Inovio CEO Interview: PD1/PDL1 Inhibitors, Immunotherapy And Why Investors Should Be Excited About 2014

| About: Inovio Pharmaceuticals, (INO)

Immunotherapies have become a hot topic in the field of oncology with several companies working to develop the next blockbuster drug. As the story continues to unfold and different approaches endeavoured, large pharmas are centered on checkpoint inhibitors. One of the emerging names leading the immunotherapy charge is Inovio (NYSEMKT:INO). Inovio has had quite a remarkable 2013 as the company has increased shareholder value by more $360 million with the stock up 320%.

I reached out to Chief Executive Officer, Dr. Joseph Kim, to gather some precise information directly from someone with knowledge on the dynamic industry. To my surprise, not only was Dr. Kim kind enough to respond, but he even took the time to answer all of my questions. Thanks to Dr. Kim's transparency, I was allowed to publish our discussion for the benefit of shareholders. The following is a transcript of my interview with Inovio CEO, Joseph Kim.

NOTE: Bold text represents my questions. Also, minor edits were made to the transcript for publication on Seeking Alpha.

Dr. Kim, thank you for participating in this interview. Could you please shed some light on PD1/PDL1 inhibitors that have excited large pharmas.

Dr. Kim: As you mentioned, large pharmas like Merck (NYSE:MRK), Roche (OTCQX:RHHBY) and Bristol-Myers Squibb (NYSE:BMY) have really asserted the focus of the last two ASCO meetings towards checkpoint inhibitors. We expect this approach to continue being the center of attention in next June's ACSO meeting.

Today, leading edge research in cancer immunotherapies is focused on two primary approaches - passive and active therapies. Each has its own merits and perhaps the ideal solution could be in utilizing a combination of both.

T-cells, the S.W.A.T. team of our body, are focused on terminating what they are designed to kill, typically targeting tumor cells in our body. Tumor cells, however, have a self defense mechanism from T-cells. One of the molecules these cancer cells show on their surface is a PDL1 receptor. PDL1 binds onto the PD1 protein on T-cells, blinding the killer cell to the presence of cancer cells.

Merck, Roche and BMY have created a monoclonal antibody, called a checkpoint inhibitor, which allows T-cells to recognize and kill cancer cells. This passive cancer approach is a great validation of the importance of T-cells in immunotherapy as T-cells and only T-cells are essential in killing cancer cells.

What the clinical trials for these checkpoint inhibitors showed was that patients who responded to PD1/PDL1 antibodies tend to have some T-cells prior to treatment with the monoclonal antibody. In comparison, people who did not have T-cells present did not respond as well. Though the level of response is dramatic and very important to cancer therapies, an opportunity is still present to improve treatment.

How do you see checkpoint inhibitors playing into Inovio's active immunotherapy approach?

Dr. Kim: This is where active cancer vaccines, such as Inovio's products, can become important in providing a one-two punch. The analogy I like to use with PD1/PDL1 inhibitors is that they take the foot off the break while active cancer immunotherapies press down on the gas pedal to accelerate the car (or antigen specific T-cell in patient's body) even faster from point A to B.

Active immunotherapy approaches, like Inovio's, can be used alone to overpower the PD1 effect or can be used in combination with the monoclonal product of large pharmaceutical companies. We expect Inovio to be the dominant player in the active vaccine field.

There are several methods that smaller immunotherapy companies are using to target cancer. How is Inovio's approach different from other immunotherapy companies?

Dr. Kim: Immunotherapy can be divided into three subsectors.

  1. Using proteins and peptides as cancer vaccines. These companies have not had much luck as we saw with GlaxoSmithKline's (NYSE:GSK) noteworthy MAGE-A3 data failure. Proteins and peptides have not shown to be very good T-cell generators in cancer vaccines. Overall, I am not too optimistic in this approach.
  2. Companies who are using viral vectors to deliver cancer vaccines. Example of folks using this approach is Transgene out of France and GSK's $300+ mill acquisition Okairos. The viruses are probably not the best delivery system for these cancer vaccines.
  3. Last group is the synthetic vaccine platform that uses the well known dendritic cell approach pioneered by Dendreon (NASDAQ:DNDN) and their Provenge product. Other companies trying to improve this approach are ImmunoCellular (NYSEMKT:IMUC) and Northwest Bio (NASDAQ:NWBO). One would only seek improvement because these approaches are not generating sufficient T-cell generation. Immunocellular's disappointing results have had a negative effect on this whole platform. Furthermore, one of Provenge's failures is that the product does not generate very strong T-cells against prostate antigens shown by its marginal clinical efficacy.

I would argue that when it comes to antigen and cancer specific T-cells, Inovio can generate better T-cells than any of these competing approaches. We look forward to demonstrating the impact in the clinic with our studies.

Arguably, Inovio's biggest driver this year was the partnership with Roche. What did Roche see in Inovio's preclinical candidates to entice the giant to partner with Inovio in the disease areas where you are now collaborating?

Dr. Kim: Inovio is leading in the race to bring effective active immunotherapies to cancer patients. Our DNA vaccines administered with our Cellectra delivery system have induced best-in-class T-cell immune responses. Published clinical papers have maintained this notion that we can achieve this better than anyone else. INO-5150, our prostate candidate that was licensed to Roche, has the potential to be used alone or in combination with Roche's monoclonal antibody to change the way cancers are treated. After much due diligence, Roche came to the conclusion that Inovio would be the leader in the active vaccine field and that working together with Inovio would increase the hope of knocking out cancer as we know it.

One of Inovio's main focuses is targeting cervical cancer patients. What does the standard of care look like today for cervical precancer patients?

Dr. Kim: Cervical cancer is the second largest killer in women. In the US, over 4,000 women die from cervical cancer each year. This number is magnified to almost half a million for the rest of the world. Surgery is the standard of care for women with high-grade cervical precancer. This procedure is a very bloody and messy one as it involves scraping out the cells at the surface of cervix. Also, this approach has a negative impact on the reproductive flexibility of these women. For more advanced cervical cancer, the standard of care is very toxic chemotherapy and radiation such as platinum based chemotherapy. The prognosis isn't that great as median survival rate is just over one year. Clearly, there is a great need for an effective therapeutic vaccine to treat cervical dysplasias and cancers caused by HPV.

How could Inovio potentially affect this market?

Dr. Kim: Inovio's immune therapeutic approach, using VGX-3100, will provide a revolutionary treatment option that employs a woman's own immune system by boosting T-Cells to target and kill the cancer/precancer cells. If we can prove to do this, it will be a tremendous, non-invasive way to treat these diseases with minimal side effects.

Can you speak about VGX-3100, its significance and upcoming milestones for 2014?

Dr. Kim: Absolutely! VGX-3100 is revolutionary therapeutic vaccine that prevents the progression of cervical and head & neck cancer by treating patients who are already infected with human papillomavirus (HPV). Our lead candidate is in Phase II trials aimed at preventing the progression of cervical cancer from late stage precancer status to actual cancer status. This presents a fantastic opportunity to demonstrate the power of this approach by clearing precancers before they become cancerous.

Inovio's Phase II efficacy trial consists of 150+ patients that are fully enrolled and fully treated. We expect data to be unblinded by mid-2014. We are all very excited about this upcoming milestone that we believe will show the immune therapeutic effect of VGX-3100 in clearing the precancerous regions in CIN2/3 stages.

Our flagship product, if successful, will set the tone for following products in our cancer pipeline. Starting in the first half of 2014, we will take VGX-3100 and use the product to treat advanced cervical cancer patients in one trial. Also, we will open up another study targeting the use of VGX-3100 in head and neck cancer since over 90% of non-tobacco and alcohol related head and neck cancers are caused by HPV infection – HPV-caused head and neck cancer is the most rapidly growing cancer in men.

How big is the market opportunity for Inovio's lead program?

Author Note: The estimated average cost of immunotherapy, as per Citi research report, is $110,000. This figure backs the market projections Inovio is targeting.

Dr. Kim: Merck's Gardasil and GSK's Cervarix HPV preventive vaccines accounted for nearly $2 billion in 2012 sales. However, these preventative vaccines are useless once the person has been infected with the virus. This presents an opportunity for VGX-3100 to act as a therapeutic vaccine.

An important market we are targeting with our Phase II is high grade cervical lesion (CIN 2/3 stage) precancer, the last step before full cancer. Around 3-4 hundred thousand American women are diagnosed with CIN 2/3 status, proving to be a potential multibillion dollar market for us.

CIN1 low grade lesions have no current treatment option available. We feel we can penetrate this market where 1.4 million women are diagnosed annually. Moving downstream to more advanced cervical cancer, there are 12,000 new cases every year.

HPV related head and neck cancer market over 20,000 patients and growing. Over 90% of non-tobacco and alcohol related Head and neck cancer are caused by HPV infection a la Michael Douglas. In men, this is growing at an epidemic rate proving to be one of the fastest growing cancers by doubling every five years.

VGX-3100 displays pervasive expandable market potential in each segment of HPV caused cancer which leads us to believe the product can be a multibillion dollar franchise.

Moving onto infectious diseases, what are the key focuses for Inovio and what can investors expect from your research in this area in 2014?

Dr. Kim: Infectious disease is where I think we can have a breakthrough product to save millions of lives. 2014 will be the initiation of our HIV vaccine trial. This is a combination of a $25 million contract from the National Institute of Health to generate an optimized HIV vaccine called PENNVAX. This vaccine is designed to address all the different global HIV strains across the world, not just the US. PENNVAX, a fully funded universal vaccine, will be designed to be used as a preventive vaccine and also a therapy to treat those already infected.

On the other side of infectious disease, we are working very hard with our partner Roche to take INO-1800 into the clinical studies as soon as possible in 2014. Sometime in 2014, we also envision starting a clinical trial for the malaria vaccine MAV that is fully founded by the Gates foundation. This five antigen combination product has shown to generate some of the best ever T-cell levels in preclinical studies. We have a very impactful infectious disease profile that will bring investors many catalysts in 2014.

What do you see as being the biggest drivers of shareholder value in 2014 and the next 2-3 years?

Dr. Kim: We continue to be in extensive discussions with potential licensees that were initially interested in our candidate programs we partnered with Roche. Certainly, these other companies remain very interested in licensing other products in our pipeline. We are hopeful of conducting other value enhancing partnerships in 2014.

2013 has been a truly banner year for us by any metric. We've completed enrollment of Phase II studies, we've progressed many of our other programs and we've published probably 20 papers (more than many big pharmas). With that said, 2014 may set up to be an even greater year due to all the milestones I've mentioned. I think we have passed our inflection point with the Roche deal. In terms of our valuation, our resources and critical mass we are on our way to transforming Inovio into a biopharmaceutical powerhouse with multiple pipeline products. I can't wait to execute the milestones in the coming 2014 year that will position Inovio on its way to becoming the next Amgen or Gilead of our industry.

Thank you for taking the time to participate in this interview Dr. Kim. Enjoy your holidays and best of luck in 2014.

Disclosure: I am long INO. 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.

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