What’s next for Inovio (NASDAQ:INO)? Betting on novel coronavirus vaccine plays like INO stock has been a winner as of late. But, now, investors are starting to take profits. Look what happened with Moderna (NASDAQ:MRNA). A few weeks back, it seemed that company had the edge in bringing a viable vaccine to market.
But, with Moderna selling off in recent days, this company’s shares may go lower as well. However, that’s not to say the party’s over. The company’s prospective vaccine is moving along, and could be in Phases 2 and 3 by the summer.
Given the unpredictability of biotech stocks, it’s tough to handicap whether Inovio, Moderna, or someone else will win the vaccine horse race. But, as investors jump back into hard-hit stocks, coronavirus plays may take a back seat.
So, what does that mean for INO stock today? With its catalyst still in play, there could be good reason to buy if shares take a dip. At today’s prices? It may be a better move to stay on the sidelines.
Inovio vs. Moderna
Investors may be less excited to bid coronavirus stocks higher. But, the company is still moving ahead with its prospective vaccine treatment. And, as our own Louis Navellier discussed May 26, initial findings show promise.
Granted, that doesn’t mean things are a slam-dunk for the company’s INO-4800 vaccine. The recent news simply means the company can proceed with Phase 2 and 3 clinical trials. But, with decision makers promoting the idea a viable vaccine could be available by year’s end, regulators could be on the company’s side when it comes to getting a vaccine approved and ready for use.
But, what does that mean in terms of who “wins” and who “loses” in the quest for a vaccine? Does Moderna, the clear favorite in this horse race, profit while Inovio flounders? Or, due to capacity limits with each company, can both vaccine treatments split the market?
My take? I think investors may be putting the cart before the horse. In other words, both vaccine candidates are still in early clinical trial stages. The fortunes for both candidates could quickly change in the coming months.
For those dabbling in both stocks, it’s a challenge to handicap their respective odds of success. And, with shares getting ahead of themselves as of late, it may not be a wise move to dive in today, as valuations remain inflated.
What am I talking about? Inovio recently was trading at an enterprise value/sales ratio of 734.8. Moderna looks relatively “cheaper” in comparison, but still was trading at a frothy multiple (EV/Sales of 334.4).
In short, it’s still expensive to bet on a “coronavirus silver bullet.” And, considering the risk the company’s shares could crater to prior prices, potential return may not line up with risk.
INO Stock Could Crater if Vaccine Catalyst Fizzles
Is there another vaccine or treatment in the company’s pipeline that could shore up the share price? For all its faults, Moderna at least another major vaccine candidate in its pipeline.
Sure, that’s not to say Inovio doesn’t have anything else in the tank. Take, for example, the company’s treatments for glioblastoma multiforme (GBM). That candidate has also shown positive results as of late. Yet, I’m doubtful investors will sustain the company’s current valuation on that treatment’s prospects alone.
Simply put, if INO’s coronavirus vaccine amounts to nothing, investors will bail. Right now, shares change hands just above $14 per share. But, pre-pandemic, the stock was trading for prices less than $4 per share.
The flip side to fast gains in biotech stocks is the potential for shares to fall on negative developments. Things turn on a dime all the time in the space. This isn’t an apples-to-apples comparison, but look what happened with Amarin (NASDAQ:AMRN) stock earlier this year.
In January and February, the company had a bright future ahead as it attempted to bring its Vascepa cardiovascular treatment to market. Yet, after losing out to generic drug makers in a patent lawsuit, shares tumbled 70% in one day!
Yes, it’s a different situation. It’s not as if Inovio could get a vaccine approved, only to lose out immediately to generic competition. But, this example shows the precarious nature of biotech stocks. Predicting the unpredictable is a tough way to win long term. And that’s the case here with vaccine plays like INO stock.
Consider Shares a ‘Hold’ For Now
A few months back, I referred to Inovio as too speculative. But now, I concede the company has a solid chance of bringing a viable vaccine to market.
Yet, with investors cooling off on vaccine plays, and shares vulnerable to a collapse on bad news, it may be best to stay on the sidelines with INO.
Thomas Niel, contributor to InvestorPlace, has written single-stock analysis since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
