When Inovio (NASDAQ:INO) posted positive clinical data against the new coronavirus, INO stock sold off sharply. That “sell on the news” event will not hold INO stock down for long.
The biotechnology sector has too few players likely to develop a treatment. Investors should continue holding onto Inovio as it progresses in its fight against Covid-19.
Clinical Study Will Lift INO Stock
Inovio and GeneOne Life Science reported its interim data through week 16. In the Phase 1/2a trial of DNA vaccine INO-4700, subjects “demonstrated strong antibody and T cell immune responses after 2 or 3 doses.”
Recall that INO-1700 is “a DNA vaccine that targets the MERS-CoV Spike (S) glycoprotein, delivered with intradermal CELLECTRA® device.“ The recipients did not show any adverse events and were well-tolerated with the regimen.
The robust immune response suggests that the company has a good chance of developing a vaccine. If approved, the world will not get to benefit from the current pandemic. But with a high genomic variation and recurrent mutations in Covid-19 (SARS-CoV-2), its eradication is unlikely.
Study Details
88% of those receiving INO-4700 demonstrated seroconversion after two doses. Seroconversion is defined as a “development of detectable antibodies in the blood that are directed against an infectious agent. Antibodies do not usually develop until some time after the initial exposure to the agent. Following seroconversion, a person tests positive for the antibody when given tests that are based on the presence of antibodies.”
Inovio had a second study group receiving a three-dose regimen. They showed an 84% seroconversion after two doses and 100% after three doses. Dr. Jerome Kim, Director General of International Vaccine Institute (IVI), said, “These and subsequent clinical trials could pave the way for accelerated development of a DNA vaccine against MERS.”
Opportunity
The advances in 21st-century technology should impress investors in this sector. The government is also helping to pave the way for the vaccine. For example, the Food and Drug Administration is more willing to approve drug trials at an accelerated rate. So, this speeds up Inovio’s development of a Middle-East Respiratory Syndrome coronavirus vaccine.
In South Korea, where contact tracing is far superior to any other country, INO-4800 studies should result in reliable data. It will give scientists a far greater understanding of the disease, how it operates in spreading, and ultimately how Inovio may protect people with a vaccine.
IVI granted $6.9 million in funding to Inovio. This study has 40 healthy subjects and runs parallel to the INO-4800 Phase 1 study running in the U.S. Previously, Korea’s Ministry of Food and Drug Safety said it would apply a fast-track approval process for trials involving Covid-19 vaccine and treatment. Before that, the clinical trial screening took 30 days. Now, this takes seven days.
South Korea will also exempt toxicology tests with Inovio. The company already has a proven safety platform for vaccine development.
Selling Pressure Temporary
ARK Invest holds a big position in Inovio. In the last few weeks, the firm slowly sold its position. When that selling ends, Inovio should resume its climb. Analysts have a $13.57 price target (per Tipranks). Similarly, simplywall.st characterized the biotechnology strong firm’s future growth ahead in the diagram below.
Expert investors may build a 5-year discounted cash flow revenue exit model via finbox.
Even at a high discount rate of 13% to price in the uncertainties ahead, the stock has a fair value of around $13.
Investors who believe the company will have a vaccine ready by next year may forecast higher revenue growth. This, in turn, suggests that the stock has more upside than in the conservative growth scenario currently modeled.
As of this writing, the author did not hold a position in any of the aforementioned securities.
