It seems that every week or so, another pharmaceutical company announces a breathtaking, breathless breakthrough on the way to perfecting a vaccine for the novel coronavirus. And those who’ve monitored Inovio (NASDAQ:INO) stock know how crowded the field is: At least 15 companies are vying to cross the finish line first. It’s enough to conjure images not of a vaccine trial but a horse race — and heaven help the investor trying to pick the winner.
Truth is, none of us should roll our sleeves up just yet for a cure, though you could roll your eyes. Here’s why: “Rarely,” the New York Times reports, “has a vaccine been developed in less than five years.”
Yes, the whole world is hoping that this age of big data and AI will produce a much faster result, and INO stock has offered investors and a pandemic-weary public some hope. Though not nearly as prominent as fellow entrants Johnson & Johnson (NYSE:JNJ) or Pfizer (NYSE:PFE), Inovio did spark some hope when it announced that its entrant, INO-4800, would produce full trial results by the autumn — and up to 1 million doses by the end of the year if all goes according to (a very very, very ambitious) plan.
INO Stock Is Headed the Wrong Way
But financial facts are facts. Inovio has done a complete flip analyst-wise from where it sat three months ago. Back then, five of seven surveyed by the Wall Street Journal called Inovio a buy, the remaining two a hold. That clearly made the stock overweight. But today, only two label Inovio’s stock a buy, with five advising investors to hold; an eighth believes it’s a sell. Thus it’s a bona-fide hold, and on that trajectory, it will plummet towards a sell by year’s end.
Not that the most recent quarterly report did anything to conjure visions of a comeback. Inovio missed pretty badly with second-quarter earnings per share, underwater by 83 cents per share, compared with the -16 cents analysts expected. In spin worthy of a contortionist, Inovio’s Q2 press release crowed and crowed about how INO-480 was killing it in full clinical trials.
But if you wanted the skinny on their ill financial health, you had to go quite a ways down. Come on: That’s, ahem, unusual for an investor report where normally that kind of info belongs at the top. Or, to quote the old saw, market players were sold a whole lotta research sizzle without any financial steak.
No wonder InvestorPlace’s Dana Blankenhorn compared Inovio to the smoke-and-mirrors disaster that was Theranos (the testing company that claimed it could conduct multiple tests on a single drop of blood but couldn’t). Spot on, that, since the story cited a report by Citron Research with a not-so-subtle title: “Bad Blood: The COVID-19 Version of Theranos: Target Price $1.”
Less Riding the Bull, More Full of Bull
So let’s review: Inovio is bullish on itself and its vaccine. But analysts are not bullish on Inovio, and any of the other companies racing to develop a Covid-19 vaccine weren’t exactly polled for their thoughts. Citron, meanwhile, points out: “It’s been over 40 years since Inovio was founded, yet the company has NEVER [their caps] brought a product to market, and all the while insiders have enriched themselves with hefty salaries and large stock sales.”
Besides, you can bet this isn’t the first time a pharma has shown off its party dress well before being named Queen of the Hop. Witness AstraZenica (NYSE:AZN), which was only too eager too eager to trumpet its “landmark agreement” on April 30 with Oxford University to produce a Covid-19 vaccine. But investment mavens, perhaps sensing a late April Fool’s joke, didn’t bite for the landmark bit: AstraZenica stock actually went down the next day by just under 1%. Ho hum.
Don’t Believe the Hype
So why are many investors still high on Inovio? Call it a FOMO hangover, as it’s all too tempting to look back on 2020 and see an astronomical run-up. In six months, INO went up 860%, peaking above $31 per share. But since July 1, it has shed more than half its value, which brings us to the present and the bare-knuckle question: Is INO stock worth your money?
In a word, no.
This you must understand: The financial fundamentals simply aren’t there for INO, and that huge Q2 miss is nothing to sneeze at. Go ahead and buy if you like, but understand that you’re making a super-speculative bet.
Until Inovio spotlights its price-earnings ratio over its race-to-vaccine “news,” you’d be much better off heading for the casino pit than the trading pit.
As of this writing, Lou Carlozo did not hold a position in any of the aforementioned securities.