By: Adam Feuerstein | 06/10/14 - 12:23 PM EDT
Inovio Pharmaceuticals (INO) CEO Joseph Kim is walking back expectations for the phase II study of its DNA vaccine VGX-3100 in women with high-grade cervical intraepithelial neoplasia (CIN 2/3), also known as cervical pre-cancerous lesions. Results from the VGX-3100 study should be announced any day, but I suspect Inovio already has data in hand. Why else would Kim be laying the foundation for a massive spin job, if not to cushion the vaccine's failure?
The red flags flying over Inovio are there for any clear-eyed investor to see:
Inovio pushed through shareholder vote approving a 1-for-4 reverse stock split on May 23, which went into effect on June 5. Why the need for a reverse stock split? Kim explained:
Our stockholders approved a reverse split to have our price and share structure reflect our leadership position in immunotherapies and expand our potential investor audience.
Inovio's decision to enact a reverse stock split right before the VGX-3100 results was more likely timed purposefully to keep the stock trading above $1 if the study fails. Well played, Kim!
Kim hints at negative VGX-3100 study results in Monday's interview conducted by a Seeking Alpha contributor.
In the interview, Seeking Alpha contributor Trevor Lowenthal asks Kim, "Inovio is expected to produce a top line data read-out for its experimental HPV immunotherapy, VGX-3100, very shortly. How crucial is this to Inovio's future?"
The upcoming data will help define the potential clinical utility of this HPV immunotherapy for late-stage cervical pre-cancers. But the efficacy and immune response data together are going to help define the broad potential of the products based on our expansive DNA immunotherapy and electroporation technologies as monotherapies and as combinations with complementary technologies, such as checkpoint inhibitors. [Emphasis added.]Later in the interview, Kim is asked, "What are the primary risks facing the company?"
If you are defining risk as what might negatively impact the company's market valuation, I think the obvious risk is that our upcoming Phase II efficacy data does not meet our primary goal and the market looks at the data simplistically and says INO is a sell. However, smart investors are going to be looking closely at our T cell data and making investment decisions with that as well. We have tremendous confidence that we can ultimately see clinical utility of one of our products as a monotherapy, either with one of our immunotherapies by itself or possibly with an immune activator included. But cancer is complex, and it may very well be the case that different mechanisms need to be used in conjunction to achieve the desired impact against cancer. [Emphasis added.]Let's unpack Kim's statement. If treatment with VGX-3100 fails to shrink high-grade pre-cancerous cervical lesions more than a placebo (the study's primary endpoint), it would be "simplistic" to consider the vaccine a failure and sell Inovio. Instead, "smart investors" will disregard the miss on the study's primary efficacy endpoint and reward Inovio if VGX-3100 causes a T-cell response in patients, even though T-cell response is not listed as an endpoint in the phase II study.
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