What a year it has so far been for shareholders of biotechnology company Inovio Pharmaceuticals (NASDAQ:INO). Year-to-date INO stock is up an eye-popping 315%.

Since the INO share price has skyrocketed in a matter of months, there is likely to be some profit-taking around the corner. Its current fortunes are riding on developing a vaccine for the novel coronavirus.

Yet if you believe in its prospects, you may regard any potential dip in the INO stock price as an opportunity to go long the company. Let’s take a closer look.

Inovio Making Headlines

Over the past three months, we have witnessed a large number of countries implement preventive strategies against the spread of the novel coronavirus outbreak. Meanwhile, a number of biotechnology companies have joined in the race to develop either vaccines or antiviral drugs.

Inovio specializes in DNA-based vaccine technology. In January, even before the Covid-19 pandemic had reached our shores, management said that it was working on a vaccine against the deadly virus from China. It received a grant of up to $9 million from Oslo-based Coalition for Epidemic Preparedness Innovations (CEPI).

Recent research published in The New England Journal of Medicine by Nicole Lurie, M.D., of CEPI, highlights that “Multiple platforms are under development. Among those with the greatest potential for speed are DNA- and RNA-based platforms. RNA and DNA vaccines can be made quickly because they require no culture or fermentation, instead using synthetic processes.”

Following a March 22 CBS 60 Minutes program, more Americans learned about the group and its efforts to develop a cure for coronavirus. Could Inovio’s potential vaccine create antibodies that protect patients and save lives worldwide?

Finally, an April 6 press release by Inovio states that the U.S. Food and Drug Administration “has accepted the company’s Investigational New Drug (IND) application for INO-4800, its DNA vaccine candidate designed to prevent COVID-19 infection, paving the way for Phase 1 clinical testing.”

It has now started working on the preparation for the trials for a coronavirus vaccine candidate. 40 healthy adult volunteers are expected to be recruited for this phase. Management expects data from the study will be available by late summer.

What Could Derail the INO Stock Price?

Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, recently said that the vaccine could take 12-18 months to develop and approve for mass production. Others believe it may take longer.

In addition to Inovio, a large number of firms and research institutes are currently working on vaccine or drug development. Other publicly traded companies that investors are watching include Johnson & Johnson (NYSE:JNJ), GlaxoSmithKline (NYSE:GSK), Gilead Sciences (NASDAQ:GILD), and Moderna (NASDAQ:MRNA). So the group may also face competition from other drug companies that may be ready to launch their own drugs against coronavirus.

Thus, it is hard to analyze the potential impact of such a vaccine on INO stock. It is not clear how many sales there would be and how the sales would translate in profits. After all, such a fast development of the vaccine will likely be rather costly.

At this point, no investor can fully tell how any of these vaccines or drugs may perform commercially.

It is also important to remember that in the past several quarters, Inovio has not released earnings that have pleased investors. For example, when it reported fourth quarter and FY 2019 financial results on March 12, it posted a quarterly loss of 32 cents, which was worse than estimates.

Moreover, revenue was only $279,000. On the other hand, Q4 2018 revenue had been $2.5 million. And its net loss hit $37.7 million. It is still a small biotech company that has no approved products.

Scientists highlight that “the demand for drugs or vaccines lasts only for a period while the outbreak lasts.” Therefore, in the coming months the hype surrounding INO stock may also come to pass as fast as it started.

Recent Price Action Urges Caution

In January, INO stock was hovering around $3. As the news of a potential new vaccine hit the wires, the investing community took notice.

On March 9, it hit a 52-week high of $19.36. Yet by March 12 when it released its Q4 results, shares were around $9.

After more volatility for another month, the second half of April saw the INO stock price start another leg up. As I write, the shares are about $14.

In other words, INO stock shoots up every time management has an update about its plans or timeline to develop a potential vaccine. Therefore, investors may want to err on the side of caution with this volatile stock.

If you are an investor with paper profits, you may want to ring the cash register and realize at least part of your gains.

Alternatively, you may consider initiating an ATM covered call position, for example, with a six-week horizon. A June 19-expiry covered call would decrease the volatility in your portfolio, offer some downside protection, and enable you to participate in a potential up move.

The Bottom Line on INO Stock

Seasoned investors realize that biotechnology investing can in part be defined as all-or-nothing. INO stock can mirror that view. It has been on a tear in recent months. Future weeks may see a continuation of that trend.

On the other hand, these early stages of the development of a potential vaccine could also falter. If so, INO stock would likely fall rather rapidly.

Meanwhile, Inovio could find itself as a takeover candidate. In early April UK-based pharma giant GlaxoSmithKline acquired a 6% stake in California-based start-up Vir Biotechnology  (NASDAQ:VIR). Could a similar collaboration or acquisition be in store for Inovio?

In other words, those willing to invest in INO stock should also be ready to embrace stomach-churning swings.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.