Whatever Happens to Inovio Pharmaceuticals, Insiders Will Do Just Fine

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The New York Times published an article on July 25 that discussed how corporate insiders had pocketed more than $1 billion from a rush to find a vaccine for the novel coronavirus. Although Inovio Pharmaceuticals (NASDAQ:INO) was mentioned briefly in passing during the article, I wonder what it means for owners of INO stock.

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“Two other drugmakers, Translate Bio and Inovio, awarded large batches of stock options to executives and board members shortly before they announced progress on their coronavirus vaccines, sending shares higher. Representatives of the companies said the options were regularly scheduled annual grants,” stated the Times’ article.

Is Inovio going to be another example where insiders make all the real money while the rest of the shareholders are left holding relatively worthless pieces of paper? Or is this a situation that’s going to provide plenty of riches for everyone involved?

The answer has yet to be written. What I do know is that regular shareholders are taking a much greater risk of investing in Inovio. Here’s why.

Inovio Got Some Funding

The last time I wrote about Inovio was in early July. At the time, it had just reported interim Phase 1 clinical data for its INO-4800 vaccine that was quite positive.

“We are very encouraged by the positive interim safety and preliminary cellular and humoral immune response results to date as well as the inclusion of INO-4800 in Operation Warp Speed,” stated Dr. J. Joseph Kim, the company’s chief executive officer (CEO).

“We are also pleased that INO-4800 vaccination abrogated viral replication in the lungs of mice challenged with SARS-CoV-2. We look forward to urgently advancing INO-4800, as it is the only nucleic-acid based vaccine that is stable at room temperature for more than a year and does not require to be frozen in transport or for years of storage, which are important factors when implementing mass immunizations to battle the current pandemic.”

A few days before releasing its interim data, Inovio announced it got $71 million from the Department of Defense (DoD) to support the manufacturing of the company’s proprietary CELLECTRA 3PSP smart device. This device is the second generation of devices it’s used to administer its deoxyribonucleic acid (DNA) medicines.

INO Stock Has Lost Altitude

While everything mentioned previously is all good news, investors were expecting more. Since the announcement, INO stock has lost more than 30% of its value.

That’s because companies such as Moderna (NASDAQ:MRNA), Pfizer (NYSE:PFE), and AstraZeneca (NYSE:AZN) appear to be leading the race to develop the first workable vaccines against Covid-19.

This doesn’t mean that Inovio should just pack up and go home. However, as InvestorPlace’s Todd Shriber recently stated, the fact that it’s fallen behind these much bigger competitors means the odds of it being one of the chosen few get smaller by the day.

That said, it’s got some potential products in its pipeline other than INO-4800 that ought to reduce how far its share price falls should its vaccine fail to be chosen to administer to actual patients.

It’s a known quantity now, which means investors will pay more attention to it in the future, even though Shriber’s right that most investors have viewed it as a pure coronavirus play.

The Bottom Line

As I said in the beginning, INO stock has lost more than 30% of its value in July. In my last article, I suggested that anyone considering speculating on its stock ought to wait for it to cool off some more. Losing almost one-third of its value in less than a month would have to be characterized as a severe cool off.

But as Shriber stated, the stakes have gone up as Inovio’s has fallen farther behind some of its peers. No wonder Inovio shareholders are exercising stock options. And while the company rightly points out that many of these sales are part of existing Rule 10b5-1 trading plans entered into well before the pandemic hit, it shows the disparity between insiders and everyone else.

Take chief financial officer, Peter Kies. He had 35,000 Inovio options to buy INO stock at $2.40 a share vest in February 2012. He finally exercised them on July 14 at $24.9488 a share as part of his Rule 10b5-1 trading plan for a neat $789,000 pre-tax profit. At the end of June, he sold another 35,000 at $26.50 a share.

If INO-4800 falls through and the share price falls back below $10 where it was until February, Kies would still be in the money, but many investors, who bought at above $30, would not.

Any way you slice it, Inovio’s insiders are making out like bandits. I guess it’s the price to be paid for getting the country out of a pandemic.

Like Shriber, I’d be careful about buying Inovio’s stock at current prices. Any future bad news will most certainly send it into the teens.

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.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2020/07/whatever-happens-inovio-ino-stock-insiders-will-be-fine/.

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