This is the first part of a two-part series on Inovio. Click here for the second part.

SAN DIEGO ( TheStreet) -- The pattern is so familiar it's almost a tradition. A public health scare develops. A tiny drug development firm issues a press release saying it may have a cure. Its stock price explodes.

Speculative traders know the pattern and try to exploit it. Retail investors often get caught up in it.

Lately the scare has been swine flu, and last week saw the most dramatic case yet of an H1N1 bidding frenzy, when the American Stock Exchange-listed shares of a little-known biotech research firm in San Diego, Inovio Biomedical ( INO), more than quadrupled in value.

The company did what such companies do. It issued a press release announcing results from a pre-clinical study of a vaccine it's been testing in H1N1-infected pigs. According to the company's findings, the vaccine, dubbed SynCon, seemed to protect those animals 100% of the time.

But when Inovio initially broadcast these results, back on July 13, the stock just sat there.

Sixteen days later, Inovio issued a second release. The differences between the two were, at least on the surface, difficult to discern. A cynic might conclude that the company had deployed that ancient biotech tactic: the recycled press release.

The company, of course, disagrees: It says the first announcement, pegged to the presentation of its findings at a medical conference in Beijing, showed that SynCon could protect pigs of the swine version of the swine flu.

The second release, on the other hand, disclosed an update to the ongoing study -- that the vaccine could protect pigs of the "currently circulating" human version of the swine flu (now designated A/H1N1).

If that distinction appeared fine, investor reaction was not. Inovio shares exploded in value, gaining more than 300% to $3.18, a new 52-week high. Volume reached an incredible 32 million shares -- the daily average had been 120,000 -- and trading in the stock has remained intense ever since, as momentum traders move in and out, making their plays.

Rightly or wrongly, a casual observer might look on this chain of events with some skepticism. Inovio, after all, has joined a long queue of biotechs that have taken advantage of the high public profile of the swine-flu pandemic.

A quick sampling of the queue: Hemispherx Biopharma ( HEB), which has used press releases to promote its Ampligen vaccine as a promising treatment for swine flu; Arrayit Corp. ( ARYCE), an "exciting and innovative public company" that says it's developing a swine-flu diagnostic test and whose stock is traded over-the-counter; Cel-Sci ( CVM), which recently "announced a provisional U.S. patent application covering its L.E.A.P.S.(TM) immune therapy drugs (vaccines) for the prevention/treatment of H1N1, swine, bird flu, Influenza A and/or evolving mutants or variants of these viruses"; and Vical ( VICL), another San Diego biotech firm, whose June 30 press release bore a familiar ring: "the company's vaccine against A/H1N1 pandemic influenza (swine flu) produced robust immune responses well above the accepted protection threshold in 100% of vaccinated mice and rabbits."

As with many publicly traded drug-development firms, whenever Inovio publicizes positive study results, it enjoys a share-price spike, and then sees little if anything of commercial substance arise out of those studies. Over the course of its 10 years as a public company, Inovio also has also exhibited a certain fundraising rhythm -- a habit of issuing fresh shares either to the public or in private placements -- that often appears synced to its study-result bulletins and stock-price upticks.

The latest iteration of the pattern has been no different. The morning after that 300% gain on July 29, Inovio issued another press release, this one announcing a direct offering of about 11 million shares, plus warrants. The company said it has already sold the stock to institutional investors for $30 million, or about $2.70 a share, although it did not name the institutions. The company -- which has no analysts' coverage, save that of Rodman & Renshaw, a small boutique investment bank that also serves as Inovio's underwriter -- said the deal had been in the works for weeks.

All of this raises an obvious question: Does Inovio's flu vaccine have real potential, or is it just another beat in a hoary pattern?

This is the first part of a two-part series on Inovio. Click here for the second part, in which Inovio CEO Joseph Kim defends his company's swine-flu drug.

-- Reported by Scott Eden in New York
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