Inovio Pharmaceuticals (NASDAQ:INO) has soared over 330% in 2020. But it hasn’t been a smooth ride for investors. Since May 20, INO stock is down over 10%, and that would have been worse if it wasn’t for a June rally.
Inovio is one of many companies that has a vaccine candidate for the novel coronavirus. The company is scheduled to announce the results of its Phase 1 clinical trial this month. If the company receives approval to move to Phase 2, INO stock is likely to climb higher. However, the opposite is also true. And even if Inovio has a positive trial, the company is having problems getting the product to market.
Investors also need to remember that, despite a promising pipeline, Inovio does not have a product on the market. And that means, as Chris Lau wrote for InvestorPlace, the company’s short-term fortunes come down to its Covid-19 vaccine candidate.
Will There Be a Second Wave?
In the span of just a few trading days, investors around the world have refocused their attention on the novel coronavirus. Specifically, markets are plunging on fears that there could be a second wave of the virus happening right now.
The economy is reopening and there is more testing. Both of these conditions were always likely to generate an increase in confirmed cases of Covid-19, the disease caused by the novel coronavirus. That’s because as more testing is available, the tests aren’t being limited to only those who feel sick.
So that numerator is not as important as the number of people who are getting sick enough to require hospitalization. After all, the stated purpose of the initial lockdown was to flatten the curve so the health care system would not be overtaxed.
United States Treasury Secretary Steven Mnuchin and other officials within the Trump administration are expressing no intention to have the economy go on lockdown again. But if we’re being honest, we kinda heard that the first time.
Whatever will come next, it’s a reminder that the novel coronavirus will hang over the economy like the Sword of Damocles until there is a vaccine or proven antiviral treatment.
Will Inovio Pass the Test?
That’s really hard to say. On the company’s most recent earnings call, Kate Broderick, Inovio’s Senior Vice President of Research & Development (R&D) remarked about Inovio’s long history working with coronaviruses, specifically with Middle Eastern Respiratory Syndrome (MERS). According to Broderick, Inovio is the only company with a vaccine candidate against MERS that is in a Phase 2a clinical trial.
And that is the experience that Inovio is bringing to its Covid-19 vaccine candidate. But there is still no guarantee their vaccine will be selected. To that end, Inovio is not currently on the U.S. government’s list of preferred vaccine candidates. However, that could also change with positive results from this trial.
Inovio’s Pipeline Is Being Ignored
When I last wrote about Inovio, I made a case that the company’s pipeline may reward investors. And that may still be true. Inovio is carving out a niche in DNA immunotherapy. The company calls their efforts Immuno-Ingenuity. Simply put, Inovio is working to develop unique immunotherapies to fight cancer and other infectious diseases.
Immunotherapy is becoming a crowded field so it’s understandable why Inovio is working to set itself apart from the pack. But these efforts are no further along than the company’s potential Covid-19 vaccine.
Should You Buy INO Stock?
It comes down to how you feel about the results of this Phase 1 trial. The stock seems like a case where all the good news is priced in. However, with the market reacting so strongly to news of a potential second wave of the novel coronavirus, any encouraging news on the vaccine front is likely to be met very positively.
That’s the good news. The bad news is that the results could disappoint. And the stock would tumble. Plus, the company still faces other challenges about getting a vaccine to market. There are likely to be some turbulent months ahead for INO stock.
I still think a small long-term position in Inovio can make sense for investors who understand the science and are willing to wait out potential pipeline candidates. But I’ll admit that’s not the reason the stock is one of the most traded on Robinhood. It’s all about the potential for a Covid-19 vaccine. And if you fall into that category, then you should pay close attention to the results of the company’s clinical trials.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
