Some COVID-19 stocks are on the rebound as the world enters the second wave. Many companies are competing to create a viable vaccine as soon as possible, including Inovio Pharmaceuticals (NASDAQ:INO) and INO stock.
Inovio has been one of 2020’s hottest stocks and is up more than 660% year-to-date. However, it has hit some turbulence recently.
A few weeks ago, Inovio presented underwhelming data on its coronavirus vaccine, leading multiple bank analysts to downgrade the stock. Roth was particularly harsh, lowering the stock to a “sell” rating with a mere $11 price target while calling the company’s vaccine data “very limited” and unimpressive.
Inovio stock plunged following that data read-out, but began to recover nicely as the pandemic started making more headlines again. However, a new threat has emerged on the horizon that could send INO stock lower.
Other Vaccine Candidates Are Closer to Success
Inovio is hardly the only biotech company looking for a Covid-19 vaccine. In fact, as I previously documented, it was worrying news for Inovio that it was left out of the government’s pool of promising Covid-19 vaccine candidates.
The Trump Administration is prioritizing some potential virus vaccines, but for whatever reason, it chose not to include Inovio in the initial funding round of its Operation Warp Speed vaccine program. Inovio subsequently received a $71 million contract, though that still is a small amount compared to what other biotech firms have scored.
That alone may speak to the medical prospects for Inovio’s vaccine. In any case, it certainly shows the competitive disadvantage that Inovio faces against better funded and more credible rivals.
Moderna and Pfizer Are the First Movers
We saw that play out precisely on Tuesday, after Moderna (NASDAQ:MRNA) released favorable results for its proposed Covid-19 vaccine. Moderna said that its vaccine produces a strong immune response in recipients.
The company’s trial was small. There are some obstacles, such as the vaccine requiring a booster shot to be effective. Moderna’s vaccine may not be perfect, but at least based on what we know now, it seems like it may be good enough to get the job done. And if it isn’t, there are a bunch of other high-powered, well-funded research and development teams at other leading pharmaceutical companies that have their own vaccines in the works.
As if that weren’t enough, traders bid up AstraZeneca (NYSE:AZN) stock on Wednesday. They did so because reports out of Britain suggest that AstraZeneca is about to release standout results for its own Covid-19 vaccine. AZN stock surged nearly 10% on Wednesday, adding more than $10 billion to its market capitalization. Make no mistake, the coronavirus vaccine race is highly competitive.
Against that backdrop, it’s hard to see what role Inovio will play going forward. Let’s assume that Inovio’s vaccine is effective and safe in clinical trials. Even then, will there be any market demand for it by the time it is ready to go? As Inovio’s latest update showed, its clinical data isn’t very far along. Rivals like Moderna are making progress more quickly.
INO Stock Verdict
Inovio has a long and distinctly unsuccessful history as a public company. If you bought the stock in July 2000, you’d have paid $48/share, and thus have lost half your investment over the past 20 years, even after this year’s exhilarating rally.
In the past, Inovio’s stock price soared as it has issued press releases about past outbreaks of infectious diseases such as Ebola. However, it has failed to turn that excitement into much in the way of meaningful and sustained revenues or profits.
History doesn’t necessarily have to repeat; Inovio could actually make money off this latest public health emergency. I give Inovio credit for pulling in that $71 million contract recently. That’s not much in the grand scheme of things, but it’s a tangible sign of progress for a company that has struggled to generate significant revenues historically.
Nonetheless, the odds greatly favor an established pharmaceuticals company with a huge R&D budget and government support, like Moderna or AztraZeneca, being the winner.
At a market capitalization of nearly $4 billion, Inovio is priced way too high for a lottery ticket. Inovio’s odds are long, and even in the unlikely event they succeed, investors probably wouldn’t get a home run return. Meanwhile, in the most likely scenario where Moderna’s vaccine continues to proceed toward commercialization, INO stock will quickly slump as traders lose interest.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he held no positions in any of the aforementioned securities.