Thursday, September 26, 2013

Upcoming Trial Data for Inovio and OncoSec Add to Market’s Interest in Electroporation

Recently presented data from a preclinical study performed using Inovio Pharmaceuticals' (NYSE: INO) DNA vaccine against the H7N9 strain of avian influenza (bird flu) garnered some interest and buying momentum in INO, although investors seemed even more impressed after the release of the peer-reviewed publication analyzing the data from 2 Phase I trials for Inovio's PENNVAX-B vaccine, which was delivered using Inovio's CELLECTRA electroporation device. PENNVAX induced a strong T-cell response in 89% of the patients that had received three doses of the vaccine plus a signaling protein called Interleukin-12, inducing a best-in-class immune system response against HIV.

In light of the data, INO is up 93% in the last month of trading and hit a recent 52-week high of $1.57/share. Although the stock has pulled back, investors who are bullish on the stock now have more detailed Phase I clinical data supporting their position.

Although the data are from Phase I trials, they demonstrate quite clearly that the delivery of DNA plasmids into mammalian cells via electroporation – in vivo – truly works as intended. This is exciting for biotech investors due to the broad range of possibilities introduced by DNA vaccination.

Another company that has benefitted from Inovio's newfound attention is OncoSec Medical (OTC: ONCS) – a newer "offshoot" company that uses a similar but distinctly different electroporation device known as the OncoSec Medical System (OMS) that is based on Inovio's technology. The specific amplitude and frequency of the OMS electroporation is calibrated such that plasmid delivery into solid tumor masses is fully optimized, while CELLECTRA electroporation is less specialized and focus more on the vaccination of skin cells. The cross-license agreement made between Inovio and Oncosec also covers the two devices for their distinctly different applications.

The two companies also have significant upside potential in the coming months based on catalysts for their most important development programs.

Inovio – Phase II Cervical Dysplasia Data for VGX-3100

The link between Human papillomavirus (HPV) and cervical cancer has been well established with past research, although significant unmet demand still remains for more effective vaccines to prevent cervical dysplasia caused by HPV in patients that already contracted the virus. Current treatment is limited to HPV prevention. The VGX-3100 program aims to prevent cervical cancer by inducing a strong immune response against precancerous cells that have been mutated by a HPV infection. The activated T-cells may be able to eliminate – or at least regress the cervical cancer.

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Phase II data for the VGX-3100 program is expected in the first quarter of 2014, which will provide more data on the extent of the immune response induced by the VGX-3100 DNA construct and the CELLECTRA electroporation device.

Inovio has already reached a market capitalization of $232 M at the time of writing, which limits the stock's upside but establishes Wall Street's initial confidence in the commercial viability of DNA vaccines. Given strong Phase II data, Inovio should be able to move above a $300 M valuation and stay there.

OncoSec – Phase II Melanoma Data for ImmunoPulse

ImmunoPulse is the name OncoSec uses to refer to the therapy that was developed using the OMS with a plasmid designed to code for Interleukin-12. IL-12, which was mentioned earlier, is a signaling protein that plays a vital role the body's natural immune system response. ImmunoPulse is currently being developed for three separate indications: late-stage melanoma, Merkel cell carcinoma (MCC), and cutaneous T-cell Lymphoma. These are all in Phase II development, although it's worth noting that the melanoma indication is the furthest developed of the three and has recently completed enrollment for its 25-patient trials.

In multiple past trials Interleukin-12 was demonstrated to be an efficacious anti-cancer therapy (particularly melanoma), although it was always constrained by its safety profile. Patients who received the most effective doses of recombinant IL-12 saw unacceptable hepatotoxicity, and other adverse side effects which prevented its widespread use by doctors. Through the use of plasmids, OncoSec is able to introduce similarly high levels of IL-12 into patients without any apparent signs of toxicity.

"OncoSec put ImmunoPulse through a 24-patient Phase I safety trial to determine the profile of plasmid interleukin-12 paired with electroporation with the Oncosec Medical System. Robust expression of IL-12 – as high as 2,813 pg/g (convertible to 2,813 ng/kg) was seen in patients who received the highest dosing of IL-12 plasmid at 1.6 mg/mL on day 11. Mean IL-12 expression in two three-patient cohorts receiving the highest dosage were  1,124 and 870 ng/kg respectively, surpassing the limits of recombinant IL-12 injections."


Interim response data from the nearly-completed Phase II melanoma trial is expected in Q3 2013, while the full data is expected in Q4 2013 or Q1 2014. The market generally disregards Phase I data, implying that a continuation of the good results seen in Phase I trials with ImmunoPulse will draw significant attention to OncoSec and the commercial potential in melanoma, MCC and cutaneous lymphoma. In particular, investors are looking for significant responses in malignant melanoma tumors that are distant from the electroporation and IL-12 injection sites, which would imply that ImmunoPulse generates a systemic (rather than local) immune response. Since this is very difficult to achieve with tolerable doses of Interleukin-12, it's implied that ImmunoPulse will make IL-12 viable for oncologists treating late-stage melanoma patients that have subpar or compromised organ function.

OncoSec is trading at a $36.6 M valuation at the time of writing, which reflects the market's skepticism over the company's technology and commercial viability. Positive Phase II data is likely to have a bigger percentage-based impact on Oncosec's valuation, since it would put the company "on the radar" for larger biotech investors. This effect could double the stock pretty easily within the next year, although investors buying now are exposing themselves to a double-edged sword.

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