While initially being left off of the list of companies that have the highest probability of producing a successful Covid-19 vaccine, Inovio (NASDAQ:INO) has made its way onto the government’s gravy train through door number two. On June 23, the company announced it was receiving a $71 million contract from the U.S. Department of Defense. Investors are cheering the news. INO stock is up nearly 40% in mid-day trading.
The contract will allow Inovio to ramp up the production of its Cellectra® 3PSP Smart Device. The contract will also assist the company in the procurement of Cellectra® 2000 devices. Both devices help the company deliver its INO-4800 Covid-19 vaccine candidate directly into the skin.
This contract builds upon two separate $5 million grants the company has received within the last year. The grants from the Bill & Melinda Gates Foundation and the Coalition for Epidemic Preparedness Innovations (CEPI) have allowed Inovio to accelerate the testing of its smart device.
In addition to being portable and user-friendly, the battery-operated Cellectra® 3PSP can operate reliably in many challenging environments. It can also be stockpiled in large quantities without requiring maintenance.
Because of Inovio’s innovation in the area of activation immunotherapy, it would seem that the Cellectra® 3PSP will only work with Inovio’s INO-4800 vaccine candidate. And that suggests the DOD contract is an initial step geared to moving Inovio into a more favorable position.
Investors Will Be Waiting to See if Inovio Passes Its Test
In the article I wrote about the “3 Companies to Bet On as the World Races For a Vaccine”, I listed Inovio as the only stock I was considering outside of the “approved group of five companies”.
One reason for that is Inovio is expecting to release interim results of its Phase 1 clinical trial for INO-4800 late in June. If those results are favorable, the company will move into Phase 2/3 clinical trials in the July/August timeframe.
Keep in mind, investors had largely ignored that news and were continuing to bid up the company’s stock. With this recent surge, INO stock is up almost 500% in 2020.
Why INO-4800 May Win the Race
INO-4800 is a DNA-based vaccine candidate. The one-of-a-kind candidate delivers optimized DNA into cells. Once there, the vaccine is translated into proteins that “activate an individual’s immune system to generate a robust targeted T cell and antibody response.”
The company’s Covid-19 vaccine candidate is the latest example of how Inovio is carving out a niche in DNA immunotherapy. The company calls their efforts Immuno-Ingenuity. Simply put Inovio is working to develop unique immunotherapies to fight cancer and other infectious diseases.
And the company does have a long history of working with coronaviruses. On the company’s most recent earnings call, Kate Broderick, Inovio’s Senior Vice President of Research & Development (R&D) remarked that Inovio is the only company with a vaccine candidate against MERS that is in a Phase 2a clinical trial.
However, immunotherapy is becoming a crowded field so it’s understandable why Inovio is working to set itself apart from the pack. But these efforts are no further along than the company’s potential Covid-19 vaccine.
And that is why the stock is anything but a sure thing. For all the hope that Inovio will be successful, prospective investors need to remember that, despite a promising pipeline, Inovio does not have a product on the market. And that means the company’s short-term fortunes come down to INO-4800.
Should You Buy Into This Rally on INO Stock?
There’s a reason why Inovio is one of the most popular stocks on Robinhood. That reason is the potential Inovio has to deliver a Covid-19 vaccine.
In the last week, the market reacted strongly to news of a potential second wave of the novel coronavirus. And then swung the other way based on any positive news on the vaccine front. It’s a reminder that the novel coronavirus will continue to hang over the economy until there is a vaccine or proven antiviral treatment.
While I wouldn’t suggest investors go all in on Inovio, I do think the company is worth a look, particularly if it receives approval to advance INO-4800 to the next stage of clinical trials. But remember just as the stock has gone up like a rocket, an inconclusive trial could send the stock falling just as fast.
This is a classic trade the news story. But it’s one that Inovio, for now, is winning.
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