If you bought Inovio (NASDAQ:INO) on the first trading day in March, you’ve seen your investment nearly double. Of course, at one point INO stock had more than tripled. And traders who bought at that lofty height are sitting on a loss.
The catalyst of the moment is the COVID-19 virus pandemic. Inovio is one of multiple companies racing to develop vaccines and antiviral treatments for the COVID-19 virus.
Inovio has been receiving a significant amount of grant money as it prepares to bring its COVID-19 vaccine, INO-4800, to trial. The company received a $5 million grant from the Bill & Melinda Gates Foundation and a $9 million grant from the Coalition for Epidemic Preparedness Innovations (CEPI).
It’s not unreasonable for investors to expect the company may also receive part of the $25 million donation recently announced by the Chan Zuckerberg initiative.
But for the stock to move higher, the company must be the first to market with an approved vaccine. And that is looking like a risky bet.
The Bullish Case for Inovio
Inovio is on the cutting edge of flu vaccine research with its SynCon treatment. This treatment employs DNA strands known as plasmids to produce antigens. The result is the company’s ability to develop universal vaccines.
In theory, universal vaccines have an advantage over traditional vaccines. For this reason, Inovio can modify the vaccine to adapt to new influenza strains and mutations. This is one reason why Inovio was able to get a COVID-19 vaccine candidate to trial so quickly.
Another reason for optimism is the company’s pipeline. In addition to INO-4800, the company has a couple of other vaccines that are closer to development.
The first is the company’s lead vaccine candidate, VGX-3100. This is a treatment for anal dysplasia, a precancerous condition caused by the human papillomavirus (HPV). VGX-3100 has made it through a successful Phase 2 trial. And, VGX-1300 uses the same DNA technology that the company used to develop INO-4800.
Inovio is also on the leading edge of the drug market for pediatric brain tumors. This is a market that could be worth $1.65 by 2023. INO uses a process they call Immuno-Ingenuity. In the company’s own words this is (in part) “the drive to develop novel immunotherapies to fight cancer and infectious diseases.”
Inovio recently announced that the FDA approved its application to evaluate its drug, labeled INO-3107, which is in development for Recurrent Respiratory Papllomatosis (RPP). This is a rare disease caused by the human papillomavirus (HPV). The disease causes noncancerous tumor growths that lead to life-threatening obstruction of airways. The growths can occasionally progress to cancer.
The Bearish Case for Inovio
However, when it comes to vaccine development, being first is not always best. Although companies like Inovio can benefit from grant money for vaccine development, any vaccine still has to meet strict regulations from the U.S. Food & Drug Administration (FDA).
And as Ian Bezek wrote recently, there is some high profile skepticism being leveled at Inovio. Citron Research, a notorious short-selling firm, posted on Twitter that the SEC should investigate the company’s claim that they developed a vaccine in three hours. Bezek also noted that Citron has had an uneven track record, but they’ve gotten enough right to be credible.
Plus, when it comes to approval, there are a couple of competitors. For example, Gilead (NASDAQ:GILD) is developing an experimental antiviral drug, remdesivir, that is now in late-stage studies. The company says it could report initial results as early as April.
What’s Next for INO Stock?
Inovio will start conducting clinical trials of INO-4800 in April. The company will be testing 30 participants in the United States. It is also planning to conduct concurrent trials in China and South Korea with a total of 3,000 doses available for the trials.
Inovio anticipates it will receive results from these initial trials in the fall. At that time, the company expects to have 1 million doses of the INO-4800 available for additional clinical trials or emergency use. However, this highlights the challenge that investors face when analyzing a stock like INO.
While the company is showing a proven ability to get vaccines ready for trial quickly, there is no “first mover” advantage for biotechs if the vaccine is ineffective.
That is the calculation that investors need to make. As Mark Hake wrote in a recent article for InvestorPlace, INO stock could be undervalued if it has greater than a 5% chance of INO-4800 being successful.
Will its COVID-19 vaccine candidate finally allow Inovio to deliver on the promise of its technology? Inovio has shown an ability to get grant money to develop vaccines, the proof will be in delivering a finished product. Until they do, INO stock remains more of a bet than an investment.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.