Inovio Pharmaceuticals (NASDAQ:INO) has been rising while the rest of the market has been falling.
So far in 2020 it’s up 36%, and it peaked 30% higher in late January. That’s because, like Gilead Sciences (NASDAQ:GILD), Regeneron Pharmaceuticals (NASDAQ:REGN), Novovax (NASDAQ:NVAX) and Moderna (NASDAQ:MRNA), it is supposedly on the trail of a vaccine against the coronavirus from China.
Covid-19, the disease from the coronavirus, has a similar mortality rate to 1918’s Spanish Influenza, which decimated the globe and helped end World War I. The coronavirus is also all anyone wants to talk about these days. Even people who rail against the annual flu shot are now desperate not to contract the new virus.
Why the Speculation?
This makes Inovio look a lot like marijuana stocks did in 2018, and like bitcoin looked in 2017. Speculators are rushing into it, ignoring both its fundamentals and its real prospects.
Inovio opened for trade Feb. 28 at $4.79 per share. That’s a market capitalization over $400 million for a company that had revenue of just $867,000 during the third quarter. It usually loses at least $25 million per year.
Inovio works with the Coalition for Epidemic Preparedness Innovations (CEPI), a Norway-based group aimed at bringing government and industry together to fight bugs like Covid-19. In January, CEPI gave Inovio $9 million to develop a vaccine against the virus, which should lead to human trials on a drug called INO-4800.
Inovio isn’t going into the work alone. One of its collaborators will be a company called Twist Bioscience (NASDAQ:TWST). TWST is up 43% this year, a market cap of over $1 billion on 2019 revenue of about $60 million.
A Long Shot
It took Inovio just hours to develop its vaccine candidate. The key “spike protein,” against which such a vaccine could work, has been mapped at the University of Texas, which had already been studying other coronaviruses.
Inovio is just one of several companies aiming at a cure or vaccine. INO-4800 is just one of many candidates for a vaccine. Just because a company is in a lottery doesn’t mean it has won a prize.
In theory, a company whose vaccine proves effective would have intellectual property it could license to a scaled manufacturer. But that’s a long-shot bet. InvestorPlace’s Ian Bezek calls Inovio “a highly speculative trade.” Thomas Niel notes Inovio has made a habit of selling stock when good news hits, meaning your “investment” is subject to substantial dilution. At the end of September Inovio had $93.8 million of cash in the bank.
Inovio has other things going on. It’s trialing a drug against the effects of HPV, a sexually transmitted virus that can cause cervical cancer. It’s trialing a drug against glioblastoma, the brain cancer that killed Massachusetts Sen. Edward Kennedy and Arizona Sen. John McCain. It has a trial underway on prostate cancer, alongside Bristol-Myers Squibb (NYSE:BMY). Chris Markoch thinks it’s drugs like these that could be the real catalysts for Inovio stock.
The Bottom Line on INO Stock
But that’s not what speculators are betting on. They’re betting on the coronavirus.
Even if Inovio’s candidate works against Covid-19, human trials will take time. We won’t have a working vaccine until the current outbreak has gone around the world. Optimists are still hoping it can be contained, and improved care can reduce the death rate.
Those are much better bets than the idea that Inovio may have struck gold on its first try at a Covid-19 vaccine.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
