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What Stock Looks Best-Suited for Annual Gains of 300%?
OncoSec Medical looks well positioned for a great 2014
By Amy Baldwin
Feb 23, 2014 7:37:29 PM PST | 56 View(s) | No Comment(s) - Post a Comment
Biotechnology has been the hottest sector of the market for the better part of two years. It’s true, 300% annual gains have almost become the norm for investors in this space. Though the question remains: what makes for a 300% gain? What are the events that have to play out in order for such gains to become a reality? In answering these questions, let’s first take a look at Inovio Pharmaceuticals (INO), and then shine a light on another company that might see a similar return based on what drove Inovio shares higher in the last 12 months.
What, Why, & How
Inovio Pharmaceuticals is a company focused on the development of synthetic vaccines to treat cancer and infectious diseases. Its synthetic vaccines are then delivered to patients via electroporation, a delivery device that uses electrical currents to give agents a clear pathway to the targeted area. It is this technology that is the epicenter of what makes Inovio both speculative, but also promising.
In 2012, Inovio was a $100 million company with multitudinous products in early development. But, in 2013 it then took off from the mid-$0.50s to its current price, just shy of $3.00. There are three reasons for this breakout in stock performance.
1.Inovio gave the market something unexpected:
Inovio really had three key announcements with its pipeline that took investors by surprise. First, a vaccine developed to prevent H7N9 flu protected 100% of animals that received a lethal dose of the virus. This occurred at a time when deaths caused by this strain were rising rapidly. Inovio also discovered that its electroporation helped to improve the effectiveness of its Pennvax-B HIV vaccine, which helped to validate electroporation as a delivery method. Finally, a preclinical test of a MERS vaccine “induced robust and durable immune response”.
All of the above trials/data were early-stage, but combined gave Inovio investors more reason to be optimistic for the future of electroporation as a way to treat a vast array of diseases.
2.Partnership validates program:
Roche agreed to a partnership on two preclinical candidates with an option for other programs in a deal that could be worth more than $400 million for Inovio. Any partnership is big news for a small biotech, but to partner with a leading research and development company like Roche is a great sign of confidence. This unanticipated event sparked a lot of interest in Inovio.
3.Anticipation of data:
Later this year, Inovio will present Phase II data on a program called VGX-3100 in treating cervical dysplasia. This data will be the most significant to date in terms of patient population. Naturally, Inovio is trading higher in anticipation. Investors are optimistic because of the data already produced.
Which Company Can Repeat History?
In seeking a company that could be the next to produce such gains (and in understanding what drove shares of Inovio higher), OncoSec Medical (ONCS.OB) looks like a solid contender.
Aside from the fact that OncoSec and Inovio both develop electroporation technologies, the catalysts and operations between the two companies are rather alike. Also, OncoSec currently trades with a market capitalization near $100 million, which is the same value Inovio sat at prior to its breakout year.
OncoSec already has robust data in treating melanoma with its ImmunoPulse platform, which is a combination of IL12 and electroporation, along with two other ongoing Phase II trials. According to the company, there will be a new trial in 2014-- and possibly more than one. This brings up the first point of providing something unexpected to the market, which will likely come in the form of treating a new indication with electroporation and an agent besides IL12, most likely an anti-PD1.
OncoSec will more than likely provide some preclinical data to support a larger trial in using electroporation plus an anti-PD1. It is this announcement/data that could cause shares of the company to go sky-high.
Second consideration: OncoSec doesn’t have a partnership with large pharma. But with two announced partnerships in the last year (one being Inovio/Roche), many are expecting OncoSec to be next in line to attract a partner. If so, OncoSec would most certainly trade much higher.
Third, there is the anticipation of Merkel cell carcinoma (MCC) data-- although investors don’t seem too involved in the near-term data in treating MCC. This is an orphan disease; OncoSec is hoping to produce the first FDA approved treatment to fight the cancer.
Currently, OncoSec is treating MCC in an ongoing Phase II trial. The company has already seen IL12 uptake of up to 1,000 fold, meaning electroporation is doing its job to deliver the cancer-fighting agent and allowing the immune system to work its magic. If such data holds, OncoSec could possibly earn an accelerated approval-- or at the very least large stock gains once data is released.
Conclusion
At the end of the day, Inovio traded higher for all the right reasons, driven by data and catalysts. Looking ahead to the next 12 months, OncoSec looks to have the potential for many of those same catalysts. Ergo, if you’re examining catalytic factors for what boosted Inovio’s value, and seeking a company that could produce equal returns with similar catalysts, it seems reasonable to suggest a peer with the same technology that’s positioned in much of the same way as Inovio this time next year. Overall, this insinuates a big year for OncoSec Medical.
