The Life Sciences Report: Congratulations on your new publication, Transformational Technology Alert (TTA). I've read the first issue, and I think your readers will find a lot of value there. Why did you start TTA?
PC: The driving force behind this new effort came from readers of former publications who are much better at trading than I am. I was encountering people who read the articles, understood the basic science, understood the markets that the breakthroughs would address and then combined that knowledge with techniques like channel trading.
TLSR: Tell me what you mean by channel trading.
PC: There is a lot of volatility in startup biotechs. That fluctuation is a favorite domain of shorters. I became really impressed that people were able to buy on dips and then sell part of their holdings when the price went up. They were making enormous amounts of money, frankly.
TLSR: These traders seem to know where the resistance and support levels are, is that right?
"I became really impressed that people were able to buy on dips and then sell part of their holdings when the price went up. They were making enormous amounts of money, frankly."
PC: That's my impression—in fact, that's sort of the point behind this new publication. The publisher, Mauldin Economics, has given me a team of excellent analysts who study resistance and are looking very closely at the past behavior of companies to help people predict what the channel or range of prices between support and resistance is going to be, and how to play that channel. I like the idea of holding fewer stocks but having more confidence in them. Not that there's anything wrong with holding more.
TLSR: It's hard to find a brand new idea that encompasses a massive market, isn't it?
PC: Just when I think that there's no possible way we can find anything else as important or as big as what we've already found, something new and exciting comes along. But that's the nature of these times. We are in a period of accelerating science. I'm constantly surprised and amazed at the new discoveries being made and applied in the field of medicine.
TLSR: Tell me how Gordon Moore's Law applies to biotechnology. This was a theme in your webinar entitled Science Saves the Future, which you and your colleagues at Mauldin Economics hosted on Oct. 15.
PC: Informational technology (IT) people are inventing and creating new computer systems from scratch, and as these systems become more powerful we see researchers applying those tools to biological systems that are very sophisticated—actually far more sophisticated than the IT systems. If you compare DNA to microcircuits—well, there just is no comparison. The systems of our biology, of our DNA, are vastly more sophisticated and interesting than anything IT experts have made.
"Information technology is giving biotechnologists the ability to analyze systems like they have never done before."
However, IT is giving biotechnologists the ability to analyze these systems like they have never done before. Moore's Law states that the density of data on a circuit will double every 18 months or so for the next 20 years. In the last 10 years, research, which is often computer-intensive, has become so much easier. I am told on a regular basis that we are seeing the rate of discovery increase by several orders of magnitude per decade. Data is processed a thousand times faster, in fact, than it was just 10–15 years ago. We are witness to new fixes for old problems, and we are going to see even more new fixes in the coming years.
TLSR: Can you summarize the Moore's Law component in this process for me?
PC: We're talking about improvements in everything from target discovery to in silico synthesis of compounds to reducing times of clinical trials to increasing efficiency associated with drug discovery and development. Moore's Law is about collapsing timeframes in all areas of technology and development.
TLSR: What about your webinar topic, Science Saves the Future? Tell me the thinking here.
PC: These advances in IT and biotechnology are important because of our economic problems. Right now 36% of the U.S. budget consists of transfer payments (Medicare, Medicaid and Social Security) to older individuals. That's three times what those payments were when they started, and they have doubled since 1970. This is mostly because we have seen a demographic transition, with people living much longer. Life spans have almost doubled in the last century or so, and birth rates have fallen to half of what they were since 1970, causing the demographic pyramid to flip. The ability of younger people to support older people, who are living longer, is gone.
"Just when I think that there's no possible way we can find anything else as important or as big as what we've already found, something new and exciting comes along."
Instead of resisting that trend, we need to embrace it. We have the ability now to work much longer, and we will do that. This is not a question of policy. This is just practical. Retirees are working past the age of entitlement eligibility already, and most say they expected that to happen.
Biotech breakthroughs are going to extend life spans further, and they are also extending health spans—that portion of a person's life that is vigorous, robust and strong. That means enhanced productivity, so savings and investment will increase. This trend is going to solve problems like the debt and entitlement crises that the entire Western world is facing right now.
TLSR: Can we talk about investment? You currently have an exciting theme revolving around DNA immunization. Would you briefly give some background?
PC: Inovio Pharmaceuticals Inc. (INO:NASDAQ) came out of the work of David Weiner, who is the father of DNA vaccines. He is the chairman of Inovio's scientific advisory board, and also a professor at the University of Pennsylvania, where he is chairman of the gene therapy and vaccine program at the medical school.
Dr. Weiner discovered how to genetically engineer plasmids, which are circular strings of DNA, to produce any protein that is normally produced by our DNA. We can create artificial DNA with these plasmids to make things like antigens, which alert the immune system to the presence of disease when it's normally hidden, and then cause the immune system to ramp up production of specific kinds of T cells that will allow the effective countering of viral diseases or cancers. This is really an astonishing technology, and that's only the tip of the iceberg.
Inovio is the amalgamation of four or five different companies that started going after DNA vaccines. Over time, after the initial enthusiasm of big pharma waned, these companies ended up coming together as a single company.
TLSR: Briefly, please, how does this work? What is the theory?
PC: Interestingly, because these plasmids are large molecules, they are not readily absorbed into the cell. That would be a problem, except that Inovio owns the key intellectual property around electroporation. This proprietary technology gives Inovio the ability to deliver plasmids across cell membranes. The process uses controlled, millisecond-long, electrical pulsations, after the vaccine injection, to produce momentary pores that open up and allow the cell to absorb the synthetic vaccine material. The vaccine then enters the cytoplasm and eventually moves into the nucleus, where the plasmids begin to express whatever protein the researchers want them to express. The cellular mechanism uses the DNA code that was engineered into the plasmid to synthesize the proteins related to the disease being targeted. These protein antigens trick the immune system into producing a response that will protect against a disease associated with that antigen, or eradicate infected cells or cancer cells.
TLSR: Inovio stock has moved upward dramatically in the last six months. It is getting a lot of respect these days, isn't it?
PC: When I first started writing about Inovio, it was so new that people were skeptical and were complaining that the company wasn't making regular gains. In early September the company signed an agreement with Roche Holding AG (RHHBY:OTCQX) for two programs, both of which are preclinical and both of which are therapeutic vaccines, INO-5150 for prostate cancer and INO-1800 for hepatitis B virus. Its stock price is doing significantly better. Moreover, it now has the resources to pursue other applications of DNA vaccines.
TLSR: What about this impressive move upward? Is it hard to sell this as an investment idea with the stock up 260% since May?
PC: I'm not at all bothered about the fact that price has gone up. Inovio still has extraordinary potential, and I'll tell you why. Here's one example: Monoclonal antibodies are expensive therapies, and they are difficult to handle, but this technology can actually produce monoclonal antibodies in these little inoculation sites. It puts this code in your body, and you make the antibodies yourself.
"The ability of younger people to support older people, who are living longer, is gone. Instead of resisting that trend, we need to embrace it."
The company has a majority-owned subsidiary, VGX Animal Health, that is using Inovio's technology on animals in Australia. The vaccine technology is causing animals to express growth hormone-releasing hormone (GHRH), which makes them larger and more fertile. Think about that. The baby boom is aging. We see athletes taking growth hormones, but because it's exogenous, coming from outside the body, it causes all kinds of problems. We know that it's possible to get effective rejuvenation of many human systems—better skin, better muscle tone, that sort of thing—with GHRH. I think that down the road, after Inovio's cancer and virus vaccines have begun to pay off and when the company is able to go where it wants to go, we're going to be looking at monoclonal antibodies, then life-extension technologies, and then other exciting applications.
TLSR: Today Inovio has a market cap of $413 million, still small enough to be an easy acquisition. Do you anticipate this company is going to be acquired before it has a chance to grow into a fully integrated biopharma?
PC: It's a possibility, but I don't think Inovio is going to give up all of its technology to a single company. I don't think it's necessary. The company has many partnerships. For instance, it has made extraordinary progress on malaria, and the Bill & Melinda Gates Foundation, through its PATH Malaria Vaccine Initiative (MVI), is funding preclinical development of Inovio's SynCon synthetic malaria vaccine.
I'm hoping that the company is not acquired. I suppose shortsighted investors would be happy about it, but I really want to see Inovio CEO Joseph Kim and Dave Weiner continue to push this technology into the future.
TLSR: Is there any other company you wanted to mention?
PC: One of the people who participated in the Science Saves the Future webinar is Cameron Durrant, who is a remarkable guy. He was a top executive at Johnson & Johnson (JNJ:NYSE), GlaxoSmithKline (GSK:NYSE), Merck & Co. Inc. (MRK:NYSE), and Pharmacia Corp. (acquired by Pfizer Inc. [PFE:NYSE]). He may be best known as the prophet who warned big pharma not to pursue beta amyloid as the cause of Alzheimer's disease. He was proven correct. He's just a brilliant scientist. He is also a founding board member of a private company, Bexion Pharmaceuticals, which has a remarkable cancer technology. He talked a little bit about that in the seminar. Retail investors can't yet own any part of this company. Would you like to hear about the technology?
TLSR: Since it's not public yet, give me just a brief description. Why is Bexion so interesting?
PC: It has taken two naturally occurring biologics and joined them to create a nanovesicle, which homes in on phosphotidylserines, which are the self-destruct mechanisms built into all of our cells. Our cells ordinarily follow a cycle of replication and apoptosis (natural cell death) to clear out aged cells for new cells. Cancer cells are, in a sense, the zombie cells. They've forgotten how to die because apoptotic functions are shut off. Bexion has demonstrated that its BXQ-350 induces apoptosis in certain glioma cell lines.
TLSR: So nice speaking with you today, Patrick. Thank you.
PC: Thank you. I enjoyed it.
Patrick Cox has lived deep inside the world of technology breakthroughs for the past 30 years. He has written more than 200 editorials for USA Today and has appeared in The Wall Street Journal and on CNN's Crossfire television program. In the late 1980s, he edited and published one of the first industry-insider software magazines, writing about topics like open-source and user-supported software long before those ideas were widely understood. Later, he wrote presentations and speeches for the CEO of Netscape. His consulting work has taken him to Fortune 500 boardrooms and inside the war rooms of national political candidates. His independent research is based solely on his investigations in transformational wealth-building companies and is generated in close consultation with important economists and scientists.
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1) George S. Mack conducted this interview for The Life Sciences Report and provides services to The Life Sciences Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
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