Due to the onset of the novel coronavirus, lesser-known biotechnology companies like Inovio Pharmaceuticals (NASDAQ:INO) quickly came into the spotlight in 2020. The result has been a sharp increase in the daily trading volume of INO stock.
There was also a rapid increase in the INO stock price, but that didn’t last forever. Indeed, some skeptics would claim that INO is nothing more than a pop-and-drop story.
To be honest, the ramp up in INO stock depended almost entirely on the status of INO-4800, which is Inovio’s Covid-19 vaccine candidate. The company has a robust pipeline with DNA-based drugs for a range of other conditions, but this year, traders have focused their attention on INO-4800.
That’s understandable since the world is mired in a second and/or third wave of coronavirus infections. And so, the billion-dollar question is: What’s the status of INO-4800, and is a turnaround in store for INO stock?
A Closer Look at INO Stock
INO stock started getting a whole lot of attention this year. However, the stock has actually been around for more than 20 years. Unfortunately for long-term shareholders, the INO share price was on a slow downward slope in the years leading up to 2020.
Covid-19 put INO stock on a new course, however, as the company now had a new focus and purpose. As a result, INO started the year at $3 and change but skyrocketed to a 52-week high of $33.79 on June 29.
I constantly warn traders not to chase after stocks that have gone parabolic. Extreme enthusiasm can often lead to a “buy the rumor, sell the news” type of event. What happened to INO stock is a textbook example of this.
In hindsight, it’s obvious that Inovio couldn’t possibly have delivered on the hype-fueled expectations surrounding INO-4800. Consequently, the INO share price plunged, landing at $10.54 on Nov. 20.
Addressing a Major Concern
One area of concern for Inovio’s critics is the partial clinical hold that the U.S. Food and Drug Administration (FDA) placed on INO-4800’s Phase 2/3 trial.
I recall when this news item was first announced, and the INO stock bears were having a field day. But in reality, the partial hold wasn’t the end of the road for INO-4800 or for Inovio.
Evidently, the partial hold provided Inovio with an opportunity to address the FDA’s questions about INO-4800. As President and CEO Joseph Kim explained, “the FDA’s partial clinical hold is not related to the occurrence of adverse events nor does it impact the completion of our ongoing, expanded Phase 1 clinical trial for INO-4800…”
If anyone listened to the INO stock bears and dumped their shares, they might end up regretting it. That’s because the fear of FDA interference may have been overstated.
Time for a Relief Rally
If the bulls needed reasons to stage a huge rally in INO stock, they now have not just one, but two of them.
First, on Nov. 16 Inovio announced that it has received clearance from the FDA to proceed with Phase 2 of its clinical trial for INO-4800. This is terrific news for INO stock as the regulatory hurdles have been a significant source of concern.
In addition, Inovio’s planned Phase 2/3 clinical trial for INO-4800 will receive funding from none other than the U.S. Department of Defense.
“We are especially pleased to continue our partnership with the DoD to advance the development of INO-4800 for active duty service members and civilian personnel and are grateful for the Department’s continued confidence in our technology to combat COVID-19,” Kim said.
Kim’s enthusiastic reaction is entirely understandable. After all, the U.S. government is a potentially endless funding source.
The Bottom Line
So, is INO stock just another example of the old pop-and-drop hype cycle?
Not really. With the FDA evidently easing restrictions and the Department of Defense offering critical funding, patient investors now have compelling reasons to believe in INO-4800 and therefore in INO stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
