Inovio’s Dramatic 30% Drop Will Be Short-Lived

The dramatic 30% drop in Inovio Pharmaceuticals (NASDAQ:INO) is a reminder on speculators on the risks of chasing hot Covid-19 vaccine players. INO stock may bounce back to the $33.79 high but that might take a while, especially when euphoria and excessive positive sentiment lifted the stock there in the first place.

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INO Stock Faces Competitive Pressures

Pfizer’s (NYSE:PFE) early-stage study results for one of its four Covid-19 vaccine candidates stoked fears on Inovio’s prospects.

In partnership with BioNTech SE (NASDAQ:BNTX), the pair announced that “ all subjects who received 10 or 30 µg of BNT162b1 had significantly elevated RBD-binding IgG antibodies with geometric mean concentrations (GMCs) of 4,813 and 27,872 units/ml which are 8- and 46.3-times, respectively, the GMC of 602 units/ml in a panel of 38 sera of convalescent patients who had contracted SARS-CoV-2.”

In layman’s terms, Pfizer and BioNTech are reporting detailed data results that will help investors evaluate those companies favorably. Plus, with four investigational vaccine candidates, the competitor to Inovio may fail in one of its studies and still come out with a vaccine later on.

In its Phase 1 clinical trial, Inovio also reported positive interim results for the INO-4800 vaccine for the novel coronavirus. It said that 94% of its subjects demonstrated overall immune responses at week 6 after two doses. The study involves 40 healthy volunteers.

The company said that “analyses to date have shown that 94% (34 out of 36 total trial participants) demonstrated overall immunological response rates based on preliminary data assessing humoral (binding and neutralizing) and T cell immune responses.”

As investors spend more time digesting the strong trial results, the stock will recover and may potentially re-touch yearly highs.

Solid Clinical Data

Inovio’s antibody binding and neutralizing tests justify the rise in Inovio’s stock price in 2020. The stock may have fallen last week due to profit-taking and a “sell on the news” event. Still, readers should expect continued interest in biotechnology companies developing COVID-19 related treatment options.

For example, Moderna (NASDAQ:MRNA) peaked at $87 in May 2020. Management sold shares to strengthen its cash balance on hand. And when the stock bottomed at around $50, it promptly bounced back in the mid-$65 range.

INO stock is still trading in a steady uptrend. Although above-average trading volume added volatility to the stock recently, shareholders will want to stay invested. As the company continues to report positive clinical results, it will get closer to releasing a commercial vaccine that the world needs.

The addressable market for a Covid-19 vaccine is several billion dollars beyond its current market capitalization. So, even though its price-sales ratio is high, this multiple will shrink in the next few years.

Valuation

Based on its future cash flow, Inovio has a fair value of $43.45 (according to simplywall.st). Wall Street analysts are less bullish, with eight analysts offering an average price target of $22 (according to Tipranks).

Here are its key rating scores:

Overall Ratings Score 54
Growth Ratings Score 69
Valuation Ratings Score 47
Data courtesy of Stockrover

Risks and Your Takeaway for INO Stock

Citron’s bearish tweet against Inovio, which follows its bearish article in April, is a risk factor for the stock. The bashing may scare investors away from investing in this emerging biotechnology company. Another risk is the bearish levels on Inovio. At a 16.67% short float, bears could renew their attack on the stock.

Fundamentally, the positive clinical data suggests that Inovio is on the right path to generating strong revenues as early as next year. The strong demand for a Covid-19 vaccine will leave room for multiple biotechnology suppliers. Inovio is in a good position to become one of several firms selling vaccines to the world that needs it.

Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities.