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Stocks  | August 7, 2020

Inovio Pharmaceuticals (NASDAQ:INO) is a hot stock to watch right now.The shares of INO stock are up more than 647% from a year earlier.

In some ways, that is surprising, given that the pharmaceutical company doesn’t currently have any products on the market. The stock jumped after Inovio entered the race to create a coronavirus vaccine. The company is currently conducting clinical trials and has seen promising results.

But after the stock rose so suddenly, does it still make sense to buy INO stock? After all, the shares have already fallen from their 52-week high set in June.

And other biotech stocks show more promise than Inovio and seem closer to actually producing an effective vaccine. Let’s look at three reasons to sell INO stock:

1. Inovio’s Phase 1 Results Were Disappointing

There are over 140 coronavirus vaccines currently in development, but Inovio has emerged as an early player in the vaccine race. So far, the company seems to be making solid headway on its vaccine, INO-4800.

INO-4800 utilizes DNA that encodes for messenger RNA which encodes the SARS-CoV-2’s S-protein. During Phase 1 of the company’s clinical trials, 34 out of 36 patients developed an immune response.

None of the patients had severe reactions to the vaccine, and the only real side effect any of them experienced was redness around the injection site. So there are no safety concerns about INO-4800.

However, Inovio didn’t provide any data on how many participants developed neutralizing antibodies or T-cell responses. For that reason, it’s unclear how effective the vaccine actually is. Consequently,  several analysts downgraded the stock after the company’s Phase 1 results were released.

2. Other Companies Are Closer to Developing a Vaccine

Although Inovio was an early player in the race to develop a vaccine, it still lags behind other companies. For instance, Moderno (NASDAQ:MRNA) began its Phase 1 triak a few weeks before Inovio.

And this week, Moderno kicked off its Phase 3 clinical trial. Moderno will enroll 30,000 healthy participants in the trial at 89 different sites across the country.

Pfizer (NYSE:PFE) also announced it has started a late-stage study for a coronavirus vaccine with the German company BioNTech (NASDAQ: BNTX). If Pfizer’s trial proves effective, the U.S. government agreed to buy 100 million doses for $1.95 billion by the end of the year.

Inovio is combining its Phase 2 and Phase 3 trials and plans to begin the study later this summer. But its efforts still lag behind those of several of its competitors.

3. Inovio Wasn’t Selected for the Warp Speed Program

In June, the U.S. government selected five companies for its Warp Speed Program. This program is part of the government’s effort to bring a coronavirus vaccine to market quickly.

Inovio was not selected to be part of this program. Washington chose to include AstraZeneca (NYSE:AZN), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK), Moderna, and Pfizer in Warp Speed. The government didn’t specify the criteria it used to select these five companies, but it seemed to prefer seasoned vaccine developers.

Government funding is an important part of vaccine development. In conjunction with Warp Speed, Moderna has received $483 million of funding, while AstraZeneca received $1.2 billion, and Novavax obtained $1.6 billion.

Inovio has yet to receive any funding from Project Warp Speed. However, the Department of Defense did grant the company $71 million of funding to support the development of a device called Cellectra. That is the device which is used to inject INO-4800.

The Bottom Line on INO Stock

Inovio seems to be a legitimate contender in the race to develop a coronavirus vaccine, but there are reasons to be concerned about the company. The lack of information regarding the neutralizing antibodies produced by those who received the company’s vaccine  raises serious questions about the effectiveness of INO-4800.

And if the company’s vaccine fails to live up to the hype, it’s likely the stock’s recent gains won’t last. So now probably isn’t the time to invest in INO stock.

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