There is a small-cap biotech stock known as Inovio Pharmaceuticals (INO) that is set to release data mid year 2014. The data to be released will be on the company's flagship cervical dysplasia vaccine which is in phase 2 clinical testing. The company is working on creating vaccines against many of today's unmet medical needs. It is doing so by attempting to create vaccines that are not just preventative in nature but also therapeutic as well. The company uses Synthetic DNA along with electroporation devices to act as an immunotherapeutic agent for the patient.
The synthetic DNA vaccine is formulated in water so it doesn't make use of any chemical compounds. This synthetic formulation without the use of toxic drugs or chemicals makes for a very safe vaccine candidate. The synthetic DNA vaccine is created instead with genetic codes from a computer. These genetic codes are the genomes of the diseases that are being targeted. Inovio doesn't create these genetic codes, they instead obtain them from a library full of genetic codes that were discovered by other clinical scientists that are free for anyone to use. With these synthetic codes formulated in water Inovio injects these patients with an electroporation device. This electroporation device is used to open the pores of the cells for a brief period of time with an electric charge. The belief is that if the cells are open for a brief period of time the Synthetic DNA vaccine antigen could enter the cells and then replicate with the new genetic code. The goal of this would be to create killer T-cells that have an antigen capable of killing off the disease in question. Inovio's goal is to allow the patients' own T-cells become the agent that will ultimately clear the viruses or other diseases in the body.
Cervical Dysplasia is a disease characterized by cell abnormality on the female's cervix. Cervical Dysplasia is also known as " cervical intraepithelial neoplasia or CIN. Cervical Dysplasia is not considered to be a cancer but depending on the severity of the disease it could turn cancerous at a later point in time. Patients with mild cervical dysplasia don't need treatment as it typically goes away on its own, but patients with severe cervical dysplasia must undergo surgery or another invasive procedure to remove the abnormal cells. Inovio is currently in a phase 2 clinical trial testing their VGX-3100 vaccine in patients with Cervical Dysplasia caused by HPV -- Human Papilloma Virus. The trial has enrolled 148 patients across various regions including the U.S, Canada, Australia, Korea and South Africa. These patients enrolled have HPV type 16 and 18. This cervical dysplasia as mentioned above is pre cancerous so Inovio's VGX-3100 vaccine is attempting to reverse these pre cancerous lesions to a less advance state. Thus the reason why the primary endpoint for this phase 2 trial is to attempt to regress these pre cancerous lesions to CIN 1 or less. A secondary endpoint for this study is to observe the clearance of the HPV 16 or 18 disease. We believe that the phase 2 results should be positive because the data to date in phase 1 has shown nothing but positive results. For instance 72% -- 13 of 18 patients -- developed antigen-specific T-cell responses during the first four months of vaccination. Treatments for this phase 1 trial for patients were given one vaccine per month for 3 months. This antigen-specific T-cell response is important, because as we mentioned above the antigen is the genetic DNA code the T-cell must obtain so that it knows what cell must be targeted. When we say targeted we say that these T-cells with specific antigens can actually kill off these pre-cancerous cells for these HPV patients. For instance in the phase 1 trial 10 of the 11 patients that responded to the vaccine treatment with VGX-3100 were able to achieve a killing effect on these targeted cells. This result is seen as a positive because it shows that VGX-3100 may have the ability to clear these pre-cancerous lesions in these HPV patient population. The killing effect on these HPV cells using killer T-cells has been published in the "Science Translational Medicine" medical journal.
The platform has yet to report results on a phase 2 clinical trial from the pipeline but we think that validation from a partnership with Roche(OTCQX:RHHBY) changes that. The partnership between Inovio and Roche was announced back in 2013 on two preclinical vaccine candidates. Both companies agreed that Roche would have the ability to license INO-5150 -- targeting prostate cancer-- and INO-1800 -- targeting Hepatitis B. One other thing to note about the partnership would be that Roche also received the license to use Inovio's CELLECTRA electroporation device for its own vaccine delivery needs. This excitement from Roche can be seen in a quote from the Head of Cancer Immunology of Experimental Medicine
"At Roche we are always interested in finding first-in-class and best-in-class therapies that may become the next generation treatments for patients with different types of cancer. INO-5150 will allow promising combination opportunities with the Roche portfolio, particularly with our emerging cancer immunotherapy molecules"
At the beginning of the quote you can see that the Head of Cancer of Immunology believes that the Inovio platform will be revolutionary in cancer immunotherapy. We think that Roche wanting to partner with Inovio just from pre-clinical standpoint is bullish in itself. In this license deal Inovio also obtained $10 million dollars as an upfront payment and the maximum possibility to obtain $415 million dollars from reaching developmental and commercial milestones. If the Validation and vote of confidence from Roche wasn't enough Inovio recently won an award in March from the "World Vaccine Congress 2014". Inovio was recognized for "Best Therapeutic Vaccine" for VGX-3100 . We believe that Inovio has the ability to advance the field of immunotherapy where innovative therapies are being produced for patients with no added toxic side effects. Even more for a boost of confidence is the amount of shares that are owned by the CEO of Inovio himself. The CEO ownsapproximately 5,965,809 shares as of April 15, 2014 which was last reported.
According to the 10-k SEC filing Inovio has cash and short term cash equivalents of $52.6 million dollars and working capital of $29.7 million dollars. The amount of cash had just recently increased as Inovio announced in March that it had closed the underwritten sale of the company's common stock for $63 million dollars. After taking away expenses from the sale of the offering and other expenses the company was left with an influx of $59.2 million dollars. With this cash influx the company now has the ability to operate its business until the 4th quarter of 2017. This means that the results for the phase 2 cervical dysplasia trial will be shown way before any additional cash is needed.
As with any small-cap biotechnology company dealing with clinical trials there are many risks involved. The first risk involves the validation of Inovio's technology in a phase 2 clinical trial. By this we indicate that to date no positive results have been posted utilizing Inovio's Syncon DNA vaccine and CELLECTRA electroporation device in a phase 2 trial. Therefore there is no assurance that these upcoming phase 2 results will guarantee a positive outcome. The whole pipeline for Inovio is built around the same technology so a failure in the phase 2 cervical dysplasia trial will not bode well for the additional trials. Investors should be cautious that there are no sure things investing in biotech and that they may lose their entire investment if Inovio's phase 2 data readout isn't positive. Even with positive phase 2 results the company will have to go up against the FDA panel for final approval. In the mean time the possible approval in the cervical dysplasia candidate could be around 2016 or 2017 this is because Inovio will also need to run a confirmatory phase 3 trial.
We believe that Inovio may prove to be a great long term investment if the phase 2 cervical dysplasia readout that is set to be released anytime now in mid 2014 proves to be successful. The upcoming catalyst could also be pivotal to short term investors who are willing to risk some money on a binary catalyst event. Inovio had a 52-week low of $0.59 per share and has seen a 52-week high of $3.95 per share. Right now the stock has been trading in the middle of the range around $2.50 per share, and investors now have an opportunity to buy in before the major VGX-3100 phase 2 data readout. One thing to note though is that the company is set to do a reverse stock split possibly before the phase 2 results so investors should be aware of this before investing. With the multiple validation's listed above: CEO major holder of Inovio stock, Partnership with Roche from preclinical products, Major publishing of phase 1 cervical dysplasia data in prestigious medical journal, and positive phase 1 result in cervical dysplasia study we believe that Inovio has a great chance to change the immunotherapy landscape for patients everywhere.
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