Why Inovio Pharmaceuticals Inc Shares Tanked

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Inovio Pharmaceuticals Inc (NASDAQ: INO  ) , a maker of synthetic vaccines targeted at treating infectious diseases and cancer, plummeted as much as 26% after reporting its second-quarter financial results after the bell on Friday.

So what: So much for heading into the weekend on a positive note! For the quarter, Inovio reported revenue of $786,000 compared to $436,000 in the year-ago period, but it also levied a wider loss of $0.06 per share on shareholders relative to its $0.03 per-share loss last year. Operating expenses actually fell 10%, working in the company's favor; however, Inovio's huge share price appreciation caused it to take a charge related to its stock warrants, which pushed losses higher. In addition, once the quarter ended, Inovio reported that it sold some 4.2 million shares under its at-the-market sales agreement and exercised warrants to purchase almost 5.3 million shares of stock.

Now what: I'm pretty sure everyone under the sun knew this rally was bound to come crashing back to Earth. My biggest concern with a company like Inovio isn't its ability to innovate so much as it is its ability to find a buyer for its vaccines. Infectious disease vaccines are growing more competitive and most governments and hospitals simply aren't buying enough of the product to make the ongoing research profitable for many of these small biotech firms. With the company's accumulated deficit over the past 30 years now at nearly $250 million, and its outstanding share count having grown by a 12 over the past decade because of dilutive share offerings, I would strongly suggest looking elsewhere for investing ideas in the biotech sector.

It's no secret that biotech stocks like Inovio are front-and-center on traders' radars because it's been soaring recently, but the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.


Read/Post Comments (9) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 12, 2013, at 5:01 PM, BigCDog wrote:

    I disagree. Inovio has too many good irons in the fire right now not just with their electroporation technology and potential universal flu vaccine but their potential cancer, malaria, and other treatments they are currently working on. They have what big pharma is looking for. Their wider earnings loss is nothing. If that what people are selling their shares for today then they are completely missing the big picture.

  • Report this Comment On August 12, 2013, at 5:08 PM, Slunty101 wrote:

    Another article written by someone who lacks the knowledge and experience to give the readers an unbiased look at a company. Seems to me this author left out ALL key statistics and financials and based his whole argument on an unfounded and naive point of view. I know 3 year olds who can write articles with more substance this. Whatever your opinion is on INO, please do research and send it to this guy. I have a financial background and though INO has no guarantees, it has a great deal of solid upside potential including great technology, partnerships, scientists, and a good pipeline. This company post Dr. Kim (came to INO in 2009) is like the Miami Heat post Lebron James! Their organizations had issue prior to their arrival, but each person made their organization thrive to new levels not seen before.

  • Report this Comment On August 12, 2013, at 5:18 PM, equilibrist wrote:

    Reposted from the Yahoo MB

    Commentary on this article from a very well respected poster: BasherBuster2012

    Important! Regarding the Motley Fool article

    Does anybody see the biggest flaw with the premise of the author's position? He said "Infectious disease vaccines are growing more competitive and most governments and hospitals simply aren't buying enough of the product to make the ongoing research profitable for many of these small biotech firms."

    He said that his issue is that he doesn't think Inovio can find anyone to purchase their vaccines due to the amount of competition there is out there.

    Does this idiot even have a brain. Please tell me what vaccines there are on the market for cancer, therapeutic HPV, HIV, Hep C, Prostate cancer, Luekemia, etc.... In order for their to be competition, there has to be vaccines that directly compete with what Inovio is creating.

    I guess he believes that if Inovio were to find a cure for the above listed conditions, people just wouldn't want the cure, because there are no other vaccines available to treat them.

    I hope this is as clear to everybody as it should be.

  • Report this Comment On August 12, 2013, at 5:40 PM, NYGuy01 wrote:

    These "Fools" can not discern the forest for the trees. Hospitals are not buying vaccines for the ailments because there are not existing vaccines to buy! Additionally, there are billions of people in developing countries that need treatment and the viability and survivability of their process and delivery methodology goes at beyond current vaccines. These treatments will be purchased via the United Nations and other humanitarian organizations funded by private concerns such as the Gates Foundation and other philanthropic groups. They are using technology that they have patented and is accepted by the medical community to develop synthetic vaccines which do not make the patient sick and deliver via plasmids to get this done. On the financial side their miss was due to a non-cash item which when backed out would yield a hit. Finally they were able to increase cash through the ATM warrants/offering so they now are cash positive to last through at least Q1, 2015 with all of the trials going on. Also of the accumulated deficit of $238 Million that is currently on the books, only $60 million has come on the books in the last 4 years is attributable to Dr. Kim and this new focus and they have also brought in over $50 million in non-dilutive grants. So this is not your father's Inovio and this is an absolute failure of an analysis. The price ran and dropped not on fundamentals but swing trading.

  • Report this Comment On August 12, 2013, at 7:43 PM, aghast wrote:

    I certainly respect the prior respondents that are universally taking issue with this blog post......

    My rebuttal is very short..... and that is: consider the source: "Sean Williams" ..... one name says it all.... LOL!

    Recommendation: whenever you read his posts.... do exactly the opposite what's he's recommending.

  • Report this Comment On August 12, 2013, at 7:52 PM, aldehyde wrote:

    every one knows you bash stocks your short and promote your long ones

  • Report this Comment On August 12, 2013, at 7:55 PM, Madisonmc wrote:

    I will never give another dime to MF.

    Consider this years enrollment to be my last.

  • Report this Comment On August 12, 2013, at 7:59 PM, BohicaJohn wrote:

    SW just keeps rehashing the same "Fool"ish commentary over & over...Was the stock overextended on the upside short term? Sure....from $.60 to $3.00 in 2 months is overextended...but the bottom line is that the innovation remains unchanged & the long term story is intact; something that SW doesn't get or will ever due proper due diligence on.

  • Report this Comment On August 13, 2013, at 12:22 PM, intrial wrote:

    The reason the stock tanked is because of speculative rubbish like this bounced it upward, then down. This is a great company unless the day traders tank it. This stock is a hold. The garbage about vaccines in this article is way off target, when the world needs vaccines and they exist they will be purchased. No mention of their cancer work.....

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