Investor interest in biotechnology companies related to coronavirus drugs and vaccines is waning. Since March 2020, volatility in Inovio Pharmaceuticals (NASDAQ:INO) declined. The trading range in INO stock is narrowing as market participants buy stocks in other sectors. In the next few months, markets will more likely react to clinical trial results from Inovio than on sentiment or speculation.
What should investors expect from the company’s DNA vaccine studies?
Inovio, the International Vaccine Institute (IVI), and Seoul National University announced a partnership to start its Phase 1/2 trial. The INO-4800 study is in two stages. In the first stage in South Korea, the companies will assess the vaccine’s safety, tolerability, and immunogenicity of “the candidate vaccine in 40 healthy adults aged 19-50 years, and will further expand to enroll an additional 120 people aged 19-64 years.”
When the study starts in June, investors will appreciate the speed at which the company started the clinical trial. Dr. J. Joseph Kim, INOVIO’s President & CEO, said that ”We will soon have Phase 1 data from a US trial of INO-4800 and plan to begin Phase 2/3 trials in mid-summer. We thank IVI and SNU Hospital for their work to speed the Korea trial of INO-4800.” Investors should expect the trading volatility in the company’s stock to increase as it gets closer to starting the study.
Since the likelihood of the coronavirus lingering among the population is high, the need for a viable vaccine is of high importance.
Other Covid-19 Drug Developers Struggle
Investor interest in Gilead Sciences (NASDAQ:GILD) waned after the company started shipping millions of doses of its remdesivir antiviral drug. Moderna (NASDAQ:MRNA) is no-where near its 52-week high of $87 after the company issued and sold shares to raise its cash levels. It took advantage of the market’s euphoria over its clinical results. In doing so, Moderna lost some investor trust. A $60 million funding for Novavax (NASDAQ:NVAX) from the Department of Defense gave its stock a lift recently.
Investors have an assortment of biotechnology plays to choose from. Any single one or more of these companies are likely to have a viable vaccine. And despite the unfavorable valuations, the company’s true worth depends on the technology behind treating virus infections.
As the clinical studies progress, bigger drug companies may take an interest in acquiring a company like Inovio. This speculation of a buyout will not come into play unless the INO stock price starts to sink to lower levels, attracting an aggressive buyer to make a bid.
Risks on INO Stock
Inovio filed a lawsuit against its vaccine supplier, VGXI, and GeneOne Life Science. VGXI told Inovio that it cannot make the material at the requested levels and in the desired timeline. If the supplier is unable to produce plasmids for the commercial sale of INO-4800, then Inovio needs its licensing so it may seek another third-party supplier.
Investors should find it troubling that the companies cannot agree without going to court. Conversely, Inovio appears confident that it will have a vaccine coming to the market. If it reports good Phase 1 results and completes its animal challenge testing, then the company needs to resolve this dispute quickly.
Your Takeaway
Inovio has a prospective DNA-based vaccine platform whose long-term prospects are improving. Its clinical studies, which are fast-tracked, will give scientists plenty of valuable data to analyze. Any result better than expected will give the stock a strong lift.
Shares are already too high for investors who did not buy the stock sooner. Those who missed out should wait for selling pressure to potentially create a better entry point.
As of this writing, the author did not hold a position in any of the aforementioned securities. Chris is on twitter and runs the DIY Value Investing Marketplace guide.
