As the novel coronavirus continues to plague the planet, vaccine development has understandably become a key theme among investors. But choosing a winner in the vaccine space is a bit like picking a winning horse on the racetrack – there’s a huge element of chance. That’s the case with Inovio Pharmaceuticals (NYSE:INO). INO stock has gotten a lot of attention as the firm works to develop a vaccine and while everyone is cheering the firm’s efforts, it’s a risky way to spend your money.
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There are a lot of reasons to like INO stock when it comes to winning the race to make a vaccine. The firm has a ton of promise, a unique approach and a nod of confidence from some big-names. But the fact remains that there may not be a vaccine that defeats Covid-19. Plus, even if there is one, it may not be Inovio’s.
The Case for INO Stock
That’s not to say that Inovio doesn’t have a good game plan. The firm uses snippets of DNA to create a vaccine that will protect against Covid-19. Phase 1 study results show that two doses of the vaccine produced an immune response, a promising development.
Back in January, the firm received $9 million from the Coalition for Epidemic Preparedness Innovations in order to develop a vaccine. Two months later, the Bill and Melinda Gates Foundation injected another $5 million into Inovio in order to speed up the firm’s vaccine development program.
Those large-scale investments in the company’s vaccine development represent a nod of confidence from big names. That should give INO stock investors a bit of confidence as it means they aren’t the only ones pumping money into the biotech firm.
Inovio’s Biggest Risks
But just because the Gates Foundation is supporting Inovio doesn’t mean the average investor should buy INO stock. For starters, without a Covid-19 vaccine, the company doesn’t have much going. Inovio isn’t profitable and doesn’t have any major growth catalysts on the horizon outside its Covid-19 vaccine. Before the coronavirus struck, INO stock was trading at a mere $3 per share.
Without a Covid-19 vaccine, INO stock isn’t anything special. Of course, if the company produces the world’s first usable vaccine it could be a millionaire-maker stock. But on the flip side, it’s value could be massively overstated based on hype.
What’s Next for Inovio
As InvestorPlace’s Ian Cooper pointed out, there are several catalysts on the near-term horizon that could move the needle for INO stock. Inovio’s vaccine is the only one of its kind that remains stable at room temperature. That means transporting the vaccine will be much easier than for competing vaccines that require precise temperature-controlled environments.
On top of that, the firm has received two big nods from the U.S. government in recent weeks.
The Department of Defense recently shelled out $71 million to manufacture the devices that deliver Inovio’s vaccine. On top of that, the firm’s been chosen by the Department of Health and Human Services to be a part of Operation Warp Speed, which aims to have a widely distributed vaccine by January 2021.
The Bottom Line on INO Stock
It’s impossible not to root for INO stock in the current climate and it’s easy to bet on Covid-19 vaccine makers that have had such a positive reception. But the bottom line on INO stock is that it’s a gamble rather than an investment.
For speculative investors, it makes for a good choice. But for the average investor who’s looking to come out of this crisis unscathed, INO stock is too risky.
This is the first time in history anyone has ever followed vaccine development so closely, and that leads to a lot of false-positive news. In reality, the process involved in creating and manufacturing a successful vaccine is arduous and sometimes results in nothing at all. For INO stock, that would be disastrous considering the firm’s entire valuation is based on a successful vaccine candidate.
With that in mind, I’d be inclined to cheer Inovio from the sidelines because the race for a Covid-19 vaccine is laced with far too much risk.
Laura Hoy has a finance degree from Duquesne University and has been writing about financial markets for the past eight years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN. As of this writing, she did not hold a position in any of the aforementioned securities.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.