As Inovio (NASDAQ:INO) stock pulls back, should you jump in? Shares in the novel coronavirus vaccine developer have dipped in recent weeks. And for good reason. With mixed results from Phase 1 trials, it makes sense INO stock has fallen more than 38% since late June.
With rivals like Moderna (NASDAQ:MRNA) already in Phase 3 trials, Inovio may be falling behind in the vaccine horse race. And, that’s not the only competition at play.
As InvestorPlace’s Todd Shriber discussed last month, big pharma names like AstraZeneca (NYSE:AZN) and Pfizer (NYSE:PFE) are leading contenders as well.
But, it’s not “game over” yet for Inovio. The company still plans to start Phase 2 and Phase 3 trials this summer. If these upcoming trials show strong results, shares could bounce back to prior highs. And then some.
But, what happens if these trials fail to impress? Expect shares to keep on heading lower. Other catalysts may soften the blow. But, shares could head back to single-digits if the main vaccine catalysts fails to pan out.
So, what’s the call? Even at today’s prices, the risk/return may not be in your favor. The best move may be to wait for shares to head lower before considering a position.
It’s All or Nothing For INO Stock
Have Inovio’s odds of vaccine success risen or fallen in the past few weeks? Depends on who you ask. A recent pre-clinical study on primates showed positive results late last month. But, InvestorPlace’s Josh Enomoto wrote Jul 29, the company’s Phase 1 results from June were a bit of a mixed bag.
In short, it’s a bit tough to handicap. Until we see Phase 2/Phase 3 results, it’s hard to see whether the company’s INO-4800 vaccine is still in play, or completely out of the running.
With this in mind, let’s assess the potential upside in Inovio stock if its vaccine pays off, versus downside if its candidate fails to deliver.
Vaccine success could send shares to price many times of where they change hands today. On the other hand, as I discussed back in June, it’s game over for Inovio shares, if its coronavirus catalyst fizzles out.
Or is it? Previously, I saw shares tumbling back to their pre-pandemic prices (around $4 per share) if the coronavirus catalyst is off the table. In other words, more than 80% downside. Yet, taking another look, the company’s non-coronavirus catalysts may cut potential downside in INO stock.
What About The Rest of The Pipeline?
While most see Inovio as only a coronavirus vaccine play, there could be value in the company’s pipeline outside of Covid-19. For example, this commentator sees potential in the company’s batch of candidates related to HPV (human papillomavirus).
In short, it’s not as if it’s “lights out” if the company’s coronavirus vaccine candidate fails to deliver. Unlike long-shot pandemic plays like iBio (NYSEAMERICAN:IBIO), which has little else going for it, Inovio shares may not tumble back to prior prices if and when the vaccine horse finishes up.
Yet, I wouldn’t consider the overall pipeline a “margin of safety” by any means. For one thing, the company’s HPV catalysts were already in motion earlier this year. That is to say, when shares traded for around $4 per share, investors were already pricing-in these potential needle movers.
Yes, with the company obtaining Orphan Drug Designation for its INO-3107 treatment, Inovio has made substantial progress with its non-coronavirus pipeline. But, that won’t stop investors from selling off shares en-masse if the company is no longer a vaccine contender.
Shares may not fall back to prior prices. But, if INO-4800 proves to be a bust, there’s a good chance shares fall back to the single-digits. Even when factoring in these other catalysts, risk/return may not be in your favor at today’s valuation.
Hold Off Buying The Pullback in INO Stock
After falling 38% from prior highs, it may look tempting to dive into Inovio shares. Sure, rivals like Moderna look like more promising pandemic vaccine plays. But, it’s not as if this company’s INO-4800 candidate is out of the running. If upcoming trials show promise, shares could bounce back again.
Yet, potential upside may not make for what’s still substantial downside risk. Even when factoring in the company’s non-coronavirus catalysts. Sure, shares may not fall back to pre-pandemic prices in a worst-case scenario. But, the company’s remaining pipeline isn’t enough to sustain today’s valuation.
So, what’s the verdict? Stay on the sidelines with INO stock for now, but consider shares if they continue falling back to lower prices.
Thomas Niel, contributor to InvestorPlace, has written single-stock analysis since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
