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GeoVax: a risk reward opportunity with significant long term positive returns

By Grant Zeng, CFA

On October 9, 2013, GeoVax Labs, Inc. (GOVX) presented additional results from HVTN 205, a multicenter, randomized Phase IIa trial evaluating the safety and immunogenicity of the Company's first generation preventive HIV vaccine, at the 2013 AIDS Vaccine Meeting in Barcelona, Spain.

Background of HVTN205 Trial

As a reminder, HVTN initiated the Phase IIa HVTN205 trial of its first generation HIV vaccine in Feb 2009. The full dose DNA/MVA (DDMM) and MVA-only (MMM) regimens were selected for testing by the HVTN in the Phase IIa trial. The HVTN 205 trial enrollment was completed in October 2011 and patient inoculations were completed in January 2012.  Data were orally presented at the Global AIDS Vaccine Conference in September 2012.

The Phase IIa clinical trial tested safety and immunogenicity of the two most promising regimens evaluated in Phase I:  (1) Priming with DNA at months 0 and 2 and boosting with MVA at months 4 and 6 and (2) priming and boosting with MVA at months 0, 2 and 6. 

                                                                                  The HVTN205 Phase IIa Trial Design

A total of 300 participants are enrolled in HVTN 205. Patient enrollment for HVTN 205 was conducted at 11 clinical sites in North America and two sites in South America. Following is the summary of the Phase IIa trial results:
Both vaccine regimens are safe and well tolerated;
Both vaccine regimens were immunogenic;
CD4 T cell response rates were higher with DNA/MVA;
Antibodies to gp120 and HIV-1 neutralization were higher with MVA only;
CD8 T cell responses and gp41 antibodies were similar;
Safety and immune responses mirrored those seen in HVTN 06

Data analysis for neutralizing antibody responses has shown elicitation of unexpectedly high response rates for tier 2 isolates of HIV.  In both DNA/MVA regimen and MVA regime, high response rate of RHPA, SC22.3C2, and 9020.A3 was detected, but MVA regime had a higher rate. 

Neutralizing antibodies can block virus from infecting cells by binding to regions of the virus that mediate entry into cells. The elicitation of neutralizing antibody for tier 2 viruses is an important result because tier 2 viruses represent viruses that undergo the most frequent transmission from an infected person to an uninfected person. Therefore, elicitation of neutralizing antibody is a much sought goal for an HIV/AIDS vaccine.

New Clinical Data From HVTN 205

GOVX presented additional results from HVTN 205 trial of the Company's first generation preventive HIV vaccine, at the 2013 AIDS Vaccine Meeting in Barcelona, Spain.

At 6 months post-vaccination, patient antibody levels had declined less than 3-fold, indicating significant durability of the antibody response.

After the final vaccination, antibody responses against the HIV Envelope protein (Env), the target for protective antibody, were detected in 93.2% of the DDMM arm (the vaccination regimen selected for further clinical study). At six months after final vaccination (the latest time point tested), gp140 IgG antibody response titers in the DDMM arm had declined by less than 3-fold, with response rates only declining from 100% to 84%, indicating significant durability of the antibody response. Additionally, HVTN 205 also showed that the antibody responses after vaccination had high affinity binding, a characteristic which has been associated with prevention of HIV infection in preclinical models.

We are pleased to see the durability of the antibody responses and encouraged that GeoVax’s vaccine is eliciting tightly binding Ab in humans. The key to a successful preventive vaccine is the antibody response, which needs to be both sustained and capable of high affinity binding.

Test of Second Generation HIV Vaccine is Under Way

The HVTN is currently conducting a Phase I trial (HVTN 094) of GeoVax's second-generation DNA-G/MVA vaccine.

This vaccine co-expresses GM-CSF as an adjuvant and achieved a much higher level of prevention of infection than unadjuvanted vaccine in non-human primate testing.

In non-human primate studies, the co-expression of GM-CSF in simian prototypes of GeoVax's HIV vaccine achieved a 90% per exposure rate of protection against twelve serial rectal challenges with the heterologous SIVE660 virus, which translated to 70% of vaccinated animals being protected against all twelve challenges. Based on these outstanding results, the 2nd generation adjuvanted form of the GeoVax vaccine is being advanced in human trials.

The Phase I clinical trial (HVTN 094) began enrollment in May 2012. Enrollment was completed in the first half 2013. The study enrolled 48 volunteers and will assess safety and immunogenicity of the adjuvanted vaccine at low-dose and full-dose regimens.

This trial is ongoing and will be completed by the end of 2013.

GeoVax is actively engaged in discussions with the HVTN regarding the design of a Phase II clinical trial of GeoVax's second-generation preventive HIV vaccine. The Company expects trial initiation in 2014, following successful completion of HVTN094. The Phase II trial is anticipated to have approximately 4000 participants equally divided between placebo and vaccine groups and to be conducted in the Americas. GeoVax is currently manufacturing product to support the Phase II clinical trial so that progression through the development path can proceed as soon as results are available from Phase I testing in HVTN 094.

We think the use of the GM-CSF adjuvant is unique in that instead of co-inoculating with the GM-CSF protein, the GM-CSF adjuvant is encoded in the same DNA that expresses HIV non-infectious virus-like-particles. This ensures that GM-CSF is immediately present at every site where vaccine responses are being initiated and allows very low levels of GM-CSF to have a profound effect on the vaccine responses.

GeoVax has made great progress in its HIV/AIDS vaccine clinical programs. The recent failure of HVTN505, a 2500-patient Phase IIb trial conducted by the National Institutes of Allergy and Infectious Disease (NIAID), strengthened our confidence in GeoVax's vaccine technology. The vaccine studied in HVTN 505 used an adenovirus vector of genetic material from the HIV virus, similar to the vaccine used in the Merck trial (STEP/Phambili) that was halted in 2007. In contrast, GeoVax's boosting vaccine uses a poxvirus vector (modified vaccine Ankara) which has been associated with clinical success.

Valuation is Attractive at Current Market Price

GeoVax has developed the technology for the development of both preventive and therapeutic HIV/AIDS vaccines. The Company’s vaccine candidates have completed Phase IIa and will enter into Phase IIb clinical trials soon, which are the only HIV vaccines for America/Europe entering efficacy trial.

The Company has a modest cash burn rate ($4 to $5 million annually) due to generous government support. Down the road, we believe GeoVax will continue to seek non-dilutive government and non-government support for its HIV vaccine development. If the Phase IIb trial proves to be positive, we believe it would be likely for the Company to find a partner from big pharma or biotech companies who seek to boost or enter into the anti-HIV/AIDS market.

GeoVax has a strong position in intellectual property. The excellent relationship with Emory University put the Company in a better position to get the most advanced vaccine technology in the first hand, therefore providing a sustainable growth engine for the Company.

Based on the current fundamentals of the Company, we believe current valuation is attractive. With a decent pipeline and mid-stage candidates, GeoVax is only valued at about $10 million in market cap. This is a huge discount in our view. We understand that HIV/AIDS vaccines have been tough to develop and that this is a high risk area for any biotech company especially for smaller ones with limited resources. However, we think GeoVax has done great job so far in the HIV/AIDS vaccine area and is well positioned to continue to create shareholder value down the road.

We see GeoVax as a risk reward opportunity with significant long term positive returns. Our price target of $1.50 represents a market cap of $30 million.

But Keep in Mind the Risks

Risk must be taken into account when investors add positions.

One major risk is development/regulatory risk. We remind investors that GeoVax’s HIV/AIDS vaccines are still in mid-stage development and the Company still needs to navigate through the regulatory process in the US and around the world, which proves to be long and tough. When it comes to HIV/AIDS vaccine, investors should be aware that this has been a tough area to tackle considering the failed developments already.

Cash burn
is still a concern. Although most of GeoVax’s clinical trials have been supported by the government grants, there is no guarantee that the Company will continue to get enough support to continue late stage clinical studies. In such a case, the Company needs alternative financing measures, which include equity or debt financing.  Current cash as of June 30, 2013 stood at $1.9 million, which can only last through the 4Q2013. We remind investors that equity financing will dilute existing shareholder base. 

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