The Food and Drug Administration notified Inovio Pharmaceuticals (NASDAQ:INO) on Sept. 28 that it had additional questions about the company’s planned Phase 2/3 trial of INO-4800, the company’s novel coronavirus vaccine, and its CELLECTRA 2000 delivery device. INO stock fell 28% on the news.
The good news is that the FDA’s “partial clinical hold” had nothing to do with anyone getting sick during the initial Phase 1/2 stages of its drug’s clinical trial process. The bad news is that Inovio will have to answer the regulator’s questions in October, and then the FDA has 30 days to respond to the company’s answers.
Assuming Inovio answers these questions sooner rather than later – let’s say by Oct. 9 – the FDA might not respond until the second week of November. That’s five weeks spent in limbo.
So, the question for interested investors is whether Inovio’s correction is a brilliant opportunity to get some shares at a bargain, or is it the beginning of a leg down into single digits.
Should you buy now, later, or never? I’ll look at all three possibilities.
You Should Buy INO Stock Now
This wasn’t the first significant correction of INO stock in 2020. At the beginning of March, its shares fell 23% in five days of trading. In two days of trading, Inovio’s shares lost 38%. In July, it fell 23% over a week, and in early August, it lost 28% over five days of trading.
I think you get my point. It’s a volatile stock. Only now, its share price is lower than it’s been since the beginning of September, and June before that. If you believe that Inovio’s got a real shot at the FDA approving INO-4800, I don’t see how you don’t buy at these prices.
Currently, the eight analysts covering Inovio have a target price of $15.29, which provides 26% upside based on its Sept. 28 closing price of $12.14. Two of these analysts believe it’s a “buy,” five rate it a “hold,” and one recommends investors “sell” its stock.
That’s not a ringing endorsement, but given the high-stakes nature of these proceedings, it’s not as damaging as one might believe.
Another reason to consider Inovio stock is that INO-4800 isn’t the only new development in the pipeline. InvestorPlace’s Faizan Farooque recently discussed this fact.
“Inovio isn’t a one-trick pony. It has several other products in its pipeline that are highly valued, which we will get to in a second. Secondly, the company hasn’t scrapped working on its Covid-19 vaccine,” Farooque stated on Sept. 28.
My colleague points out that Inovio’s been around for 30 years. It is currently working on developing Syncon, a proprietary immunotherapy platform that effectively makes your immune system stronger. Also, Farooque mentions the company’s CELLECTRA 3PSP device, which will be used to administer INO-4800, should it get the green light from the FDA.
Drug development companies are risky propositions. Inovio is no different. However, it has generated revenue in 2020, which is more than some of the companies chasing the Covid-19 lottery can say.
Is it risky? You bet, but if the FDA says it can go back to work getting INO-4800 approved, you can be sure there will be a 30-40% pop on the news.
You Should Wait
The Motley Fool’s Keith Speights made a very observant comment while discussing the FDA’s partial clinical hold on Sept. 28.
While everyone and their dog is freaking out about the pause in Inovio’s move to its Phase 2/3 trial, the biggest issue could be whether it has the funding to carry out the trial.
“[T]he initiation of the study isn’t just dependent on an FDA resolution of the partial clinical hold. Inovio also stated that the launch of the Phase 2/3 study is ‘subject to the receipt of external funding to conduct the trial,’” Speights stated.
“Inovio has previously hinted that an announcement regarding external funding for its INO-4800 program could be made in September. However, it’s uncertain whether or not this announcement will also be delayed.”
If Inovio’s trial is taken off hold because the FDA is satisfied with its answers, the worst-case scenario would be an announcement that it’s further delayed because it can’t gain the funding necessary to move ahead. That would put the company even further behind than it already is.
The stock might jump on the news the trial’s back on, but it would most certainly fall if it’s unable to proceed because of a lack of funding.
The cautious investor might want to wait for more information coming to light before committing to buying Inovio stock.
You Should Never Buy
My colleague makes a good point that the vaccines that are approved will be the ones that are the safest and most effective long-term solutions, not the first to the finish line. That said, several larger companies are well ahead of Inovio in terms of their clinical trials, and most certainly will be able to provide the funding to produce the vaccines.
If you’re not an aggressive or speculative investor, this latest piece of news should permanently put you on the sidelines. There are better options.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.