Expert Financial Analysis and Reporting

I had the opportunity to meet with some of Inovio's (INO) management team- Joseph Kim (Chief Executive Officer), Peter Kies (Chief Financial Officer) and Bernie Hertel (Senior Director of Corporate Communications)- in San Francisco in early January. I have been following and periodically calling on the company for over two years. I have come to believe that Inovio potentially has a disruptive technology. I also have seen the soft spoken Joe Kim and his management team steadily move forward and broaden the company's pipeline

Over two decades ago, the creation of naked DNA vaccines gave the promise of a significant advance in the development of both therapeutic and preventative vaccines. The idea was to incorporate genes in a plasmid that would express certain antigens that would trigger an effective immune response that could be used to either treat or prevent cancer and infectious disease. A plasmid is a circular piece of DNA that when injected into muscle or skin will be taken up by cells and its genes will then express the desired antigens and trigger an immune response to those antigens. Vical is well known for this technology and currently has two products approved for animal use, one concluding a phase III trial, two starting a phase III, two in phase II, one in phase I and two in pre-clinical. Its lead product Allovectin-7 is scheduled to report much anticipated topline results in malignant melanoma in 1H, 2013

Inovio has made two significant advances over the original naked DNA technology. Its SynCon technology has allowed the company to better determine the most effective antigens to be expressed by the plasmids. As importantly, it has developed an electroporation process that allows much more effective uptake of injected plasmids into cells. These two advances may overcome issues that have been problems in the development of naked DNA vaccines. The generation of immune responses is believed to be the key predictor of effectiveness and Inovio's technology has produced better immune responses not only when compared to naked DNA but also to other competitive technology approaches such as viral vectors, lipid vectors and the gene gun

Inovio's technology also allows for rapid product development. It is a small company that has had limited financial resources but it has an impressive pipeline consisting of seven products in phase I or II and two in pre-clinical. These address prostate cancer, hepatitis C, HIV, influenza, malaria and tropical diseases. Importantly, its lead product, VGX-3100 for cervical cancer, will report out topline data from a phase II trial in 2H, 2013

This year could be the coming out party for Inovio. Like me, Wall Street has been in a "wait and see" mode on the company awaiting maturation and validation of its technology. I think that there are two factors which could create this validation in 2013. Phase II data from the company's therapeutic vaccine for cervical cancer (not to be confused with Merck's preventative vaccine for cervical cancer, Gardasil) will be available in 2H, 2013. In addition, I think that the company may successfully partner one or more of its earlier stage products that will provide third party validation to its technology approach. The year 2013 promises to be a transformational year for Inovio that could vault it into a brighter biotech investor spotlight

This is a company I intend to do more work on in 2013. Vical currently carries a market valuation of $300 million while Inovio is valued at $100 million, which is reflective of Vical's more advanced pipeline. Vical's market valuation could be a proxy for how Inovio will be valued in the next two years if VGX-3100 reports encouraging data, partnering efforts provide third party technology validation and other products in the pipeline continue to progress. The company will need significant amounts of capital in coming years, but this is not a bad thing. If investors believe that this capital can be employed in high value product development opportunities, the company will find funding at a reasonable cost to the benefit all shareholders. To repeat myself, the events of 2013 will be very important in determining how investors value Inovio's technology platform