Inovio (NASDAQ:INO) was always fighting an uphill battle when it comes to developing a successful coronavirus vaccine. But recently its path to developing that vaccine got much harder.
Inovio’s Previous Problems
As I noted on April 30, the company is using a new DNA-based technology. Furthermore, while the company has been around since 1983 and its CEO has been in charge of the company for 11 years, it has yet to launch any products for public consumption.
Meanwhile, its most promising vaccine helped 50% of patients, versus 30% for a placebo.
Finally, its CEO doesn’t have a great resume and the company is competing with dozens of peers, including a number of huge drug developers, that are also trying to create a successful coronavirus vaccine.
Inovio’s New Biggest Problem
The White House has identified five potential coronavirus vaccines that it thinks have the best chance of being successful. Inovio’s vaccine is not on the list.
The vaccines that were chosen are being developed by Moderna (NASDAQ:MRNA); Astra Zeneca (NYSE:AZN), in collaboration with Oxford University; Pfizer (NYSE:PFE), in partnership with BioNTech; Johnson & Johnson (NYSE:JNJ); and Merck (NYSE:MRK).
The U.S. government has committed to helping these five finalists as much as possible. Obviously, the American government has a tremendous amount of resources, both in terms of money and personnel.
As a result, the companies that will receive the government’s backing have a huge advantage over their competitors that don’t get Washington’s support. It appears that Inovio is in the latter category.
Bloomberg, however, has reported that two companies will be added to the list “within weeks.” Analysts have speculated that Inovio could be one of those two firms. But given Inovio’s lack of achievements and the roughly 100 other entities looking to develop a vaccine, I think there’s at least a 75% chance that it won’t make the cut.
Inovio’s Other Issues
As I reported in my previous column on Moderna, there’s a chance that companies will not be able to develop a vaccine because they won’t have enough subjects on which to test it. Specifically, an official at Oxford University stated that there is a 50% chance that a test of its vaccine will “get no result at all,” due to too few people having the coronavirus. Of course, Inovio could very well run into the same problem, rendering its vaccine unusable.
And speaking of too few people having the virus, as I noted previously, an Italian doctor recently told Reuters that “that the virus had become much weaker” in his nation, adding that ” in reality, the virus clinically no longer exists in Italy.” Moreover, Dr. Anthony Fauci on May 27 told The Hill “that a ‘second wave’ of the virus in the fall is “not inevitable.”
So even if Inovio overcomes all of the hurdles it’s facing and manages to launch one of the best vaccines for the virus, it’s possible that the virus will be largely eradicated by the time its vaccine is ready.
In that scenario, some people would still want to get the vaccine and many governments would want to stockpile it. But the company probably wouldn’t generate enough profit from it to justify the current $1.81 billion market cap of INO stock.
The Bottom Line on INO Stock
Inovio’s exclusion from the White House’s list of most favored vaccine developers will likely keep the company from getting assistance from the government.
Consequently, the chances of Inovio beating out the more accomplished companies that did make the list have dropped further. Additionally, the number of people with the virus may have fallen too far to adequately test a vaccine and the virus may have largely disappeared by the time a vaccine is rolled out.
Given all of these points, I would recommend selling INO stock at this point.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been airlines, Lyft and Snap. You can reach him on StockTwits at @larryramer. As of this writing, he did not own any of the aforementioned securities.
