Some investors might remember Inovio Pharmaceuticals(NASDAQ: INO); others might not. The small-cap biotech was once racing to develop an effective coronavirus vaccine. Its bet to become a leader in this field fell flat, the company largely fell into irrelevance, and its value decreased substantially.
However, Inovio isn't dead in the water. The company might be mounting a comeback, with its shares up by 96% since the year started. Is Inovio Pharmaceuticals a good contrarian buy? Let's find out.
What's going on with Inovio?
Inovio Pharmaceuticals develops DNA-based medicines. It uses a proprietary platform to manufacture plasmids, or DNA molecules, that it can insert into patients' bodies (also using proprietary devices) and that are designed to help produce disease-specific antibodies. Inovio boasts eight programs in clinical trials, an impressive number for a biotech with a market cap of just $305 million. Still, most of its programs haven't made it to phase 3 studies.
It discontinued the development of its coronavirus vaccine, INO-4800, in the U.S. after encountering a range of clinical and regulatory issues, not to mention the stiff competition that charged into the U.S. market before Inovio had the chance to launch its candidate. The company's VGX-3100, a potential vaccine for cancer caused by human papillomavirus (HPV), looked promising at one point but ended up flopping in late-stage studies.
Still, the biotech has had positive developments over the past year. It generated positive results from a phase 1/2 study for INO-3107, a potential treatment for recurrent respiratory papillomatosis (RRP) associated with HPV type 6 and HPV type 11. The study included 32 patients, 26 of whom required fewer HPV-related surgical interventions in the year after INO-3107 administration compared to the year before. The medicine also had a reasonable safety profile.
Here's some even better news: The U.S. Food and Drug Administration (FDA) agreed that the data from Inovio's phase 1/2 study for INO-3107 can be used to support accelerated approval. The agency granted it breakthrough therapy designation, which should help speed up its approval. That said, accelerated approval means that Inovio will still have to conduct a confirmatory study if INO-3107 is approved. If it fails this study, it could be pulled off the market.
Still, INO-3107 could hit the market by next year and start generating some revenue. That beats the company having to ace a phase 3 study before launching it.
The stock is still too risky
Last year, Inovio Pharmaceuticals generated $832,000 in revenue, much less than the $10.3 million recorded in 2022. That amount was connected to a contract it signed with the U.S. Department of Defense back in 2020 to support the production of a proprietary device it would use to administer INO-4800, its coronavirus candidate. That will no longer be a source of revenue for Inovio.
Though INO-3107 could start generating some sales for the company next year, it has limited potential. Inovio estimates that there are about 14,000 active cases of RRP associated with HPV type 6 or HPV type 11 every year in the U.S. That's not a particularly large number.
Although Inovio has several programs in early-stage clinical trials, it's far too early for them to contribute much to its prospects. The biotech ended 2023 with $145.3 million in cash and equivalents, which management estimated would last until the second quarter of 2025. If it encounters any issue with INO-3107, the company would be in danger of going out of business.
On the other hand, even if it manages to launch its leading candidate, Inovio Pharmaceuticals stock is unlikely to skyrocket given the medicine's relatively small target market.
In other words, the downside is massive, while the upside is limited. Investors should stay far away from this biotech stock.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
