Inovio Pharmaceuticals (INO 3.80%) has enjoyed an impressive run over the past few months. The company was one of the first to announce it would develop a COVID-19 vaccine candidate back in January. Since then, shares of Inovio have shot up by over 532%, making it one of the best-performing stocks this year.
Those who bought this stock back then have enjoyed fantastic gains over the past few months. However, even if you've stayed on the sidelines, there are a couple of major reasons why this stock will continue to rise in the future.
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A primer on its COVID-19 vaccine
Inovio's COVID-19 candidate, INO-4800, is really what catapulted the company into mainstream attention. Despite Inovio's other candidates, its rise in stock price had a lot to do with being one of the first companies to start work on a potential vaccine. Since then, however, there are now over 160 COVID-19 vaccines currently in development. Around 26 of those have moved on to clinical testing. Some of these candidates are even employing cutting-edge technologies, such as Moderna's mRNA-based treatments.
Despite this, the reason why many investors are so confident with Inovio's candidate comes down to the company's prior experience treating another type of coronavirus. Specifically, the company has a MERS (Middle East respiratory syndrome) vaccine that's currently in stage 2 trials, INO-4700. As of right now, the results have proven to be fairly effective.
While for a different disease, INO-4700's success so far has helped provide proof that INO-4800 could succeed as a viable candidate, too. So far, INO-4800's phase 1 trial data is quite positive, with any reported adverse reactions being relatively minor.
Some looming concerns
While INO-4800 was considered one of the leading candidates earlier this year, it ended up falling behind some of its competitors in terms of clinical progress. Companies like Moderna have already begun late-stage clinical trials. In comparison, Inovio's INO-4800 is still in the early clinical stages, although the company expects to move on to phase 2/3 trials sometime this summer.
At the same time, Inovio hasn't really received the same degree of government support for its candidate. The company received a $71 million contract from the U.S. Department of Defense to manufacture Cellectra, Inovio's smart-device delivery system for INO-4800. However, that's a pretty small sum compared with what other companies out there got. Moderna received $472 million last month from the U.S. government, which is on top of a further $483 million the company was given back in April.
With that in mind, some investors are getting at bit worried about Inovio. If it's COVID-19 candidate is so promising, why hasn't it received more government funding by now?
It's a question that's hard to answer. For one, there's certainly some degree of politics involved in the world of federal funding and COVID-19 treatments. Big companies that have major connections are likely to have an easier time of securing these types of contracts. At the same time, Inovio is a fairly small company in terms of manufacturing capacity. It said it aims to produce around 1 million doses by the end of the year. In comparison to AstraZeneca, which expects to produce 400 million doses for its own vaccine, Inovio is a relatively small-time player in the vaccine world.
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Don't forget about this blockbuster candidate
Arguably an even bigger opportunity for Inovio is VGX-3100, the company's phase 3 HPV (human papillomavirus) vaccine. While not mentioned nearly as often as Inovio's COVID-19 vaccine, VGX-3100 could be a major blockbuster for the company, too. Current clinical results are quite impressive, with recent phase 2 trial results showing reductions in lesions for 75% of patients tested.
Just one of the indications that VGX-3100 is being tested for, cervical dysplasia, had a market size of around $6.3 billion back in 2017. At the moment, the main treatments for this condition include laser therapy and cryosurgery. Both of these are much more complicated than simply taking a vaccine. Thus, it's not surprising why some Wall Street analysts predict VGX-3100 could be worth billions of dollars for Inovio.
Is Inovio a buy?
While Inovio's COVID-19 vaccine still holds a lot of promise, I think there's just as much of an opportunity for Inovio in its other candidates. VGX-3100 has serious potential to become a blockbuster for the company, a possibility that's easy to miss amid the excitement for a coronavirus treatment.
While it's easy to think that you've missed out, Inovio likely still has quite a bit more room to rise in the future. If you're a long-term investor that's looking for a promising high-growth biotech stock, Inovio certainly fits the bill.
