The novel coronavirus is dominating headlines around the world right now. But in Maxim Group’s latest report on Inovio Pharmaceuticals (INO), COVID-19 merits hardly a mention. Turns out, Maxim loves this stock, but not only because of Coronavirus.
In Maxim’s note, analyst Jason McCarthy notes that “it’s too early to tell” if Inovio is “a COVID-19 play.” On the one hand, “Inovio has rapidly developed its DNA-based COVID-19 vaccine, INO-4800.” Within just three hours of receiving its first sample of the virus’s genetic sequence, Inovio already had the vaccine candidate prepared “using its DNA-based vaccine platform,” and began “preclinical development.”
Like Novavax (NVAX) before it, Inovio also received a grant from Norway’s Coalition for Epidemic Preparedness (CEPI) to fund development of the vaccine through “preclinical and” Phase 1 stages. Notably, Inovio’s $9 million grant was approximately twice the size of the grant awarded to Novavax last week, and Inovio received a further $5 million grant from the Bill and Melinda Gates Foundation “to support the scale up and testing of the delivery device (Cellectra 3PSP smart device) used for delivery of the vaccine.”
While not dispositive, the size of these grants does seem suggestive of the donors’ optimism about the efficacy of Inovio’s vaccine relative to Novavax’s. And yet, Maxim’s McCarthy seems much more excited about the other work that Inovio is doing in two other fields.
As the analyst explains, “we would view the rise in valuation [of Inovio stock] over the past few weeks as validation of the company’s approach in using DNA-based immunotherapies” such as VGX-3100 for treating cervical dysplasia (a condition in which the human papillomavirus causes abnormal cells to develop in a woman’s cervix) and also in oncology.
VGX-3100, notes McCarthy, is currently undergoing two Phase 3 trials, one of which should produce results this very year. Success with that drug could unlock what the analyst calls “a $1B+ plus opportunity” for Inovio. At the same time, Inovio has a “robust” oncology pipeline that should also generate positive press releases as results come out this year. And the company’s recurrent respiratory papillomatosis (RRP) drug, INO-3107, is in Phase 1/2 trials, en route to what the company hopes will be an Orphan Drug Designation that could speed approval.
Financially speaking, McCarthy notes that Inovio’s Q4 earnings report last week showed the company losing about $38 million a year. Cash burn for the year was less than half that, however, and for the year as a whole, Inovio burnt through less than $100 million. With a recent capital raise having lifted cash reserves to about $270 million, if one were to assume a constant rate of cash burn, then this would suggest Inovio now has enough cash in its reserves to fund another two to three years of development and operations — plenty of time for the company to get at least one drug approved and begin generating some revenue of its own.
The upshot: Based on the progress of the pipeline, with or without a COVID-19 vaccine, McCarthy sees Inovio stock as now worth twice what he previously thought — about $12 a share, or roughly 67% more than its closing price from Friday. (To watch McCarthy’s track record, click here)
The rest of Wall Street largely buys into what this small biotech player has to offer, as TipRanks analytics reveal INO as a Buy. Out of 7 analysts polled in the past 3 months, 5 are bullish on Inovio stock while 2 remain sidelined. With a return potential of 45%, the stock’s consensus target price stands at $10.43. (See Inovio stock analysis on TipRanks)