First-mover advantage in pharmaceuticals is huge, and that certainly doesn’t bode well for the long-term outlook of Inovio (NASDAQ:INO) or INO stock. Here’s why.
A few years ago, I received an MBA from Rutgers University with a concentration in pharmaceutical management. I remember my pharma professors emphasizing that drug makers who launch their treatments for a given indication first have a huge advantage over their rivals.
Specifically, the first treatment launched has an average market share of around 80%, and the second drug has an average share of around 15%.
At any rate, Inovio is developing a vaccine for the novel coronavirus, but it seems to have fallen behind a few other companies in the race to bring a vaccine to market. Moreover, Inovio appears to trail many of its rivals when it comes to the financial resources it has to advance and manufacture its vaccine.
AstraZeneca (NYSE:AZN), which is developing a COVID-19 vaccine candidate in partnership with Oxford University, reported that its candidate “has progressed to…{a} phase 3 trial.”
China’s Sinovac has plans to test its vaccine on “nearly 9,000 healthcare professionals working in COVID-19 specialised facilities” in Brazil.
Finally, Moderna (NASDAQ:MRNA) is reportedly ” close to being on target” to launching a Phase III trial of its vaccine sometime this month, according to unnamed “investigators” cited by STAT in a July 2 article.
A Closer Look at INO Stock
By contrast, Inovio only stated that it “plans to initiate a Phase 2/3 efficacy trial this summer upon regulatory concurrence.” It sounds like Inovio is meaningfully behind a few of its competitors.
Moreover, as I’ve pointed out previously, “AstraZeneca (NYSE:AZN)… plans to start distributing the vaccine to the U.S. and U.K. in September or October, with the balance of deliveries likely to be made by early 2021.”
It intends to deliver a combined 400 million doses of the vaccine to the U.S. and U.K.” Further, as I also noted, the company has already signed agreements to provide its vaccine to ” the U.S., many European nations, and the U.K.”
In short, AstraZeneca not only looks like it’s meaningfully ahead of Inovio, but its actions suggest that it’s very confident that its vaccines will be successful.
Missing Data and Financial Resources
Also making Inovio looking less confident than AstraZeneca is the allegation by well-respected Stat that Inovio “provided none of the details necessary to determine whether {its} vaccine is working.”
Meanwhile, Inovio appears to have much weaker financial resources than its top competitors. The U.S. government reportedly gave AstraZeneca “more than $1 billion” to subsidize its development of a vaccine. That company had over $4 billion of cash as of the end of the first quarter and trailing operating cash flow of $3.5 billion.
Moderna received nearly $500 million from the federal government to subsidize its coronavirus vaccine development and sold stock in an effort to raise more than $1 billion in May.
Sinovac probably has access to large sums of money from Beijing. Another company developing a coronavirus vaccine, Novavax (NASDAQ:NVAX), received $1.6 billion from the U.S. government as part of the Trump administration’s “Operation Warp Speed” program.
Inovio obtained a (comparatively) paltry $71 million from the Pentagon. It has received other funds, including $17.2 million from the Coalition for Epidemic Preparedness Innovations as of April 30, at least $5 million from Bill Gates’ foundation and an undisclosed amount of money from South Korea.
Inovio was also chosen to be part of Operation Warp Speed, so it’s possible that the company will receive more funding from Washington down the road. Still, at this point, it looks as though the company, which had only $270 million of cash at the end of Q1, has a sizable disadvantage when it comes to money.
The Bottom Line on INO Stock
In the world of pharma, it’s usually difficult to overcome the first-mover advantage, and it doesn’t look like Inovio is going to be the first to develop a coronavirus vaccine. Moreover, the company appears to have meaningfully less money than several of its competitors and, as I’ve noted in the past, its track record is less than stellar.
INO stock has a market cap of $3.89 billion, while its 2019 revenue came in at just $4.1 million. Given all of the points I’ve covered, I continue to recommend selling INO stock.
As of this writing, Larry Ramer did not own any of the aforementioned securities. Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been airline stocks, oil stocks and Snap. You can reach him on StockTwits at @larryramer.
