Unless you’ve been living in a doomsday bunker before the novel coronavirus pandemic was a thing, vaccine specialists have always carried great importance to our modern societies. However, lesser-known entities like Inovio Pharmaceuticals (NASDAQ:INO) have seen a dramatic rise in their profile due to the Covid-19 crisis. Furthermore, Inovio’s proprietary technology to fast-track a potentially viable vaccine candidate saw INO stock skyrocket from obscurity to national prominence.
According to an NBC San Diego report — where the Pennsylvania-headquartered drug maker has research and development and manufacturing facilities — Inovio was one of the first biotechnology firms to jump on the novel coronavirus vaccine train. Naturally, this captured investor attention because this relative unknown was able to beat so many big biotechs to the punch. Thus, INO stock was able to drive out of its low-single digit price range to double digits where it currently trades.
Specifically, Inovio was able to leverage its gene sequencing platform to develop a vaccine without having a physical sample on hand. Inovio senior vice president of R&D Kate Broderick explained:
“One of our strengths is to move extremely fast … On Jan. 10, we get the sequencing, three hours later we have a vaccine. One of the differentiating factors is that DNA medicine can be manufactured very quickly. It allows us to get into the clinic in a few short months as we have done.”
Fair enough. However, this statement attracted critics, one of them being Citron Research. The short-seller accused Inovio of playing up this technology, ala shamed company Theranos, to artificially and fraudulently inflate INO stock. This has led to class-action lawsuits that the biotech misled investors.
Terrifyingly Bullish Case for INO Stock
Of course, many investors were skeptical about Inovio well before Citron entered the arena. I think it’s fair to say that most people who don’t have a keen interest in biotech never heard of INO stock prior to the pandemic.
Under ordinary circumstances, I believe I might join the chorus of critics. Interestingly, when Citron leveled its accusation against Inovio, the biotech firm backtracked on Broderick’s three-hour claim, clarifying that it developed a “vaccine construct.”
So no, on the surface, it’s not a great look. However, these are extraordinary times. And in this situation, contrarians might get away with one because of the imperative for a novel coronavirus vaccine.
Primarily, the U.S., unlike many other countries with major Covid-19 outbreaks, has failed to substantively “flatten the curve.” Yes, on a percentage-growth basis, we have slowed the acceleration of cases. But daily new cases remain stubbornly high, around the 20,000 level.
It’s best to put up a nominal chart comparing U.S. total coronavirus cases with that of the previous epicenter, Italy. Looking in retrospect, the Italians instituted a nationwide lockdown just as cases started to accelerate on March 9. On May 4, as both the acceleration of cases and the nominal tally began to flatten, Italy relaxed its restrictions.
Contrast this picture with the U.S. On March 19, California was the first state to go on lockdown. But in late April, the first batch of states started to open their economies. However, you can see clearly that cases nominally haven’t flattened by then. At time of writing, cases still haven’t flattened.
This isn’t a funky Rorschach test where you see chirping dolphins and I see a tomato garden. A true flattening should resemble an S-curve, just like what Italy has printed.
Risky but Compelling
I mention the above dynamics to suggest that Inovio may have a longer upside pathway than you might expect. It’s also possible that while Inovio may have exaggerated its gene sequencing technology, it’s still substantively legitimate that it may offer the key to the coronavirus dilemma.
But that’s not to say that INO stock isn’t without risks. Keep in mind that the underlying company is undergoing Phase 1 clinical trials for its vaccine. Likely, Inovio will declare its results later this month. If things don’t go as planned, INO could tumble in a hurry.
As well, many players now exist in this space, including Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX). Both have seen their profiles soar as well. And in the case of Moderna, not without controversy.
Still, if INO stock were such a terrible bet, I doubt that the markets would drive shares up relatively consistently this year. Again, people were skeptical about Inovio before Citron. While this doesn’t guarantee upside, as far as high-risk, high-reward names go, INO is at least very intriguing.
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.