Healthcare Business

Why 'Positive Results' in Coronavirus Are Not Good Enough for Inovio Pharma

Inovio Pharmaceuticals Inc. (NASDAQ: INO) is one company that hopes to win big in the fight against coronavirus. This company is not without controversy, and the COVID-19 pandemic is not its only target, but the pandemic has been the main driver of the interest in Inovio so far in 2020.

When a company reports “positive preliminary results from an early stage vaccine trial,” it sounds as though the investing community would cheer the news on and buy the stock up higher and higher. The problem is the many other companies targeting COVID-19, and some are deemed to be much closer than Inovio. To prove the point, note that Inovio’s results were interim in Phase 1.

Inovio did indicate that its INO-4800 was deemed to be safe and well tolerated through eight weeks of the study. The company noted that there no serious adverse events, and the adverse events that were reported were all listed as grade 1 in severity. The Phase 1 study originally enrolled 40 patients, who were adults and volunteers, and 94% of participants demonstrated overall immune responses at week 6 after just two doses of INO-4800. In the preclinical animal study, INO-4800 had provided full protection against SARS-CoV-2 replication in the lungs in mice that were challenged with the virus.

The company’s DNA vaccine is looking to generate antibody and T cell immune responses, but the vaccine is still considered very early-stage, and it is not without its critics. The study did not indicate whether INO-4800 will protect people who are exposed to the coronavirus, and many early-stage studies fail to deliver in later stage trials with larger groups. The company is planning to publish the full data of this study in a peer-reviewed medical journal.

Inovio previously received $71 million funding from the U.S. Department of Defense to support large-scale manufacturing of its Cellectra 3PSP smart device and the procurement of Cellectra 2000 devices, and the company previously noted that the development of INO-4800 has funding from Coalition for Epidemic Preparedness Innovations (CEPI) and from the Bill & Melinda Gates Foundation.

The many competitors who have deeper pockets and are further along also may have weighed on Inovio shares, after the U.S. Food and Drug Administration released guidelines for a coronavirus vaccine needing to be submitted, and after enduring the FDA’s regulatory standards for approval, as well as to reduce the risk of disease caused by COVID-19 by 50% versus the placebo.

Shares of Inovio traded down 20% at $25.00 on Tuesday, and 65 million shares had traded hands before 1:30 Eastern Time. With a 52-week trading range of $1.92 to $33.79, and now having a market cap of nearly $4 billion, it was understandable that profit-taking was seen. Some doubters also might be at work here. With a short interest of more than 25 million shares (and remaining above 20 million since mid-March), there are quite a few investors who are not buying into the story.

Another issue worth considering is that the Refinitiv consensus analyst price target of $22.57 with a prior close above $30 implies either that the stock has run too much or that the analysts are just way behind the stock. The consensus revenue expectations are just $24.7 million for 2020 and $359 million for 2021.

One impressive lineup that Inovio does have going for it is its partnerships and collaborations. Some of these include companies and organizations such as AstraZeneca, DARPA, National Cancer Institute, National Institutes of Health, Regeneron, Roche/Genentech and the Walter Reed Army Institute of Research, among others.

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