Start-up story: A 13-year pursuit of success

Inovio Pharmaceuticals gave investors a reason to celebrate in 2013.

Its stock price ended the year up more than 400%. A Big Pharma giant became a partner, bolstering the company's image as an up-and-comer in biotechnology and bringing at least $400 million into the firm. And a handful of vaccines in the Blue Bell, Pa., company's pipeline showed promise in treating cancer and fighting disease.

And yet — after 13 years of work — there's still no product on the market. And the vaccines, as revolutionary as they promise to be, have only just begun to be tested in patients. The stock price sits below $3 per share; and the company is far from turning a profit. It lost $51 million in the first nine months of 2013.

Says co-founder and CEO Joseph Kim, "We haven't yet arrived."

Not every start-up takes so many years to enter the market. But some of the most important ideas require that. And their stories remind us that start-ups are volatile.

They require patience, perseverance and a passion that doesn't fade under pressure. They require risk and sacrifice, not just from the founders but from investors, partners, employees and in the case of Inovio, doctors and patients.

Inovio's journey offers that example. Born in a lab at the University of Pennsylvania, the company was called VGX Pharmaceuticals. Its creators were Kim, a Ph.D. student who longed of developing vaccines and building a business, and David Weiner, a professor who'd spent his career researching vaccines that regenerate and create disease-fighting T-cells in the body. The men hoped to make their company the next Amgen or Genentech.

It would require impressive scientific discovery, the translation of discoveries into vaccines that work, a best-in-class team and lots of money. Kim was up for the challenge. He completed an MBA while working in Weiner's lab; he left a promising career at Merck to pursue the business.

Funding was always difficult. Three times, the company neared bankruptcy, but the men went months without pay, and Kim took out a second mortgage on his home. They eventually raised $40 million in venture capital to keep operations going.

And in 2009, after another scare during the recession, they merged with Inovio Biomedical, a public company, and tapped the public market to raise more than $100 million. The company's name became Inovio.

"In some ways, you can only build a company like this based on luck and non-venture funding," says Charles Duncan, a Piper Jaffray analyst who covers the company.

Over time, the pair developed a pipeline of products, prioritizing based on data that showed their likelihood of better treating or preventing disease. Kim pledged never to become "a one-trick pony."

"Let's build a sustainable company where you're not dependent upon the success or failure of a binary event," he says. That meant exploring a preventative malaria vaccine and earning funding from the Gates Foundation, and HIV and influenza programs with other grant sources.

A cervical pre-cancer treatment is now furthest along, with results of a phase two study in humans coming soon. Another experimental product, Kim says, could treat 85% of cancers, including breast and lung cancer.

At times, development seemed slow, says Raghuram Selvaraju, the Aegis Capital analyst who rates the stock a hold. Clinical data on the cervical pre-cancer trials will come more than a year behind schedule.

But the Big Pharma partnership, a deal with Roche to collaborate on prostate cancer therapy and a treatment for hepatitis B, came earlier than expected.

"Validating the platform with a Big Pharma partnership is something we think is positive," Selvaraju says. "I'd give them a B, and I think if they hit with the cervical cancer data, I'd give them an A."

Kim compared the process of securing the agreement to "a yearlong colonoscopy, in terms of thoroughness."

To keep the staff engaged, Kim and Weiner award every employee stock options. They want workers to share in any Inovio success.

And to keep investors, analysts and the medical community interested, Inovio has published more than 70 papers on its findings in the last five years.

That helped fuel the stock price last year, says Duncan, who rates the stock a buy.

"These guys are doing a good job of articulating the story, and it's becoming mature enough to attract the attention of a broader set of investors," he says.

But how long will they wait? It might be four years before a vaccine enters the market, Kim says.

Buy or hold, Inovio remains a question mark.