Investing in DNA Vaccines

Last week an investor-relations representative let me know that his company’s CEO was in town for the World Vaccine Congress and asked if I wanted to have a sit-down to discuss the company’s contributions to this exciting field.

Once my heart returned to sinus rhythm–the World Vaccine Congress has that affect on science geeks–we arranged to meet. I have a friend who researches RNA Interference (RNAi) and runs an investing group of like-minded professionals. We talk about cutting-edge technologies and the companies leading the charge forward. He looks to me for the business side; I look to him for the science side.

One area that’s captured both of our attentions is DNA vaccines. There are numerous advantages to developing vaccines using DNA, but until recently this field was more theoretical than practical. In the past decade DNA plasmids have become available commercially, spurring their use in a wide range of applications from vaccines and drug delivery to RNAi experiments.

Over the past year I’ve kept an eye on a DNA vaccine company called Inovio Biomedical Corp (AMEX: INO). Last week I had the opportunity to talk with the company’s CEO, and last Saturday the company’s executive director was gracious enough to be the luncheon speaker at our Wealth Society Investing Summit in San Diego.

Drug delivery systems have always interested me much more than specific treatments. Inovio’s proprietary delivery technology involves the most fundamentals of life–deoxyribonucleic acid, or DNA.

Without getting into too much detail, we can now find the genetic markers on a strand of DNA that expresses anything from H1N1 virus, HIV and HPV to cervical and prostate cancer, rheumatoid arthritis and diabetes. Once the offending sequence is identified, it can be eradicated by inserting genetic coding that direct the human body’s immune system to eradicate the offending marker and get on with reproducing healthy DNA.

By using DNA to put the immune system into action, patients no longer need to be exposed to a live virus. And DNA vaccines are more stable than traditional vaccines and can be stored longer and produced more quickly should an outbreak occur.

I’ve written extensively about Invio Biomedical and a handful of other next-generation drug delivery companies in Portfolio 2020. If you’re an investor who likes what you read in this free e-zine, consider signing up for a no-risk free trial of Portfolio 2020.

In the 1980 and 1990s big pharma, as well as focused little guys, jumped into DNA vaccines in a big way. Results from trials on small animals showed promise, and big pharma could taste the profits from innumerable vaccines targeting at innumerable maladies. You see, these vaccines are not only preventative but also can be therapeutic. That is, the vaccine can help people avoid contracting the disease (preventative) and treat patients who already have the disease (therapeutic).

What’s more, vaccines don’t have any competition: Each vaccine is unique and approved individually–there’s no threat of patents expiring or competition from generic manufacturers.

But the great results from trials on small animals didn’t translate to human subjects; the human immune system is more complicated than those of smaller mammals. At this point, big pharma decided to chase newer shiny objects and abandoned the sector.

But Merck’s (NYSE: MRK) Joseph Kim, then working toward his PhD at the University of Pennsylvania, kept returning to the efficacy puzzle–while also working on an\ MBA from the Wharton School.

Kim and his advisor, a world-renowned scientist, found a way to produce higher efficacy rates in humans. The two discovered that delivering the vaccine by needle was the stumbling block. The solution was electroporation–an electrical pulse that is highly effective in getting highly charged molecules like DNA through a cell membrane and into a cell. The technology has been used in labs for decades, so this isn’t a new technology stacked on a new technology: This is an established technology put to new use.

Last summer Inovio Biomedical, which specialized in electroporation delivery systems, merged with VGX Pharmaceuticals, Kim’s company that specialized in DNA vaccines. Kim is the new company’s CEO; Avtar Dhillon, formerly CEO of the old Invio, is the new executive director.

Before Dhillion spoke at our conference, I talked to him about other companies that I like and mentioned an RNAi company my buddy told me about, Canada-based Tekmira Pharmaceuticals (TSX: TKM, OTC: TKMRF). He then informed me he was one of the original partners in Tekmira and sold his share when the company moved to Canada.

These companies represent the new dynamic in the way drug discovery works–and will work for the foreseeable future. In the old days, a big pharma company would hire legions of bright scientists, have them pan for medicinal gold in various fields and then develop the best ideas. Now, they’re transitioning out of that plan to more of an “outsourced” model.

Instead of hiring all these expensive experts, buying and maintaining their equipment and insuring them, big pharma shops the burgeoning market of high-tech independent labs that focus on developing innovative core products with the potential for big returns. If it finds one that looks particularly promising, it writes a check to give the research legs, funds safety trials and then licenses the technology or buys the company outright.

Investments in well-run companies with unique and interesting technologies like Inovio Biomedical, Tekmira Pharmaceuticals and our recommendations in Portfolio 2020 can pay off big over the long haul. But don’t allocate too much of your capital to a single name.

Sail Away with Me

KCI’s editors have been combing the globe for their next luxury investment cruise: Any ports of call must be ripe with investment potential, of course, but they must provide a rich slice of the world’s treasures and unique insights into human luxury. And after the brutal year we just finished, who couldn’t use some luxuriant downtime learning how to prepare their portfolios for what this next decade has in store?

Save the dates: Thursday, October 21 – Monday, November 1, 2010. Explore the wonders of Turkey and the Greek Isles while learning about the newest investment strategies from KCI editors Roger Conrad, Elliott Gue, Yiannis Mostrous and Gregg Early. While you enjoy unfettered access to the finest minds in investing today, Seabourn Cruises will upgrade the way you think about luxury cruising as you are feted aboard the brand new Seabourn Odyssey. From its all-included open bar of premium liquor, wine and beer to its almost better than 1:1 staff-to-passenger ratio, you will understand why it immediately jumped to the top of the luxury cruise line ratings charts when it hit the water in 2009.

For those of you lucky enough to have sailed with this keen crew in the past, you know you are in for a meticulously planned journey into the business, investment and cultural offerings of the region. KCI in partnership with Joseph H. Conlin Travel Management is offering this journey solely to KCI subscribers and their friends. For more information and reservations, please click here.

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