The More Things Change The More They Stay the Same for Inovio Stock

Inovio Pharmaceuticals (NASDAQ:INO) reports after the market closes on May 11. The stock is expected to report negative earnings per share of 23 cents. Inovio disappointed investors in March when the company released its fourth-quarter financials. The company posted negative earnings per share of 38 cents which was worse than the analysts’ forecast for a negative 24 cents per share.

But any disappointment was short-lived. INO stock is currently up over 250% since the beginning of the year. In fact, the stock is trading at levels it hasn’t seen since 2014. It’s no wonder it’s popular with many younger investors. Inovio is one of the most popular stocks on the Robinhood trading app.

So the question on investors’ minds is whether INO stock is a buy after the company’s earnings come out. The reality is that for the stock to move higher, the company has to deliver on its promise. And there’s no guarantee of that happening.

Inovio is Still a “Clinical Stage” Company

As long as Inovio has been in existence, they don’t have a product in their pipeline. And, as noted above, the company is not profitable and analysts are not projecting the stock to be profitable in 2020. This means that from time to time, Inovio runs low on cash. Fortunately, Inovio receives some revenue from research and development agreements. However, in 2019, the company didn’t have one of these payments and that meant they reported a decline in revenue of over 80%. This in turn widened the company’s annual net loss by over 20%.

As 2020 began, Inovio’s fortunes took a turn for the better with the outbreak of the Covid-19 pandemic spawned by the novel coronavirus.

Will Inovio Win the Race to Launch a Coronavirus Vaccine?

You don’t need to be a virologist to understand the fundamental difference between the novel coronavirus and the disease it spawns, Covid-19, and the regular flu. There are treatments for the flu. And millions of Americans, particularly in our most vulnerable populations can get a flu vaccine (i.e. a flu shot) every year.

There is no such vaccine or proven treatment for the novel coronavirus. And that is what adds complexity to both the problem and the solution.

Inovio has been on the forefront of developing vaccines for years. So it’s no surprise that the company was one of the first to announce it had a candidate for treatment of Covid-19. In April, Inovio announced that its vaccine candidate, INO-4800, was entering a phase 1 trial with healthy volunteers.

The study will last four weeks and the company is expecting initial results by late summer. According to Inovio, preclinical data for the vaccine was in line with the phase 1 study for its MERS vaccine, which is also caused by a coronavirus.

The problem for Inovio is that they were not the first company to get a vaccine into a clinical trial. The biopharmaceutical firm, Moderna (NASDAQ:MRNA) released their vaccine candidate, mRNA-1273, for a clinical trial in March. And the company just received permission to take its vaccine into a phase two trial on May 7. The company is planning to move the vaccine into phase 3 trials in early summer.

This outlines the problem for Inovio. They’re already behind other companies in getting a candidate into a phase one trial. But there’s an additional concern for Inovio.

And even if they get a vaccine approved, they may face a problem getting the vaccine produced at a scale that will be necessary. By contrast, Moderna is already making plans to accelerate production for up to 1 billion doses of the vaccine. And the first doses could be made as early as July.

What Does Inovio’s Pipeline Look Like?

Prior to the outbreak of the novel coronavirus, Inovio had other candidates that were further along in production. Its most promising product, VGX-3100, is an immunotherapy that is in phase 3 trials. VGX-3100 is designed to treat precancers and cancers caused by the human papillomavirus (HPV). Inovio also has six other candidates that target head and neck cancer, glioblastoma, and prostrate cancer. All are in phase 2 testing.  

The Bottom Line on INO Stock?

Let the buyer beware. Inovio carries the same risks as other biotech companies. However, it doesn’t have any products that are generating revenue. That means right now investors are taking on all the risk without a guarantee of a reward. The historical performance of the stock suggests that there is no reason to believe the stock should climb higher than where it is right now.

The long-term outlook for INO stock will depend on the vaccine candidates that were already in the pipeline before the novel coronavirus. And while those products may come to market, they will not be the revenue generators for Inovio that would come from having a Covid-19 vaccine.