Among the many signs of the apocalypse in recent days, it wasn’t another 1,000-point drop in the Dow that grabbed my attention. No, it’s the rise of Inovio Pharmaceuticals (NASDAQ:INO), Monday’s drop not withstanding. (Pre-market sees it already regaining half of yesterday’s loss…)
As I wrote a month ago, Inovio is one of several companies working on a coronavirus vaccine. They’re part of the Coalition for Epidemic Preparedness Innovation, a Norway-based group that tries to finance and advance vaccines against infections like the one known as COVID-19.
CEPI gave Inovio $9 million to finance its part of the work, but traders are acting as though Inovio already has something in production. The last time I wrote the stock was at $4.79. It opens March 24 at $6.62. That’s a market cap of $965 million for a company that had 2019 revenue of $4 million and just got a $9 million contract.
Why It Happens
The run-up illustrates something important about the stock market.
It’s that you buy the rumor and sell the news.
Inovio doesn’t have a vaccine. It has a vaccine candidate, called INO-4800, which it whipped up in a matter of hours. This was possible because University of Texas researchers have mapped the chemistry of a protein on COVID-19. Attention is focused on a “spike” whose shape changes as it attacks a cell. The idea is that if that action can be deactivated the infection will not occur.
This is a theory. INO-4800 is a vaccine candidate. There are several vaccine candidates, but it will take time to test them, to see if they work and if they have side effects. That could take 18 months. If INO-4800 works, then Inovio will have intellectual property to sell to a scaled manufacturer. But the value of that is unclear. Buyers are in no mood for profiteering.
Inovio has a lot of such speculative formulations under trial. It has a drug to treat glioblastoma, a brain cancer that killed Sens. Edward Kennedy and John McCain. It has a drug for prostate cancer, under trial with Bristol-Myers Squibb (NYSE:BMY). It has a total of 15 drugs in various stages of development. Any of these could be a catalyst for growth, but it’s all speculative.
The Hype Machine
Meanwhile, the hype goes on.
Inovio has traded as high as $18.72 per share, on March 6. (The spike was even more pronounced than the one on the virus.) The company sold 43 million new shares to raise $210 million for operations, at a price of $4.92. If you bought those shares you can sell them today for a profit.
The price was unwarranted. Short-sale specialists Citron Research quickly tweeted a warning, and the stock began falling. This was followed by lawyers anxious to call Inovio a scam. Along the way Inovio’s CEO appeared on TV to state he had something, which he did. It’s just that he didn’t have what his listeners thought they heard. This nonsense even went to the White House, where the occupant knows less about science than a fifth grader.
Even after all this, the hype wasn’t over. Inovio got $5 million from the Bill and Melinda Gates Foundation to fund injection technology. Inovio also reported a loss of $37.7 million, 38 cents per share, on revenue of $279,000 for the fourth quarter.
Bottom Line on INO Stock
Inovio is a prospector. It’s not a drug company. It designs molecules, based on good science, that can then go into the testing pipeline. Any investment in INO stock is a bet on that and nothing more.
Any one of its many drug candidates could be a gold mine. They’re all ripe for hype. But until positive results are achieved on trials hype (and hope) is all you are buying.
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. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.