Inovio Pharmaceuticals (NASDAQ:INO) stock has fallen more than 64% since its peak at the end of June and more than 47% since my last article on June 23. I was skeptical of the company’s prospects and value at the time and I remain so today.
At the time I wrote that it would be a binary stock. If its Phase 1 tests went well, INO stock would do well, and vice versa. Well, the binary happened.
FDA and Its Questions for Inovio
On Sept. 28, the FDA put on “partial clinical hold” Inovio’s Phase 2/3 trials for its novel coronavirus vaccine candidate INO-4800. They have “additional questions.” Until the company can satisfactorily answer those questions, it cannot proceed with its next trials.
Inovio tried to put the best light on the situation. It says that it will continue with its “expanded Phase 1” trial. It plans on preparing for Phase 2/3 trials once the FDA questions are answered and “subject to the receipt of external funding to conduct the trial.”
Moreover, on Nov. 9, with the release of its quarterly results, Inovio says that it has responded to the FDA with answers to their questions. They claim the FDA has 30 days to respond.
That has been the kiss of death for INO stock. The market does not like this kind of uncertainty. Moreover, at least one major short-sell research firm says the company is due for another fall.
Citron Research’s Skepticism
First of all, anyone who is considering investing in INO stock should be very careful. One way to be careful is to read what a stock market skeptic on the stock has to say.
The Citron Research report on Inovio’s Sept. 29 press release is very important in that it raises the kind of questions that an informed observer of FDA proceedings would normally ask.
Citron says that it isn’t normal for the FDA to immediately put on clinical hold a potential trial until questions are answered. That is not its normal procedure. A trial usually can proceed after questions are answered unless the FDA stops the trial.
Moreover, Citron reports that the delivery device, its unique plant methodology, hasn’t been questioned in other types of FDA applications. The point is the FDA doesn’t seem to really like the Inovio vaccine effort.
And here is one more important fact. The FDA has never yet approved any Inovio products over its multi-decade history with the agency.
That is an extremely poor track record, to say the least. No one would know this unless they’ve read the Citron report. Citron’s bottom line is that they think INO stock is worth no more than $2 per share, or about 80% below recent prices.
And there is one more reason to be skeptical. The company is mired in losses. Apart from some one-time investment gains, Inovio reported a net loss for the quarter of $43.1 million, or 26 cents per share.
What to Do With INO Stock
Barron’s magazine points out that Inovio’s Covid-19 vaccine method uses DNA rather than RNA to insert a protein found on the coronavirus. This allows the body to raise an immune response to the Covid-19 virus.
However, apparently using DNA to insert the genetic instructions that produce the protein which evokes the immune response is “cumbersome.” Moderna (NASDAQ:MRNA) and Pfizer (NYSE:PFE) use RNA to evoke the response. On Nov. 9, Pfizer said its vaccine was 90% effective in preventing Covid-19 in its Phase 3 trials and Moderna said its vaccine was 94.5% effective.
In other words, if you are looking for a horse to bet on in the Covid-19 vaccine race, it’s not going to be Inovio. You will be much better off with either Moderna or Pfizer at this point. Moreover, given all the questions surrounding Inovio, caution is warranted.
On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.