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Perception is reality. And that’s a harsh reality for Inovio Pharmaceuticals (NASDAQ:INO) and investors in INO stock. The stock is down 62% since the end of June. However, if you listen to at least one analyst, the stock has further to drop.
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If you’ve been keeping up with the vaccine race, you’ll recall that Inovio’s Covid-19 vaccine candidate uses unproven DNA vaccine technology. With the population still anxious about a vaccine in general, the idea of a vaccine that uses DNA may be a bridge too far for the Food and Drug Administration (FDA).
But getting its vaccine approved is only the first of two problems that may keep INO stock down. The second I believe is actually the larger threat that may be just coming to light. But both represent the fundamental risk of biotech stocks in the face of a global pandemic, nothing is decided until it’s decided.
Let’s look at each individually.
The FDA Has a Few Questions
To a biotech firm, those words must be like hearing you’re going to get audited by the Internal Revenue Service. The FDA is not letting Inovio move into late-stage trials for its Covid-19 vaccine candidate, INO-4800, until it answers some questions.
The problem is nobody, not even the bearish analysts, knows exactly what the FDA’s questions are. According to Inovio, the company has not seen any side effects in its Phase 1 trial. So what could it be?
Based on what I know of Inovio’s progress to date, there could be several issues. The first may be the size of Inovio’s trial. Johnson & Johnson (NYSE:JNJ) is going forward with a very robust 60,000 candidate trial. With the scrutiny being put on this vaccine, it’s possible that the FDA is leery of moving forward with a trial with a significantly lower sample size.
A second issue may be that to date, Inovio has not had the results corroborated in a peer-reviewed journal. The company submitted its results in August, but the results have not been published yet.
And a third issue may be questions regarding Inovio’s proposed CELLECTRA delivery device. However, this could be a blessing in disguise.
Inovio Stands Out in the Last Three Feet
Logistics is one of the key issues with vaccine delivery. And this is one area where Inovio clearly stands out. First, INO-4800 can be stored at room temperature and shipped at refrigerator temperatures (35-40 degrees Fahrenheit). And, the CELLECTRA device would remove another concern, the need to dispose of millions of needles. In fact, Inovio received over $70 million in funding from the Department of Defense for CELLECTRA.
Whatever the reason for the FDA’s questions, I believe the market is starting to realize there was an overreaction. And as I’ve pointed out before, there is likely to be more than one vaccine candidate. That is if a vaccine makes it to market.
Therapeutics Just Got a Huge Proof of Concept
President Donald Trump’s recent announcement that he was positive for Covid-19 has put the spotlight on two experimental antiviral therapies for Covid-19. The first is remdesivir from Gilead Sciences (NASDAQ:GILD). The second is the REGN-COV2 antibody cocktail treatment from Regeneron (NASDAQ:REGN).
As the pandemic has raged on, I’ve begun to suspect that the focus of the medical community was going to shift to therapeutics. From the outset, there have been statements that were clearly suggesting that, like AIDS, therapeutics may be the more realistic way to manage the virus.
And now that therapeutics have had a chance to show their possibilities in perhaps the highest stakes game of poker they could play, will the conversation shift? I think it’s likely.
The pandemic is fraying the fabric of our society. Now the great vaccine debate has commenced. And it’s not just the anti-vaxers that are in on this one. Many people are skeptical of the biotech community’s ability to produce a vaccine so quickly. Some of that is undoubtedly due to the current occupant of the White House. With that in mind, if Joe Biden wins the White House, a vaccine could be quietly put to the side as therapeutics become the “new normal.”
INO Stock Bears Watching, But That’s It for Now
Inovio needs a win. And it may still get that win. But with a Phase 2/3 trial not starting until late October at best, the company is severely behind in the current race. However, if Inovio can get INO-4800 through a late-stage trial, it could be the boost the rest of its pipeline needs.
But right now, INO stock needs a catalyst, but it just doesn’t have one. Put this on your watch list. But it’s hard to recommend you buy it right now.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.
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