If it weren’t for the coronavirus from China, I’d imagine not too many folks would have heard about Inovio Pharmaceuricals (NASDAQ:INO). But because of the outbreak, which has rapidly devolved into pandemic status, several pharmaceutical names have exploded higher due to the race to find a vaccine. Suddenly, INO stock – which went nowhere for most of 2019 – has skyrocketed 180%.
Under any circumstance, that’s a staggeringly positive return. For one thing, we haven’t even completed the first calendar quarter. Beyond that, INO stock dropped 16% last year, despite moving higher on broader optimism since October. But with the major indices printing a historic amount of red ink, it’s Inovio that’s offering a glimmer of hope.
Still, a lingering question remains: is it safe to bet solely or largely on a single vaccine? As I pointed out in my list of pros and cons for INO stock, the underlying company faces significant competition; namely, pharmaceutical giant Gilead Sciences (NASDAQ:GILD) entered the arena, as have several other players.
With many analysts arguing that the disease labeled Covid-19 will come and go, betting on Inovio appears hazardous. However, the time frame for INO may be a bit more favorable than you might imagine.
For instance, the scale of Covid-19 is far greater than the SARS epidemic of 2003. Seven weeks after SARS infected at least 160 people, total cases numbered 5,633. For the coronavirus, the case number over the same period and criteria totaled over 134,500.
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Further, Covid-19 has impacted over 100 nations. In order to prevent a rapid deterioration, multiple urgent responses are necessary. Therefore, I see INO stock having a longer pathway than previously anticipated.
INO Stock on the Front Lines
I’m not suggesting that you should go guns blazing into Inovio shares. Certainly, the current environment is incredibly volatile. Even the promises of aggressive fiscal stimulus is at time of writing failing to mitigate the bleeding.
Nevertheless, on Thursday’s bloodbath, INO stock jumped 13.5% higher against the prior day’s close. I can’t imagine that all this bullishness is based on pure emotions. Surely, there must be some rationality behind this move?
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From my analysis, investors are extremely optimistic on Inovio and other promising pharmaceuticals because government agencies are losing the war on containment. If you consider many of the coronavirus hotspots – China, Italy, South Korea, Iran and the U.S. – their case tallies all accelerate and cluster in similar fashion.
In my research, arbitrarily my data set’s starting point is at 50 cases or more. From there, I juxtaposed individual nations’ infection rates using the 50-case starting point criteria. What I discovered was that certain measures taken over a one-week period can either accelerate or decelerate infections.
As a prime example, South Korea’s case numbers have recently flatlined. However, between days seven and 14 following the starting point, Korea’s infection rate was nearly 431%, higher than Italy and Germany. Yet comparing days 14 to 21, their infection rate dropped to 45%.
That’s awesome news for them. But for poor Italy, their nation is struggling badly to contain the virus. Their growth rate between days 14 to 21 is on pace for 226%, which is higher than China’s over the same period. Unless a miracle occurs, Italy may face a crippling blow to its healthcare system.
Interestingly, its regional lockdown early in the game failed to stem the tide. Unfortunately, I don’t see this virus just fading away like many are hoping.
Will We Listen to Each Other?
Another factor why INO stock may have a longer pathway to profitability is politics. Opinions about President Donald Trump’s closing transportation networks from specific countries may vary. Whatever the case, the Trump administration should strike a balance between barriers and cooperation.
For instance, many analysts have noted that China’s growth rate in coronavirus cases have declined sharply. It’s true. But South Korea is the real model for successful containment, not China. After all, between days 14 and 21 following the starting point, China’s total cases increased 221.5%. Again, in the same period, Korea only saw a 44.9% increase – that’s a big difference.
And what about Japan? Aside from Diamond Princess cruise liner cases, it has mitigated infection rates while Europe imploded into a crisis. Granted, the numbers may be artificially lower due to a lack of testing. Nevertheless, Japan acted quickly in shutting down schools, theme parks and sporting events. In other words, while this is a time for caution, it’s also a time for goodwill and the exchange of vital information.
But we’re not doing that, are we? I’m afraid that based on my modeling, the U.S. is not taking appropriate measures for containment and mitigation. Therefore, it’s possible we can see a markedly worsening coronavirus crisis here. That’s not good news for anybody except for perhaps stakeholders of INO stock.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
