Will Inovio (NASDAQ:INO) and INO stock explode, or is its run over? Creating vaccines requires massive resources. Thus, questions regarding the ability of smaller biotech companies to compete with their better-heeled and more experienced adversaries have persisted. Yet, the potential return on smaller biotech companies was and perhaps remains too tempting.
Reports that government scientists are having trouble running trials with Moderna (NASDAQ:MRNA) don’t bode well for smaller biotech companies pursuing a vaccine. That much larger drug makers like Johnson & Johnson (NYSE:JNJ) have not received such complaints is telling.
This points to the sophistication and advanced nature of the large drug makers’ Covid-19 programs. Perhaps they are simply better versed in cooperating with the government. Nevertheless, investors should recognize the risk these smaller biotech stocks represent. Inovio may yet receive government funding and explode.
A Reversal of Fortune at Inovio?
Barron’s reports a reversal of analyst sentiment regarding Inovio within the past month. One month ago the tally was five “buys,” three “holds”, and no “sells.” Consensus was that the stock was overweight at that time. However, the current tally is two “buys,” five “holds,” and one “sell” with the consensus being to hold it.
Investors should bear this change of sentiment in mind given recent news concerning Novavax (NASDAQ:NVAX) and Regeneron (NASDAQ:REGN). The federal government signed a $450 million contract with Regeneron to purchase as many as 1.3 million does of its antibody cocktail.
Novavax announced that it received $1.6 billion to test its Covid-19 vaccine. Novavax does not have any commercially marketed products and yet it is receiving $1.6 billion in funding.
Markets should interpret this as one of two things: either the government is hedging a massive bet, or it knows more about Novavax’s vaccine than has been released. Given that Novavax shares popped 29% following the funding news, markets are betting on the latter.
Inovio Seeking Government Cooperation
Inovio’s ability to leverage government relationships in the fight against the pandemic is crucial. It seeks to do what Novavax and Regeron have recently achieved. Former U.S. military vaccine and pandemic expert Dr. Mammen Mammen joined Inovio on June 25 to lead clinical development of the vaccine.
Two days prior, Inovo received $71 million in funding to scale up manufacturing of its vaccine delivery device. Inovio’s CELLECTRA 3PSP proprietary delivery device delivers INO-4800 directly into the skin. Investors are keenly scrutinizing these developments and their potential.
Markets also want to know when peer review news will be released relating to INO-4800. This will be very important on the heels of the news released on June 30. Inovio’s June 30 press release regarding phase 1 data for their INO-4800 vaccine didn’t spike the price. Market reactions indicated some skepticism regarding Inovio’s claims about INO-4800. Thus, investors will await peer review for the drug, which will likely serve to confirm or discredit the company-issued June 30 statement.
Inovio also stated that it will begin a 2-stage trial in Korea. Inovio announced it added Gene Kim to its management team. He has a long history of leading Korean biotechs and previously helped list an IPO.
INO Shares Might Rise to Warp Speed
The federal government’s largest expenditure in Operation Warp Speed thus far has been its bet on Novavax. The government’s $1.6 billion bet is a clear indication that unproven biotech companies are a pillar of its Covid-19 strategy.
Signs certainly point to a possible Operation Warp Speed funding announcement of Inovio in the coming weeks. Despite the market’s tepid reception of Inovio’s June news, there are signs of something big coming. The company is scrambling and aligning a coherent strategy in this volatile environment. Investors can also assume that a government funding deal is being discussed.
Is INO Stock a Buy?
INO stock is absolutely a hold and given all of the signs, one to consider as a Covid-19 play. Inovio has huge upside.
The more I read about this stock the more I feel like investors are going to only regret not buying it. However, this is all speculation. Inovio could certainly strike out in regards to INO-4800. The company, however, has many other products in its pipeline and I can’t help but feel like it’s headed somewhere positive.
As of writing, Alex Sirois does not own any of the aforementioned stocks.