On Nov. 16, the Food and Drug Administration gave Inovio (NASDAQ:INO) the green light to resume its Phase 2 clinical trial for its Covid-19 vaccine, INO-4800. INO stock initially jumped on the news, but it’s since fallen back to where it traded before the announcement.
If you’re long Inovio, getting back in the game has to be a relief. On the sidelines for six weeks, you can’t make it into the endzone if you’re not on the field. So, that’s a small victory, for sure.
However, it wasn’t all good news.
Although it can resume the Phase 2 segment of its clinical trial, to start Phase 3, it still has to answer some questions from the FDA regarding its CELLECTRA 2000 delivery device before it can move to the final phase of its clinical trial.
While it’s unlikely that the FDA would approve the resumption of Phase 2 if it had a problem with Inovio’s delivery device, investors never like to leave things to chance. Until the company gets a thumbs up from the FDA for its delivery device, there’s always a chance that INO-4800 dies on the research table.
If you own INO, that would be bad.
Furthermore, with Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) possibly days away from Emergency Use Authorization (EUA), and Johnson & Johnson (NYSE:JNJ), Novavax (NASDAQ:NVAX), and AstraZeneca (NASDAQ:AZN) seemingly on the doorstep, it seems as though Inovio’s ship has sailed.
Is it too late for INO-4800?
It’s never over until it’s over. That said, the risk of investing in INO stock today is much higher than it was at the end of September.
Operation Warp Speed Is Getting Away
The last time I wrote about Inovio was on Oct. 23. I recommended that only speculative investors consider betting on INO stock. Almost a month later, Inovio is just days removed from the FDA, lifting its hold on INO-4800, while many of its larger competitors have had a six-week advantage developing their Covid-19 vaccines.
In normal times, that wouldn’t be an issue. Still, now that the world’s got a taste of good news on the vaccine front, Operation Warp Speed is likely headed to hyperspace as governments around the world clamor for millions of doses of the winning vaccines.
Despite the fact the U.S. Department of Defense is ponying up more cash for Inovio’s Phase 2 and Phase 3 segments for its clinical trial — that’s on top of $71 million it’s already gotten — no amount of money can make up for the lost time.
I don’t see how Inovio can leapfrog the six companies that are in Phase 3 trials at the moment. I’m including Canada’s entry, Medicago, in this group. It started a combined Phase 2/3 clinical trial on Nov. 12.
I’m not the only one who thinks this way. InvestorPlace’s Louis Navellier recently discussed this very subject. His headline read The Clock Is Ticking for Inovio Stock. What’s interesting is Navellier rates it a strong buy.
Why Is INO Stock a Strong Buy?
I have to say that I’m puzzled by Navellier’s assessment.
He believes that Inovio isn’t a one-trick pony. In other words, the business doesn’t begin and end with Covid-19 and INO-4800.
“Unlike some companies working on a coronavirus vaccine, Inovio has been in the vaccine business for years. It has worked on everything from the flu to treating cancer patients. One of its best, more interesting innovations is its proprietary delivery method for vaccines, known as CELLECTRA,” Navellier wrote on Nov. 17.
“CELLECTRA is used in place of an old-fashioned syringe for drug delivery. Instead, it uses an electrical charge to open small pores in the cell and allow plasmids to enter. The idea is that opening pores in the cell is a more efficient and effective way to deliver a vaccine. And because CELLECTRA is proprietary, Inovio stands to earn a lot of money as medical providers purchase it.”
The problem that I have with Navellier’s assessment is that I can find no available information about CELLECTRA’s potential sales. A quick search shows that CELLECTRA’s been in development since at least 2009. Here’s a study from 2013.
The company itself has never generated more than $42 million in annual revenue. It did that in 2017. The majority of that revenue was for an up-front payment of $13.8 million from MedImmune, along with a $7 million payment for hitting the Phase 2 milestone of an ongoing clinical trial.
Nothing suggests CELLECTRA is a revenue powerhouse. In fact, the FDA still has issues with Inovio’s delivery device, which means the decade-long development of this product still might not produce meaningful sales.
If it were a blockbuster, I would assume someone like Becton Dickenson (NYSE:BDX) would be knocking on its door.
The Bottom Line
At this point, I suppose anything is possible. I mean, I didn’t think it would take the most powerful country in the world more than two weeks to decide an election winner, but here we are.
To anyone who wants to preserve their capital, INO stock is absolutely the wrong choice, even if it does end up winning the Covid-19 sweepstakes.
Remember, you always have options. Inovio shouldn’t be one of them.
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.