It’s been a thrilling year of ups and downs for Inovio (NASDAQ:INO). INO stock rocketed as much as 1,000% earlier this year following news that Inovio had a leading candidate in the race for a novel coronavirus vaccine. Things have gotten more complicated since summer, though.
The government left Inovio out of its multi-billion dollar Operation Warp Speed to hurry along vaccine development. Inovio’s small trial size — compared to rivals — raised doubts about the quality of its research.
And repeated advances in other Covid-19 vaccine programs made it appear that Inovio was falling behind. Still, Inovio investors had hope. As recently as two weeks ago, INO stock popped 50% on a favorable corporate update.
On Monday, however, everything changed. The Food and Drug Administration (FDA) hit Inovio’s Covid-19 vaccine with a dreaded partial clinical hold.
Shares plunged by 30% following the news. And, in all honesty, they should be down even more. Like Inovio’s vaccine, traders should halt any buying activity in INO stock for the time being.
FDA’s Unresolved Questions and INO Stock
On Monday, Inovio informed investors that the FDA had halted Inovio’s planned Phase 2/3 trial of its Covid-19 vaccine. Inovio was quite terse in its explanation of what happened. It says that no adverse health effects occurred in the Phase 1 trial of the vaccine. Given that, however, it’s unclear what the issue is.
From the press release, it seems like the FDA’s issue might be with Inovio’s Cellectra 2000 delivery device. However, short seller Citron Research questioned that explanation.
In an analysis, Citron suggested that Inovio’s clinical halt is due to issues with the particular Covid-19 vaccine or the company’s sudden switch in manufacturers. Citron also noted alleged discrepancies in past Inovio press releases indicating that deeper problems may be brewing beneath the surface.
Whatever you may think of Citron Research, the burden of proof is clearly on Inovio at this point. They’ve issued far less data than rival vaccine programs. Given that, the FDA halt is particularly alarming news. At this point, Inovio says it will address the FDA’s concerns in October, and it hopes to hear back in a month about whether it can proceed with its proposed clinical trial.
The Window of Opportunity Has Shut
Given this FDA delay, in a sense, it hardly matters with the Covid-19 vaccine going forward. Inovio was already far behind rivals in development of a vaccine for this particular coronavirus.
And now it seems as if Inovio might be able to launch its Phase 3 trial in November at the very earliest. That’s far too late to matter. You’re likely looking well into 2021 before it’d potentially make it to market even if everything went perfectly.
A bunch of other vaccine trials are already in Phase 3 right now. And various politicians and medical authorities have suggested that a vaccine should be avialable by the end of the year. Even if the FDA issue is resolved, by the time Inovio gets back to work, the commercial opportunity for a Covid-19 vaccine will likely be gone.
INO Stock Verdict
Why does Inovio’s problematic trial matter? Up until now, I’ve been arguing that Inovio stock would suffer once the Covid-19 race completed. Since getting left out of Operation Warp Speed, it seemed increasingly unlikely that Inovio could get a vaccine to market before its larger rivals. With the FDA hold, the odds of Inovio being first to market are now vanishingly small.
Still, bulls can point to Inovio’s other vaccine programs in the pipeline. Recall that Inovio was working on various other projects prior to this pandemic. Even with Covid-19 being a swing and a miss, there are still other sources of value, right?
However, if it turns out that Inovio misled investors and/or the FDA with this program, it could be lights out for the company in its current form. Inovio has never obtained meaningful commercial revenues from any of its vaccines. There’s no track record of success here. And if it comes out that they’ve cut corners in this case, it’d be a disaster for the firm.
A company like Inovio needs credibility to raise capital and keep its clinical trials running. If investors conclude management isn’t trustworthy, Inovio stock could collapse in short order. Inovio was a $3 stock before Covid-19 excitement got going. And at this rate, there’s a good chance that Inovio will be worth $3 or less by this time next year.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.