Just three months ago, San Diego-based Inovio Biomedical looked like one of the many biotechs with big ambitions that were headed for the dustbin of history. The company has been burning cash for 15 years and it was down to its last $5 million in working capital. Inovio tried to merge with another little biotech company from Pennsylvania for 11 months, before finally closing the deal on June 1.
Investors didn’t give it a New York minute of attention: Shares closed at 63 cents that day.
But Inovio wasn’t done. The company (AMEX: [[ticker:INO]]) pounced on a new opportunity to treat the latest public health scare. On July 29, Inovio said its “universal” DNA-based vaccine was able to protect pigs and mice who were directly exposed to current circulating strains of the H1N1 “swine” flu. That evidence added heft to an earlier finding, which said Inovio’s approach offered the same blanket immunity to mice that were exposed to the deadly strain of flu that killed 40 million people around the world in 1918.
This time, Inovio struck a nerve. The obscure little company’s stock more than quadrupled in value, rising that day from 74 cents a share to $3.18 a share on huge volume of 32 million shares. Inovio cashed in that exact same day—raising $28.5 million of new capital—enough to keep its doors open until the second half of 2011, according to its latest quarterly report.
While Wall Street reacted on the usual primal emotions—fear and greed—I wanted to dig a little deeper into the fundamentals when I spoke recently with Inovio’s new CEO, J. Joseph Kim.
Time will tell whether Inovio really deserves its lofty new market valuation (currently about $92 million), but it’s worth noting that the vaccine field as a whole is hot—and H1N1 vaccines are incandescent. The vaccine industry made up a $13 billion market in 2007, according to Lehman Brothers. What’s more, vaccine sales are expected to grow at an 18 percent annual rate through 2011, compared with 4.4 percent projected growth for the drug industry as a whole during that period, according to Lehman. Merck’s human papillomavirus vaccine, Gardasil, as well as Wyeth’s pneumococcal vaccine, Prevnar, have proven that new generations of vaccines can sell at high prices-and create new billion-dollar markets.
So there’s a business case for a lot of vaccine companies. But what about the science at Inovio, or the newly-combined Inovio to be more precise, That might give the San Diego company a new lease on life?
The rationale for the merger
