Inovio Pharmaceuticals: Smart Devices And A Smart Investment (NASDAQ:INO)

Inovio Pharmaceuticals: Smart Devices And A Smart Investment (NASDAQ:INO)

On Tuesday, June 23, 2020, Inovio Pharmaceuticals (INO) announced that it had received a $71 million contract from the U.S. Department of Defense (DoD) to scale up manufacturing of its CELLECTRA 3PSP smart devices, as well as the procurement of CELLECTRA 2000 for Inovio’s COVID-19 DNA vaccine, INO-4800. This new award continues to strengthen and ensure the ongoing relationship between the United States Department of Defense and Inovio Pharmaceuticals, a relationship that dates back over the last several years.

Inovio CEO Dr. Joseph Kim added this regarding their upcoming work with the DoD,

We look forward to working closely with DoD, JPEO-CBRND and JPL-CBRND-EB to provide much needed protection to DoD personnel and their families through development of a safe and effective vaccine against COVID-19. This next generation smart device leverages the efficacy delivery and safety track record of an earlier version that has received CE mark certification and has been used in clinical trials to safely dose more than 2,000 patients in over 7,000 administrations of INOVIO’s DNA medicines. The current DoD contract further supports INOVIO’s large-scale production of devices and arrays to deliver potentially hundreds of millions of doses of INO-4800 next year to combat the global COVID-19 pandemic.”

In my last article, “Inovio Pharmaceuticals: Positioning for a Global Opportunity”, I wrote about the critical importance of this smart device for the effective delivery of Inovio’s DNA vaccines. In essence, I reported that without this device, INO vaccines are essentially worthless and ineffective. Therefore, with the DoD granting an award to scale up manufacturing as well as procurement for these devices, it serves to validate and acknowledge the significance of the marriage between electroporation (EP) for the delivery of Inovio’s DNA vaccines.



As a result of the DoD award, INO churned over 172M shares in volume for the day (a bit more than 110% of the entire float of outstanding shares), gained an additional 40% in SP appreciation and raised the market cap to $3.41B.Source: Tradingview.com

A Smart Decision

So, what makes this investment by the DoD such a smart decision? I’ll break this down into small parts so as to not lose the reader in the science of electroporation (EP) in order to illustrate the marriage between (EP) and the introduction of (DNA) into living cells and why the DoD gets it.

1. It all starts with identifying a sequence of the genetic code found in the disease target. Once the identification of a genetic sequence has been selected, the DNA plasmid (usually a circular ring of a harmless fragment of E Coli DNA), is encoded with only that portion of the sequence deemed safest to deliver an optimal response, hence the expression ‘optimized DNA plasmid’.

2. After pre-clinical trials on small animals (mice and guinea pigs), challenge studies of infected larger animals such as rabbits, ferrets and primates are initiated and the results analyzed to confirm safety and efficacy, as well as some time to allow for peer reviews, before a vaccine can move into human trials. This can take years however, Inovio has the advantage of years of prior research that make their rapid response platform to infectious diseases attractive to the DoD.

3. Next follows the introduction of measured doses of the pre-clinically tested DNA plasmid into humans. These occur in PHI, PHII and PHIII trials. The introduction of the DNA medicine is done via a common ordinary syringe into the upper layers of the skin.

4. Once injected into the skin via syringe it is followed by electroporation or better stated, a series of pulsed electrical discharges which open up small holes in nearby cells which allow the plasmids to enter cells. The pulses are spaced milliseconds apart and are administered using the 3PSP device, an electric toothbrush sized device (pictured below). The device is an un-tethered, AA” battery operated and uses disposable cartridge tips. It can be used for both intra-dermal (ID) and intra-muscular (IM) delivery.

It’s safe because the plasmid is only encoded with a nano piece of the gene sequence, in the case of COVID-19, a part of the spike protein. Once inside the cell, after EP, the DNA plasmids enable the cell to produce the targeted antigen. The antigen is processed naturally in the cell and triggers the desired T cell and antibody-mediated immune response. In lay terms, the body recognizes an unfamiliar visitor and activates the immune system to provide front line protection before the disease can infiltrate and infect a potential host.

For those new to the science, pictured below is an illustration of a circular DNA plasmid (in blue) and the added snippet of an antigen (in green) which depicts the DNA technology that Inovio identifies as “SynCon” or synthetic consensus.

Source: Inovio.com

Armed with all of this knowledge it makes sense for the DoD to capitalize on their partnership with Inovio. Inovio has repeatedly shown a proven safety profile while dosing over 2,000 patients with EP electrical stimulation. Additionally, it has shown to be the most efficient method to effectively permit DNA to pass through the protective membrane walls of living plants, animals and humans, a process known as ‘transfection’. Furthermore, the appropriate genetic sequence selection for plasmids used for delivering coded instructions that activates the immune system is part of the Inovio IP portfolio and why INO can design a vaccine in a matter of hours.

As described and detailed above, Inovio has produced an attractive platform for partnership with the DoD in order to protect its military members and their families with a safe and effective vaccine. This also has significant meaning in more than one way as two of my children are military members (US Army & USN) and the third is married to another (USAF). There isn’t a vaccine I would desire more for their protection, while serving this great country, than to see the approval of INO-4800. Inovio remains laser focused because saving lives and protecting our country is in their DNA, too.

Additional Smart Device Funding

On March 12, 2020, Inovio announced that it had received an award of $5 million from the Bill & Melinda Gates Foundation to accelerate the testing and scale up of their CELLECTRA® 3PSP proprietary smart device for the intra-dermal delivery of INO-4800. The press release adds this about CELLECTRA,

The device has been designed with reliability, challenging environments, user needs and ease of large scale manufacturing in mind. INOVIO’s San Diego Device Manufacturing facility will build initial quantities and demonstrate the design and scale up of manufacturing processes which can then be transferred to additional contract manufacturers for increased capacity. Initial development of CELLECTRA 3PSP was started in 2019 with $8.1 million funding from the medical arm of the U.S. Defense Threat Reduction Agency (DTRA)’s Medical CBRN Defense Consortium. The new funding will help to accelerate the testing and completion of the device development and scale up to combat the COVID-19 disease. INOVIO’s DNA medicine platform is ideally suited to rapidly respond against emerging viruses with pandemic potential. INOVIO was the first to advance its DNA vaccine INO-4700 against MERS-CoV, a related coronavirus, into evaluation in humans. INO-4700 is the only MERS-CoV vaccine in Phase 1/2a setting, and INOVIO is currently preparing to initiate a larger Phase 2 vaccine trial for INO-4700 in the Middle East where most MERS viral outbreaks have occurred. These efforts are supported by previous CEPI funding of up to $56 million and from other collaborators and partners.

Dr. Kate Broderick, PhD., and INO VP of R&D said this after the announcement of the $8.1M 2019 U.S. Defense Threat Reduction Agency Medical CBRN Defense Consortium award mentioned above,

We are honored that the U.S. Government considered highly of Inovio’s track record of innovation and is providing this funding to support the further development of our commercial intradermal vaccine delivery device. Our CELLECTRA 3PSP is a small, portable user-friendly device which will allow broader access to Inovio’s vaccines and immunotherapies, whether the vaccine is administered to our troops ready to be deployed around the world, at a local pharmacy or in challenging settings such as rural Africa.

Finally, tucked away in a DoD announcement of contracted military awards for the United States Army, the Department of Defense announced on June 22, 2020, the purchase of 900 CELLECTRA devices from Inovio worth over $16.6M. The award was granted on June 19, 2020 and it largely remained a secret behind the larger award announced on June 23, 2020.

Inovio Pharmaceuticals Inc., Plymouth Meeting, Pennsylvania, was awarded a $16,570,397 firm-fixed-price contract for 900 CELLECTRA 2000 DNA vaccine injection devices. Bids were solicited via the internet with one received. Work will be performed in Plymouth Meeting, Pennsylvania, with an estimated completion date of Dec. 31, 2020. Fiscal 2020 defense emergency response funds in the amount of $16,570,397 were obligated at the time of the award. U.S. Army Contracting Command, Aberdeen Proving Ground, Maryland, is the contracting activity (W911QY-20-C-0084). (Awarded June 19, 2020)

To date, the total amount of funding from various stakeholders for the production, manufacturing and purchase of CELLECTRA devices, tops $100M.

These announcements solidify commitments from a broad spectrum of stakeholders who have an interest in advancing Inovio’s CELLECTRA technology in order to support their efforts to combat viral outbreaks such as COVID-19 and the DoD is leading in a big way.

HPV Update

It has been a while since there has been any coverage of Inovio’s HPV products. INO quietly announced on June 22, 2020, that they’re enrolling patients for an Open-label Multi-center Study of INO-3107 With Electroporation in Subjects With HPV-6- and/or HPV-11-associated Recurrent Respiratory Papillomatosis (RRP). In a prior press release, dated February 3, 2020 this was announced,

RRP is a rare, orphan, HPV-associated disease that can cause noncancerous tumor growths leading to life-threatening airway obstructions, and occasionally progresses to cancer. Currently, the disease is incurable and can only be treated by surgery to remove the tumors, which temporarily restores the airway. The tumor always recurs and the surgery must be repeated, usually multiple times a year.

Study results demonstrated that INO-3106 generated immunogenicity and engagement and expansion of an HPV 6-specific cellular response, including cytotoxic T cells. The paper also showed that Inovio’s immunotherapy allowed two patients who previously required approximately two surgeries per year to manage this disease to delay the need for surgery to a robust degree; with one patient requiring no surgeries for over a year and a half (584 days surgery free) and a second that remained surgery free for over two and a half years (over 915 days surgery free).

If you can attack the virus and clear the HPV infection completely, what is that worth to those infected? For these two patients it meant going from having invasive surgery every 6 months to shelving those procedures to every 1.5 to 2.5 years. Inovio has a very moving testimonial on their website from a patient who has suffered with this very depressing and costly disease that forces patients into a reclusive lifestyle. This is life changing and investors should look for Inovio to apply for INO-3106 to be granted Orphan Drug Designation by the FDA for this rare HPV linked disease.

Investment Risks to Consider

As has been discussed ad nauseam in my previous articles, Inovio’s CELLECTRA device has not yet been approved by the FDA. However, as noted by Dr. Kim in his most recent press release regarding the $71M DoD award, a CE Mark has in fact been granted to Inovio Pharmaceuticals for the CELLECTRA EP device in the (EU). Additionally, Inovio’s manufacturing facilities are all ISO 13485 certified. This means their manufacturing facilities are physically audited for compliance, the devices are spot checked to ensure they’re being made as specified and INO is utilizing the latest quality management system practices and procedures, including changes in technology and regulatory requirements and expectations.

One piece of good news concerning ISO compliance is in an announcement by the FDA in DEC 2018 that they will adopt ISO 13485 regulations to replace their own existing medical device quality regulations. This was updated in 2019 and remains pending final adoption. The ISO 13485 certification and the pending adoption by the FDA of ISO 13485 regulations means Inovio’s CELLECTRA device is on the path towards likely approval.

Only one question remains; Will approval by the FDA for CELLECTRA be granted after 7,000 uses in over 2,000 patients in controlled clinical settings with no reported serious adverse events or will they need more? The FDA’s approval process requires comprehensive studies and “only scientific evidence in an attempt to substantiate the safety and effectiveness of a device”. Does 7,000 uses in 2,000 patients meet the standard? Only the FDA has that answer. However, as I’ve stated before some common sense, research and judgement come into play when making every investment decision.

The VGXI Injunction remains unanswered and is not a gimme, on either side. The courts will rule to determine the best course of action moving forward. I will not speculate on the outcome, but investors should understand that VGXI is a small plasmid manufacturer with a commitment to produce less than 50,000 plasmids for INO-4800. Richter-Helm, Inovio’s other contract manufacturer for plasmids, is on track to produce over 500,000 plasmids or 10X VGXI’s contribution and other manufacturers like Ology Biosciences remain in play. If the judge grants Inovio’s Petition for Injunction against VGXI, it could mean less delays in plasmid manufacturing. If the judge refuses to grant the injunction, there will be delays, but nothing near the magnitude of earth shattering. In fact, Inovio will still be moving forward with manufacturing of 1,000,000 doses of the COVID-19 INO-4800 vaccine before the end of 2020 through manufacturers suited to handle the volume, like Richter-Helm BioLogics.

Conclusion

If readers recall, my first published “Exclusive SA Article” covered the five key pieces necessary for Inovio to have a solid chance at bringing a safe vaccine to market. The key pieces still remain unchanged; technology, science, financing, people and partnerships. The Department of Defense has been and continues to be a central piece to the Inovio growth story, as a key partner. In a matter of two days investors learned that the DoD committed $16.5M towards buying 900 CELLECTRA devices for use by the United States Army and another $71M to scale up manufacturing of the devices. If investors need some help connecting dots, it looks like the gas station is being built and the pumps are getting installed. The only thing left to order will be the gasoline that will be used to fill those little needle like nozzles.

I’ve also recently discussed the international community and potential for additional funding opportunities beyond Operation Warp Speed (OWS). The (EU) ACT-Accelerator remains a huge piece of the long-term value proposition in INO and the White House has not yet officially named the OWS participants. The DoD award may or may not indicate inclusion. FDA approval or approval from any other international regulatory agencies of INO-4800 could potentially unlock the long-term value proposition of Inovio and provide an enormous opportunity for investors to get in ahead of the data yet to come for their other indications. As I always make investors aware, margin calls on short positions also provide excess liquidity to the market. Therefore, investing comes with risk for both investment styles.

One final note: The only favor I ask is that you click the “Follow” button so I can grow my Seeking Alpha readership. This will help me, to help you. Learning and knowledge is a key to investing. It’s already difficult for the casual retail investor to find little nuggets of information behind the backdrop of high speed-high frequency investment houses that collate data and trade in milliseconds. My promise is that I will always do my best to provide you with accurate and timely information, when it is submitted to SA.

Disclosure: I am/we are long INO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.


Originally published on Seeking Alpha

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