The Department of Defense pulled its funding for Inovio Pharmaceuticals‘ (INO) final-phase Covid vaccine test in late April, leading INO stock to crumble.
According to Inovio, the decision was based on the growing availability of Covid vaccines in the U.S. The department will continue funding Phase 2 testing. After that, Inovio says it will refocus on testing its vaccine outside the U.S.
The biotech company is working on a vaccine using pieces of DNA. It’s combining the vaccine with a device that delivers a brief electrical pulse to open small pores in cells.
Last June, Inovio said its Covid vaccine was 94% effective in early-stage testing. But, in September, the Food and Drug Administration placed its Phase 2 and Phase 3 test on a clinical hold. It lifted the hold on Phase 2 testing in November. But Phase 3 testing was still on hold this month.
Shares of INO stock have made a roundtrip to their March 2020 point, trading well below 10 per share. The company has a large pipeline of drugs in development for cancer and infectious diseases. As of Dec. 31, it had $411.6 million in cash, non-cash equivalents and short-term investments.
All in all, is INO stock now a sell?
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 fourth quarter, Inovio reported a 14-cent net loss per share compared with a loss of 38 cents per share in the year-ago period. Revenue was $5.6 million, up 2,000%.
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.
But INO stock isn’t lining up with CAN SLIM rules for investing in growth stocks. Savvy investors should 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 a 19-cent loss per share on $1.1 million in revenue in the current quarter. Revenue would fall 20%, but losses would narrow.
Currently, INO stock has a Composite Rating of 24 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 outranks less than a quarter of all stocks in terms of that metric.
In 2020, the biotech lost $1.07 per-share on $7.4 million in sales. Losses shrank year over year, while sales grew. For 2021, analysts surveyed by FactSet call for Inovio to lose 65 cents per share on $120 million in sales.
Inovio Stock Background
And its technicals demand a critical look. Inovio was essentially a dollar-stock in 2019, hitting as low as 1.91 in October 2019.
In February, INO stock catapulted to a five-month high, at 19, after investment firm BlackRock upped its stake in the biotech company and amid a Reddit call to action against short investors. But shares quickly tapered off. In April, shares plunged after the company lost its Covid vaccine funding.
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 2020, 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 eight analysts cover INO stock, according to MarketBeat.com. Three had buy ratings, four had hold ratings and one had a sell rating on April 23. 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 March 31, 262 mutual funds owned 55.7 million shares of Inovio stock.
Technical Analysis Of INO Stock
Inovio stock hit a high mark of 33.79 last June after the biotech company received a $71 million contract from the U.S. Department of Defense to scale up manufacturing for its coronavirus vaccine. But in April, shares plummeted after the department withdrew funding for Phase 3 testing.
In 2020, INO stock rocketed 168% higher, albeit shares started the year at just 3.30. Today, the biotech company has a Relative Strength Rating of 5, putting it in the bottom 5% of stocks. The RS Rating pits all stocks against one another in terms of 12-month performance, on a scale of 1-99. Shares have also returned to dollar-stock status, trading below 7 on April 23.
The shares have a middling EPS Rating of 59. This reflects INO stock’s continuing losses per share.
As of April 23, Inovio stock was below its 200-day moving average and 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.)
INO Stock: Coronavirus Vaccine News
The Department of Defense’s decision wasn’t based on Inovio or its product, the company said. Analysts say it’s possible Inovio could still launch its vaccine and device internationally. The firm is also working on a vaccine to target all variants.
Phase 2 testing — which U.S. officials are still funding — resumed in late 2020. In March, the company said in early March it had finished enrolling 400 participants in midstage testing. But the Phase 3 test remains on hold. The Phase 2 test is expected to wrap this quarter.
In February, INO stock soared after a Reddit user called for a short squeeze of the stock. Also helping the biotech company: BlackRock, an investment management firm, upped its stake to more than 14.2 million shares. It now owns 8.4% of Inovio.
Is Inovio Stock A Sell Now?
INO stock isn’t a sell as of April 23, but it’s also not a buy. Shares aren’t forming a specific chart pattern and, based on technical analysis, aren’t showing the marks of winning stocks — strong growth in sales and earnings.
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, Inovio stock has weak Composite and RS Ratings. Its EPS Rating is much stronger, but remains below the upper echelon of stocks.
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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