Recent times have not been rewarding for investors of vaccine maker Inovio (INO). Over the past two months, shares have declined by a depressing 48%. However, zoom out and a different picture emerges. Despite the recent drop, since the turn of the year, the stock is up by a very impressive 325%.
Which presents investors with a conundrum. Does the recent pullback present an opportunity to get in at a discount or has time already passed for this small cap biotech?
Well, Inovio remains a high-risk company, and if you're not a risk taker you may want to monitor its progress from the sidelines. At least that's the approach of RBC analyst Gregory Renza.
After virtual meetings with Inovio management, Renza noted, "We are encouraged by management's high confidence in ongoing clinical execution and external funding prospects to accelerate INO-4800 development," Renza said. "Though we believe several unanswered but natural questions continue to mount on the program - efficacy, manufacturing scale capability, as well as ultimate revenue and market realization. We look to the upcoming weeks for more clarity on INO's vaccine path forward."
And there lies the crux of the matter. Inovio's market thrashing performance in the first half of the year came off the back of the potential for its experimental COVID-19 DNA vaccine candidate INO-4800 to win the coronavirus vaccine race. But Inovio's progress has been far slower than that of almost all other competitors.
While several rivals have already began Phase 3 trials for their candidates, Inovio has yet to present the full set of data for INO-4800's Phase 1 study.
A clearer picture of the Phase 1 study should emerge with the presentation of a fuller set of data and late September should see the initiation of a Phase 2/3 trial which is still dependent on regulatory approval and additional external funding.
Funding, however, still remains an issue. Despite being awarded several grants to pursue INO-4800's development, none have been of the same magnitude as those received by some of Inovio's peers.
At the meeting, Renza notes management displayed an "increased level of confidence around external funding for the ph.II/III trial," yet no specifics were provided.
The next month, Renza argues, will be crucial in determining the vaccine's fate. "We believe September continues to shape up as an important month for clarity on the path forward given the expectation of a funding announcement as reiterated by the team," Renza summed up.
For now, however, the 5-star analyst remains on the sidelines with a Sector Perform (i.e. Hold) rating. Renza's price target remains at $12 and implies shares will decline by 14% over the coming months. (To watch Renza's track record, click here)
Overall, the analyst consensus rates Inovio a Hold, too. In contrast to Renza's forecast, the $15.60 average price target suggests a 12% premium will be added to INO's share price. (See Inovio stock analysis on TipRanks)
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