Despite the hemorrhaging in the markets that the novel coronavirus caused, one of the bright sectors has been pharmaceuticals. Specifically, those who specialize in vaccine development and treatments for infectious diseases have seen their profile soar. Among them, Inovio Pharmaceuticals (NASDAQ:INO) went from a no-name entity with a checkered past to a suddenly relevant contender. However, two recent developments have soured sentiment toward INO stock.
First and foremost, big pharma flexed its muscles in a very disruptive manner. During the most chaotic period of the Covid-19 pandemic, President Donald Trump frequently talked about remdesivir. An antiviral drug produced by Gilead Sciences (NASDAQ:GILD), remdesivir finally received the endorsement it needed. White House health advisor Dr. Anthony Fauci declared that a recent Covid-19 trial demonstrated a “clear-cut positive effect in diminishing time to recover.”
Let me just say that I’m not discounting President Trump’s support for remdesivir. But when he makes off-the-cuff remarks about injecting disinfectants into Covid-19 patients, joking or not, he at least slightly diminishes his credibility. But with Dr. Fauci’s support, the endorsement carries more weight. That’s positive for Gilead Sciences but not so much for INO stock.
The other concern about Inovio is the coronavirus’ infection curve. Clearly, the curve has flattened and we’re now entering the final phase of this outbreak. Logically, a vaccine for the virus seems far too little, too late. Today, many Americans are concerned about their livelihood and want to reopen. For instance, sweeping protests raged across California, the biggest economic powerhouse of the U.S.
With diminishing need for a vaccine – along with apparently reduced demand – INO stock seems headed back toward anonymity. But is that really the case?
INO Stock Is Risky but Still Relevant
Admittedly, Dr. Fauci’s endorsement of remdesivir is a huge blow to INO stock, as reflected in its recent volatility. Further, remdesivir is more relevant in the immediate front. You can give it to those who need it, which doesn’t require the scale for wholesale vaccinations.
However, it’s fair to point out that the mainstream media has played a tremendous role in framing the narrative of coronavirus treatments. What I mean is that many if not most headlines suggest that the antiviral drug is promising. However, I would argue that we just don’t know enough yet to characterize it as a win.
Don’t misread this because I’m not bashing Gilead Sciences. As one of our most viable pharmaceuticals, they continue to play a critical role in the fight against Covid-19. However, we need to take a step back and approach the subject of remdesivir objectively.
As a recent Wall Street Journal op-ed points out, remdesivir does not have a great track record of efficacy. Originally developed as a childhood respiratory disease treatment, the drug ultimately failed on that end. Later, it was touted as a solution for Ebola, which also proved fruitless.
Refusing to give up, Gilead pressed on with its research. Eventually, scientists discovered that it could address diseases caused by coronaviruses, specifically SARS and MERS. But with those outbreaks in the past, robust clinical trials were not available.
As France24.com argued, the problem is that those robust trials are still not available for the novel coronavirus. To their point, remdesivir has conflicting results against Covid-19. Therefore, it’s too early to jump on the bandwagon.
Put another way, Gilead is still in the fight, as is Inovio. That alone is enough to at least not dismiss INO stock offhand.
Inovio Is a Compelling Gamble at the Right Price
But even if the race for a treatment or vaccine is ongoing, this isn’t a 100% endorsement for INO stock. No matter what, you must remember that with Inovio, you’re dealing with a speculative sector. Just like a junior mining company, sometimes you don’t know what you’ll get until you get it.
Often, that means a devastating amount of red ink in your portfolio.
For knowledge sake, you should be aware that short-seller Citron Research sharply criticized Inovio, blasting its proprietary vaccine production technology as a sham. Comparing the innovation to toxic Theranos, Citron mentioned that Inovio has never brought a product to market.
What I can say is that Citron has clout. Therefore, it’s not surprising that INO stock has fallen sharply from this year’s highs.
At the same time, the U.S. labor force just lost 30 million jobs over a six-week period. Moreover, the federal government has unleashed trillions of dollars to combat this crisis. Absolutely, we cannot afford another repeat of such outbreaks. Thus, the Inovio story probably won’t go away anytime soon. Just be careful if you decide to put some skin in it.
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.
