Inovio Biomedical Corp. bouncing back from shaky past, facing critical year: company raises $15.5m in sale of stock, gains $1.1m grant from U.S. Department of Defense

San Diego Business Journal, Nov 6, 2006 by Katie Weeks

If Avtar Dhillon has his way, history won't repeat itself.

Twenty-three years ago, Inovio Biomedical Corp. was born--albeit three names and four chief executive officers ago.

Mergers and acquisitions abound in the biotechnology industry, making the long-standing company a small wonder. The former Genetronics Biomedical Corp. almost folded before Dhillon took over as CEO in 2001, picking up the pieces left by episodes of mismanagement and a soured partnership with Johnson & Johnson, he said. Inovio's value dived from about $200 million to $15 million.

Since the Indian-born, Canadian-raised medical doctor-turned venture capitalist took over, Inovio's market capitalization has rebounded to nearly $100 million, and Inovio has formed a partnership with Whitehouse Station, N.J.-based Merck & Co. Inc., one of the world's largest pharmaceutical companies.

San Diego-based Inovio has released several announcements in the last couple of weeks, including raising $15.5 million from the sale of stock, securing a $1.1 million grant from the U.S. Department of Defense for development of DNA vaccines, the purchase of technology from Burlingame-based Valentis Inc. for $860,000, and positive results of a preclinical study that tested Inovio's technology against hepatitis C.

Inovio today has 35 employees and plans to add more. Inovio reported having nearly $11 million in cash and short-term investments as of June 30.

Analysts say the company is coming back, and that the next year could be telling for the firm as several clinical trials wind down. Inovio's stock has been hovering around $3.

The firm's technology is centered on its patented electroporation machine. Dhillon narrowed the Inovio pipeline to focus on applying the technology to two areas--DNA vaccines and cancer therapies.

In use for vaccines, DNA is injected into skin or muscle, and the machine applies electrical energies for less than one second. The electroporation causes uptake of the DNA into the cells and triggers local inflammation, which stimulates the immune system, said Dhillon.

In cancer therapy, a Food and Drug Administration-approved generic drug called Bleomycin is injected into the solid tumor before the electroporation machine is used. For this use, the electroporation enhances the uptake of the drug by several thousand times, killing cancer cells, he said.

Technological Advantages

Dhillon said the major advantages of Inovio's technology, should it be approved here, is that surgery to remove solid cancer tumors would be less necessary. The process is also cheaper, with fewer side effects that hurt quality of life, he said.

Inovio is partnering with pharmaceutical giant Merck, San Diego-based Vical Corp., Sweden-based Tripep and the United Kingdom's University of Southampton to test its technology for preventing or treating diseases such as HIV, hepatitis C and prostate cancer. In the United States, head and neck cancer trials are the furthest along--in phase three, which is the last phase before submission for FDA approval. The federal regulatory body in Europe has already approved the technology for head and neck and skin cancers.

"The technology was not what was leading the company to the downward spiral," Dhillon said. "I like to create value for people interested in supporting me. When I could see something promising, I put management resources and money behind it. A company can gain value quite quickly."

Dhillon came to Inovio from Toronto-based MDS Capital Corp., a major health care venture capital organization, where he was vice president. Dhillon, 45, began his career as a doctor. He had his own family practice in Vancouver, British Columbia, Canada, for 12 years. After nine years in the practice, he sought new challenges. Dhillon found his niche as he began investing in biotechnology firms 13 years ago.

A Leader

Dhillon's investment strategies and ability to see areas for improvement within a company soon turned into biotechnology consulting and analyst jobs, and ultimately to the venture capital firm.

Berkeley-based biotechnology analyst John McCamant said Inovio is "well past the critical stage," and that the company has "done a good job of learning how to create value."

New York-based investment bank Rodman and Renshaw put Inovio on its radar screen two years ago.

"We looked at the data, and felt they had a chance," said Navdeep Jaikaria, a New York-based senior biotechnology analyst. "They are doing the right thing. It doesn't matter what you did 10 years ago or five years ago. It matters what you are doing now."