INO stock’s recent sell-off is unjustified, but also presents an excellent buying opportunity
The Phase II/III clinical trial of Inovio’s (NASDAQ:INO) novel coronavirus vaccine candidate was put on hold by the Food and Drug Administration (FDA) late last month. As a result, INO stock tanked 28% on the day of the announcement. This month, it’s still down over 20%, hesitating now around $10.
But investors appear to have jumped the gun, as the partial hold has nothing to do with Phase I results. Additionally, it has little or no impact on the advancements of the company’s other product candidates. Clearly, Inovio is still in the vaccine race despite recent setbacks.
Of course, Inovio did miss out on the multi-billion-dollar funding it could’ve secured in the final round of “Operation Warp Speed.” But the company stands to develop a more refined product in the long run, expecting to produce 100 million doses by 2021. Moreover, it also has a great chance of having its human papillomavirus (HPV) vaccine approved by the FDA.
So what does this mean for the stock? The dip in Inovio’s price represents a fabulous buying opportunity for investors.
INO Stock and the Partial Hold
The FDA placed a temporary hold on Inovio’s Phase II/III clinical trial of its Covid-19 vaccine candidate, INO-4800. These trials were highly anticipated, as INO-4800 produced an extremely durable response in the first trial phase. But the FDA has sought additional information regarding the use of the company’s CELLECTRA 2000 delivery device. Inovio has time to respond to these questions through October, after which the agency will follow up within a month.
Bear in mind that this hold has nothing to do with any adverse events related to the Phase I study of INO-4800. Phase I trials were hugely successful, as roughly 90% of the participants exhibited significant T-cell and antibody responses. The company noted:
“In addition, this partial clinical hold does not impact the advancement of Inovio’s other product candidates in development. Inovio and its partners are continuing to prepare for a planned Phase II/III trial of INO-4800, following resolution of the FDA’s partial clinical hold and subject to the receipt of external funding to conduct the trial.“
The company’s cash and short-term investments are roughly $400 million, including $121.7 million in sales agreements. With a cash burn of $161 million in the first half of the year, it should have enough to continue its trials until late 2021. What’s more, Inovio has formed a strategic alliance with global collaborators and partners to support its trials until the end.
This all means INO stock has significant room to grow in the future.
Promising Product Pipeline
With INO stock’s recent hurdles, investors seem to have turned a blind eye to its extensive product portfolio. Although its Covid-19 vaccine has immense potential — and is currently the focus of many investor’s concern — other vaccine candidates could become significant growth catalysts as well.
Perhaps the most promising of the lot is VGX-3100, a vaccine treatment for HPV. VGX-3100 is currently in Phase III trials, which will be announced in the fourth quarter of this year. In the previous trials, the vaccine candidate successfully met its primary and secondary endpoints.
Moreover, there is also the INO-3107, which could treat recurrent respiratory papillomatosis (RRP), a disease caused by HPV.
And on top of that, you cannot count out INO-4800 by any means. The partial hold could prove to be only a minor hiccup in what otherwise has been a fruitful journey of vaccine development. In the end, Inovio might come up with the most effective vaccine, regardless of the time it takes to complete it. After that product’s approval, the company stands to achieve massive sales.
Inovio is behind, certainly. But it cannot be counted out of the race just yet. INO-4800 has the chance to be a great product — with promising results already — and investors seem to have reacted too fast towards the stock.
Despite the recent setbacks, I think the company will soon resume development on its Covid-19 vaccine. The challenges are temporary. And in addition to Inovio’s answer to the pandemic, the company has a product portfolio with excellent depth. These vaccines have the potential to be decisive game-changers for the company, once they hit market.
INO stock is currently over 65% down its 52-week high price, which presents a great buying opportunity. Therefore, my thesis is bullish on the stock and remains unchanged from my previous article. Inovio is a stock that is ripe with possibility.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article
Author: Muslim Farooque
Source: Investorplace: Investors Should Buy the Phase II/III Dip in Inovio