Shares of Inovio Pharmaceuticals (NYSE:INO) were under pressure on Monday, August 24. INO stock dropped 16.8% on the news that President Trump might grant an emergency use authorization (EUA) for AstraZeneca’s (NYSE:AZN) experimental Covid-19 vaccine by October. For its part, AstraZeneca said it has held no discussions with the U.S. government about an EUA for its vaccine.
This game of political football crystallizes the importance of getting a vaccine to market quickly. However, it also illustrates to investors that careless statements have consequences. And that’s the inherent risk of investing in a stock like Inovio at a time like this.
If it wasn’t already, it’s been a silly season for vaccine stocks. And sadly friends, it’s only going to get worse from now until the election. As I wrote earlier this month, it’s clear that this sprint is really more like a marathon. There is likely to be more than one vaccine candidate when all is said and done. And there is even money that there won’t be a vaccine at all.
That’s hardly a ringing endorsement for Inovio, I get that. But there are a few reasons why I believe it’s not time to throw in the towel yet.
Failure Is an Option (and Maybe Likely)
First, it’s fair to say that Inovio has not produced a vaccine candidate in its 40-year history. But the nature of science is that failure is part of the process. Inovio is attempting to produce the first nucleic-acid-based vaccine, INO-4800. And as my colleague Josh Enomoto wrote for InvestorPlace, the Food & Drug Administration (FDA) is going to make sure due diligence is applied, pandemic or not.
To that end, on August 25, Inovio posted a statement from the World Health Organization (WHO) on its Twitter page. As part of the Expert Committee on Biological Standardization, the WHO will be discussing the adoption of DNA vaccine guidelines to assure their safety, security, and efficacy of DNA vaccine candidates. We should find out very soon if Inovio’s approach will be deemed relevant.
This announcement and the fact that Inovio was funded by the Bill & Melinda Gates Foundation in April suggests that Inovio is being looked at as a serious candidate. But what makes this time different? I have a thought on that as well.
Operation Warp Speed Is Leveling the Field
Now I get to the “we’ve never done it that way before” argument. Essentially, Inovio bears will dismiss the company because in their mind, now is not the time to get risky. We should use tried-and-true methods. But the reality is that we may not have an approved vaccine using the traditional methods, so why not try something different?
But less cynically, this isn’t Inovio’s first rodeo. It has experience with coronaviruses. However, I have to point out that Inovio’s nucleic-acid-based vaccine approach is its hammer. And so far, the company has never been able to find a nail.
Fair enough. But in a “typical” vaccine process, Inovio’s nucleic-acid-based candidate would get put in the back of the line behind “traditional” approaches. Time (ironically) would not be on their side. But these are not ordinary times, and perhaps a traditional approach is not what the doctor ordered.
Operation Warp Speed is leveling the field. But what is being misunderstood is that this isn’t a race to be first, it’s a race to be right. It’s not first one in, wins. Which brings me to my final point.
Inovio Only Has to Be Right Once
Thomas Edison made 1,000 unsuccessful attempts to create the light bulb. But as I turned on the light in my kitchen this morning, I was grateful that he only had to be right once.
The same is true of Inovio. They haven’t been right yet. Now would be a great time for them to be right. It’s a funny thing how so many people advocate trusting science. Yet they dismiss science when science tells them what they don’t want to believe. Inovio has an unconventional approach that is unproven. But that doesn’t mean it won’t work.
INO Stock Is Still a Wildly Speculative Play
As I was preparing this article, I read about a huge share purchase (approximately 500,000 shares) that occurred the morning after AstraZeneca denied any knowledge of an EUA. INO stock went up almost 5% on the news. And I felt it was only fair to include this because one of the criticisms of Inovio is that the stock has been a pump-and-dump scheme. This will only add fuel to that fire for the analysts that are abandoning Inovio.
And let me be clear, I have no skin in this game. The virus roulette is one I simply don’t want to play. If you’re investing in any of these vaccine stocks you should have your eyes wide open. Some will dismiss INO stock by suggesting nothing is different. I would counter by saying everything is different. And that’s why you shouldn’t be so quick to dismiss Inovio.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.