As the deadly new virus spread worldwide, Inovio Pharmaceuticals, a small biotech company in Pennsylvania, rushed to develop a vaccine. After announcing promising early results, Inovio’s stock market rose more than 1,000 percent. By gaining momentum, the company sold more shares to the public.
That was in 2009, when H1N1, better known as swine flu, fueled fears of a devastating pandemic. In the years since, Inovio has announced encouraging news about its work on malaria vaccines, the Zika virus, and even a “cancer vaccine.” The upbeat declarations have caused the company’s share price to jump, enriching investors and senior executives.
There’s only one catch: Inovio has never actually brought a vaccine to market.
Now, with a new pandemic raging, Inovio is working on a new vaccine: for the novel coronavirus. A flurry of positive news about its financing and preliminary results have boosted Inovio’s shares by as much as 963 percent – helping the company attract money from the government and investors. At the same time, Inovio insiders have sold stock.
But some scientists and financial analysts are questioning the viability of Inovio’s technology. Although there are some early signs of promise with the company’s vaccine, Inovio has only released data on bare bones from the first phase of clinical trials. It is embroiled in a legal battle with a major production partner who claims that Inovio is stealing its technology.
Shareholders have sued Inovio, claiming it has exaggerated its progress on a coronavirus vaccine to inflate its share price. Adding to the challenges, Inovio’s potential vaccine will have to be administered through a gadget – similar to an electric nose-hair trimmer and called the Cellectra – that would target genetic material in millions of patients.
And although the company has said it is part of Operation Warp Speed - the flagship federal effort to quickly produce treatments and vaccines for the coronavirus – Inovio has not been selected on the list of companies to receive financial support for vaccines for mass-producing.
“The lack of that funding, coupled with its ongoing lawsuit, along with the need to scale a device, coupled with the lack of complete Phase 1 data, makes people skeptical,” said Stephen Willey, an analyst at Stifel, an investment firm .
While trying to defuse the coronavirus crisis, the Trump administration is betting, in part, on companies – such as Moderna and Novavax – with spotty track records and penchants for self-promotion. In June, Inovio received $ 71 million from the Department of Defense to produce its battery-powered Cellectras.
Some medical experts are concerned that taxpayer support for unproven companies could erode the already dark public confidence in faxes.
“If you build trust, you’ll almost have a self-defeating statement with vaccine intake,” said Arthur L. Caplan, a bioethicist at the New York University School of Medicine. “The more you are hype and less reality, the more you take money away from things that are cheaper, closer than both,” he added.
Inovio was able to provide an update on its progress with the fax when it releases its second-quarter financial results on Monday.
Developing faxes is hard. In addition to coming up with an effective formula and the funding to produce it, drugmakers need to navigate an obstacle course of government safety checks and strict scientific review on a fast enough timeline to stay competitive. The fact that a company like Inovio has never marketed a fax machine is not necessarily an accusation of its underlying approach to faxing. Otherwise, scientists say, the world would never have technological breakthroughs.
Inovio’s specialty seeks to develop DNA-based vaccines, which use the virus’ own genes to provoke an immune response. But the company’s decade of trying has not borne fruit.
In fact, no DNA-based vaccine has ever made it to market. While some encouraging results have been produced in small animals, they have not been shown to be effective in humans – against the coronavirus as another disease.
However, the scientific community believes that technology is promising in part because such gene-based vaccines can be designed quickly. Companies in Korea, India and Japan follow similar DNA-based coronavirus vaccines.
Inovio CEO J. Joseph Kim said that when the coronavirus’ DNA sequence was released in January, the company was able to remove a vaccine. Later that month, Inovio secured a $ 9 million grant from the Coalition of Epidemic Preparedness Innovations, a leading funder of vaccine research.
In March, Dr Kim – an immunologist who became Inovio’s CEO in 2009 – was invited to attend a White House cabinet meeting with President Trump and pharmaceutical executives.
At the public meeting, Drs. Kim Inovio as “the leader in coronavirus vaccine development in the world”, adding that it had its own production capabilities.
Mr. Kim said that, thanks to “our highly innovative, 21st-century platform” Inovio “was able to fully construct our fax machine within three hours.” All the business that was needed now, he told Mr. Trump, was the support of the federal government to scale production.
The Inovio stock market will rise 220 percent in the coming days. The market value has gone from less than $ 500 million at the beginning of the year to more than $ 3 billion today.
Shortly after the White House meeting, Inovio announced that it had received a $ 5 million grant from the Bill and Melinda Gates Foundation. The money would help Inovio test the Cellectra. The devices use electrical pulses to direct DNA into patients’ cells – a technique experts say is grounded in legitimate science.
However, some investors were skeptical.
On March 9, Andrew Left of Citron Capital, which lacks the shareholding of Inovio and stands to profit as it declines, began public question Inovio’s approach to inventing a coronavirus vaccine and accusing it of ‘serious share promotion’. He later released a report comparing the company to Theranos, the disgraced blood test company, and cataloged Inovio’s history of promoting and then not vaccinating vaccines.
Inovio’s share price fell 66 percent, although it would soon reach new heights thanks to optimism about its potential future.
Days later, shareholders sued Inovio in federal court in Pennsylvania. Comments from Dr. Kim at the White House and previous comments he made on Fox Business Network about having a fax machine claimed the suit the company had “capitalized on widespread Covid-19 fears by falsely claiming that Inovio had developed a fax machine. ” In April, another group of shareholders filed a separate case in the same court, accusing the board of Dr Kim and Inovio of mismanagement and unjustly enriching themselves, among other things.
Inovio has challenged Mr Left’s critics, but the company publicly clear that it had developed a fax machine – essentially a road map – not an actual fax machine. Inovio has not publicly commented on the lawsuits for shareholders.
In the past 10 years, insiders at Inovio have sold more than $ 25 million in advance, according to financial data provider Equilar. Last year, Dr. Kim was forced to sell about half of his Inovio shares – causing the share price to fall by more than a third – after he used his shares as collateral to borrow money and was caught in a so-called margin call, demanding his loan to repay immediately.
This year, after a steep rise in Inovio’s share price, insiders sold $ 3.8 million in shares. (Earlier this year, Inovio banned operators from “entering into short-term as speculative transactions in the company’s securities, including the placement and purchase of corporate securities on margin.”)
Hoping to raise money to fund its fax efforts, Inovio said this year that it planned to sell about $ 150 million in new supplies to investors.
In April, Inovio began testing its potential vaccine, testing it on 36 people. (A volunteer in the trial said taking the juice with the Cellectra did not hurt. ‘It just feels weird,’ she said.)
On the last day of June, Inovio reported encouraging results in the 36-person trial. Inovio said the vaccine was “generally safe and well tolerated” and generated an immune response.
But the company did not disclose data on the size of that response. Scientists said it made it impossible to measure whether the vaccine would protect anyone.
Jeff Richardson, a spokesman for Inovio, said the company would release more data soon.
When it announced the results of the investigation, Inovio also claimed that the vaccine was “selected for the US Government’s Warp Speed operation.” But Inovio received no federal funding to produce faxes. Instead, the vaccine candidate was chosen for inclusion in a preliminary study on rhesus-macaque monkeys organized by Warp Speed. (Vaxart, another company that participated in the monkey trial, similarly claimed to be selected for Warp Speed, drawing criticism from the Department of Health and Human Services.)
Asked about Inovio’s claim to be part of Warp Speed, Mr. Richardson: “It depends on what you call Warp Speed.” He declined further comment.
At the White House, Dr. Kim talks about Inovio’s production capabilities. While the company is making its Cellectra, however, it has relied on another company, VGX International, to produce its fax candidate.
Now Inovio and VGX are in a legal battle. In June, Inovio filed a lawsuit alleging that VGX refused to share technology needed to produce the Inovio vaccine with other companies and was a threat to public health. The case, along with a countersuit by VGX, is pending in state court in Pennsylvania.
In the lawsuits, VGX accused Inovio of stealing trade secrets and challenging its claim that there is a public interest in Inovio’s work.
“While the Covid-19 pandemic is terrible, Inovio is unlikely to win the race for the vaccine,” VGX lawyers wrote. Despite Inovio’s years of work, “it has never developed an FDA-approved product.”
