Analysts warned investors about buying Inovio Pharmaceuticals (NASDAQ:INO) before it released data about its INO-4800 vaccine for Covid-19. To make matters worse, Inovio management was somewhat vague about the information it did release, sending INO stock down more than 20% in early trading June 30.
Despite a 20% decline in a single day, INO is still up 568% from the beginning of the year, a win in any investor’s book. The question now is whether this is merely a cooling-off period or the start of a major retreat?
Let’s have a look at both sides of the argument.
INO Stock Was Due for a Setback
Over the first 25 weeks of 2020, INO stock has fallen by $2 or more on just two occasions while it’s risen by $2 or more on five occasions. The trend is higher. Even the best performing growth stocks have bad weeks. You can call the week of June 29 to July 2, a bad week.
However, just because Inovio management failed to provide enough data in their June 30 press release about INO-4800’s Interim Phase 1 trial, doesn’t mean it won’t be one of the winning vaccines to beat back the novel coronavirus.
According to its press release, 34 of the 36 adults in the trial who received both a 1 milligram and a 2-milligram dose of the vaccine, did exhibit one or more positive response criteria, which included antibody binding, neutralization, and T-cell responses. Further, and equally important, the vaccine appears to be completely safe.
“INO-4800 has been selected to participate in a non-human primate (NHP) challenge study as part of the U.S. government’s Operation Warp Speed, a new national program aiming to provide substantial quantities of safe, effective vaccine for Americans by January 2021,” Inovio’s June 30 press release stated.
“Furthermore, INOVIO has expanded its Phase 1 trial to add older participants in additional cohorts and plans to initiate a Phase 2/3 efficacy trial this summer upon regulatory concurrence.”
Initially, the trial was 40 people between the ages of 18 and 50. Of those, four people dropped out or were excluded from the trial. To be able to include older people in the phase 1 trial will give it a chance to show regulators at the Food and Drug Administration that the drug is safe and that it can work.
Bloomberg reported what some of the analysts had to say about the initial data from the phase 1 trial. Cantor Fitzgerald analyst Charles Duncan, who rates INO stock at “overweight,” is cautiously optimistic.
“Differentiated efficacy, safety and logistics in Phase 1 study ‘bode well for moving forward with Covid vaccine candidate’ into later stages of testing,” Bloomberg reported.
I think it’s safe to say that Inovio is still very much in the U.S. government’s $18 billion vaccine plan to fight Covid-19.
Up almost 600% in 2020, it was due for a setback along the way.
The Rose Is Off Inovio’s Bloom
Days before Inovio was set to release data on its Phase 1 trial for INO-4800, Stifel analyst Stephen Willey cut his rating on the stock to hold from a buy, suggesting its valuation might have gotten ahead of itself. He did, however, raise his 12-month price target to $24 from $19 to reflect investor interest.
“Risk/reward seems less palatable here,” Willey wrote. Trading at 1,231 times sales, it’s not hard to see why the analyst has some concerns about the latest Covid-19 moonshot.
Now that the preliminary data is out, Willey and many other analysts are left wanting further details, especially regarding the participants’ immune responses. Some of those answers could come with the release of all of the results in the next few weeks.
Further, the analyst continues to question how INO-4800 holds up to Moderna’s (NASDAQ:MRNA) vaccine candidate, mRNA-1273, which is currently in Phase 2 clinical trial with 600 healthy people over the age of 18.
Moderna is quite a bit ahead of Inovio. Unless Inovio’s able to provide some compelling arguments with the full results of the company’s Phase 1 trial, I don’t think there’s any doubt the rose will come off the bloom for analysts such as Willey, who is on the fence.
The Bottom Line
My InvestorPlace colleague, Luke Lango, recently suggested that bullish investors should wait for INO stock to cool off before buying. As I finish this article, it’s gained back some of its June 30 losses but is still down double-digits on the day.
Is this enough of a cool off for those that haven’t bought Inovio yet? I’d say not.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.