The Chinese coronavirus outbreak is an unequivocally horrendous tragedy. Efforts to address this outbreak must first and foremost be cognizant of the human element. But in recognizing this, there’s also an opportunity — and please forgive how callous that word sounds in this context — for pharmaceutical and biotechnology firms. Recently this drove the bull case for Inovio Pharmaceuticals (NASDAQ:INO) and INO stock.
Hardly a household name outside of the biotech community, Inovio was one of the high-flying names during the late 1990s/early 2000s tech bubble. At one point, INO stock was closing in on $200 a share. Today, shares are trading at a few cents above $3. Even at its recent peak, equity was just under the $6 mark.
However, INO stock has been trending upward since early October of last year. And it really captured headlines when it announced a possible vaccine for the coronavirus last month.
Better yet, according to NBC San Diego, “Coalition for Epidemic Preparedness Innovations awarded up to a $9 million grant to support Inovio’s vaccine. It’s in preclinical testing and could move into human trials by early summer.”
It’s an incredibly promising start for this biotech firm. But can INO stock complete its riches-to-rags-to-riches tale? Here are three pros and three cons to consider, beginning with the bad news first.
Con: Regulatory Approvals Take Time
Typically, regulatory approvals for drugs require extensive clinical trials, which would take time that Inovio doesn’t necessarily have. The worst-case scenario is that once it attains those approvals, the demand for the company’s vaccine is gone because the outbreak has quieted.
That was the case with the SARS virus back in 2003, where the bulk of the infections occurred well inside one year. Even cutting the time down to a few months wouldn’t have helped in the SARS case.
Around mid-March 2003, the World Health Organization reported 167 cases. By the end of May, the number of cases hit 8,360. But by then, SARS had peaked. By the end of June, the case number had “only” hit 8,447.
Bottom line: time is not in INO stock’s favor.
Con: China Reluctant to Seek Help
As a communist government, China has never completely earned the trust of the west and western-friendly nations. You’d think though that a humanitarian crisis would change hearts and minds, at least temporarily. And you’d be wrong.
True, China recently opened its doors to the WHO to allow international experts to study the virus and seek solutions. But that’s only after tens of thousands have been infected.
China’s reluctance to seek assistance while their own people die on the streets speaks volumes about their governmental integrity, or lack thereof. In my opinion, it’s almost impossible to have a true, trusting relationship with the Chinese communist party. As such, I view this as a headwind against Inovio and U.S.-China relations in general.
Con: Big Pharma Beat Everyone to the Punch
As I mentioned earlier, INO stock was on the brink of touching $6, which represented a huge leap from where it was at the beginning of the year. So, what happened? Gilead Sciences (NASDAQ:GILD) entered the picture.
Earlier this month, Gilead announced a research collaboration with Chinese authorities to run trials for its antiviral medication. While we don’t know if Gilead’s solution will be effective, the big pharmaceutical company has first-to-market advantage.
Plus, with GILD’s massive financial resources, it makes it risky for smaller firms like Inovio to invest their limited funds to battle against an industry giant.
Pro: Coronavirus Far Worse than SARS
A lot of folks have compared the coronavirus to SARS. But juxtaposing the two outbreaks based on their timelines, I think it’s apples to oranges.
To me, this chart says it all. I set the starting point from when both outbreaks first infected 100 people or more. From there, I cumulatively totaled the number of cases at certain time intervals. I think you’ll agree that the differences are shocking.
My biggest takeaway is that the acceleration of the coronavirus is on an exponential scale relative to SARS. If we assume a similar outbreak trend to SARS, we’re merely at the beginning of this awful crisis. Cynically though, it does augur well for INO stock and its underlying possible vaccine.
Pro: INO Stock Is Intensely Relevant
I’m not a doctor, nor do I play one on TV. However, I do analyze numbers daily and they’re painting me a very grim picture.
According to the latest update from The New York Times, the coronavirus has infected 37,198 people. Further, the death toll in China has jumped to 811, surpassing the SARS epidemic. However, SARS lasted about eight months. With the coronavirus, we’re only at six weeks long.
While Gilead may have first-to-market advantage, I’m not sure if it means that much. After all, the Times has reported new cases away from the virus’ epicenter, such as the U.K. and Spain. Thus, we may need Inovio’s vaccine.
Pro: Inovio’s Profound Medical Breakthrough
Even if Inovio fails to deliver its vaccine for whatever reason, the company received free publicity. In my opinion, the biggest catalyst for INO stock wasn’t about the vaccine. Instead, it was how quickly the underlying biotech firm produced a possible solution.
On January 10, Chinese scientists disclosed online the genetic sequence of the coronavirus. In 24 hours, Inovio responded with their vaccine. As Inovio CEO Joseph Kim put it, the company’s technology revolves around DNA. Therefore they didn’t need a physical sample of the virus, just the genetic profile.
In my opinion, this is next-level innovations, something out of science fiction. It’s just that before, probably most investors didn’t know about this tech.
“Thanks” to the coronavirus, they do now.
Bottom Line: A Compelling Buy
Like other investors, I’d never heard of Inovio, even though one of their main offices is in my backyard. But I’m paying attention now due to this outbreak.
But what’s very compelling about INO stock is its underlying innovations. Inovio might not win the coronavirus vaccine wars. However, it might be in position to respond and get to market first with the next outbreak.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.