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Are Investors Wrong About Inovio Pharmaceuticals?

Editor's Note: A previous version of this article incorrectly stated that Inovio's short interest as a percentage of its float was 54%. This, however, did not reflect Inovio's recent reverse-split, and its short interest is actually 13.6%. The headline has also been updated to more accurately reflect the analysis provided. The Fool regrets the error.

Because short-sellers take on substantially more risk than individuals long a stock, they tend to be some of the more sophisticated and informed investors in the marketplace. So when they decide to jump into a stock with both feet, it's probably a good idea to pay attention.

Some investors are shorting the DNA vaccine maker Inovio Pharmaceuticals (NASDAQ: INO  ) , buying up 13.6% of the float in recent weeks.  Considering this, let's take a closer look at why shorts are piling into this clinical-stage biotech. 

INO Chart

INO data by YCharts

Inovio's pivotal mid-stage data readout is close for VGX-3100
Inovio is actually a fairly old company by biotech standards, but it has yet to push any of its clinical candidates into late-stage testing. So all eyes are closely watching the company's mid-stage DNA vaccine dubbed "VGX-3100," which is expected to report top-line data at any time now. Briefly, VGX-3100 is delivered by Inovio's electroporation technology and is indicated as a potential treatment for adult women with biopsy-proven HPV 16 or 18 associated cervical intraepithelial neoplasia grade 2/3 or 3. Put simply, it would likely compete with Merck's (NYSE: MRK  ) Gardasil as a prophylactic HPV treatment in women.  

What's key to understand is that this data readout could be a make or break moment in the life of the company. So far, Inovio hasn't generated an impressive enough immune response for its other clinical candidates to justify initiating a pivotal late-stage study. So a negative trial result for VGX-3100 at this critical junction could cast doubt on the validity of this approach to vaccine development in general. 

DNA vaccines haven't lived up to their promise
Perhaps the bigger problem, however, is that DNA vaccine technology has yet to lead to the development of a commercial product indicated for human use. Despite decades of work, DNA vaccines tend to produce limited immune responses in humans in mid- to late-stage studies. Presently, researchers are focusing on new ways to deliver the vaccines, and potentially employ additional immune boosters, to increase their clinical benefit. But so far, they have yet to outperform traditional protein-based vaccines in human subjects.  

And Inovio is even planning on using its own immune activator called IL-12 as part of the vaccine regimen in further clinical testing of VGX-3100. Taken together, shorts believe VGX-3100's mid-stage trial is more likely than not to fail. 

Foolish wrap-up
In light of the diversity of diseases Inovio is targeting with its platform and the blockbuster potential of a new HPV vaccine, it's easy to understand why investors remain optimistic about the company's future. At the same time, this short position shouldn't be taken lightly.

When push comes to shove, what's going to matter most is VGX-3100's mid-stage results that are set to be released at anytime. If positive, Inovio could see a large short squeeze. On the flip side, a negative readout will undoubtedly cause shares to crater. Viewed this way, I think investors with a long-term outlook should stick to the sidelines for the time being with this battleground stock, at least until after this binary event has passed.  

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Read/Post Comments (27) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 11, 2014, at 7:54 PM, sgreer13 wrote:

    I believe your calculation with regard to the short interest is erroneous. You neglected to account for the recent R/S. The short interest is more like~15%. I'm sure you can easily find the correct numbers and will correct this glaring falsity. Surely you wouldn't want to be disseminating lies albeit "foolishly".

  • Report this Comment On June 11, 2014, at 8:03 PM, sgreer13 wrote:

    Here's a link if your are too busy to "do" any "research" before you write your correction.

  • Report this Comment On June 11, 2014, at 8:13 PM, sds1972 wrote:

    Wow you didn't even take into account there was a RS last week? The short interest as of the last date, may 15, was approx 7.6 million. With a float of 56.7 mil, that equates to a short % of float of 13%. Really can't believe people write articles these days with so much misinformation. I hope this wasn't intentional.

  • Report this Comment On June 11, 2014, at 8:14 PM, kayak9966 wrote:

    Mötley Fool hates math and INO. Another bull crap article.

  • Report this Comment On June 12, 2014, at 12:00 AM, tqroll wrote:

    Please tell me that George will write a correction and an apologize for being so inept. Do the right thing George, go to your local community college and take an accounting class.

  • Report this Comment On June 12, 2014, at 12:29 AM, KulaBob wrote:

    Aloha George,

    Please address whether you believe your numbers to be correct or if you made a small Boo-Boo here. I know if it is a Boo-Boo it kind of invalidates your whole article, but just for the minor sake of responsible journalism you probably should deal with this. It just really looks like you missed the 1:4 reverse split numbers for the shares held short.



  • Report this Comment On June 12, 2014, at 2:00 AM, Lendit wrote:

    Just to make it easy for you George here are the actual numbers. George its important that you do some research, its all about Credibility at the end of the day and right now you don't have it.

    Short Interest INO

    Shares Outstanding 60.16 Mil

    Float 56.58 Mil

    Shares Short (as of 05/15/2014) 7.67 Mil

    Short % of Float 13.56%

    Short Ratio 6.36

    Shares Short Chg. (from 04/30/2014) 6.05%

  • Report this Comment On June 12, 2014, at 6:06 AM, voodoo1506 wrote:

    "Why Wall Street Hates Inovio Pharmaceuticals" ? Come on be serious! is just a couple of nasty posts and the weakness of retail investors.

  • Report this Comment On June 12, 2014, at 8:14 AM, Dan555 wrote:

    My blood naturally defeated the hepatitus c virus. There is around 15% of the population that is capable of doing this. I suppose that if one were to study my immune system response one could perhaps attempt to replicate the process.

  • Report this Comment On June 12, 2014, at 8:53 AM, JohnWest wrote:

    Another moron pretending to know what he's talking about!

  • Report this Comment On June 12, 2014, at 10:07 AM, Chapman03030303 wrote:

    How has these inaccuracies not been corrected yet?? 54%??? Oh yeah, old Georgie boy has his own agenda. Simply put, TheStreet and Motley Fool are jokers and criminals!

  • Report this Comment On June 12, 2014, at 12:03 PM, egnarops wrote:

    Guess the bashing will continue. He only changed the numbers and even though the new and accurate percentage dropped from 54% to 13%, he still claims the short investors are "piling in".

    To address his question, " Are Investors Wrong About Inovio Pharmaceuticals?" One must determine if he is talking about short or Long investors. So the answer yes AND no!! In the article , the author himself labels shorts as investors so I am not mincing words here.

    "Because short-sellers take on substantially more risk than individuals long a stock, they tend to be some of the more sophisticated and informed investors in the marketplace." This is a highly erroneous statement as shorts have repeatedly displayed very little grasp of the facts.

    "Inovio is actually a fairly old company by biotech standards, but it has yet to push any of its clinical candidates into late-stage testing." Notice the author does not state the full and accurate name of Inovio Pharmaceuticals in this quote but does earlier in the article. He is playing into the whole "34 year" argument . Inovio Pharmaceuticals was founded in 2009 . The company , Inovio Pharmaceuticals did not exist before 2009 so the company is not so old after all..

    Although this article is slightly more accurate than AF's hack job. it is still riddled with inaccuracies.

  • Report this Comment On June 12, 2014, at 12:22 PM, sfdmichels wrote:

    The opening premise of this article is incorrect:

    "Because short-sellers take on substantially more risk than individuals long a stock, they tend to be some of the more sophisticated and informed investors in the marketplace."

    Considering a nearly 80% failure rate in P2 clinical trials, the contrary is correct: Long investors take on considerably more risk that shorts.

    Granted many of the long investors are rather minimally informed retail investors. However, insitutional investors are generally well informed before making a bet on a small biotech and generally have subject industry knowledge.

    Since the very premise of the article is incorrect, the entire article is worthless.

    George, if you want to be or become a journalist that is being taken seriously by his readers, you must do better.

    For this article I must fail you and expect improvement in the next one.

  • Report this Comment On June 12, 2014, at 1:52 PM, voodoo1506 wrote:

    Where is comment from the "NextThing" ? What is the reason to remove it?

  • Report this Comment On June 12, 2014, at 2:03 PM, HoraceDebusyJonz wrote:

    Where are earlier comments by "theNextThing" which were far better researched and cited than this poor excuse for an article? Why did you take those comments down after making correction?

  • Report this Comment On June 12, 2014, at 3:41 PM, Dan555 wrote:

    Whether or not investor's are wrong is going to depend on whether the Inovio and other science teams are wrong. So far, so good. I would not take the probabality of breakthrough very lightly as one of the companies I use, TIAA-CREF, has a stake in them more so on the MSN site than the Yahoo site. That is not to say that they know or don't know anything about the science.

  • Report this Comment On June 12, 2014, at 3:44 PM, theNextThing wrote:

    Shorting a stock can be riskier, since you can lose “unforeseen” amount of money(especially, if you get caught in a “short-squeeze”).

    While, longs know exactly what their maximum loss can be, if the stock goes against their direction.

    Remember these three short squeeze events from the past?

    1. TSLA (May 2013)

    2. NFLX (Jan 2013)

    3. Porsche vs Volkswagen(2008)

    *** So, short-sellers have to be extra careful.

    However, being careful does not guarantee short-sellers from being burnt.

    (If you are considering shorting stocks, it can be better idea not to short against potentially revolutionary companies likes of TSLA, NFLX & INO.)

    I recognize a lot of mediocre assessments done on INO that can put short-sellers in another potentially dangerous short-squeeze situation.

    Here are few examples that I recognize that many short-sellers are not well aware of :

    1. Most of the current Inovio investors are investing in the “expected results” from the merger(in 2009) between Inovio Biomedical (specialist in Electroporation DNA vaccine delivery technology) & VGX Pharmaceuticals (specialists in DNA-based Vaccine technology).

    - Inovio Biomedical (founded in 1979) had effective Electroporation DNA vaccine delivery technology, but did not have great DNA-based Vaccines.

    - VGX Pharmaceuticals (founded in 2000) had great DNA-based Vaccines & Platform, but did not have effective delivery technology.

    - After merger (2009) = achieved “best-in-class” immune responses in Phase 1 trial of VGX-3100 for Cervical Dysplasia (2011) & Phase 1 trial of PENNVAX-B for HIV (2013).

    (Inovio DNA Vaccine Delivery System enhanced cellular uptake of VGX DNA vaccines by 1000x. According to Dr. Kim, it is the secret source for overcoming two decade huddle of DNA delivery. *** NOT MANY SHORT-SELLERS KNOW THIS.)

    2. Highest dose group achieved 83% T-cell responses in Phase 1 of VGX-3100 Cervical Dysplasia trial.

    Highest dose used in phase 1 was administered to all of its phase 2 study patients (excluding placebo patients) due to its low / non-toxicity.

    Dose used in Phase 2 : 6mg (3mg of plasmid encoding for E6 & E7 proteins for type 16 HPV + 3mg of plasmid encoding for E6 & E7 proteins for type 18 HPV)

    Take a look at these data-charts from Phase 1 of VGX-3100 trial :

    Review data charts on pages 14-17 from this link : ( )

    Review the data-chart under the “Study Data" section : ( )

    3. What Dr. Kim said during a Q&A session, when he was asked whether he’d consider adding Immune Boosters (IL-12 or 28) for the Phase 3 of VGX-3100 Cervical Dysplasia.

    “…..we feel “VERY STRONGLY” that our levels of efficacy may not require the use of IL-12 immune activator…..”

    *** Read the transcript of Q&A session during the 4Q 2013 Financial Result Conference Call ( )

    4. Inovio can seek “ORPHAN DESIGNATION” as there is no other “therapeutic” vaccine for Cervical Dysplasia.

    - Merck’s Gardasil is only for “prophylactic” use. (Not for “therapeutic use.)

    - Inovio’s VGX-3100 is for "therapeutic" use.

    (Inovio's VGX-3100 does not compete against Merck’s Gardasil.)

    NOTE : This is another fact that many short-sellers didn’t know.

    5. Industry experts may know better about Inovio’s DNA vaccines than investment analysts.

    - VGX-3100 was voted by the vaccine industry experts at the World Vaccine Congress in 2013 & 2014 as the “Best Therapeutic Vaccine(approved or in-development)”.

    6. Roch Partnership.

    Dr. Kim said that it felt like they just went through a yearlong Colonoscopy exam by Roche, when Roche was examining a potential partnership with INO.

    The scientist at Roche must been confident enough with INO’s technology to offer $400+ licensing deal after the grueling review.

    7. Orbimed, a leading fundamental biotech investor had recently invested $8.7 million in Inovio.

    8. Phase 2 result from VGX-3100 Cervical Dysplasia trial WILL NOT MAKE OR BREAK the company.

    Inovio has multiple shots on goal & over $100 million reserve money.

    (Inovio’s Foundation Is Being Built With Four Pillars of Break-Through Technologies)

    - SynCon DNA Vaccine “Platform”.

    - Electroporation DNA Vaccine delivery technology

    - DNA-based Cytokine & Chemokine Immune Boosters(Activators)

    - DNA-based Monoclonal Antibody Therapy

    *** Take a look at Inovio’s pipeline :

    9. Short-sellers fail to recognize the potential VALUE of Inovio’s “Universal Cancer Vaccines”.

    i.e. INO-1400 hTERT “Universal” Cancer Vaccine that target “prevalent-type-cancer / antigens”.

    The hTERT antigen is highly expressed in 85% of all human cancers. INO-1400 is design to specifically target hTERT antigens. (Thus, INO-1400 hTERT can be used to treat 85% of all cancer types.)

    Inovio has developed a highly optimized synthetic hTERT DNA vaccine with two mutations designed to target multiple cancers expressing the antigen hTERT, including :

    - Non-small cell lung carcinoma

    - Breast cancer

    - Pancreatic cancer

    - Melanoma

    - Prostate cancer

    And, INO is working on 4-6 more of DNA cancer vaccines targeting “prevalent-type-antigens" likes of hTERT, to be productized for testing by end of 2014.

    With the combination of these “prevalent-type-antigen" cancer vaccines, Inovio expects to be able to address almost every cancer type out there.

    Review data chart on page 23 of this link :

    From this condition,

    if Phase 2 result is positive, some serious short-squeeze event can take place.

    So, each investors need to do some deeper researches on their own.

    Ultimately, each individual investors need to make their own decisions.


    In my opinion,

    it's a shame that anyone would wish to make money hoping / guessing that dedicated groups of people / organizations would fail to meet their mission.

  • Report this Comment On June 12, 2014, at 3:46 PM, Rspthrpst wrote:

    Why did you delete the comment made by "theNextThing"? That was the only thing worth reading from your article.

  • Report this Comment On June 12, 2014, at 4:54 PM, Rspthrpst wrote:

    Thanks for reposting your comment "theNextThing". I will copy it and save it in case it gets deleted again.

  • Report this Comment On June 12, 2014, at 4:54 PM, theNextThing wrote:

    I didn't.

    MF deleted it.

    So, I re-posted.

  • Report this Comment On June 12, 2014, at 7:53 PM, orpilot wrote:

    Nice work theNextThing! You should try your hand at writing an article for MF or SA. You will have the support of a lot of people, I suspect.

  • Report this Comment On June 13, 2014, at 9:30 AM, jabel5 wrote:

    "Put simply, it would likely compete with Merck's (NYSE: MRK ) Gardasil as a prophylactic HPV treatment in women."

    You are simply wrong.

    INO's vaccine is intended as a therapeutic vaccine to attack HPV after infection occurs. Gardasil is a prophylactic vaccine which is meant to prevent infection. The two vaccines use very different antigens in order to achieve those two very different goals Thus, INO's vaccine is not in direct competition with Gardasil. Even if Gardasil should become widely adopted and start to decrease the incidence of HPV-caused cancer, millions of HPV infections worldwide still need to be cured. HPV also causes head and neck cancer, which could eventually become a target of INO's vaccine.

  • Report this Comment On June 13, 2014, at 10:14 AM, theNextThing wrote:


    As of now, Inovio is focused on “treating" cervical dysplasia after the women are infected with HPV with VGX-3100.

    (Description of VGX-3100 Cervical Dysplais)

    (Protocol for VGX-3100 Phase 2 Trial)

    (watch this WSJ interview with Dr. Kim from 3:14)

    it’s smarter strategy to stay focused in getting this thing approved via “orphan designation”.

    Treatment space for Cervical Dysplasia is a multi-billion market by itself.

  • Report this Comment On June 13, 2014, at 10:20 AM, orpilot wrote:

    Did anybody else notice this article was cut and pasted into a new article this morning on market news call under a different authors name... also the comments were closed. What's up with that?

  • Report this Comment On June 13, 2014, at 10:31 AM, orpilot wrote:

    So tell me George, did you give Richard Frank at Market News Call permission to reprint your article under his name? If the goal was to further depress the pps than it's done it's job. If you didn't give them permission you should be contacting the editorial staff there, eh?

  • Report this Comment On June 13, 2014, at 2:20 PM, aldehyde wrote:

    even though you've got all these articles floating around about wall street hating on the stocks you're still lame and boring

  • Report this Comment On June 17, 2014, at 1:44 AM, Sciencebased1K wrote:

    WOW - what a seriously flawed article. So many errors - so little time for us readers to correct you.

    The Fool said: "So far, Inovio hasn't generated an impressive enough immune response for its other clinical candidates to justify initiating a pivotal late-stage study."

    The above comment is either intentionally misleading or simply incompetent - which is it? Of course the fact that Inovio has won international accolades and awards for its' Best in Class T-cell responses doesn't count, right? Below is one of many examples of Inovio's breakthrough performance in immune response: : "Inovio's CELLECTRA® Electroporation Delivery Technology Powers Durable, Best-in-Class T-Cell Responses from HIV Vaccine in Human Study"

    The "pivotal late-stage study" - as any student of clinical trials should know - needs to happen in orderly sequence. Phase 1, Phase 2, Phase 3, right? Or can't you count from 1 to 3? Cool your jets, and maybe next time do your research.


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George Budwell

George Budwell has been writing about healthcare and biotechnology companies at the Motley Fool since 2013. His primary interests are novel small molecule drugs, next generation vaccines, and cell therapies.

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