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 and Phase 3 Covid-19 vaccine trial. On Nov. 16, the FDA gave Inovio the go-ahead to begin the Phase 2 portion of the study.
Shares of INO stock have yo-yoed on the various FDA news. 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?
A Look At INO Stock Fundamentals
First, it’s important to note Inovio isn’t profitable and expects significant losses in the foreseeable future. In the third quarter, Inovio reported an 11-cent gain per share compared with a loss of 23 cents per share in the year-earlier period. Sales declined 72% but are still negligible at $236,000.
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 22-cent loss per share on $1.2 million in revenue in the fourth quarter. Revenue would grow as losses narrow.
Currently, INO stock has a Composite Rating of just 45 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 $1.16 per share and to have no 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 2019. 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 nine analysts cover INO stock, according to MarketBeat.com. Three had buy ratings, five had hold ratings and one had a sell rating on Dec. 8. 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. Maxim Group, though, upgraded the stock to buy from hold. Roth Capital also upgraded shares to neutral from a sell rating.
Analysts from outfits like HC Wainwright, RBC Capital Markets, Citigroup and Piper Sandler also cover Inovio stock.
As of Sept. 30, 257 mutual funds owned 34.3 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%.
Technical Analysis Of INO Stock
Inovio stock hit a high mark of 33.79 on June 26 after the biotech company received a $71 million contract from the U.S. Department of Defense to scale up manufacturing for its coronavirus vaccine.
On a year-to-date basis, INO stock has rocketed about 259.5% as of midday Dec. 8, albeit shares started the year at just 3.30. That’s reflected in the biotech company’s Relative Strength Rating of 94, putting it in the top 6% of stocks. The RS Rating pits all stocks against one another in terms of 12-month performance, on a scale of 1-99.
But the shares have a poor EPS Rating of 30. This reflects INO stock’s poor profit track record.
As of Dec. 8, Inovio stock was sandwiched between its 200-day moving average and its 50-day line. Shares aren’t forming a definite chart pattern. And, if a base forms, investors should take it with a grain of salt. It will be key to watch whether Inovio can launch a commercial product.
(Related: Keep tabs on bullish stock charts by visiting MarketSmith.com.)
As of Sept. 30, mutual fund ownership in INO stock was less than 21%. But more funds were adding or retaining shares than those reducing their positions. That included several actively managed funds.
INO Stock: Coronavirus Vaccine News
In its Nov. 9 earnings announcement, Inovio said it had answered the FDA’s questions regarding its planned Phase 2 and Phase 3 studies. On Nov. 16, the company announced the FDA had cleared it to begin the Phase 2 test, though the Phase 3 study is still on a partial hold.
Many observers expect emergency use authorization of at least one or two vaccines before year-end. So, Inovio is falling further behind. Meanwhile, Pfizer with partner BioNTech (BNTX) and Moderna all recently had positive news for their coronavirus vaccines in Phase 3 testing.
In September, Inovio announced a vaccine manufacturing agreement with Thermo Fisher Scientific (TMO). Inovio says it lined up enough third-party manufacturers to manufacture 100 million doses of its Covid-19 vaccine in 2021, if the vaccine is approved.
In its late June announcement, Inovio said its coronavirus vaccine generated an immune response at six weeks in 94% of participants who received two injections. Inovio also tested the vaccine in animals. After that, researchers exposed the animals to SARS-CoV-2, the virus that causes Covid-19. The animals were immune.
In early August, the San Diego-based company said it has added 80 adults to its Phase 1 test of its Covid-19 vaccine candidate INO-4800. The test had previously enrolled 40 adults.
Inovio said 95% of vaccinated participants responded with neutralizing and/or bind antibodies vs. Covid-19 after two vaccine doses. It also said nearly 90% of vaccinated participants generated strong T cell responses.
But some analysts criticize Inovio for providing vague antibody data in its second-quarter earnings report. That, combined with the misses on both the top and bottom lines, sent INO stock tumbling 23% on Aug. 11.
The biotech company has said the U.S. government selected its vaccine to be part of Operation Warp Speed. Operation Warp Speed is a program aimed at delivering an effective coronavirus vaccine by January 2021.
Is Inovio Stock A Buy Now?
To make a long story short, no, INO stock isn’t a buy right now based on technical analysis, along with its revenue and profitability.
Inovio stock isn’t forming a definitive chart pattern. Investors are encouraged to buy a stock when it tops a buy point and is less than 5% extended from that entry. (Check out Stocks Near A Buy Zone.)
Further, although Inovio stock has a strong RS Rating, its Composite and EPS Ratings are weak.
What is important, for now, is watching INO stock as the biotech company works to get back on track in developing coronavirus vaccine. Its DNA approach differs from traditional vaccines and from the newer messenger RNA approach.
Staff Writer Michael Krey contributed to this article.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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