As the deadly new virus spread around the world, Inovio Pharmaceuticals, a small biotech company in Pennsylvania, rushed to develop a vaccine. After announcing promising first results, Inovio’s share rose by more than 1,000%. Riding the momentum, the company sold more shares to the public.
It was in 2009, when the H1N1 flu, better known as the swine flu, fueled fears of a devastating pandemic. In the years that followed, Inovio reported encouraging news about its work on vaccines against malaria, the Zika virus and even a “cancer vaccine”. The bullish statements sent the company’s share price up, enriching investors and senior executives.
There is only one catch: Inovio has never put a vaccine on the market.
Now, with a new pandemic raging, Inovio is working on a new vaccine: for the new coronavirus. A wave of positive press releases about its funding and preliminary results pushed Inovio shares up 963% – and helped the company attract government and investor funds. At the same time, Inovio insiders sold shares.
But some scientists and financial analysts question the viability of Inovio’s technology. While there are early signs of promise with the company’s vaccine, Inovio has only released straightforward data from the first phase of clinical trials. He’s locked in a legal battle with a key manufacturing partner who claims Inovio stole his technology.
Shareholders sued Inovio, saying it had exaggerated its progress on a coronavirus vaccine to inflate its share price. In addition to the challenges, Inovio’s potential vaccine will have to be delivered by a gadget – it looks like an electric nose-hair trimmer and is called the Cellectra – which is said to direct genetic material to millions of patients.
And although the company has said it is part of Operation Warp Speed - the flagship federal effort to rapidly produce coronavirus treatments and vaccines – Inovio is not on the list of companies selected to receive financial support to mass produce vaccines.
“The lack of this funding, coupled with their ongoing litigation, coupled with the need to scale a device, coupled with the lack of full Phase 1 data, is making people skeptical,” said Stephen Willey , analyst at Stifel, an investment firm.
As it attempts to defuse the coronavirus crisis, the Trump administration is betting, in part, on companies – like Moderna and Novavax – with uneven track records and penchant for self-promotion. In June, Inovio received $ 71 million from the Ministry of Defense to manufacture its battery operated Cellectras.
Some medical experts fear that taxpayer support for unproven companies could erode already tenuous public confidence in vaccines.
“If you dry up your confidence, you’ll have a nearly doomed proposition with vaccine adoption,” said Arthur L. Caplan, bioethicist at New York University School of Medicine. “The more publicized you are and the less reality you are, the more money you take away from things that are cheaper, closer, or both,” he added.
Inovio could provide an update on its progress with the vaccine when it releases its second quarter financial results on Monday.
Developing vaccines is difficult. In addition to coming up with an effective formula and the funding to produce it, drugmakers must navigate an obstacle course of government safety checks and rigorous scientific scrutiny in a fast enough timeframe to remain competitive. The fact that a company like Inovio has never brought a vaccine to market is not necessarily an indictment of its underlying approach to vaccine creation. Otherwise, say scientists, the world would never have technological breakthroughs.
Inovio’s specialty is trying to develop DNA-based vaccines, which use a virus’s own genes to elicit an immune response. But the company’s decade of trying has not paid off.
In fact, no DNA-based vaccine has ever been marketed. While some have produced encouraging results in small animals, they have not been shown to be effective in humans – against coronavirus or any other disease.
Nevertheless, the scientific community continues to believe that the technology holds promise in part because such genetic vaccines can be designed quickly. Companies in Korea, India and Japan are using similar DNA-based coronavirus vaccines.
Inovio chief executive J. Joseph Kim said that when the DNA sequence of the coronavirus became public in January, the company was able to design a vaccine immediately. Later that month, Inovio secured a $ 9 million grant from the Coalition of Epidemic Preparedness Innovations, one of the major funders of vaccine research.
In March, Dr Kim – an immunologist who became CEO of Inovio in 2009 – was invited to participate in a meeting in the Cabinet Room of the White House with President Trump and pharmaceutical executives.
During the public meeting, Dr Kim described Inovio as “the leader in the development of coronavirus vaccines in the world”, adding that he has his own manufacturing capabilities.
Mr Kim said that, thanks to “our very innovative 21st century platform”, Inovio was “able to fully build our vaccine in three hours”. All the company needed now, he told Mr. Trump, was support from the federal government to help expand manufacturing.
Inovio’s shares climbed 220% over the next few days. Its market value has grown from less than $ 500 million at the start of the year to over $ 3 billion today.
Shortly after the White House meeting, Inovio announced that he 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 that experts say is based on legitimate science.
Some investors, however, had become skeptical.
On March 9, Andrew Left of Citron Capital, which is bypassing Inovio’s stock and could profit from it if it falls, began publicly question Inovio’s approach to designing a coronavirus vaccine and accusing it of engaging in a ‘promotion of serial stocks’. He went on to publish a report comparing the company to Theranos, the disgraced blood testing company, and cataloging Inovio’s story of promoting and not producing vaccines.
Inovio’s share price plunged 66%, although it would soon reach new highs on optimism about its potential vaccine.
Days later, shareholders sued Inovio in federal court in Pennsylvania. Citing Dr. Kim’s remarks at the White House and previous comments he made on Fox Business Network about the creation of a vaccine, the lawsuit claimed the company had “capitalized on widespread fears of Covid-19 by wrongly claiming that Inovio had developed a vaccine. In April, another group of shareholders filed a separate lawsuit in the same court, accusing Dr Kim and Inovio’s board of mismanagement and unjust enrichment, among other things.
Inovio took issue with Mr. Left’s criticism, but the company publicly clarified that he had developed a vaccine – essentially a roadmap – and not a real vaccine. Inovio has not publicly responded to the pending shareholder lawsuits.
In the past 10 years, Inovio insiders have sold more than $ 25 million in inventory, according to financial data provider Equilar. Last year, Dr Kim was forced to sell about half of his Inovio shares – which caused the share price to drop by more than a third – after using his shares as collateral to borrow money. ‘money and was caught in a so-called margin call, requiring him to repay his loan immediately.
This year, after strong increases in Inovio’s share price, insiders sold $ 3.8 million in shares. (Earlier this year, Inovio banned executives from “engaging in short-term or speculative trading in the company’s securities, including pledging and buying the company’s securities on margin.”)
Hoping to raise money to fund its vaccination efforts, Inovio said this year that it plans to sell some $ 150 million in new shares to investors.
In April, Inovio began trials of its potential vaccine, testing it on 36 people. (A trial volunteer said it didn’t hurt to be zapped with the Cellectra. “It’s just weird,” she says.)
On the last day of June, Inovio reported encouraging results in the trial of 36 people. Inovio said their vaccine was “generally safe and well tolerated” and generated an immune response.
But the company has not disclosed any data on the extent of that response. Scientists said this made it impossible to determine whether the vaccine would protect someone.
Jeff Richardson, an Inovio spokesperson, said the company will release more data soon.
When announcing the results of the study, Inovio also claimed that its vaccine had been “selected for the US government’s Operation Warp Speed”. But Inovio has not received federal funding to produce vaccines. Instead, its vaccine candidate had been chosen for inclusion in a preliminary study on rhesus macaque monkeys that had been organized by Warp Speed. (Vaxart, another company participating in the monkey trial, also claimed to have been selected for Warp Speed, drawing criticism from the Department of Health and Human Services.)
Asked about Inovio’s claim to be a part of Warp Speed, Mr. Richardson said, “It depends on what you call Warp Speed.” He declined further comments.
At the White House, Dr Kim had spoken of Inovio’s manufacturing capabilities. Although the company makes its Cellectra, it relied on another company, VGX International, to manufacture its vaccine candidate.
Now Inovio and VGX are in a legal battle. In June, Inovio filed a lawsuit claiming that VGX refused to share the technology needed to produce the Inovio vaccine with other companies and endangered public health. The case, along with a VGX counter-suit, is pending in Pennsylvania state court.
In court filings, VGX accused Inovio of stealing trade secrets and challenged his claim that there was a public interest in Inovio’s work.
“While the Covid-19 pandemic is horrific, Inovio is unlikely to win the vaccine race,” VGX lawyers wrote. Despite Inovio’s years of work, “he never developed an FDA approved product.”