Inovio: Long-Term Biotech To Own With Several Catalysts Expected In 2022 (NASDAQ:INO)

Inovio Pharmaceuticals (NASDAQ:INO) is a great long-term biotech to own if one has patience. The reason why I state that is because achieving the primary endpoint for one of the two phase 3 studies in women with HPV-16/18-associated cervical high-grade squamous intraepithelial lesions (HSIL). This was the set of results that were released from the REVEAL 1 study, where VGX-3100 was able to meet the primary endpoint of this phase 3 study. Well, there’s a second ongoing study by the name of REVEAL 2, where results from this study will be released by Q4 of 2022. If this study also meets the primary endpoint like REVEAL 1, then that will bring Inovio closer to potential commercialization of the drug. Of course, it will first have to bring both sets of results to the FDA first to see if it can obtain U.S. marketing approval for VGX-3100. Most importantly, this second study would reinforce Inovio’s DNA medicines platform.

VGX-3100 Hits The Mark In One Study, With 2nd Study Data Rapidly Approaching

The thing about Inovio is that I believe it’s heavily undervalued trading at around $3.20 per share. That’s because as I noted above it has already achieved the primary and secondary endpoints in the REVEAL 1 study. This late-stage study recruited a total of 201 women who were 18 or older and who had histologically-confirmed cervical HSIL associated with HPV-16 and/or HPV-18. Patients were randomized 2:1 to receive either VGX-3100 or placebo at weeks 0, 4, 12. The intent to treat population was about 193 patients. It was ultimately found that 23.7% (31 out of 131) had achieved histopathological regression of HSIL combined with virologic clearance of HPV-16 and/or HPV-18 at week 36. On the other hand, only 11.3% (7 out of 62 patients) in the placebo group achieved this. This why the primary endpoint ended up achieving statistical significance, with a p-value of p=0.022. This is great data and good news for patients and for Inovio who hopes to eventually receive FDA approval of VGX-3100 for these women with HSIL. What’s even better is that there’s a catalyst opportunity that investors have to look forward to if they can wait until the latter part of 2022. That is, results from REVEAL 2 are expected in the Q4 2022. REVEAL 2 is the second phase 3 study using VGX-3100 for these women with HSIL. Looking at the study it’s being evaluated in the same way as REVEAL 1. I think that these upcoming results carry more weight. Why is that? That’s because Inovio couldn’t seek FDA approval with the success of meeting the primary endpoint with one study. I think investors will reward Inovio more for this second late stage REVEAL 2. The reason why is because then the company can move forward to possibly file a Biologics Licensing Application (BLA) to the FDA to possibly receive U.S. marketing approval for VGX-3100 for HSIL.

Financials

According to the 10-K SEC Filing, Inovio Pharmaceuticals had cash and cash equivalents and short-term investments of $401.3 million as of Dec. 31, 2021. The reason for the large amount of cash on hand is because it sold 20,355,000 shares of its common stock in an underwritten public offering at $8.50 per share. This even included the underwriters option to purchase an additional 2,655,000 shares of stock at the same public offering price of $8.50 per share. The total gross proceeds, minus expenses, ended up being $162.1 million. Even with this cash offering done then, the company will likely need to raise cash. That’s because it believes that it has enough cash to fund its operations for at least the next 12 months from the date of the 10-K SEC Filing, which was filed on March 1, 2022. This means it may have to raise cash by Q4 of 2022. As I always believe there’s a possibility that it may raise cash earlier than expected if it releases positive news. Having said that, the releases of results from REVEAL 2 with VGX-3100 for HSIL are expected in the Q4 of 2022. If this late-stage study meets the primary endpoint with great success, I expect the stock to rise considerably on the back of that. This means it’s highly possible that management would take advantage of such a rise in the share price and almost raise cash immediately.

Risks To Business

The first and biggest risk would be the upcoming results from the REVEAL 2 study. This study is using VGX-3100 in women with HSIL and results are expected in the Q4 of 2022. I believe that the primary endpoint will be met for this study as well since it is modeled exactly like REVEAL 1. However, be aware that risk remains because clinical trials are sporadic. There’s no guarantee that the primary endpoint will be met for the second phase 3 study. A second risk to consider is the regulatory landscape. Even if both studies achieve the primary endpoint, Inovio has to take all of its safety/efficacy data and satisfy the FDA. That means this becomes another risky hurdle that it must clear in order to receive FDA marketing approval for VGX-3100. The final risk would be the financials, which I have described above. That’s because it’s highly likely that Inovio will need to raise cash at least before the end of 2022. I’m still in the opinion that it will do so if the primary endpoint for REVEAL 2 is met in the Q4 of 2022.

Conclusion

The final conclusion is that Inovio is a great long-term biotech to own because it has a great chance to succeed in the upcoming REVEAL 2 study. Especially, since the primary endpoint was met in the REVEAL 1 study back in March of 2021. While risk still remains, proof of concept was established in that VGX-3100 was able to achieve more responders compared to placebo. A second thing to note is the company’s technology. It’s using DNA medicine to treat diseases, but a major problem with such an approach in the past is that it couldn’t enter the cell properly. Kind of an issue with some messenger RNA (mRNA) molecules. To get the DNA medicine into cells it uses an electroporation device known as CELLECTRA 5PSP, which opens small pores to allow it in. The bottom line here is that with proof of concept of CELLECTRA 5PSP and DNA medicines together, it can target other indications just like it has in its pipeline. The thing is that there’s much potential with Inovio in terms of possible catalysts. For instance, another catalyst in the 1st half of 2022 would be the release of results from a phase 1b study using INO-4500 for Lassa fever. Then, you have several other catalysts expected in the second half of 2022 like: Phase 1/2 data for INO-5401 in newly-diagnosed glioblastoma (GBM), phase 2 data for INO-4700 in MERS, phase 1b booster data for INO-4201 for Ebola. Plus, you have the initiation in the 2nd half of 2022 for a study using a DNA encoded monoclonal antibody for Covid-19. With so many catalysts in 2022, plus a depressed stock price, these are the reasons why I believe Inovio is a great long-term buy. This boils down to it having already established proof of concept using VGX-3100 for HSIL.