Over the last 10 years, Inovio Pharmaceuticals, Inc. (NASDAQ:INO) stock has generated a total return to investors of 2.8%. That performance is definitely underwhelming, to say the least.

But the past performance of a stock isn't important in assessing how smart of an investment it could be for the future. Inovio is in a much different place than it has been over the last decade. Is the biotech stock a buy now?  

Hand holding test tube with DNA sequences and chemical structures in background

Image source: Getty Images.

The case for Inovio

Inovio's pipeline is exceptionally deep, with 10 candidates in clinical development. Few clinical-stage biotechs can claim that many pipeline programs.

The company's lead candidate is VGX-3100. Inovio is evaluating the immunotherapy in a pivotal phase 3 clinical study for treating cervical dysplasia -- a precancerous condition in the cervix -- caused by the human papillomavirus (HPV). Recruitment is under way for this study at 60 sites across the world. Top-line data from the study should be available by late 2019. VGX-3100 is also in a phase 2 clinical study targeting treatment of vulvar dysplasia and associated diseases.

It's often a good sign for a small clinical-stage biotech when its candidates attract the interest of a larger drugmaker. Inovio has three big partners. AstraZeneca's MedImmune subsidiary licensed rights to INO-3112 (now called MEDI0457), an immunotherapy that combines VGX-3100 with a DNA-based immune activator encoded for interleukin 12 (IL-12). Another DNA immunotherapy, INO-5401, is being evaluated in clinical studies in combination with Regeneron's cemiplimab and with Roche's Tecentriq. 

Inovio's antiviral programs, although in early development, appear to have significant potential. The biotech ranks among the leaders in developing an experimental vaccine for the Zika virus. Inovio recently reported encouraging results from a phase 1 study of its MERS vaccine. Earlier this year, the biotech stock enjoyed a big bounce after Inovio published promising data from a preclinical study of a "universal" flu vaccine.

These experimental therapies along with Inovio's other pipeline candidates present enough potential that market research firm EvaluatePharma projects that the biotech is a dark horse that could become one of the top 10 vaccine developers in the world by 2024. 

The case against Inovio

There are two big strikes against Inovio that could disqualify the stock for many investors. Strike one is the biotech's significant pipeline risk. Aside from VGX-3100, all of Inovio's candidates are in phase 1 or phase 2 clinical studies. The odds of a program eventually winning regulatory approval at those stages of development are really low.

But what about the chances for VGX-3100? The probability of an oncology drug in phase 3 testing winning Food and Drug Administration approval is only one in three, according to a report published by the Biotechnology Innovation Organization. Cervical dysplasia is close enough to an oncology indication that these odds are probably in the general ballpark. For drugs addressing all indications, by the way, the average likelihood of approval for a phase 3 candidate is still less than 50%.

It's also important to remember how the phase 2 clinical study for VGX-3100 was conducted. Most scientists prefer an "intent-to-treat" approach where results for all patients are included in the final analysis. Inovio, however, used a "per protocol analysis" that excluded results for any patient who started treatment but later violated the study's protocol. This approach can make results look better than they would have otherwise. 

Strike two for Inovio is its cash position. As of March 31, 2018, the biotech had cash, cash equivalents, and short-term investments totaling $112.8 million. That's enough to carry Inovio into early 2019 but not much longer. The company will need to raise additional cash somehow. Its most likely option will be to conduct a stock offering. Although this generates more cash, it also dilutes the value of existing shares. 

To buy or not to buy?

Inovio is a speculative play that could potentially pay off in a big way. The consensus one-year price target among Wall Street analysts is that the stock will more than double over the next 12 months.

However, Inovio is also a very risky bet. There's no way to know for sure if VGX-3100 will be successful in the current phase 3 study. The rest of the biotech's pipeline faces even steeper hurdles.

In my view, buying Inovio stock at this point is more of a gamble than an investment. I think there are too many stocks, including biotech stocks, with better risk-reward propositions for Inovio to be a great pick right now.