Inovio - Sitting At The Pot Of Gold

| About: Inovio Pharmaceuticals, (INO)
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I recently challenged my investment research group to uncover a biotech stock that has positioned itself to be a market leader and/or a substantial innovator within a twenty-four month period. Our team screened over twenty potential candidates, some of whom have received recent market attention, and others that have been progressing in stealth mode. Three of the five team members converged on a small biotech company called Inovio Pharmaceuticals (INO). And, we agree that Inovio is about to lay comfortably at the end of the rainbow and swim in a pot of gold.

Inovio has certainly not been in stealth mode, and in fact, has been in a tug of war with both bulls and bears as to the direction of its pipeline. Much of the bear case we uncovered is based on time dated material and conjecture, especially related to the long history of the company, its past employees, its prior dilution requirements and its time dated reverse merger. Much, if not all of the bear case has become irrelevant, simply on basic lack of current merit. The attempt to discredit an emerging company based on its thirty-year old history fundamentally disregards the mechanics of the stock market, the speed of change within technology, the integrity and skill of new management and the advancement of medical science.

Since 2009 and with Dr. Kim at the helm, Inovio has been targeting on twenty-first century medicine, plain and simple. Most bears often cast stones from 1984, yet, most likely cannot name an officer, director or initiative of the former Inovio.

The bull case, which we endorse, advances the introduction of several key medical members, including Dr. Joseph Kim and Dr. David Weiner, both of whom have propelled a concept into what may very well become a revolutionary medical tool in twenty-first century medicine. In fact, Inovio has proven itself to be a leading and most viable candidate in a delivery platform technique called "electroporation".

Electroporation, in and of itself, might very well become a key component to breaking resistance to a significant number of strains, viruses and cancer-resistant arsenals. What Dr. Kim and his science team have continued to find during its research is that by introducing DNA-styled vaccines to patients via electroporation delivery, it can do so in a safe, reliable and tolerant manner.

An important advantage of the electroporation delivery system is that it allows the delivery of the vaccine to be precisely targeted to certain tissue and cell depth. What Inovio has found is that by introducing delivery to specific targets, the cell walls and natural immune system are at a far less of an advantage to fight off the vaccine, as is the case with a general delivery method, such as epidural, site injection and oral ingestion.

But, as much value as electroporation can bring in potential licensing and partnership revenue, the actual synthetic drug program led by Dr. Kim and Dr. Weiner may prove to be the revolutionary concept that will reward both investors in Inovio as well as the patients who are in immediate need of life-saving medical innovation.

Currently, Inovio has an impressive pipeline that has produced intriguing results though its pre-clinical and Phase One trials. For instance, Inovio's scientifically evaluated and recent peer reviewed publication demonstrated stellar results, an excerpt is below:

Inovio's HIV DNA vaccine together with the CELLECTRA device significantly increased the number of responders producing robust and durable CD4 and CD8 T-cell responses in humans. The observation of robust T-cell responses against distinct targeted diseases generated by different Inovio SynCon® DNA vaccines delivered using CELLECTRA electroporation technology have now been published in two respected peer-reviewed journals.

These results are compelling because T-cells are considered critical to fighting cancers and chronic infectious diseases. Robust T-cell responses were generated in 89% of the subjects that received three vaccinations of PENNVAX-B, which consists of 1 mg of each of three DNA plasmids (encoding for HIV gag, pol, and env proteins) along with 1 mg of IL-12 DNA plasmid, followed by intramuscular electroporation with Inovio's CELLECTRA device. Three or four vaccinations with a 2 mg dose of each PENNVAX-B plasmid plus 1.5 mg of IL-12 DNA generated fewer responses when delivered without electroporation.

What one must keep in mind as you study and digest the significant pipeline currently being practiced at Inovio, is that the success they are achieving at this early stage can be replicated throughout its pipeline by using its proprietary Syncon technology, in association with its electroporation delivery system.

In upcoming articles, I will amplify the revolutionary power of Inovio's pipeline and the importance of Syncon, but for now, it is my intention to introduce readers to the technology that will, in our opinion, become a revolutionary and key driver to the success of Inovio over the short, medium and long term for this company and shareholders.

Too many pundits simply fail to recognize the company from where they are positioned today. If an author attempts to grab your attention by citing material from a 1984 SEC filing, then it demonstrates that they are either intentionally trying to fan flames of indecisive shareholders or are intentionally trying to mislead interested investors from the reality of the "new" Inovio, which I classify as being founded in 2009 under the direction of Dr. Kim.

And, while other pundit reporters seem to dismiss the recent partnership with Roche, I and my team see it on a far different linear scale. It is impossible to ignore the confidence that Roche has demonstrated in its newly-formed agreement with Inovio. The initial receipt of ten million dollars to Inovio was certainly a valuable starting point, but the validation of the technology as well as the rush to secure a seat at this revolutionary technique is the coveted gem in the eyes of investors.

And as time gets closer to important result publications in the first half of 2014, I expect at least two additional partnerships, or modifications of existing, to lessen the available seats for other large pharma competition.

A key measure that led us to report on Inovio is the credibility that Dr. Kim has demonstrated. We listened to every published seminar and presentation by Inovio, have read each of the peer reviewed articles and publications and have recognized the significant accolades that are being bestowed upon Dr. Kim in the global medical community. As the CEO of a two-dollar stock, Dr. Kim is receiving more exposure, praise and industry awards than any doctor I have been able to source in any large pharma or University group.

Dr. Kim is leading the pack in several key directions, and I feel that his work will be deemed revolutionary if the results of the Inovio Phase ll trial are reported to achieve significant and robust responses. As an investor, expect to be rewarded exceptionally well if the upcoming results are positive.

In crunching some cursory numbers, the valuations would lead this current stock price to levels in excess of 2X to 3X per share, based on a targeted and accessible market of five billon dollars per marketable treatment. Even if the electroporation system proves successful on its own merit, I can extrapolate price per share levels at several multiples higher.

Based on too many irons in the fire, which I like, I rate Inovio a "speculative strong buy" with substantially less risk than many other small cap biotech companies.

With a healthy cash balance and zero debt, Inovio is a perfect candidate to park some long-term money and watch the fireworks from the sidelines. As Inovio redeems its tickets to success, I am certain that the FUD players will emerge in force. Stay long.

Sentiment: STRONG BUY/PPS Target: $4.50

Note: This article represents my opinion and the opinion of several team members who have spent significant time and energy to support an opinion. Do not buy, sell or hold any security based on another person's diligence. Always take the time to analyze and evaluate any investment prior to committing your dollars.

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.