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My trading experience includes over twenty five years of intense investment analysis, trend analysis and deep level due diligence studies. My interest is to find small company opportunities that have established funding sources, have a plan of action and are in the preliminary to first stages of... More
  • OncoSec, Inovio And The Promise Of IL-12, Undeserving Of This Biotech Sell Off 8 comments
    Mar 26, 2014 12:17 PM | about stocks: INO, ONCS

    As we enter the third day of this massive biotech sell off, I am reminded of an old adage...when there is blood in the streets, stay on the sidewalk.

    But, as much as I would like to stay on the sidelines and remain a spectator during this frenzy from the bears, I simply cannot ignore the loss of focus on two of my favorite biotech stocks, OncoSec. (SYMBOL: OTCQB:ONCS) and Inovio Pharmaceuticals (SYMBOL: INO).

    Both OncoSec and Inovio have been longtime favorites of mine, originally because of their secure hold on certain aspects of the electroporation technology that is becoming more in vogue on a daily basis. Lately though, the clinical trials of each have taken center stage.

    Specifically, OncoSec holds patent rights to delivering vaccines or other DNA based therapies through intramuscular electroporation, a topic I will address in more detail a bit later in the article.

    Although I always liked the prospect that OncoSec could easily entertain a partner prospect through electroporation license alone, the intrigue increased for me when I started to research and find answers about a cytokine called IL-12. OncoSec is currently busy in several clinical trials, but, there is growing consensus that the IL-12 therapy can be a game changer in the treatment of cancers, at least in the method employed by OncoSec..

    IL-12 is not new to clinical trials, however, current research has produced less than stellar safety data. Although the medical community is aware of the positive effects from IL-12, what has been determined in current treatment is that to elicit greater response, the levels of IL-12 had to be increased as well.

    Such increases have shown to cause increases in liver toxicity, mild fever, chills and even death. Of more importance in the clinical research, it was also found that even when the dosages increased in the level of IL-12 therapy, there was progressively less response and effectiveness in the treatment.

    Therefore, although the medical community could conclude that IL-12 was demonstrating encouraging results, when it was used in current clinical form and delivery, it posed a significant safety risk as well as suppressed response data after higher doses were received into the test subjests.

    Well, you ask...if IL-12 poses such a risk and OncoSec is in the clinic studying this treatment, how can it bode well for current and future investors. Good question and I will provide a two part answer.

    First, OncoSec is delivering IL-12 with a proprietary method of delivery called Immunopulse. Immunopulse uses pulses of electric fields that open up microscopic pores in the cell membrane. Through these tiny openings, the agent, or IL-12 in this case, can begin its work and fight cancers cellular defense mechanisms. Using this method of delivery, OncoSec has demonstrated, in clinical study, a far less degree of safety issues as well as being able to elicit key response with less cytokine, or IL-12. Thus, patient safety as well as risk of toxicity is greatly reduced while at the same time the IL-12 has been shown to produce a positive immune response that has been shown to target and eliminate cancer cells.

    The current Phase ll trial has demonstrated positive effect and response on metastatic melanoma. The company announced, in June of 2013, the continuation of their study with Old Dominion University, using the Immunopulse approach in combination with several therapy designs in an effort to investigate potential increases in response rate in animal studies.

    Second, IL-12, in current trials, has been regarded as a potential breakthrough in treating cancers. The issue, though, is that it has been hard to regulate the level to which the immune system is fighting. Too much of a good thing can quickly become a bad thing, especially when an immune system continues to fight off positive results from treatment .

    What OncoSec can do, and has been successful in demonstrating, is that with it's Immunopulse technology, the IL-12 can be reduced in dose, BUT, can achieve a better response. Consider it this way, OncoSec is able to precisely target a desired response, reducing the amount of ancillary damage that can be caused by an increased dose of the IL-12. In this case, less can be more, and, the benefit to the patient is determined in many ways, inclusive of triggered response, safety and tolerability.

    Although I am certainly excited about the prospects that OncoSec will be successful in being able to treat patients with a targeted, specific and safe use of IL-12, the company is far from a one trick biotech.

    OncoSec is currently showing successful data in two other Phase ll clinical trials, one for Cutaneous T-cell Lymphoma and the other for Merkel Cell Carcinoma.

    Merkel Cell Carcinoma is a rare and deadly disease which has an approximate mortality rate of 40%. Statistics show that over 80% of MCC is caused through viral infection, thus, OncoSec is determined in its studies to demonstrate that an efficient and targeted immunotherapy program will be effective in treating the disease. Phase ll data is expected to be released by mid year of 2014.

    Cutaneous T-Cell Lymphoma is a rare form of Non-Hodgkins Lymphoma that effects the t-cells of the immune system. Current treatments have shown little long term effectiveness. Although CTL is not as life threatening cancers, OncoSec believes that it can elicit similar targeted response rates using Immunopulse therapy. Phase ll results are expected to be released during the second half of 2014.

    Obviously, my belief is that the vacuum effect of the prior three day sell off of biotech stocks is well overplayed. In fact, I took the opportunity to add additional shares in each company, actually cost averaging UP in this instance.

    For those that think I am easily pulled into small cap biotech's, you would be mistaken. I hold three to be exact...Inovio, Chelsea and OncoSec. I wrote about Chelsea in February and my commitment has not changed.

    My prior coverage and belief in Inovio is far from wavering and the stock remains a significant part of my portfolio. In fact,my belief in Inovio is cemented in positive interim data, top notch management and a CEO who is personally and significantly invested in the company, through market price stock purchases and significant personal ownership.

    In comparison, Punit Dhillon, current CEO of OncoSec purchased 50,000 shares in the open market on March 20, 2014. CEO purchases do not push me into a buy decision, but, I can tell you that very few small cap biotech CEO's are purchasing shares via open market without the hedge of cheap warrants or non open market gifted shares.

    Thus, I do take the gesture as more than just a token indicator.

    A key point that is important to realize is that electroporation is a treatment option that is essentially owned by Inovio and OncoSec.

    Baffling to me, Pfizer recently purchased an electroporation license from a small, privately held company named Ichor. How Ichor found the right to sell a license for electropoartion, well, I am trying to get the answers as it remains my understanding, through research, that OncoSec and Inovio own the current rights to the clinical technology.

    Financial information about the deal is obviously private with Ichor not required to report. However, I do believe that Pfizer is taking a very inexpensive look at electroporation, and, the time will come when both Inovio and OncoSec will step up to protect its patented claims to electroporation. What the Pfizer deal does show, however, is that electroporation has the interest of very large pockets.

    Elctroporation, on its own, can be significant. However, the combinations that can and will be applied via electroporation using DNA vaccine, IL-12 and other cytokine therapy will be the game changing technology as these companies progress through the clinical trials.

    OncoSec remains one of the few promising biotech companies to be partnerless, although the Old Dominion University collaboration is a step in the right direction. I do, however, expect OncoSec to be courted quite soon, as the company has demonstrated far too much early success for a large pharma to not at least attempt to make an inexpensive run at a partnership deal.

    The potential dilution argument is moot to me, especially as a holder with a time horizon in excess of the time it takes for a snow cone to melt. If pennies are going to scalped from me because I invested today, last month or next year, so be it. I manage my investments, but, I do not micromanage them.

    I do not doubt that many retail investors lost key positions in small cap biotech's this week. The market preys on the weak handed investor and although many actually sold with a profit, in my opinion they will lose significant appreciation if positions are not re-taken sooner rather than later.

    The strong data and insider purchases from OncoSec have been forgotten this week, although I do believe that they get recalled next week. For Inovio, three target price increases, with the lowest being five dollars, lost face in the current storm. I expect a swift and meaningful recovery in Inovio quite soon, as well.

    I can't time the market, nor can I tell the future. But, what I can do is evaluate all the current data presented to me, investigate on my own and do my best to reach out to management for answers.

    With that said, I am more than happy to wait out the storm and take advantage of some of the shares that have been washed away during this brutal week of selling.

    As the tide returns to favor for small cap biotech, I will be standing ashore...holding Chelsea and buying more Inovio and OncoSec.

    Disclosure: I am long ONCS, INO, CHTP. 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.

    Stocks: INO, ONCS
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Comments (8)
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  • Tile
    , contributor
    Comments (81) | Send Message
     
    $ONCS is one of the largest % of my portfolio. They have the only active p2 in MCC, a deadly disease. I am also long $ONCS.
    26 Mar 2014, 03:57 PM Reply Like
  • MIaffal33
    , contributor
    Comments (83) | Send Message
     
    Great write up! I agree with your analysis and will also weather the storm for a bright ending.
    26 Mar 2014, 03:58 PM Reply Like
  • KWorono
    , contributor
    Comments (8) | Send Message
     
    I like the technology of both of these companies, however, I don't see the ONCS platform being as strong INO's. I know they've purchased electroporation technology from INO, but electroporating protein seems like a rather transient approach when compared to electroporating cells with DNA.

     

    Plus, INO is attempting to develop vaccines that are preventative as well as therapeutic. Whereas it seems ONCS is only developing techniques to deliver cytokines by directly electroporating tumors.
    26 Mar 2014, 08:28 PM Reply Like
  • hessmessinc
    , contributor
    Comments (18) | Send Message
     
    KWorono, my understanding of the article is that both ONCS and INO are good buys. Your comment sends the message that INO is good and ONCS is bad. I would love a clarification on your part telling me whether you believe that or whether you think both are good buys, but INO has the bigger future.
    26 Mar 2014, 10:11 PM Reply Like
  • Biotech Research Group
    , contributor
    Comments (100) | Send Message
     
    Author’s reply » K...I agree with you. I like OncoSec, but, Inovio is going to be huge, imo.
    27 Mar 2014, 04:32 PM Reply Like
  • Biotech Research Group
    , contributor
    Comments (100) | Send Message
     
    Author’s reply » thanks, Hess. my message is definitely that both are excellent companies and both have huge potential. What is an important takeaway is that each company can succeed based on proving the value of electroporation.
    27 Mar 2014, 04:34 PM Reply Like
  • 8513871
    , contributor
    Comments (4) | Send Message
     
    I agree also with your article. I have added more shares of Inovio and I don't care about the price, because I think in the next weeks we'll see the 5$ and much more in the next months and years.
    27 Mar 2014, 04:55 AM Reply Like
  • Biotech Research Group
    , contributor
    Comments (100) | Send Message
     
    Author’s reply » 851, here is my take. As much as I hate to see an unwarranted sell-off, once Inovio became an etf/index holding AND there were option contracts available, we became even more volatile. When the indexes get slammed, these etf's must sell to pay the redemption's.

     

    But, when the sector heats back up, the rush to replace the position will be just as quick. Index funds and etf's will model the spyder funds. We will recover quickly.
    27 Mar 2014, 04:38 PM Reply Like
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