Should Inovio Be On Your Buy List As It Tackles A Coronavirus Vaccine?
ALLISON GATLIN
07:15 AM ET 10/07/2020
Inovio Pharmaceuticals (INO) has thrown its hat into the coronavirus vaccine ring with biopharma names like Moderna (MRNA), Johnson & Johnson (JNJ) and Pfizer (PFE). But INO stock is frequently volatile on Covid-19 vaccine news, and regulators recently forced the company to delay its Phase 2/3 study.
Biotech company Inovio is taking a different tactic compared with other coronavirus vaccine makers. It's making a vaccine using pieces of DNA. That method could be promising. In late June, Inovio said 94% of Phase 1 study participants showed an immune response after receiving two doses of its vaccine.
But on Sept. 28, the company said the U.S. Food and Drug Administration wanted additional questions addressed before Inovio could begin a Phase 2/3 Covid-19 vaccine trial. Inovio planned to start those trials in September. A Phase 1 trial remains ongoing.
The setback hit INO stock. After all, Inovio is going up against giants in vaccine development. It trails Pfizer, Moderna and others in the race for a coronavirus vaccine. Biotech Inovio, however, has a large pipeline of drugs in development for cancer and infectious diseases.
So, amid the backdrop of the coronavirus pandemic, is INO stock a buy now?
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A Look At INO Stock Fundamentals
First, it's important to note Inovio isn't profitable and expects significant losses in the foreseeable future. For the second quarter, Inovio reported a wider loss than expected and sales that also missed Wall Street expectations. The company posted a net loss of 83 cents a share, or 20 cents minus special items. Sales almost doubled but are still negligible, at $267,000.
Also of note, Inovio doesn't have a commercially approved product on the market. It was founded in 1983, while its DNA work dates to 2000. Its revenue is comprised of collaboration and development money. The biotech company has big biopharma partners like AstraZeneca (AZN) and Regeneron Pharmaceuticals (REGN).
The revenue picture could change quickly if Inovio succeeds in making an effective coronavirus vaccine. The biotech also has a drug in Phase 3 testing to treat a precancerous condition of the cervix. It's partnered with privately held ApolloBio on that drug.
Simply put, INO stock isn't lining up with CAN SLIM rules for investing in growth stocks. Savvy investors are encouraged to seek companies with at least 20%-25% recent earnings growth. Inovio stock isn't expected to get there anytime soon. (Learn more about IBD Digital to get CAN SLIM stock investing tips.)
Analysts surveyed by FactSet expect Inovio to report an 19-cent loss per share on $3.1 million in revenue in the third quarter. Revenue would grow as losses narrow.
Currently, INO stock has a Composite Rating of just 46 out of a best-possible 99. The Composite Rating is a 1-99 measure of a stock's key fundamental and technical growth measures. This means Inovio stock ranks in the bottom half of all stocks in terms of that metric. In its case, the strength comes overwhelmingly from INO stock technicals, not fundamentals.
In 2019, the biotech lost $1.21 per-share on $4.1 million in sales. Losses grew year over year, while sales declined markedly. This year, analysts surveyed by FactSet call for Inovio to lose $1.47 per share on $10 million in sales.
Inovio Stock Background
And those technicals demand a critical look. Inovio was essentially a dollar-stock in 2019, hitting as low as 1.91 in October. Today, the biotech stock trades near 12.
Here's its background: Inovio was founded in 1983 under another name, Genetronics. At the time, it focused on a technological platform called electroporation. Electroporation is using controlled electrical pulses to create openings in cells. In theory, that should make them more permeable to drugs and other agents.
Then, Genetronics focused on developing drugs for cancer and dermatology. It also developed machines for electroporation to sell to research companies, according to the company's first U.S. Securities and Exchange Commission filing.
In the 1990s, Genetronics traded on the Vancouver Stock Exchange, American Stock Exchange and the Toronto Stock Exchange. It voluntarily delisted from the Vancouver exchange in 1998. It remained on the Toronto exchange until 2003.
Two years later, Genetronics acquired gene therapy company Inovio AS and changed its name to Inovio Biomedical. In 2006 and 2007, Inovio had to restate some of its financials. In 2009, Inovio merged with VGX Pharmaceuticals. That added a cancer vaccine to its pipeline.
A year later, Inovio Biomedical became Inovio Pharmaceuticals.
Gates Foundation, CEPI Award Inovio Grants
After merging with VGX, Inovio began focusing on DNA vaccines and electroporation delivery. But, in 2016, the fervor wavered after the Food and Drug Administration placed a key cancer vaccine on clinical hold. At the time, Inovio stock was also running hot on its Zika virus and influenza vaccines.
The next few years saw a downfall for INO stock, which plummeted to dollar-stock status.
But shares began a turn in January 2020 when the biotech company announced that the Coalition for Epidemic Preparedness Innovations, or CEPI, awarded it $9 million to develop a coronavirus vaccine. CEPI is a group of public, private and nonprofit organizations that fund vaccine development worldwide.
In March, the Bill and Melinda Gates Foundation awarded Inovio $5 million to scale up its coronavirus vaccine delivery system. That followed a $1.6 million grant in 2016 to back its Zika virus vaccine.
Just 10 analysts cover INO stock, according to MarketBeat.com. One does not rate the stock. Among the others, three had buy ratings, five had hold ratings and one had a sell rating on Oct. 7. But, after the FDA put a hold on the Covid-19 vaccine Phase 3 trials, Cantor Fitzgerald lowered its price target on INO stock to 12 from 31, and Roth cut its price target to 8 from 11. Maxim Group, though, upgraded the stock to buy from hold.
Analysts from outfits like HC Wainwright, RBC Capital Markets, Citigroup and Piper Sandler also cover Inovio stock.
As of Sept. 30, 252 mutual funds owned 36.4 million shares of Inovio's 161 million-share public float.
About twice as many mutual funds added to their position in the latest quarter than cut their stakes. But a number of top funds recently reduced the position, including the A+-rated Wasatch Micro Cap, an IBD Best Mutual Fund. Its position in Inovio stock shrank by more than 28% from the prior quarter, while three other funds in the Wasatch family cut their stakes by as much as 66%.