Inovio Pharmaceuticals Inc (INO)

[chmcnfunds]

Inovio Poised For Breakthroughs In 2018 And Beyond

Jan. 1, 2018 11:25 AM ET|About: Inovio Pharmaceuticals, Inc. (INO)

Summary

Focus is on near term hidden value rather than trading technicals (e.g., up to 9 marketable vaccines and 3 priority review vouchers in 2018/2019).

We explore Inovio partnerships for 2018/2019 to unlock further hidden value.

Inovio is near a 52 week low with a ~$373 million market cap with opportunities worth multiples of that value.

Discussion

Many investors that look at Inovio see a 2020 market opportunity for Inovio’s flagship product (VGX-3100) for cervical dysplasia caused by HPV.

We present near-term opportunities for Inovio starting in 2018 and extending thru 2020 which many potential Inovio investors overlook. In order to understand the hidden opportunity one first has to look at the growth that occurred between 2014 and 2017 to setup for 2018:

Employees went from 86 (August 2014) to 271 (July 2017). (slide 40 Investor presentation)
San Diego office space has grown by ~51,000 square feet. Pennsylvania office space has grown by ~30,000 square feet (page 18)
Inovio has acquired needle-free injection technology and is planning on integrating that technology with electroporation to have next generation intradermal needle free delivery which will be perfectly suited for infectious diseases. Inovio’s top talent here includes:
Dr. Kate Broderick leadership with electroporation
Fluid dynamics experts from Texas Tech to optimize intradermal delivery.
The patent portfolio is several hundred strong with dozens added each year
Inovio ranked number 107 out of Deloitte’s Technology Fast 500 growth award.
We look at Inovio’s partnerships which unlock each of the hidden opportunities starting in 2018 with an understanding that the current Inovio market cap (~$373 million) is likely too low given these hidden opportunities.

Supplemental Information

Several of the topics discussed in this article go in to a level of details which are beyond the scope of a short article. The reader is encouraged to read the Supplemental Information here where more details exist beyond the scope of this short article.

Near Term Hidden Value (Up to 9 Marketable Vaccines and 3 Priority Review Vouchers)

In 2018 Plumbline Life Sciences (16.8% owned by Inovio) is expected to market 2 new vaccines (PLS-D5000 which is a dog version of Inovio’s Tert vaccine and PLS-D1000 for renal failure in dogs) in addition to expanding the market of a third already marketed DNA vaccine for pigs (LifeTide SW5). There are also indications that Plumbline Life Sciences may be readying 3 additional vaccines for market by end of 2019. See Supplemental Information for details.
The key here is that these 6 products represent royalties (due to Inovio owned patents), an ownership position by Inovio, and electroporation device sales by Inovio since the Plumbline products depend on Inovio EP. Three of these 6 products have the potential for sales in 2018. Three more have potential for sales by end of 2019.
Inovio will also license a 7th product to Plumbline for marketing at some point in the early 2020’s related to Foot and Mouth Disease
The FDA Emergency Use Authorization (EUA) has at least 3 vaccines (Ebola, MERS, Zika) and less likely a 4th (H7N9 influenza) which Inovio could bring to market over the next 3 years. An EUA approval could yield a priority review voucher (PRV) from the FDA which has a worth of roughly $350 million per voucher in recent history (roughly the same as current Inovio market cap per PRV and there are more than one PRV with potential in the near term). There are also a few vaccine types that Inovio works which may not qualify for an EUA but would qualify for a PRV including Dengue, Malaria, and Tuberculosis. One path that an EUA can take is by “animal rule” where a safety trial plus data from 2 animals is required to bring a solution to market.
Currently the Ebola vaccine from Inovio is the furthest along as a potential EUA. The Inovio Ebola vaccine is possible to go to an EUA in 2018 per Dr. Kim’s comments in 3rd Quarter 2016 conference call which state “The path for Ebola vaccine will likely involve the use of animal rule and we will look to get the clarity armed with our 200-patient study data in 2017”. It is speculation what an EUA approval for Ebola might look like in 2018 but one likely way that it could look is a US government stockpile order for somewhere between 50,000 doses and 200,000 doses along with an order from Inovio for electroporation devices to deliver those doses in case of an emergency.
The next most advanced candidate for EUA from Inovio is MERS. Associated with MERS is an “Advanced Biopharmaceuticals International Center of Support” (ABICS) hosted by VGXi (leading contract manufacturer of DNA plasmids) which Inovio partially owns and partners with. An EUA approval for MERS is possible in late 2018 or early 2019. Again it is speculation on how the rollout for an EUA for MERS would occur. But it is likely that vaccinating young dromedary camels which are the main carrier of MERS would occur in late 2018 possibly followed by either a stockpile order or a prevention order for humans in areas of the world where young dromedary camels exist. Associated with both camel and human vaccination of MERS is also a device delivery order from Inovio for electroporation devices to deliver the vaccines. Initial rollout for the Inovio MERS vaccine would be for the preventative version that Inovio develops. However, an Inovio therapeutic dMab solution may be available a couple of years later.
The Inovio Zika solution has the potential to go for general worldwide use in 2019 or 2020 by EUA. Please reference my article here for a detailed discussion. As with MERS the first EUA will likely be for a preventative solution. A couple of years later the therapeutic dMab version of Zika will be available. Zika has the potential for most doses required out of any EUA due to the worldwide presence of the Aedes aegypti mosquito that carries the disease. It likely will be debatable regarding the ability to give a Zika vaccine to a mother in pregnancy but Inovio will likely be well situated to prevent Zika based on data to date. A 40 person human trial completed in December, 2017 while a 160 participant trial has a completion date of June 2018.
Near Term Inovio Partnership Activity

In 2018 Geneos Therapeutics may be exciting to watch as it either performs an IPO spinoff of Inovio or makes further announcements as a fully owned Inovio subsidiary. Per the 3rd quarter 2016 earnings conference Dr. Kim stated “We (Inovio) incorporated a 100% owned subsidiary Geneos Therapeutics Inc to develop and commercialize neoantigen based personalized cancer therapies.” “Geneos plans to build its own team and independently secure operating capital, it will not use Inovio’s resources”. These statements imply funding from an outside source which likely implies a partner in the newly formed company. Possible partners for Geneos Therapeutics are discussed in the Supplemental Information about Inovio Partners. The neoantigen space which Geneos Therapeutics targets is the first entry in to the personalized medicine space by Inovio which should well complement the generalized therapies that Inovio already targets. Similar types of IPO’s in the personalized medicine space have been going for $115 million and $93 million. Depending on the partner and the scope of Geneos Therapeutics the value of a Geneos IPO has the potential for being worth more than that.
Medimmune partnership could yield rewards in 2018. The partnership is worth $727.5 million and a milestone payment is likely in 2018 with a value of potentially 10’s of millions of dollars for 2018 and follow up milestone payments expected in subsequent years.
ApolloBio partnership could yield rewards in 2018. There is a potential China market opportunity for Inovio for VGX-3100 (for cervical dysplasia) and potentially other indications if the People’s Republic of China (PRC) corporate and regulatory approvals occur. The partnership details will likely either be agreed or rejected soon and may involve an investment on the part of ApolloBio in Inovio stock. For 2018 the immediate benefit is the potential of money to Inovio to help fund 2018 activities if the deal can be agreed upon. Subsequent years can see additional benefits if and when Inovio products are approved for sale in China.
The Coalition of Epidemic Preparedness (CEPI) and DARPA P3 both have significant potential for offering large grants or even orders for Inovio vaccines or devices in 2018. Significantly CEPI already lists Inovio as a partner and DARPA P3 has invited Inovio to speak with them. Both programs have potential to move very fast once they get started because timelines on orders for both programs are on the order of weeks, not years. CEPI is driving towards a model of being able to target an infectious disease within 16 weeks of identification whereas DARPA P3 is driving towards a 60 day model. If these timelines are taken literally there is potential for products to be produced from these two partnerships within 2018 although more likely there will be grants offered in 2018 with potential products offered in the years following. DARPA has already granted $45 million to Inovio for preliminary work using Ebola as a target vaccine. And CEPI has declared that “finishing the job on Ebola” is a priority to CEPI whereby per the above section on EUA’s that is very possible to do within 2018. Please read the Supplemental Information for further details about these 2 exciting programs and how they may be connected to Inovio. 2018 should be exciting for both.
The Gates Foundation and the Penny Heaton Medical Research Institute (associated with the Gates Foundation) are two other avenues that grants may be possible particularly for tuberculosis which Inovio is involved with. The Gates Foundation has already provided $8.8 million in funding to Inovio and Inovio’s science partner (Wistar) for furthering Zika dMabs. There is an interesting story about how Gates, CEPI, Penny Heaton, Wistar, and Inovio could all be connected. Please read the Supplemental Information for details. For 2018 there is potential for the Gates Foundation to get further involved as these stories evolve
IVI (International Vaccine Institute) is sponsoring Inovio’s MERS vaccine. And perhaps equally as important the IVI has 3 Inovio board members on the IVI board of Trustees. Those board members include Dr. Adel A.F Mahmoud (Inovio board of directors), Mr. George Bickerstaff (Inovio board of directors), and Dr. Joseph Kim (CEO Inovio). IVI has a global footprint that includes South Korea, China, India, Brazil, and other Asian, African, and South American countries. In addition to MERS the IVI also has a focus on Dengue and “Aedes-transmitted Diseases”. That is convenient because Inovio’s dengue, Zika, and chikungunya vaccines fall in to this category of IVI focus. It is reasonable speculation that Inovio will launch some of these dMab candidates in 2018 and that IVI will help to contribute towards their cause.
Inovio mentions in its PR that Regeneron Pharmaceuticals is interested in solutions to rheumatoid arthritis. Per an earlier PR Inovio mentions that dMabs have the potential to solve rheumatoid arthritis. Dr. Kim during 3rd quarter 2017 conference call stated “We have our own version of Humira which is the largest selling rheumatoid arthritis (solution). I think it is a highest grossing pharmaceutical product today with over $10 billion sales”. One could speculate that Inovio could partner with Regeneron on a solution to rheumatoid arthritis in 2018 to meet Regeneron’s desired result. Inovio and Regeneron are already partnering on glioblastoma.
Dr. David Weiner from Wistar has signed a collaborative research agreement with Inovio. This lab is the heart of vaccine creation for Inovio although other partners contribute as well. Imagine the ability to support 100,000 vaccines within 8 weeks of an emerging outbreak or the ability to support the US military within weeks of an infectious disease outbreak. Imagine the ability to cure HIV or to break thru cancer defenses in multiple ways to potentially provide a cure to cancer. This is what Wistar is working on for deployment in 2018. In 2018 advances include:
DNA monoclonal antibodies (dMabs trademark) from Wistar and Inovio have the potential to bring 17 or more therapeutic, fast and potent immune response solutions to clinical trials per slide 36 of the Inovio Investor Presentation.
dMabs have the potential of addressing DARPA P3 goals of cutting response time to weeks and staying within the window of relevance for containing an infectious disease outbreak which can be used to support US military deployments.
dMabs have the potential of addressing CEPI Call for Proposal #2 which targets a 16 week timeframe from identification of antigen and a 6 week timeframe from administration of first dose to achievement of clinical benefit, and ability to produce 100,000 vaccine doses within 8 weeks to impact an emerging outbreak. Additionally, the Call for Proposals requests support for Lassa, Ebola, MERS, Zika, and Chikungunya. All 5 of these items are addressed by Inovio in dMab form per here, here, here, here, and here. If you read those latter links the results are quite impressive.
dMabs are also likely for 2018 in cancer, influenza, RSV, and even in antibiotic resistance
In early 2018 we can expect to hear more on Inovio’s clinical results from its Pennvax-GP vaccine for HIV which completed November, 2017 with 94 patients. Inovio and Wistar are committed to curing HIV. Inovio so far has demonstrated with nearly 100% success the highest overall levels of immune response rates in humans in any human study in 2017. Over 15% (9 of 29) “BEAT HIV” faculty come from Wistar including Dr. David Weiner himself. Wistar has nearly $23 million in funding for HIV. Note that this grant is for an HIV dMab similar to those discussed above. Equally important is the ability to test HIV solutions as they are created and to that end Inovio test partners are also receiving money. There is a potential of HIV being fast tracked in 2018.
In 2017 Wistar and Inovio announced some exciting cancer solutions including WT1 which can break tolerance and targeting FAP which helps fight the tumor microenvironment. When these are combined with a universal cancer therapy (hTert) and an immune activator (IL-12) and further combined with a checkpoint inhibitor such as PD-1 there are some exciting things to look for in 2018 for helping to cure cancer.
For those questioning whether these vaccines will work, please watch this video particularly at the 10 minute 35 second mark. This is the principal investigator of Inovio’s flagship product (who does not work for Inovio) discussing with emotion how well Inovio’s vaccines can work with “every reason to think that we can tweak the system to get cure rates even higher”. Wistar has been tweaking for the past 2 years for greater success which makes 2018 and beyond even more promising.
Walter Reed and the US Army have partnered with Inovio over the past several years. More recently the partnership has been with testing of MERS. In the recent past Connie Schmaljohn from USAMRID and Inovio have partnered on electroporation for Army needs including a multi-head intradermal electroporation device to provide spatial separation to reduce interference of multiple vaccines provided to a patient simultaneously as might be required for troops being prepared for overseas deployment. And also recently Inovio and the Army are working together on a Lassa vaccine. And this Inovio paper, while the Army is not mentioned, is specifically setup to be aligned with the defense of the US military for the use of preventing a clostridium botulinum neurotoxin attack. Critical Limb Ischemia (NYSE:CLI) is also of importance to the Army and Inovio has been involved with that as well. The relationship of Inovio with the Army dates back over 10 years. Examples include a 2013 collaboration with Connie Schmaljohn from the Army for $3.5 million, a 2008 collaboration for bio-defense, and a 2006 $1.1 million collaboration. Historical collaborations give a clue as to how the future relationships with the company will go. One could expect that the past Army interest in intradermal electroporation will have an Inovio 2018 bioject intradermal device looking desirable to the Army. One may speculate that the Army would be interested in an order of bioject intradermal devices (potentially a multi-headed device for simultaneous injections which are spatially separated) in either 2018 or 2019.
Inovio has a significant ownership of partner Geneone Life Sciences in South Korea now that VGX in Woodlands, Texas (which Dr. Weiner and Dr. Joseph Kim cofounded) became a subsidiary of Geneone. Over 2018 Geneone will play a role in advancing Inovio partner vaccines to regulatory approval paths including Ebola, MERS, and Zika. Geneone will also play a likely role in advancing several dMabs particularly in the cancer space (anti-HER2 and herceptin per here and here).
Grants received can offset cash burn rate for Inovio in 2018. Examples of grants include:
Gates Foundation $6.1 million sub-grant through Wistar for Zika
IVI and Samsung Foundation grant of “part of” $34 million for MERS
Three separate grants of $6.95 million, $25 million, and $16 million are awarded from NIAID to Inovio and collaborators for HIV. The $6.95 million grant is for a two-step clinical study in HIV positive subjects to assess Inovio’s HIV immunotherapy PENNVAX-GP with INO-9012 (an IL-12 immune activator).
Inovio is in the ending phase of wrapping up a $45 million DARPA grant from 2015 with likely further interest from DARPA P3 program as mentioned in this article
Inovio has smaller ongoing grants from the US Army for advancing delivery of DNA vaccines. For example, in 2016 it received a grant for $500,000 which is an ongoing series of small grants from the Army dating back more than a decade.
Other partnerships exist that could impact 2018 for Inovio. Please reference the Supplemental Information to this article for details.
Inovio Investment Proposition

As with any investment there are risks involved. Please do your own due diligence and be aware that shares can lose value as well as gain value. As of the time of this writing Inovio is trading near its 52 week low ($4.13 per share currently versus $4.09 at the 52 week low point). Factors involved with trading low include a recent dilution to raise cash.

Inovio’s cash position is over $100 million compared to a market cap near $373 million with no debt which is a favorable cash to market cap ratio. The Medimmune partnership alone has a potential value worth roughly twice Inovio’s current market cap not accounting for any other partnerships mentioned in this article. Many of the other partnerships mentioned also have potential to be multiples of Inovio’s current market cap. A potential spinoff of Geneos Therapeutics can also represent multiples of the current market cap of the stock. Also the patent portfolio owned by Inovio is quite large with over 100 patents protecting Inovio intellectual property. An investor might factor in the value of that patent portfolio in addition to Inovio’s cash position when considering an investment in the company.

Cash burn rate was high over the 3rd quarter of 2017. However, we present in this article multiple events that have the potential to occur in 2018 to offset the burn rate and even has the potential of being a profitable 2018 if events are favorable. Contributing to cash burn rate is higher employee count at over 270 employees but at the same time those employees are contributing to the growth model to address the opportunities presented in this article. Also contributing to cash burn rate is larger office space but at the same time that office space represents an opportunity for device shipments to customers and manufacturing ramp up to be ready for shipments of product which is required of late stage biotechs. Last, contributing to cash burn is a larger pipeline including a phase 3 trial but on the flip side a bullish argument could be made that the larger pipeline is leading to greater opportunities for Inovio to provide solutions to market and to potentially partner with others.

Summary

Frequent published analyst articles focus on short term technical volume and price based indicators. This review focuses on pipeline, industry partnership, and fundamental issues that are believed by the author to be stronger indications of the future direction of the company.

We have presented dozens of vaccine targets that are on the short term radar for Inovio. We have listed multiple partnerships and associations which will drive Inovio growth forward in the coming years starting in 2018. We have examined the potential for 6 products to be released by partner Plumbline Life Sciences ahead of VGX-3100 (Inovio’s cervical dysplasia product) going commercial including a few products with potential commercial viability in 2018. We have examined 3 likely candidates for EUA approvals for either stockpile orders or field use authorizations for Inovio products ahead of VGX-3100 going commercial in 2020. We have examined internal growth within the company and by its partners. And we have documented both US government (DARPA/Walter Reed/Army) and international (CEPI/IVI/other) interest in Inovio progress. We have discussed the potential of 6 priority review vouchers (PRV’s) which may be obtained by Inovio starting in 2018 each of which may be worth up to the current approximate market cap of Inovio. The future looks bright for Inovio. And if the indications of this article hold true the future brightens significantly starting in 2018.

Again, the reader is encouraged to visit the Supplemental Information link for this article.

Stocks: INO

Disclosure: I am/we are long INO.

Additional disclosure: The author was not paid or compensated for the views in this article.
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https://seekingalpha.com/instablog/47724076-douglas-mcbride/5092974-inovio-poised-breakthroughs-2018-beyond

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