When it comes to a stock that’s out of favor, often enough there are reasons to remain hopeful. But when it comes to Inovio Pharmaceuticals (NASDAQ:INO) the challenging combination off and on the INO stock price chart strongly warns otherwise for would-be buyers.
Let me explain.
It has been a year of big ups and downs for biotech Inovio. Along with top candidates Moderna (NASDAQ:MRNA), Regeneron (NASDAQ:REGN), Pfizer (NYSE:PFE) and AstraZeneca (NYSE:AZN), despite its small-cap stature and iffy fundamentals, Inovio was among Wall Street’s early favored companies ready to find a breakthrough treatment for the novel coronavirus. That optimism took shares up more than 1,000% from its January low of $2.95 to late June high of $33.79. But despite still being in the hunt to find a vaccine, that was as good as it would get for Inovio investors.
In less than four trading sessions, INO’s valuation plunged 50% off its highs despite delivering impressive Phase 1 clinical trial results for its INO-4800 coronavirus drug candidate. What exactly went wrong? It’s hard to know for sure, but in an arms race to find a coronavirus cure, Inovio may have already been falling behind.
At that same moment Inovio had cleared its first big hurdle, drug giant Pfizer’s partnership with German-based BioNTech (NASDAQ:BNTX) was showing even more ammunition against Covid-19 with four candidates compared to INO’s one shot at success. There may have been more at play as well.
A successful Phase 1 means a drug like INO-4800 can move forward into a second clinic study. But roughly 86% of drugs in clinical trials ultimately fail to become safe and marketable drugs approved by the Food and Drug Administration. The deck was still stacked against it. And armed with massive gains in Inovio, which were fully tied to an eventual successful outcome for Inovio’s drug candidate, those investors taking early but lucrative profits with imperfect information were well rewarded.
Since Inovio’s June peak shares are off roughly 70%. Moreover, not only has enthusiasm been tempered in INO stock over the last four months, but a promising start has turned riskier by some measures as well.
During the past couple months, Pfizer and BioNTech have continued to see promising success. But Moderna’s mRNA-1273 has become the front runner in the eyes of many on Wall Street. With phase 3 enrollment just completed the company has stated it’s ready to ship 20 million doses of its vaccine by the end of 2020 vis-à-vis the “emergency-use authorization route” and taken in just over $1 billion in deposits from governments around the world.
Aside from the competitive threats, Inovio’s INO-4800 prospects have also grown more questionable. Earlier this year the company was optimistic it could begin its own late-stage study in September. But those plans were ultimately quashed by the FDA, which requested more data and information before it could precede. Inovio countered saying it would respond in October. Management failed to comply.
Now, with November on the calendar, any future FDA recommendation for INO-4800’s study is still waiting on Inovio’s top brass to respond. If all goes well, a from behind-the-pack, late-stage study start by early December might commence.
INO Stock Daily Price Chart
Source: Charts by TradingView
So, there’s still hope yet, right? I suppose there is that chance. And INO stock’s price chart also has the possibility of pulling a rabbit out of its hat as well. That said, I’d warn against getting too heavily invested in Inovio.
Technically, Inovio’s massive correction has shares testing its 76% retracement level over the last several sessions. In of itself, the deep correction could be viewed favorably. But today’s challenge follows an initial test back in early September, which lifted shares handily, only to fail against a test of key Fibonacci and trendline resistance as a bearish gap was filled. And right now, all indications suggest even lower share prices are in store for INO stock investors.
Currently, the signs are for a bullish “false positive” on the price chart. This is evident given that Inovio’s Bollinger Bands are tightly pinched and in position to widen. This is also happening in tune with a bearish daily chart stochastics crossover, which confirms that technical support is falling. My best guess is Inovio will move towards its former 2014 – 2017 downtrend near $4 a share. That is, of course, before, and if, a low might come into play.
Ultimately, smaller-cap biotechs are inherently risky. INO stock fell firmly into that group before Covid-19 and now at this later stage within the disease’s vaccine race, it’s there once more. To be fair, I’m no PhD. and if an investor has reasons to see Inovio’s correction more opportunistically, my advice would be to use either a long Feb or May $15 / $20 call vertical spread as a way to potentially thrive with this this coronavirus play.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.