar stages of development to VGX-3100, address conditions that afflict a tiny patient population, though usually in dire straits and likely to perish if left untreated. Cervical cancer, if you recall from the discussion above, kills 4,000 women every year in the United States (National Cancer Institute). There are similarities, it seems, between rare disease companies and a segment of Inovio's pipeline, though a parallel comparison is questionable. Instead, the takeaway is that much of the excitement surrounding both Synageva and Sarepta's respective drug candidates could translate to excitement for data on Inovio's VGX-3100 candidate as the need for a robust therapy to treat cervical cancer is painfully clear.