Stock Analysis & Ideas

Inovio Pharmaceuticals Stock (NASDAQ:INO): A Risky but Worthy Wager on DNA Solutions

Story Highlights

Inovio Pharmaceuticals is working tirelessly to treat communicable diseases with groundbreaking DNA medicine. It takes guts and strong risk tolerance to hold INO stock through its up and down cycles, but one positive surprise could be all that’s needed to spark a 2x, 3x, or even bigger move.

Inovio Pharmaceuticals (NASDAQ: INO) is definitely not a company to “bet the farm on,” even if you’re an audacious investor. However, the company’s determination to address communicable diseases with leading-edge DNA technology is impressive. So, for a small but confident long-term position, I am bullish on Inovio Pharmaceuticals stock.

Pennsylvania-based Inovio Pharmaceuticals is a biotechnology business with a focus on DNA-based medicine. During the onset of the COVID-19 crisis, some traders bought INO stock as a bet on Inovio’s COVID-19 vaccine candidate, INO-4800.

Suffice to say, that bet didn’t work out too well because other vaccine manufacturers beat Inovio to the punch. Still, Inovio Pharmaceuticals seems to have shifted its focus to an entirely different disease category – and Inovio already scored a clinical victory with one of its highest-conviction treatment candidates.

Don’t Get Too Hung Up on Inovio’s Financial Issues

It’s always important to check a company’s financials before making any investment decisions. As we’ll discuss in a moment, Inovio Pharmaceuticals’ fiscal figures aren’t exactly ideal. Nevertheless, it could still be fine to consider a very small position in INO stock.

So, let’s start with the basics. Inovio Pharmaceuticals is a small-ish biotech company with a market cap of around $519 million. The company ended 2022’s second quarter with $348 million in cash and short-term investments, which isn’t exactly a huge reserve of capital. However, Inovio expects to be able to fund its operations into the third quarter of 2024.

None of this sounds off-putting so far, but there are financial issues that prospective INO stock investors should be aware of. It is true that Inovio Pharmaceuticals grew its revenue from $273,000 in Q3 of 2021 to $784,000 in the second quarter of 2022. The problem is that, during the same time span, Inovio’s net loss widened from $82.1 million to $108.5 million

This might already be a deal-breaker for some traders. The other major problem is that Inovio Pharmaceuticals’ capital reserves are dwindling. I already mentioned the company’s $348.1 million position in cash and short-term investments; this represents a decline compared to Inovio’s $401.3 million recorded at the end of Q2 2021.

This, however, isn’t unusual for biotechnology businesses with small-to-midsized clinical pipelines. Sure, it’s a good idea to keep an eye on Inovio’s bottom line and reconsider your position if the company’s net loss widens even further. That said, biotech traders should understand that these are speculative bets, and if you invest in 20 of these types of companies, it’s likely that some will double or triple in market cap while others will get cut in half.

That’s just the nature of biotech investing. At least, we can say that Inovio’s management seems confident that the company is sufficiently capitalized through the third quarter of 2024 and that Inovio’s cash burn will “decrease incrementally” through that quarter.

INO Scored a Clinical Win with an Infectious-Disease Treatment

We’ve already observed that Inovio Pharmaceuticals seems to be pivoting from its COVID-19 vaccine to treatments for a different class of communicable diseases. In particular, Inovio is making strides in advancing medicines for diseases associated with a sexually transmitted disease known as HPV (human papillomavirus). Indeed, recent clinical data indicate that one of Inovio’s HPV-focused treatments looks promising.

Recurrent respiratory papillomatosis (RRP) is a debilitating disease caused primarily by certain strains of HPV. It has an incidence rate of 1.8 per 100,000 adults.

INO-3107 is Inovio Pharmaceuticals’ clinical-stage DNA medicine intended to treat RRP. The company recently evaluated INO-3107 in a Phase 1/2 trial involving 32 participants with RRP.

The results were highly encouraging. 76% of the participants presented with a “reduction in number of surgical interventions compared with previous year.” Also, six of the participants “required no surgical intervention during the trial.” Plus, INO-3107 was well-tolerated, and overall, the drug “demonstrated statistical significance based on clinical endpoint of reduction in overall number of surgical interventions compared with previous year.”

Preventing so many of the participants from requiring surgery to treat RRP is a major victory from a clinical standpoint. As Inovio Pharmaceuticals President and CEO Jacqueline Shea pointed out, RRP is a lifelong condition, and surgery is the current standard of care for this disease. Moreover, Shea observed that “there are no currently FDA-approved therapeutic vaccines or drugs” for RRP.

This could change soon, however. With the aforementioned results in the books now, INO-3107 could move through the clinical and regulatory pipelines with surprising speed.

Is INO a Good Stock to Buy, According to Analysts?

Turning to Wall Street, INO is a Moderate Buy based on one Buy and two Hold ratings. The average Inovio Pharmaceuticals price target is $4.00, implying 92.8% upside potential.

Conclusion: Should You Consider Inovio Pharmaceuticals Stock?

What exactly does it mean to get “results”? For small-to-midsized biotech firms, it doesn’t always mean delivering immediate profits. Sometimes, the results are seen in the laboratory today and on the balance sheet in a few months’ time. So, continue to check the data but don’t obsess over Inovio Pharmaceutials’ current financials, as they could improve dramatically over the long run. For now, feel free to celebrate Inovio’s positive clinical outcome with INO-3107, and if you can handle the risks involved, consider a small stake in INO stock.

Disclosure

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