At least they took a shot. It was a long shot to be sure, but it appears that Inovio Pharmaceuticals (NASDAQ:INO) is falling behind in the race to develop a Covid-19 vaccine. But the bulls are not giving up without a fight. INO stock is still up nearly 700% for the year. And just in the last month, the stock is up nearly 70%.
So, what’s going on? I have to believe that a lot of traders are trying to keep interest alive in the stock. But it’s hard to ignore that without a vaccine, the stock looks overvalued and overpriced.
The Vaccine Was Always a Long Shot
Back in February, I wrote about how Inovio was staking out territory around the promise of immunotherapy. The company has a proprietary system known as Immuno-Ingenuity. Inovio describes it as “the drive to develop novel immunotherapies to fight cancer and infectious diseases.”
As it turns out, Inovio uses the same proprietary technology to develop a vaccine candidate. And Inovio impressively rolled out a Covid-19 vaccine candidate, INO-4800, within hours of receiving the novel coronavirus’ genetic sequence.
Inovio has been in business for a long time, and they have never had a successful vaccine candidate. So, the rapid creation of INO-4800 felt a bit like a proof of concept. Inovio managing to win the race for a vaccine would be a nice benefit.
This is not to say you should ignore Inovio’s immunotherapy. The company has several drugs in its pipeline that are further down the clinical trial road than INO-4800. But I agree with my colleague Dana Blankenhorn, INO-4800 is the sole reason the stock continues to climb to record heights.
It’s Not Over Until It’s Over
Now to be completely fair, Inovio’s trial wasn’t horrible. It just included a very small sample. This means the company will have to have an expanded Phase 1 trial, while other companies such as Moderna and Pfizer are moving into late-stage trials.
Does that mean that Inovio can’t come from behind? It’s possible. And here’s why.
When the federal government initiated its Operation Warp Speed program to get a Covid-19 vaccine by Jan. 2021, the list included AstraZeneca (NYSE:AZN), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK), Sanofi (NASDAQ:SNY) and Moderna (NASDAQ:MRNA).
As you can see, Inovio was not on that list. Neither was Pfizer (NYSE:PFE), but the company recently released positive test results that is moving its candidate to a later stage trial. However, after release of its initial Phase One results, Operation Warp Speed selected Inovio to take part in a non-human primate challenge study.
The process for how the short list of companies was determined has not been transparent. And that, says Dr. Nicole Lurie, Assistant Secretary for Preparedness and Response during the Obama administration, is the problem. “We’re operating in such an atmosphere of distrust in this country. But the more explanation there is and the more transparency, the better off we are.”
Lurie also believes it would be prudent for the government to keep its options open regarding vaccine candidates.
Inovio Can Still Play a Supporting Role
In late June, Inovio received $71 million from Operation Warp Speed. But those funds were not for development of INO-4800. The funds were for its delivery system which will be equally important in getting a vaccine distributed expeditiously.
That’s enough to help keep the company in the news, but it doesn’t justify the company’s current stock price. For that to happen, Inovio has to get a vaccine developed. And that still looks like a long shot.
The Bottom Line on INO Stock
At this point, it would feel irresponsible not to state that Inovio is one of the more popular stocks on Robinhood. There is nothing wrong with that, but it suggests to me that investors view the stock as a trade and not an investment.
And that means when it does start to drop, it may drop hard and fast. And it will drop. Why? Eventually investors will care about fundamentals. And right now, Inovio is not profitable and has no drugs on the market. There is nothing there to justify its current $4 billion market capitalization.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.