Is Inovio Poised to Climb, or Will It Tumble?

VGX-3100 is a big opportunity for Inovio -- and a big risk.

Jun 26, 2014 at 1:34PM

Inovio Pharmaceuticals (NASDAQ:INO) discovers and develops synthetic vaccines and immune therapies focusing on infectious diseases and cancers. Here's what you need to know about this stock.

VGX-3100 a big binary event for Inovio
Large pharma interest within the space sets the backdrop for Inovio's pivotal mid-stage data readout for VGX-3100, expected between late June to late July. Delivered through Inovio's electroporation technology, VGX-3100 is indicated as a potential treatment for adult women with biopsy-proven HPV types 16 or 18 associated cervical intraepithelial neoplasia.

We also have to consider Inovio's partnership with Roche (NASDAQOTH:RHHBY), for the development of INO-1800 and INO-5150 for hepatitis B and prostate cancer, respectively. This represents a $412.5 million opportunity in milestone payments for Inovio, and potentially much more should Roche decide to explore additional indications. It is not inconceivable that Roche could decide to expand its partnership with Inovio by licensing VGX-3100 upon a positive top-line readout from the ongoing phase 2 trial.

Provided this understanding of the overall climate surrounding Inovio, the upcoming data readout is pivotal to the future of the company, as its other clinical candidates may not have shown enough of an immune response to warrant late-stage study.

Simply put, I suspect that this binary event will be crucial -- this is one of Inovio's most advanced pipeline candidates, and it's crucial, not just for the drug itself, but also to help validate the pipeline.

Are DNA vaccines still viable?
It seems that as clinical trials progress into phase 2/3, DNA vaccines tend to produce suboptimal immune responses in humans, potentially lending credence to the bear case with respect to Inovio that VGX-3100 could be destined for a similar fate. Of course, since Inovio has yet to develop a commercial product since its inception, the bear case may be all the more relevant.

Despite the fact that Inovio is planning on using its own immune activator called IL-12 as part of the vaccine regimen in further clinical testing of VGX-3100, there remains the looming concern that the enhancement may not significantly improve the prospects of success.

Thus, while many are optimistic about VGX-3100, clinical failure would likely be catastrophic to shareholders as it is the lead clinical candidate at this time.

Strong financial position
For Q1 2014, Inovio lost $11 million, or $0.05 a share, missing analyst expectations. However, earnings were bolstered by Inovio's research agreement with Roche, which accounted for three developmental fees totaling $1.4 million. As a result, total revenue was $2.4 million for the quarter, beating the consensus of $1.41 million. Inovio has plenty of cash -- about $116.8, with $63.3 million garnered from an underwritten offering during the quarter -- so cash burn isn't an immediate issue, although Inovio will eventually need additional cash unless a partnership is signed.

My Foolish takeaway
Post reverse-split, short interest stands at roughly 13.6% of the float. This indicates that there are many who are betting on a decline, following the top-line readout anticipated to be between late June-late July.

Given the negative sentiment surrounding the top-line readout of VGX-3100, as well as the poor track record of DNA vaccines, I think investors should sit on the sidelines until after the binary event occurs.

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool’s new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

 

Trevor Lowenthal has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers