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Is Inovio Pharmaceuticals' Zika Surge Premature?

By Keith Speights - Feb 4, 2016 at 3:59PM

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The biotech's stock has heated up recently with fears about the Zika virus. Too much too fast?

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Zika fever has spread across the globe. I'm not referring to the virus itself, although reported cases continue to increase. I'm talking about the frenzy of the media over Zika. And the clamor has even spread to the investing world. Just look at Inovio Pharmaceuticals (INO -0.72%).

As stories about the Zika virus made headlines, Inovio's stock soared more than 20% thanks to intense speculation about Inovio's potential to develop a Zika vaccine. Although it's given up some of those gains, the biotech's stock is still up by a double-digit percentage. But is Inovio's Zika surge premature? 

Years away
The way the market has reacted in driving Inovio's shares higher, you might think that the company has a Zika treatment nearly ready to go. That's really not the case.

Dr. Anthony Fauci, director of the National Institutes for Allergy and Infectious Diseases, said in a briefing about the virus, "It is important to understand we will not have a widely available safe and effective Zika vaccine this year and probably not in the next few years." Fauci's caution stems from the fact that there has been no human testing of any potential vaccines for the virus yet.

Inovio is currently testing an experimental Zika vaccine on animals. The company hopes to complete that effort by the third quarter of 2016. If all goes well, Inovio would then move forward with phase 1 clinical studies of the vaccine in the latter part of the year. 

Phase 1 clinical trials typically involve a small group of patients and focus on safety. Most drugs must go through two other phases before they can be considered for regulatory approval. However, there's a reasonable chance that a Zika vaccine could win approval after phase 2 testing if the vaccine is demonstrated to be safe and effective. Still, even if Inovio quickly advances through the regulatory process, any approval is well down the road.

Other runners in the race
Inovio also isn't the only company racing to tackle Zika. French drugmaker Sanofi (SNY -0.60%) already developed the first vaccine for dengue -- Dengvaxia. The symptoms of Zika are similar to dengue. According to the World Health Organization, Zika can even be misdiagnosed in parts of the world where dengue is widespread. 

Because of these similarities, Sanofi thinks that its dengue vaccine could potentially be a good fit to fight Zika as well. It took the company over 20 years to develop and test Dengvaxia. However, Sanofi believes that the time to launch a vaccine to combat Zika will be significantly less with the infrastructure the company has built for the dengue vaccine.

Another large pharmaceutical company, GlaxoSmithKline (GSK -0.43%), might also jump into the race. Glaxo claims a long list of vaccines already on the market for addressing other diseases. It is trying to wrap up feasibility studies quickly to determine if any of its existing products could also treat Zika.

Vaccines also aren't the only way to potentially fight Zika. Intrexon's (PGEN -8.44%) genetic technology could help control Zika by attacking the primary way that the virus spreads. Intrexon's subsidiary, Oxitec, has developed genetic modifications for mosquitoes that could be key in battling the virus. These genetically modified mosquitoes carry a gene that causes their offspring to die prematurely.  

Investors are placing high expectations on Inovio to emerge as a big winner in the race to fight Zika, and those could very well be justified. Inovio and Sanofi seem to have a lead over other players in developing a vaccine. GlaxoSmithKline faces longer odds, in my view. Meanwhile, Intrexon's mosquito control approach should also rack up success independently of the Zika vaccine race.

However, there's plenty of uncertainty for Inovio. Clinical testing doesn't always go the way everyone expects it to. Sanofi's dengue vaccine technology could prove to be much more effective than Inovio's DNA-based vaccine. The recent Zika-fueled surge in Inovio's shares could end up fading.

That being said, I still like the long-term prospects for Inovio. In particular, the biotech's VGX-3100 cervical dysplasia drug looks to be very promising. A phase 3 study of the drug starts up in 2016. With or without the "Zika fever," Inovio could be a hot biotech stock in the years ahead.

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Stocks Mentioned

Inovio Pharmaceuticals, Inc. Stock Quote
Inovio Pharmaceuticals, Inc.
$2.06 (-0.72%) $0.01
Sanofi Stock Quote
$49.88 (-0.60%) $0.30
GSK Stock Quote
$43.12 (-0.43%) $0.18
Precigen, Inc. Stock Quote
Precigen, Inc.
$1.48 (-8.44%) $0.14

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