Inovio Pharmaceuticals (INO -2.58%) has seen more downs than ups over the last three years. While the biotech stock is up a little so far in 2018, Inovio's share price has fallen more than 30% over the last 12 months and 56% over the last three years.

But Inovio is in a different position now than it was one or three years ago. Is the beaten-down biotech stock a buy now? Let's look at the arguments for and against Inovio. 

Cancer cells with light shining in background

Image source: Getty Images.

The case for Inovio

In a nutshell, the argument for buying Inovio stock is that the company's current market cap of around $400 million doesn't reflect the full potential of its pipeline. And for a clinical-stage biotech, Inovio has a pretty robust pipeline.

The company's lead candidate is VGX-3100. This immunotherapy is being evaluated in a late-stage study targeting treatment of cervical dysplasia, which is the presence of pre-cancerous abnormal cells in the cervix caused by human papillomavirus (HPV). VGX-3100 is also being evaluated in a phase 2 study for the treatment of vulvar dysplasia.

Over 400,000 new cases of cervical dysplasia are diagnosed in the U.S. and Europe each year. The only treatment available right now is invasive surgery. If successful, VGX-3100 should have a great opportunity.

Inovio has already landed an international partner for VGX-3100. ApolloBio Corporation licensed rights to market the immunotherapy in China and surrounding countries. In January, Inovio stock jumped after the biotech announced that it amended its agreement with ApolloBio, with the company receiving an additional $8 million on top of an up-front payment of $15 million previously agreed upon.

The biotech also has a couple of other immunotherapies in phase 2 development. Inovio is evaluating INO-5401 in combination with Regeneron's checkpoint inhibitor cemiplimab in treating bladder cancer and glioblastoma, an aggressive form of brain cancer. Inovio and Roche are also evaluating INO-5401 in combination with Tecentriq in treating bladder cancer. In addition, AstraZeneca's MedImmune subsidiary is studying MEDI0457 in treating head and neck cancer and cervical cancer.

Inovio's vaccine programs have generated a lot of attention. Earlier this year, the company reported promising data for its experimental universal flu vaccine. Inovio is also developing vaccines for Ebola, HIV, MERS, and Zika. 

Wall Street analysts' consensus one-year price target reflects a premium of more than 160% over Inovio's current share price. Success for VGX-3100 could justify that price target all by itself, even without good news from the rest of Inovio's pipeline. 

The case against Inovio

The primary argument against buying Inovio stock is that it's still very risky. Inovio has been in business since 1979. That's right -- the company is nearly 40 years old and doesn't have a product on the market. What are Inovio's chances of success? Despite its relatively deep pipeline, the odds aren't necessarily in Inovio's favor.

Although VGX-3100 is in a phase 3 study, there's certainly no guarantee of success. Historically, less than half of drugs in late-stage testing ultimately win approval. 

Other pipeline candidates have even lower chances of success. INO-5401 and MEDI0457 are in phase 2 studies, but fewer than one in 10 experimental cancer drugs at that stage go on to win regulatory approval. Inovio's vaccines aren't as far along in development as its immunotherapies.

There's also the fact that Inovio continues to burn through cash. At the end of 2017, the company had a cash stockpile of around $130 million, including cash, cash equivalents, and short-term investments. That's enough to fund operations through 2018 and into 2019, but more money will be needed in the not-too-distant future. Inovio could generate more cash through out-licensing. However, the company could also have to issue more shares, a move that would dilute the value of existing shares.

Final verdict

Inovio could have a big winner on its hands with VGX-3100. And if the drug is successful, it could bode well for MEDI0457, which is a combination of VGX-3100 and a DNA-based immune activator. The biotech stock could easily make current investors a ton of money.

The problem is that Inovio stock could just as easily lose investors a lot of money, as it has in recent years. I'm actually cautiously optimistic about the chances for VGX-3100. However, at this point, my view is that it's best for most investors to stay on the sidelines with Inovio.