Inovio Pharmaceuticals (NYSEMKT: INO ) and Roche (NASDAQOTH: RHHBY ) announced last month that they have reached an agreement to develop and commercialize multi-antigen DNA immunotherapies. Invovio is a development stage biotechnology company working toward developing synthetic DNA-based vaccines, with some pipeline products in phase 2 and nearing phase 3. The partnership will focus on developing INO-5150 for prostate cancer and INO-1800 for hepatitis B.
Inovio specializes in developing synthetic DNA-based vaccines and therapeutics that help prevent and treat cancers and other infectious diseases. The company has a rich early-stage pipeline with multiple drugs in ongoing phase 1 and 2 clinical trials.
Conducting several trials can be a daunting task for any development stage biotechnology due to the large capital requirements. The best solution to this predicament is to find good development partners. These partnerships serve a number of different purposes. They not only divide financial burden of clinical trials but also increase investor confidence in the viability of candidates. A development partnership with a large pharma company also assures a ready-made buyer for candidates and even the company itself. Therefore, it's a big plus point for Inovio that 10 of its 13 studies are being funded by collaborators.
Last month, Inovio announced that it has partnered with Roche for the developmental vaccines for hepatitis B and prostate cancer. Under the partnership agreement, Roche has acquired exclusive license for DNA-based vaccine INO-5150 and INO-1800. The license also extends to the CELLECTRA electroporation technology used for the delivery of these vaccines. The health care giant will also have the option to license more vaccine opportunities from Inovio with a collaborative research program in oncology.
At a recent investor forum, Inovio's CEO Joseph Kim hinted toward a future partnership or licensing out of their products for further development and commercialization. The company is trying to spread the costs and risks with R&D grants, non-dilutive partner funding, and sponsored clinical trials. This is an excellent strategy for any development stage biotechnology company and should have a positive impact on Inovio's valuations.
During the presentation at the Bio Investor Forum, Kim seemed optimistic about Inovio's pipeline. He pointed out that the INO-1400 for breast/lung cancer could prove to be the universal cancer therapy and will have a huge revenue potential if approved. Quoting the closing words of the CEO himself, "We have the cash, we have the technology we have the validating partnership. We are the future of immune therapy." Certainly an optimistic statement that the company will have to back-up with positive clinical trial results.
Some of the largest pharma companies are paying huge sums to replenish their development pipelines. The increased popularity of development stage biotechnology companies is reflected in the stellar performance of NASDAQ Biotechnology Index, which is up 46% in the last twelve months.
However, investing in development stage biotechnology companies can be risky because only a small portion of promising candidates actually make it to store shelves. An effective method of screening out winners is to look for companies which have captured the interest of other major health care players. Inovio fits this bill with 10 partnered trials out of a total 13 ongoing clinical trials. The Roche partnership is a good long-term prospect because it will strengthen the financial position of Inovio and also provide it with a strong commercialization partner for INO-5150 and INO-1800.
Investors must do their own due diligence before making any long term investment in Invovio and should consider the downside risk of its candidates failing to succeed in clinical trials.
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