In July 2020, McKinsey indicated that 250 vaccine candidates are being pursued globally. The consulting firm also estimated that between five to seven vaccines would be approved in the next two years. Inovio Pharmaceuticals (NASDAQ:INO) has been in the race for the vaccine against Covid-19 and INO stock has exhibited high volatility.
INO touched a high of $33.8 during the year and currently trades lower by 68% at $10.7. The markets therefore seem unimpressed with the developments. And I agree with the market sentiments.
I believe that Inovio is potentially out of the vaccine race and this column will discuss the reasons. As an overview, Inovio Pharmaceuticals was founded in 1979. The company is yet to deliver any U.S. Food and Drug Administration approved product. This track record does not lead to any optimism.
Big Progress Means Big Trouble for INO Stock
The progress made by some other major candidates in the vaccine race is a key reason to be bearish on INO stock.
Recently, Pfizer (NYSE:PFE) announced that the company’s vaccine candidate is more than 90% effective in preventing Covid-19 in participants in Phase 3 trials.
Pfizer and BioNTech (NASDAQ:BNTX) have also reached an agreement with the European Commission to supply 200 million doses of the vaccine. Deliveries are expected to start by the end of the year (subject to regulatory approvals).
Similarly, AstraZeneca (NASDAQ:AZN) has resumed Phase 3 trials. The company also has global agreements for vaccine production. As an example, the Serum Institute of India will have 200 million doses of the vaccine ready by January 2021.
Moderna (NASDAQ:MRNA) has also made significant progress. Phase 3 trials are expected to begin early next year. Moderna has also signed agreements with the U.S. government, European Commission, Japan and Qatar for the supply of the vaccine. The agreement is for millions of doses of the vaccine.
With success in Stage 1 and Stage 2 trials, Bharat Biotech is also expecting to launch a vaccine in India by February 2021.
The point I am trying to make is as follows – There can potentially be three to five companies that roll-out millions of doses of the vaccine in the next few quarters. These companies can potentially grab a bulk of the market for the vaccine against Covid-19.
On the other hand, Inovio Pharmaceuticals is lagging.
Inovio Pharmaceuticals Vaccine Progress
Towards the end of September 2020, Inovio announced the “partial hold” from the FDA for planned Phase 2 and Phase 3 trials. The company has responded in October 2020 to the questions from the FDA. It remains to be seen if the FDA is satisfied with the response.
Even if the FDA allows Phase 2 trials, the company is lagging behind in the vaccine race. I don’t expect any positive outcome in the next few quarters.
In a September 2020 report, Citron Research believes that the company’s “chemistry manufacturing and controls are unacceptable to the FDA and this is why a clinical hold was instituted.” The research firm believes that the stock is likely to drop to $2.
The response from the FDA is likely to be a major stock movement trigger. If the FDA allows the company to initiate Phase 2 and Phase 3 trials, the stock would be a good speculative buy. INO stock can plunge if the FDA is not satisfied with the response. Therefore, even for short-term traders, it makes sense to wait.
Concluding Views on INO Stock
After the surge in June 2020, INO stock has witnessed a sharp correction. I believe that it’s a speculative stock more than a name that can be considered for long-term investment.
The company’s track record is unimpressive. The probability of delivering a vaccine against Covid-19 is therefore low.
However, if the FDA does approve further clinical trials, some near-term trade can be considered.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
