When it comes to novel coronavirus stocks, Inovio Pharmaceuticals (NASDAQ:INO) stock is proving to be a cautionary tale.
Since peaking at $33.79 a share on June 26, Inovio has fallen 64% to its current level of less than $13 per share. An investment of $10,000 made in INO stock in June would today be worth less than $4,000.
Of course, investors are understandably upset that the once-skyrocketing share price has crashed and left them with a loss. At the same time, potential investors are circling, wondering if the current price per share might represent a buying opportunity.
Given the poor status of Inovio’s vaccine candidate — and a myriad of other problems — current investors would be best off selling now before they lose more money. On the other side, prospective investors should move on to more stable bio-pharmaceutical companies.
INO Stock Can’t Stand Out of the Crowd
To say that the novel coronavirus vaccine race has crowded the market would be an understatement. Globally, there are more than 100 vaccines under development right now. And the biggest pharmaceutical companies in the world are leading the charge.
Companies like Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), AstraZeneca (NASDAQ:AZN) and Novavax (NASDAQ:NVAX) each have vaccine candidates either in advanced stages of development or in final stage clinical trials. More importantly, these companies have already signed agreements with governments around the world to provide doses as soon as they receive regulatory approval. By the end of 2021, total production of Covid-19 vaccines is expected to reach 7.7 billion doses worldwide.
By contrast, Inovio has not received any orders for its experimental vaccine, a DNA-based candidate known as INO-4800. The candidate has also failed to make the U.S. government’s list of coronavirus vaccine developers receiving funding as part of “Operation Warp Speed.” This all means that Inovio has been left behind, despite even its promising results in early studies.
While the science behind Inovio’s Covid-19 vaccine appears to be solid, the reality is that the Pennsylvania-based company — which has a little over 250 employees — just doesn’t have the staff or resources needed to aggressively market and secure contracts.
Legal and Financial Trouble
Lack of interest in its vaccine candidate would be bad enough for Inovio. But the company has several other problems that are dropping the INO stock price and giving shareholders fits.
For one, the company is currently locked in a heated legal battle with its contract manufacturer. This situation puts Inovio’s ability to deliver any products at risk.
Equally bad, the U.S. Food and Drug Administration (FDA) — which approves vaccine candidates — has partially halted clinical trials of INO-4800, saying it needs more information before the company can proceed. This action puts Inovio’s vaccine at a standstill, while its competitors are filing for “emergency use authorization” from the FDA for their own vaccines. It’s worth noting, too, that INO has never succeeded in bringing an FDA-approved product to market.
Finally, Inovio’s finances are a mess. In its most recent quarterly results, INO reported negative earnings per share (EPS) of -83 cents compared to the -17 cents that had been expected by analysts. The company’s revenue — which consists of license fees, collaborative research and development arrangements — has declined 90% since 2017 to just over $4 million in 2019.
In an effort to raise capital and stay afloat, the company has been issuing more shares, which has diluted the INO stock price. Total shares outstanding have swelled to 167.5 million from 100 million last year.
Any way you look at it, Inovio appears to be a company held together by just spit and duct tape. As for INO stock, the consensus view of analysts is for a median target price of $12 a share over the coming 12-months. That represents a 1.6% decline from the last price of $12.19 per share.
Not much is going right for Inovio Pharmaceuticals right now. What’s worse, a turnaround doesn’t appear imminent. For this reason, shareholders would be smart to sell now and take what they can get out of INO stock. Likewise, investors looking for a vaccine play should look elsewhere. When it comes to a successful Covid-19 vaccine, Inovio looks dead in the water.
On the date of publication, Joel Baglole held a long position in MRNA.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.