Inovio Pharmaceuticals Inc (INO)

[Lakers_w]

Inovio Undervalued On Potential 2022 Catalyst
Jan. 26, 2022 5:36 AM by William Meyers
Summary

Inovio’s stock price is back near pre-Covid levels.
It is nearing commercialization of its HPV dysplasia vaccines.
It might even still succeed in the Covid vaccine game.

Inovio (INO) is a leader in DNA plasmid-based vaccines. It already had an extensive pipeline of potential vaccines against a variety of indications back in 2019. When the Covid pandemic hit, it quickly announced it was developing a DNA vaccine for Covid. But delays from regulators kept pushing back that timeline. Today Inovio’s Covid vaccine is in Phase 3 trials, but no date has been announced for final data. Given all this, it is not surprising the stock price surged from a base of around $2.25 per share in 2019 to a peak of $33.79 on June 22, 2020. Lately it has slumped to close at $4.04 on January 24, 2022, giving the company a market capitalization of just $850 million.

While I believe there is still the possibility of eventually seeing revenue from its Covid vaccine, or from an update engineered to handle variants, in this article I will focus on the HPV dysplasia pipeline. I believe that this segment of the pipeline, by itself, can propel Inovio to commercial success and a significantly higher stock price within the next few years.

VGX-3100 for cervical dysplasia
In March 2021, Inovio reported its first VGX-3100 Phase 3 trial for cervical dysplasia had positive results. The disease is caused by HPV infections and is also known as HSIL or high-grade squamous intraepithelial lesions. More simply, pre-cancers. This was the first time a DNA plasmid medicine achieved efficacy endpoints in a Phase 3 clinical trial. Topline results were that 23.7% of patients achieved histological regression with viral clearance versus 11.3% in the placebo group. Positive secondary results included HPV clearance. More detailed VGX-3100 results were released in December at the 34th International Papillomavirus Conference. Notably patients treated with VGX-3100 who were cleared of HPV at week 36 remained clear of HPV-16 and HPV-18 at week 88. Then in late December Inovio announced completion of enrollment in the second Phase 3 VGX-3100 study. Top line safety and efficacy data for this REVEAL2 trial should be available in the second half of 2022. In addition, with partner Qiagen, a biomarker to predict which patients are likely to have positive results is under development. A third Phase 3 trial is being run by partner ApolloBio in China to help gain regulatory approval there.

There is no guarantee yet, but it looks to me like VGX-3100 is headed towards regulatory approval and commercialization for cervical dysplasia. Guessing how much income could be generated is highly dependent on the pricing of the therapy. Technically it is a vaccine, but I expect it to be priced more like a cancer therapy. In America alone there are at least 250,000 cervical dysplasia diagnoses annually. That may go down over time as preventative vaccines like Gardasil are given to more adolescent women, but given the opposition to the vaccine, it is not likely to go away during the patent life of VGX-3100. The current treatments, once the disease advances to high-grade dysplasia, are various forms of surgery. Failure to treat can lead to cancer. I would be surprised if the vaccine treatment is not in the $1,000 to $10,000 range in the U.S.

VGX-3100 for vulvar neoplasia
VGX-3100 is also being used to treat vulvar neoplasia. Current treatments are like those for cervical dysplasia. It is, however, far less common, with only about 6,000 new U.S. cases annually. In January 2021, Inovio reported positive interim results from the open-label Phase 2 trial of VGX-3100 to treat HPV-16 and HPV-18-associated vulvar HSIL in 24 patients; 5 patients withdrew before evaluation. At six months post-treatment a 25% or more reduction in HPV-16/18-associated vulvar HSIL was observed for 63% of participants treated with VGX-3100. Three patients with histology data (15%) resolved their vulvar HSIL and had no HPV-16/18 virus detectable in the healed area. The trial will continue for 18 months following the last dose.

VGX-3100 for anal dysplasia
In December 2021 at the 34th International Papillomavirus Conference, new positive Phase 2 data was released for VGX-3100 for anal dysplasia, which can lead to anal cancer. Inovio is in discussions with the FDA on Phase 3 trial options for anal and vulvar dysplasia.

Other pipeline highlights
Inovio is working with Regeneron (REGN) to find a cure for glioblastoma, the most aggressive form of brain cancer. Phase 2 data has been good so far for the combination of INO-5401, INO-9012, and Libtayo, a PD-1 inhibitor. In late 2020, Inovio shared encouraging interim OS18 (overall survival at 18 months) data, which also demonstrated immunogenicity and tolerability in a majority of patients. We are now waiting for 24-month overall survival data from the Phase 2 trial. While there is an urgent need for an effective glioblastoma therapy, meaning the possibility of FDA conditional approval based on Phase 2 trial data, more likely a Phase 3 trial will be required. It looks like commercialization is not likely before 2026. If approved by the FDA and other regulators the combination could be a very large revenue generator.

In Q4 2022 Inovio announced full enrollment in its Phase 1B clinical trial for INO-4500 vaccine for Lassa fever. This is the first vaccine clinical trial for Lassa fever conducted on the African continent, where the disease is endemic. The trial enrolled 220 adult participants with the primary endpoints of evaluating safety and immunogenicity.

The complete Inovio pipeline includes several other DNA vaccines for infectious diseases and cancers, most at earlier stages of development.

Cash and burn rate
At the end of Q3 2021 Inovio had $395 million in cash and short-term investments. Revenue, mainly from collaborative R&D arrangements, was $291 thousand. Operating expenses were $60.2 million. If we take $60 million per quarter as a cash burn rate, Inovio can operate into at least Q1 2023 on its current cash. It could also raise more money through licensing. If VGX-3100 cervical dysplasia results are positive and submitted for FDA approval, I would expect additional stock to be issued to raise money for commercialization efforts.

Conclusion
With its VGX-3100 dysplasia HPV vaccine nearing commercialization, I think Inovio is highly likely to be headed towards commercial success. If it also gets approval for its Covid vaccine, it looks like the pandemic will still be with us, somewhere in the world, so sales of that are possible as well [something I discounted when other vaccines became available in early 2021]. I hope that Inovio will also be able to use commercial revenue to progress and expand its potential DNA vaccine therapy pipeline. The current market capitalization of $850 million includes some assumption of success, but since I expect VGX-3100 revenue to top $250 million annually at some point, in my view Inovio is currently undervalued. Positive Phase 2 glioblastoma results could also be a catalyst for a higher stock price. There is risk that the second Phase 3 VGX-3100 trial results will not be positive, or that the FDA will find some reason to reject the vaccine, or that the market for the vaccine will be smaller than I anticipate. Those who are risk-averse would probably want to wait to see further results before investing.
https://seekingalpha.com/article/4481675-inovio-stock-undervalued-on-potential-2022-catalyst