Although companies pivoting to the development of novel coronavirus vaccines have soared this year for obvious reasons, the investment community may have been on the receiving end of a reality check. Plus, with so much profit in hand, many decided to head for the exits. However, renewed interest in the space has seen even smaller players like Inovio Pharmaceuticals (NASDAQ:INO) jump once again. Is it time to get back into INO stock?
First, let’s discuss the reason why Inovio recently received its sentiment burst. According to InvestorPlace web content editor Sarah Smith, Inovio CEO Joseph Kim made a presentation at the H.C. Wainwright Annual Global Investment Conference. In it, Kim shared that peer review of its Covid-19 vaccine candidate INO-4800 could be ready in the next few weeks.
This is important to address some lingering questions regarding the candidate’s efficacy.
In addition, Kim “shared that later-stage human trials could begin later this month. Inovio is simply waiting for approval from the U.S. Food and Drug Administration.”
Because Inovio is one of the relatively few competitors in the DNA vaccine space, investors were encouraged at the company’s progress. Thus, buyers decided to re-up their risk profile and head back into INO stock.
While I want to avoid making too strong an opinion on vaccine profitability, Inovio may be relevant until the end of this crisis. That’s because investors must be aware that efficacy alone does not equate to wholesale victory. As you know, manufacturing, distribution and administration all present different challenges in the vaccine supply chain.
Thanks to Inovio’s thermal-stable DNA vaccine candidate, this automatically offers INO stock a distribution/administration advantage that shouldn’t be overlooked.
The Vaccine Race Is Tightening Favorably for INO Stock
Another reason why investors have suddenly renewed their interest in INO stock after months of volatility could be the narrowing of the vaccination race. In my opinion, the longer Inovio sticks around, the likelier it is that it could play at least a secondary role in the battle against Covid-19.
To understand why, you must look at the different approaches biotechnology firms are taking to develop their candidates. First up is the traditional approach, the one we’re all familiar with. By taking a weakened or inactivated form of the novel coronavirus and injecting it into the body, our cells develop antibodies that prevent active forms of the virus from infecting healthy cells.
While this approach has a track record of success on its side, it takes too long. Obviously, that runs counter to the spirit of the Trump administration’s Operation Warp Speed.
Second, we have subunit vaccines, which is a type Novavax (NASDAQ:NVAX) is running with. This involves injecting protein fragments (subunits) of the coronavirus into a patient to foster antibody production. While effective, I noted that “manufacturing the nanoparticle subunits is more expensive … and lengthier than developing the oligonucleotides (short DNA fragments) associated with nucleic-acid vaccines.”
Again, time is not a luxury we have.
Third, a compelling concept is viral-vector vaccines. This involves placing the genetic sequence of the coronavirus into a carrier (vector) virus, such as the adenovirus. Injecting this into a patient leverages the natural infectiousness of a virus but with the intent of producing positive health outcomes.
This sounds great but one of the problems is that patients can develop a negative response to the carrier virus. And that may have been the culprit behind AstraZeneca’s (NYSE:AZN) hiccup in its Covid-19 vaccine candidate when a trial participant suffered an unexplained illness.
For this reason, viral-vector vaccines may have a PR problem.
By process of elimination, we have nucleic-acid vaccines. Here, the clear front runner is Moderna (NASDAQ:MRNA). Utilizing a messenger RNA (mRNA) injection to provide the “recipe” for cells to develop coronavirus antibodies, Moderna to my knowledge has not suffered any glaring setbacks. As well, nucleic-acid vaccines, which includes Inovio’s INO-4800, are much easier to manufacture and deploy than other vaccine types.
But the beauty of Inovio’s candidate – and why INO stock is still relevant – is that the company focuses on DNA.
The Science Behind Inovio
At first glance, Inovio’s proposal might seem inefficient. Basically, the process works by injecting the novel coronavirus’ DNA into a patient’s cell. From there, the cell forms mRNA, which eventually leads to the production of antibodies against the coronavirus.
But Moderna’s proposal sidesteps the initial step altogether. By engineering mRNA in a laboratory and injecting it into the patient, the body’s cells instantly have the recipe for antibody production. Additionally, mRNA vaccines are easier to manufacture because they can be made without using cells.
This sounds like a double whammy. So, why bother with Inovio’s longer DNA process and by extension, INO stock?
Primarily, clinical trials have demonstrated that DNA approaches enjoy long-term safety profiles. Conceptually, the standard flu vaccine revolves around DNA. Further, less harmful viruses are known to inject their DNA into our cells, leading to an immune response. All this to say that DNA as a broad concept has its own extensive natural and clinical track record.
Of course, the upside potential and risk of INO stock is that modern biotechs can design DNA or mRNA on a computer in a matter of hours. However, this specific process has never been pressure tested. Inovio could be the first or it could fail like the others.
Further, beyond the advantages of safer profiles, quick production, and thermal stability, DNA vaccines have demonstrated long-term effectiveness against the target virus – and only the target virus. At the same time, a lingering concern about this process is that insertion of foreign DNA may impact the host genome, causing cells to become cancerous.
I don’t know about you, but I’ll take my chances with Covid over cancer.
Pros and Cons
Still, I want to be fair with Inovio. With so many unknowns regarding this accelerated push for a vaccine, any of the vaccine types mentioned above could cause temporary and long-term negative health outcomes. Unfortunately, that’s the risk people will assume if they decide to take a vaccine.
However, what’s critically important about the vaccine race is that the true winner (or winners) will offer holistic solutions. For instance, if a vaccine works but it takes too long to manufacture, that setback alone may cost that candidate. Contextually, Inovio’s INO-4800 has advantages – scalability, stability, and low cost, among many others – that are vital.
Is that enough to justify buying INO stock today? For those that believe in the DNA process, taking a modest bet isn’t a bad idea. However, conservative investors may want to wait until the peer review is released before deciding.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.