On July 17th, I published the article "Investment Potential in Electroporation Companies" and investigated the possibilities for investment success in a handful of companies looking to directly, or indirectly, benefit from the technology's growth. Due to recent events in the field in the three months since that piece was released, I think it is now time to review the companies' progress and see where they may be headed in the coming weeks and months. Although the last three months' stock performances may not guarantee successful investment going forward, the performances are recognition by investors of the technology's potential in unmet clinical needs. I wish to summarize the events that transpired and look at potential catalysts in Q4 and beyond. As in the original article, there is a diverse choice of companies presented with varied upside potential and downside risk, presenting options for a diverse investor group.
Inovio Pharmaceuticals (INO) is a $93.1 million market capitalization company that has had an impressive 2012. The company has two interwoven platforms, with each showing promise in the coming months and years: synthetic vaccines and electroporation. Still a development phase company with its most advanced products in phase 2 clinicals, Inovio's synthetic vaccines program is targeting infectious diseases and cancer. The combined market group targeted can potentially give the company's shares huge upside potential with targeted cancers, including leukemias, prostate cancer, lung cancer, breast cancer, and cervical cancer. Targeted infectious diseases include hepatitis C, HIV, and influenza. Many of the synthetic vaccine programs and trials underway involve partnerships with large pharmaceutical companies, universities, and government agencies. Upon reviewing the company's pipeline, one can see partnerships with entities such as Merck (MRK), the University of Southampton, the UK research charity Leukemia and Lymphoma Research (LLR), the Efficacy and Mechanisms Evaluation (EME) programme, VGX International, the National Institute of Allergy and Infectious Diseases (NIAID), U.S. Military HIV Research Program (MHRP) and the National Institutes of Health (NIH). Although some of these partnerships may mean sharing some of the profits in the upcoming months or years as approved products are marketed, they also mean better interim financials while the company is progressing toward a marketing-phase status rather than its current development-phase status.
While Inovio's common stock has been trading on an uptrend since its June 2012 lows, it has been primarily trading in the $0.50 to $0.60 range since mid-July. However, a promising press release on October 10th vaulted the stock with opening trades up over 20% while closing at $0.70, up over 12% from the previous day's close. The press release helped to validate much of the company's synthetic vaccine platform. It noted impressive results in a phase 1 clinical trial using VGX-3100 to trigger an immune response against antigens present in human papillomavirus (HPV) affected cells that had mutated into precancerous cervical dysplasias. Results of the small trial of 18 patients indicated 100% of them responded by showing "antigen-specific antibody responses to Inovio's vaccine, while 78% showed T-cell responses in the validated ELISpot assay." The results confirmed, at least via these early-stage results, that the company's synthetic DNA-based immune therapy can generate potent and durable T-cell responses in its subjects.
A week earlier, on October 4th, the company released news pertaining to its electroporation program that, although potentially significant, did not generate the share-price-moving response of the cervical cancer news. In the release, Inovio announced that promising results were presented in the paper titled "Intradermal DNA vaccination enhanced by low-current electroporation improves antigen expression and induces robust cellular and humoral immune responses" in the journal, Human Gene Therapy. The results were of an optimizing study of the company's electroporation device used to administer the company's universal flu vaccines and HIV vaccines. Although the test was on animal models, the optimized parameters of the electroporation device was said to help "pave the path for more efficient delivery" of the company's vaccines. The likely investor disinterest in the news release, as indicated by a "flat" trading day on October 4th, was probably not due to disinterest in the electroporation platform, but rather was probably due to the event occurring in a very early stage clinical. A legitimate piece of information noted in that release that not only could have long-term ramifications for Inovio, but the rest of the sector also, was a statement that investors should take to heart in the news. It pretty much wraps up the focus of the technology and where it might grow and benefit shareholders and the healthcare sector. Summarizing the potential for electroporation sector-wide, it stated "The newly published optimized conditions for Inovio's skin EP delivery systems will dramatically enhance this delivery system as an attractive method for mass vaccination by decreasing dose levels, increasing tolerability of the vaccination, and increasing the breadth of viable vaccine targets."
So, where's the significant, share-price-moving electroporation news since the earlier article, as the October 4th news did not immediately create interest? The aforementioned press release, in which promise was seen in utilizing the synthetic vaccine, VGX-3100, to treat precancerous cervical cancer cells did not directly mention in the news that the vaccine was administered via…electroporation. Please see clinicaltrials.gov identifier, NCT01304524, for more detailed information of the exciting phase 1 results. One can also find more information on the trial via the article mentioned in the company's October 10th press release in Science-Translational Magazine.
Investors interested in opening a position in Inovio should consider the risks associated with the company and its platform. As of June 30th, the company had working capital of about $11 million and is still operating at a loss as it is a development phase company. Having much dependent on its electroporation platform, the company's shares have much upside potential with success. Conversely, failure in its endeavors would be crippling to the company's future. Currently trading at its simple moving average (SMA), potential investors should watch the trend closely to ascertain if the support will hold, fail or trend up from that technical indicator.
Not to be left out of the newly-found hype in electroporation therapy administration, OncoSec Medical (OTCQB:ONCS) has also had significant events unfolding in the 3 months since my earlier electroporation article as well. The company's OncoSec Medical System (OMS) has close ties with Inovio's platform as OncoSec purchased the rights to "certain non-DNA vaccine technology and intellectual property relating to electroporation technology useful for electrochemical and cytokine based immune therapies for treating solid tumors" from Inovio in March of 2011. The two companies should not be construed as competitors as they target different indications utilizing differing agents. However, their individual successes will each help to legitimize the other's technologies and ride share price waves up (or down), depending on the ensuing catalysts.
Utilizing its electroporation platform a bit more differently than Inovio, OncoSec uses its platform to attack cancer tumors or tissue directly by targeting the specific region. The treatment procedure first involves injection of the chemotherapy or immunotherapy agent at or into the cancerous region. A 6-needle (actually 6-electrode) hand-held applicator is used to then apply a brief electrical current across the targeted tissue. This current causes a significant increase in the porosity of the affected cells' membranes which dramatically increases cellular uptake of the agent (4,000 to 10,000-fold) and increases its effectiveness. The company's OMS platform is comprised of two divisions: NeoPulse, which administers the chemotherapy agent, bleomycin, and ImmunoPulse, which administers DNA IL-12, a plasmid DNA construct with instructions for the cells to produce the IL-12 cytokine.
At the time of the original article, the potentially huge upcoming catalyst was the then-upcoming presentation of data from earlier pivotal phase 3 trials for head and neck cancer while the platform was being developed by Inovio in 2007. The independent data monitoring committee (DMC) had recommended discontinuation of the trials citing concerns about "efficacy and serious adverse events, including higher mortality rates on the SECTA arm of the study than on the surgery arm. In the DMC's opinion, based on the totality of the issues, the SECTA arm has an unfavorable benefit-to-risk profile, relative to the surgery arm." A reevaluation of the data (part of the newly-renamed NeoPulse platform) by OncoSec, as presented on July 23rd of this year, yielded different conclusions than the DMC. CEO and president, Punit Dhillon, stated that "Interim analysis of these two phase 3 studies, and the recently released data from the phase 4 study carried out in Europe, has demonstrated that the primary endpoint of maintaining quality of life was achieved. In addition, OMS ElectroChemotherapy appears to provide a potentially important treatment alternative to surgery that may address hard-to-treat tumors where there exists a particular need to preserve function and quality of life." He went on to indicate that the company would pursue partnerships for that platform. This statement provides hope of future catalysts for investors, but it disappointed them on that day, apparently, as shares sold off from the previous week's mid $0.20s to that day's $0.19. Shares continued to trade in the lower $0.20s the next couple of months despite news that the author construed as positive.
On October 9, OncoSec announced that it was presenting interim data from its phase 2 trial using ImmunoPulse to treat Merkel cell carcinoma at the 27th Annual Meeting of the Society for Immunotherapy of Cancer (SITC 2012), October 26-28, 2012, in North Bethesda, Maryland. The company also noted that it would be presenting interim data from its phase 2 trial using ImmunoPulse to treat patients with metastatic melanoma at the 6th World Meeting of Interdisciplinary Melanoma/Skin Cancer Centres/8th EADO Congress, November 14-17, 2012, in Barcelona, Spain. Investor interest had already been growing since an October 1st interview with the CEO, but the news of the data presentations catapulted the share price from the October 8th close of $0.26 to trade into the mid $0.30s for the following week. With 76,250 projected new cases of melanoma in the U.S. in 2012 and 9,180 associated deaths, investor interest may continue through each presentation with solid upside potential if results are positive. Additional data from the NeoPulse phase 3 and 4 trials as pertaining to the pharmacoeconomic benefit of the therapy is also being evaluated. The final results for the analysis will likely be published in Q1 2013, providing an additional catalyst in the near future. Finally, the company's third phase 2 trial using the ImmunoPulse treatment regiment for cutaneous T-cell lymphoma, which initiated enrollment in September, should be presenting its interim data sometime in mid 2012 as well, giving ONCS multiple catalysts to keep investor interest alive in the coming months, especially if either of the two upcoming presentations in October and November have favorable data.
An additional catalyst "lying in wait" presented itself via Wednesday's surprise press release that managed to sneak up on many investors (especially the author) who were thinking the next significant catalyst would be the October 26-28th phase 2 data presentations. The company announced on Wednesday, October 17th that it had received authorization to CE Mark its OMS device for use in the European Economic Area (EEA). The authorization enables OncoSec to market the device in the 30-nation EEA and Switzerland. Marking a huge transitional step for the company, it has now been vaulted from a solely development-phase company now to a coming commercialization-stage entity. In the coming weeks, I would anticipate news on plans for the commercialization of the OMS product. These plans could come in the form of anything from manufacturing and marketing the product on its own to licensing it out to other pharmaceuticals and receiving milestone payments and revenue from sales. Either way, this commercialization of an electroporation device will likely serve to draw additional interest not only to OncoSec, but to the entire group of companies presented with interests in the technology.
With much upside potential in share price with additional success in its electroporation a possibility, investors should also consider the alternative. Much is riding on the phase 2 data to be presented in the upcoming weeks. However, with the differing indications targeted, failure in one indication does not mean failure in others, so risk is muted somewhat. Even though the company now has a product approved for commercialization in the EEA, upstart costs, depending on how the company goes forward with marketing, should be taken into consideration. According to the company's most recent 10Q, OncoSec had approximately $5 million in cash and equivalents on July 31st. Per a statement in the filing, the company needs an additional $1.3 million to fund its operations into July 31st, 2013. However, with the marketing approval in the EEA under its belt, perhaps the company now has some leverage for either favorable financing or licensing/sales of its platform for that market. Interested investors should consider all the possibilities. Unlike the other companies presented, OncoSec's common shares are trading in the "overbought" versus the "oversold" condition. Although not normally construed as a desirable entry point, the condition is typical for companies with recent or impending possible positive significant news, and OncoSec has both conditions present.
Merck is developing its Plasmid V930 phase 1 candidate for treating breast, ovarian, non-small cell lung and colorectal cancers. The vaccine is being administered by Inovio s electroporation MedPulser DNA Delivery System to deliver the therapeutic DNA vaccine into muscle tissue to increase the expression of HER2 and CEA antigens and increase immune response to cells with these overexpressions. However, Merck has not mentioned V930 in quite a while, so investors can only surmise the program is either on hold, being discussed with Inovio, or the data wasn't promising enough for Merck to pursue further. Although I had mentioned the company as an investment possibility in my earlier article, I don't believe it to now be a company to invest in for exposure to electroporation technology.
The final two companies I recommended in the July article for exposure to electroporation are not pharmaceuticals, but may appeal to those not wishing exposure to the volatility and risks associated with small pharmaceuticals such as Inovio or OncoSec Medical. Harvard Bioscience (HBIO) has been trading a bit under-the-radar still despite the recent surge in investor attention to ONCS and INO due to promising electroporation-related news. The company manufactures and sells not only electroporation systems, but also other specialized products, apparatus and scientific instruments. Although neither Inovio nor OncoSec mention the manufacturer of the electrical generator and needle-like electrodes that they use to administer the targeted electrical current, it is a strong possibility that the units, or at least some components, are manufactured by Harvard Bioscience. Interested investors are advised to perform additional research and/or contact the company directly to see if it may divulge some of its current customer base. Additional information may likely be gleaned from OncoSec or Inovio directly. Regardless, interest in and demand for its electroporation devices will only increase as additional uses for the product are now being validated.
Harvard has a low market capitalization of $116.9 million with a share price of about $4.06 as of market close on Friday. In terms of technicals, the company's shares are trading in an "oversold condition," at the lower Bollinger. Current levels may be construed as a good entry price for those desiring a near-term entry. Harvard just received another analyst upgrade from "hold" to "buy" by TheStreet with no target price given. Of special note in the press release was the statement "This year, the market expects an improvement in earnings ($0.25 versus $0.13) over the coming year and a substantial improvement over 2012." Interested investors are advised to review that report and the company's 2Q 2012 financials. As noted in the earlier article, Harvard Bioscience's BTX electroporation device is sold via several venues and can be viewed on Fisher Scientific s website, a large supplier of laboratory and medical instrumentation, labware and laboratory chemicals.
Fisher Scientific's parent company, Thermo Fisher Scientific (TMO), is another option for investment consideration to have exposure to possible upside if events continue to unfold positively for the electroporation administration technology. Thermo Fisher Scientific is a $21.2 billion company that has been experiencing annual growth via acquisitions and a solid product line over the last few years. The company has Q3 earnings being released before markets open on October 24th, and interested investors should consider viewing those financials and company updates before making an investment decision. The upside in the company's common stock as a result of a surge in demand for its Harvard Bioscience manufactured electroporation device is unlikely as the company's revenue stream is rather substantial. However, the company does present investors with low risk tolerance a viable option to have a small piece of the electroporation pie, while still having exposure to a vibrant and growing laboratory and medical supply company's stable financials. For near-term entry consideration, the current $58.04 share price is a likely solid entry price as it is trading at the lower Bollinger, in "oversold" territory.
Following is a chart of the companies presented above with share prices as they were on July 17th, the date of my original previous piece on electroporation, versus where the share prices are now with the three smaller market cap companies showing the most upside so far. A picture is worth a thousand words, and I believe stock price changes reveal even more as they represent the growing possibilities and increasing interest in a dynamic and growing therapy administration technology.
Market Capitalization 10/19/2012
Latest Financials (via links)