Inovio Pharmaceuticals (NASDAQ:INO) has been in the spotlight recently after the company announced a potential vaccine for the novel coronavirus.
INO stock jumped more than 70% in the space of a week as investors saw promise in the Pennsylvania pharmaceutical firm. Since then, the firm’s share price has come down substantially but remains 50% higher than it was trading just a few months ago.
While the rest of the market is brimming with bargain buys, Inovio and a handful of others are currently trading at a premium due to thee potential windfall that a COVID-19 treatment would provide. But is the stock worth the hype? Here’s a look at the case for INO stock.
Invio’s Coronavirus Vaccine
The past week has taken INO stock 12% higher as the firm moves forward with clinical trials for its coronavirus vaccine. The Food and Drug Administration has accepted Inovio’s application, clearing the way for phase 1 clinical trials to begin. That’s a big deal because the firm can start administering its vaccine to up to 40 individuals.
The group will have one dose in the coming days and a second four weeks later. That’s a big deal for investors because it means data regarding the effectiveness and safety of Inovio’s vaccine will be available as early as this summer.
What the Trials Mean
Encouraging data from phase 1 trials will almost certainly bring the share price higher upon their release — but that boost will be temporary. The firm still has quite a few hoops to jump through before its vaccine could be approved for public use. Most expect a vaccine can be developed and approved by 2021 at the absolute earliest.
There are 4 phases of clinical trials that Inovio’s vaccine must pass through — each more rigorous than the last. It’s worth noting that only a tiny percentage of vaccines make it through the entire process — so although Inovio’s vaccine is one of only a handful being tested right now, its chances of success are small.
INO Stock is Risky
There’s a good chance that Inovio’s coronavirus vaccine won’t make it through clinical trials, so betting on that alone is akin to gambling. Outside of its coronavirus hopes, Inovio’s business doesn’t look all that enticing, especially in an uncertain economic climate.
Perhaps the biggest red flag is the fact that Inovio doesn’t have a single approved product on the market. That’s after nearly 40 years of being in business, suggesting either very bad luck or a questionable pipeline.
Speaking of pipelines, Inovio’s is relatively dry in the near to medium-term. Aside from the coronavirus vaccine, which is likely to be rushed through its clinical trials, the company doesn’t have many products nearing the approval phase. As only a small percentage of treatments make it through the entire process, it doesn’t give investors much to hope for if the coronavirus vaccine fails.
Coronavirus is an Ace in the Hole
Of course, Inovio’s pipeline won’t matter much if the firm’s COVID-19 vaccine is successful. Most agree that the pandemic will be a drag on the global economy until a viable treatment or vaccine is developed. Whoever makes that vaccine is effectively changing the world and saving lives, and that means they’ll be making a ton of money.
At this point, Inovio management hasn’t disclosed how much it would charge for its vaccine, but for comparison sake Merck’s MMR/Varicella vaccine costs upwards of $200. If just a quarter of the 327 million people in the US were to use Inovio’s vaccine, that’s 81 million syringes at $200 each— an addressable market worth $16.2 billion in the US alone.
The Bottom Line on Inovio
If Inovio is able to create a coronavirus vaccine, investors will be handsomely rewarded — making this a good speculative play for those with a strong stomach. However, with economic uncertainty casting a shadow on the future, INO stock is too risky to buy. If its coronavirus vaccine doesn’t work out — which is the most likely scenario — the firm doesn’t have much else going for itself. Inovio isn’t profitable and is weighed down by an enormous debt pile. The firm’s debt to equity ratio is 2,242%, meaning it’s not a company you want in your portfolio with the economy on the rocks.
While I’m rooting for Inovio, and every other biotech that’s working on a coronavirus vaccine, I don’t think it’s worth the risk.
As of this writing Laura Hoy did not hold a position in any of the aforementioned securities.