If shares of Inovio Pharmaceuticals (NASDAQ:INO) were to cliff dive from their current price of $12.48 per share to $1, that would amount to a) a decline of more than 90% in INO stock; b) the biggest such investor travesty for a company in the hunt to produce a novel coronavirus vaccine; and c) a remarkable news story. And to be clear, the Philadelphia-area biotech firm appears safe from such a fate for the foreseeable future.
But those who know their investment ABCs will tell you that one noteworthy activist short seller is betting on an Inovio dollar-share debacle. Andrew Left, editor for Citron Research, didn’t exactly mince words in an April 27 report “Bad Blood: The COVID-19 Version of Theranos: Target Price $1.” (The now-defunct Theranos fraudulently claimed it could perform multiple tests from a drop of blood.)
Here are some choice lines from the 12-page investor broadside, which I read with astonishment:
- “Inovio shareholders have been ‘Theranosed’ and the SEC should immediately halt this blatant stock promotion.”
- “Simply put, the management team at Inovio is a group of charlatans.”
- “Inovio is guilty of issuing highly misleading information to pump the company’s stock price. … In the case of COVID-19, they are taking advantage of retail investors while they’re stuck in quarantine.”
Ouch. Yes, Citron uses some over-the-top verbiage to slam Inovio stock. But in the case of the Covid-19 vaccine race, slash-and-burn hyperbole beats a suspect hypodermic any day. And so we present, the upshot, down shot and my best shot at getting to bottom of it all.
INO Stock at a (Sideways) Glance
Since Sept. 16, Inovio has lost a third of its value; over 2020 as a whole, though, it has nearly tripled in value. That kind of performance may be enough for some investors who’ve made out well to dismiss Citron’s citric gripes as sour grapes.
Still the company’s healthy rise would seem, if you believe the report, to reflect an unhealthy plot to capitalize on Covid-19 fears. Regardless, it made for poor PR when Inovio announced on Sept. 28 that it would suspend vaccine trials until it answered questions from the Food and Drug Administration. As a consequence, shares plummeted as much as 39% and trading was halted.
How close was or is Inovio to nailing a vaccine? That’s hard to say, as all the pharmas seeking to arrest Covid-19 have understandably avoided sharing granular details. That leaves us with Inovio’s press releases, awash with generalities and historically speaking, timed to health scares the company has thus far failed to remediate.
This 2016 CNBC clip begins with an astonishing observation directed by reporter Melissa Lee to Inovio Chairman and CEO Joseph Kim at the time of the Zika virus: “You seem to be Johnny-on-the-spot when it comes to infectious diseases. Whenever something pops up it seems Inovio comes back into the news.”
Trying to Track a Track Record
There’s tremendous substance to Lee’s statement. As Citron points out: “It’s been over 40 years since Inovio was founded, yet the company has NEVER [their caps] brought a product to market.”
I couldn’t recommend Inovio stock any more than its stock of vaccines, which as we’ve already established don’t exist. It’s one thing for an investor who’s unaware of Inovio’s dubious practices to watch this pharma and work it for some short-term profits.
In fact, this is one of those rare cases where I’m going to say that a stock that may be capable of making you money shouldn’t be touched with a 200-ft. pole. Thus far, Inovio has either ignored or failed to address the damning contentions in the Citron Research report. If it’s all true, or if any of it is true, it reeks of foul fraud.
But look: It’s entirely possible that, like a good many companies, Inovio’s reputation will change overnight should it ever beat out one of Big Pharma’s two-ton gorillas to market with an effective vaccine. Going from zero to hero in no time flat is endemic in the American Way and Wall Street is no exception.
Inovio a No Go
And so, my final call: INO stock reminds me of how disgraced reporter Stephen Glass gamed the fact-checking system at the New Republic to fabricate stories, because he knew exactly how that system worked.
Pharmas on the hunt for a vaccine are afforded the opportunity to shroud their work in secrecy in the name of protecting a potential product breakthrough. Medical jargon and acronyms baffle virtually all investors. Pandemic-weary people want hope. Investors love to bet. Press releases spin to win.
Someone could easily set up a company that takes advantage of all that and makes insiders filthy rich in the process — with the stress on “filthy.” Could Inovio be one of those companies? There’s no way I can say. But until I can say either way, I’m staying away.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.
