Just three months ago, San Diego-based Inovio Biomedical looked like one of the many biotechs with big ambitions that were headed for the dustbin of history. The company has been burning cash for 15 years and it was down to its last $5 million in working capital. Inovio tried to merge with another little biotech company from Pennsylvania for 11 months, before finally closing the deal on June 1.
Investors didn’t give it a New York minute of attention: Shares closed at 63 cents that day.
But Inovio wasn’t done. The company (AMEX: INO) pounced on a new opportunity to treat the latest public health scare. On July 29, Inovio said its “universal” DNA-based vaccine was able to protect pigs and mice who were directly exposed to current circulating strains of the H1N1 “swine” flu. That evidence added heft to an earlier finding, which said Inovio’s approach offered the same blanket immunity to mice that were exposed to the deadly strain of flu that killed 40 million people around the world in 1918.
This time, Inovio struck a nerve. The obscure little company’s stock more than quadrupled in value, rising that day from 74 cents a share to $3.18 a share on huge volume of 32 million shares. Inovio cashed in that exact same day—raising $28.5 million of new capital—enough to keep its doors open until the second half of 2011, according to its latest quarterly report.
While Wall Street reacted on the usual primal emotions—fear and greed—I wanted to dig a little deeper into the fundamentals when I spoke recently with Inovio’s new CEO, J. Joseph Kim.
Time will tell whether Inovio really deserves its lofty new market valuation (currently about $92 million), but it’s worth noting that the vaccine field as a whole is hot—and H1N1 vaccines are incandescent. The vaccine industry made up a $13 billion market in 2007, according to Lehman Brothers. What’s more, vaccine sales are expected to grow at an 18 percent annual rate through 2011, compared with 4.4 percent projected growth for the drug industry as a whole during that period, according to Lehman. Merck’s human papillomavirus vaccine, Gardasil, as well as Wyeth’s pneumococcal vaccine, Prevnar, have proven that new generations of vaccines can sell at high prices-and create new billion-dollar markets.
So there’s a business case for a lot of vaccine companies. But what about the science at Inovio, or the newly-combined Inovio to be more precise, That might give the San Diego company a new lease on life?
The rationale for the merger with VGX Pharmaceuticals, Kim says, was to bring together two technologies that have potential to help vaccines stand up to adaptations pathogens employ to evade conventional vaccines. The old-school approach, which traces origins back more than 200 years, was to inject killed or weakened pathogens into the body to show the immune system examples of what to fight.
Scientists now are aiming to take this up a few notches in sophistication. DNA vaccines, that is to say vaccines that are made of snippets that make up the backbone of certain viruses or other pathogens, have long been considered for years as one of the more promising frontiers for immunization. Kim co-founded VGX Pharmaceuticals, a spinout from the University of Pennsylvania, to develop such next-generation vaccines, which are supposed to help ward off pathogens, even when they mutate.
The big problem is that scientists found it was hard to deliver the DNA vaccines inside cells where it needed to go. So VGX sought to complement its work with longstanding R&D from Inovio in “electroporation” of vaccines—a technique that essentially shocks cells so that pores open up in the cell membranes to allow the new DNA from a vaccine to pass through, Kim says. Inovio has some big name partners who consider this worth a try: Merck, the HIV Vaccine Trials Network, the National Cancer Institute, and International AIDS Vaccine Initiative among them.
“In this combination, we think one plus one equals more than two,” Kim says.
Inovio has trademarked its technique SynCon. No such DNA-based vaccine has reached the market yet for use in humans, Kim says. But if the technique really works, it will stimulate both conventional antibodies to respond to invading pathogens, as well as T-cells, the second major arm of the immune system. By triggering this double-barreled immune response, in a way that homes in on specific invaders, Inovio says it may have an opportunity to prevent infections and treat existing ones, or even stimulate a therapeutic immune response to cancer cells.
But how might the electroporation actually work? The way Kim describes it, people would get the usual injection into the muscle, or just under the skin, with a syringe. That would come in combination with an electroporation applicator that would deliver a few milliseconds of electric shock as the vaccine is entering the body. The apparatus would have to be connected to a pulse generator about the size of a laptop, he says. The shock can cause “mid-level pain” that lasts two or three seconds, Kim says.
This technology will be put to a big test by the end of the year, when Inovio expects to start an initial clinical trial for an H5N1 “bird” flu vaccine in Europe. By the next quarter, it hopes to start another trial of this vaccine candidate, VGX-3400, in the U.S. It has another vaccine candidate in clinical trials to treat women with cervical cancer, who, if they are already infected, can’t be helped by Merck’s preventive vaccine, Gardasil.
It’s an ambitious docket for a newly-integrated company with just 40 employees, and operations stretching from Texas to Pennsylvania to Southern California. Kim, who took over as CEO back in June at the time of the merger, made some pretty bold predictions that would have sounded ridiculous if he had uttered them in public when the company traded at 63 cents.
“Inovio is one of the more exciting vaccine companies out there,” Kim says. “If we’re correct, we’ll establish a platform to develop, manufacture, and commercialize potential blockbuster vaccines and therapeutics against major diseases.”
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