The move lifted its share price by more than 9% Monday, providing some much-needed relief for a stock that’s lost 42% of its value since hitting a 52-week high of $5.95 on Jan. 27. Inovio stock had been on quite a run in 2020, aided by the company’s development plans for INO-4800 in China.
Anything related to China’s coronavirus outbreak is getting major coverage at the moment, however, speculators are having a ball. Inovio itself has obtained a $9 million grant from the Coalition or Epidemic Preparedness Innovations (CEPI), a global partnership of public, private, philanthropic, and civil society organizations working together to develop vaccines for deadly infectious diseases such as the coronavirus.
It’s all very noble.
Inovio’s Capitalizing on the Situation
However, the move by Inovio to up its shelf offering appears to be a case of the company taking advantage of the current news cycle and has very little to do with its desire to help solve the coronavirus.
So, while INO stock will remain extremely volatile over the next few months, providing speculators with plenty of trading profits, I have to wonder why anyone who’s the slightest bit risk-averse would be sniffing around this $3.50 stock.
“Even if a company successfully develops a vaccine, which will likely take years, there typically isn’t a lot of money in it,” Brad Loncar, the creator of two biotech indexes including the Loncar China BioPharma Industry Index, told the Financial Times. “While it’s possible that a large company like Gilead or AbbVie will be able to use an existing medicine against this as a therapeutic treatment, it’s unlikely to be much of a needle mover from a stock market perspective for a large company like that.”
If you believe the addition of $100 million to Inovio’s shelf offering is meaningful in any way, I’d like to sell you a few acres of Florida swampland.
Like many pharmaceutical companies, Inovio loses a lot of money. As of Sept. 30, 2019, it had an accumulated deficit of $702 million, which means it has lost $702 million over its history.
Now, I’m sure that doesn’t set a record for the most amount of money lost by a biopharmaceutical company over a decade, but it’s a heck of a lot of money. Inovio has spent a decade to get to today, where it generates less than $4 million in revenue.
Again, I have a hard time understanding why anyone except someone like Brad Loncar, who I quoted earlier, would bother with INO stock.
The Bottom Line on INO Stock
My InvestorPlace colleague, Josh Enomoto, recently discussed the pros and cons of owning the company’s stock. Interestingly, Josh concluded that it was 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,” Enomoto wrote on Feb. 10.
“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 a position to respond and get to market first with the next outbreak.”
Josh is a very bright guy, so the fact he sees potential in Inovio down the road suggests I might be flying against the grain on this one.
That’s OK. It wouldn’t be the first time I’ve missed investing in a high-flyer. I wouldn’t buy Inovio, but that doesn’t mean you shouldn’t.
Just remember one thing: the addition of $100 million to its shelf offering means very little to the future success or failure of the company unless it’s able to sell those shares.
I guess we’ll find out soon enough.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.