Inovio Pharmaceuticals (INO 0.59%) isn't a particularly well-known or prominent name in the biotech industry, but some may remember it as one of those smaller companies that sought to develop and market a coronavirus vaccine in the early years of the pandemic. Inovio's efforts were unsuccessful, and since then, the stock has lost significant market value. Will it continue moving in the wrong direction? Or is there a rebound in the cards?
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Is Inovio's first approval close?
First, for the good news. Inovio Pharmaceuticals is a fairly innovative company that develops DNA medicine, a type of therapy that gives patients' bodies the blueprint to produce specific immune responses to fight diseases. One of Inovio's most advanced candidates is INO-3107, a potential medicine against recurrent respiratory papillomatosis (RRP), a rare disease caused by certain strains of the HPV virus that leads to the growth of non-cancerous tumors in the respiratory tract, potentially causing severe difficulty breathing.
INO-3107 could have a decent commercial opportunity, with an estimated 14,000 cases of RRP in the U.S. every year and few treatment options. In fact, the U.S. Food and Drug Administration approved the first therapy for RRP last year, and some analysts estimate that this INO-3107 competitor could reach peak sales of about $1.1 billion. Inovio requested FDA approval for INO-3107 last year.
Inovio Pharmaceuticals has several other pipeline candidates of the DNA medicine variety. If INO-3107 is successful, the biotech will have demonstrated that its platform can deliver significant clinical and regulatory outcomes. It could be the start of a rebound for Inovio Pharmaceuticals.
NASDAQ: INO
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Lots of complications
That said, Inovio Pharmaceuticals faces significant risk. First, although it requested accelerated approval for INO-3107 under the accelerated approval pathway -- which would fast-track the process and require Inovio to conduct post-approval studies to demonstrate efficacy to keep the medicine on the market -- the FDA rejected this strategy, with regulators arguing that the company has not provided sufficient justification for INO-3107's eligibility for the accelerated approval program.
The medicine may still be approved later this year, but since Inovio itself thought it would need confirmatory trials, there is a good chance the agency will decline to approve INO-3107 and request more data supporting efficacy before it can hit the market. Second, Inovio's DNA medicines are administered using its proprietary Cellectra electric device (it sort of resembles an electric toothbrush). This complicates manufacturing (it is more expensive) and commercial rollout, since many physicians and health insurers may hesitate to adopt the therapy given this extra step that has yet to be proven in the real world.
Third, Inovio has encountered several regulatory setbacks in recent years, including a phase 3 clinical trial failure for one of its former leading candidates, VGX-3100, which was being developed to target HPV-related cervical precancerous lesions. Inovio still faces too many obstacles, and in all likelihood, the stock will continue to drop over the medium term. In five years, the company's shares could be worthless. It's best to stay away.
