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Better Buy: Novavax vs. Inovio Pharmaceuticals

By Keith Speights - May 18, 2019 at 12:00PM

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Which stock wins in a head-to-head matchup between these two clinical-stage biotechs?

It wasn't long ago that Novavax (NVAX 0.31%) claimed a market cap more than twice the size of Inovio Pharmaceuticals (INO -7.54%). Then Novavax announced in late February that its experimental respiratory syncytial virus (RSV) vaccine, ResVax, failed to meet the primary endpoint in a phase 3 clinical study for maternal immunization of infants. Its stock plunged more than 80% over the following weeks.

Now Inovio is nearly twice the size of Novavax. But which of these two clinical-stage biotech stocks is the better pick for long-term investors? Here's how Novavax and Inovio compare.

Hands holding beaker with other lab glassware in background

Image source: Getty Images.

The case for Novavax

Despite the late-stage clinical setback for ResVax, Novavax hasn't thrown in the towel on the RSV vaccine. The company plans to meet with regulatory agencies to see if there's a path forward for potential approval of ResVax based on encouraging results from the phase 3 study that demonstrated efficacy of the vaccine in preventing hospitalizations caused by RSV lower respiratory tract infection in infants.

It's possible that Novavax could even file for approval based on the available phase 3 study results. However, the biotech might need to conduct another study focusing on reducing hospitalizations as the primary endpoint. Either way, ResVax could still prove to be an important product for Novavax in the future.

It's important to note that ResVax continues to enjoy support from the Bill and Melinda Gates Foundation. Novavax CFO John Trizzino stated in the company's Q1 conference call in early May that "the Gates Foundation thinks that we have clinical trial data that fits their mission, that meets their needs." He said that Novavax is working with the Gates Foundation on a potential pathway for licensing ResVax in "lower-middle-income countries."

The good news is that Novavax's fortunes don't depend entirely on ResVax. Nanoparticle-based influenza vaccine NanoFlu also has significant potential. Novavax announced positive phase 2 clinical study results in January for NanoFlu. The biotech plans to meet with the U.S. Food and Drug Administration in the next few months to discuss the design of a pivotal phase 3 study for the vaccine. Novavax hopes to win an accelerated approval pathway for NanoFlu.

At least one Wall Street analyst remains optimistic about Novavax's future. Oppenheimer bought shares of the biotech in the first quarter. In addition, Oppenheimer analyst Kevin DeGeeter raised his one-year price target for Novavax that's more than triple the current share price.

The case for Inovio Pharmaceuticals

Two late-stage clinical studies are under way for Inovio Pharmaceuticals' lead candidate, VGX-3100, in treating high-grade squamous intraepithelial lesions (HSIL) caused by human papillomavirus (HPV). Inovio CEO Joseph Kim said in the biotech's Q1 conference call last week that he continues to anticipate filing for U.S. approval of VGX-3100 in 2021.

While VGX-3100 is Inovio's only late-stage candidate right now, the biotech's pipeline includes a solid lineup of earlier-stage programs. VGX-3100 itself is also being evaluated in phase 2 studies targeting the treatment of vulvar HSIL and anal HSIL. MEDI-457, which combines VGX-3100 and a DNA-based immune activator encoded for IL-12, is currently in phase 2 testing in combination with AstraZeneca's immunotherapy Imfinzi. Inovio licensed MEDI-0457 to AstraZeneca. 

Inovio is also collaborating with several other major drugmakers. It's working with Regeneron to test INO-5401 in combination with Libtayo for treating glioblastoma. Inovio and Roche teamed up to evaluate INO-5401 in combination with Tecentriq in treating bladder cancer.

In addition, the company is researching an especially hot area of immunotherapy: DNA-encoded bispecific T cell engagers (dBTE). These drugs connect cancer-fighting T cells with tumors. Inovio presented preclinical results from its dBTE program at the American Association for Cancer Research (AACR) meeting earlier this year. The biotech plans to rapidly advance its dBTE candidates into clinical testing. 

Although Inovio has a lot of activity going on in the oncology area, the company also has a significant focus on infectious diseases. INO-8100 is being evaluated in a phase 1 study for treating hepatitis B. Inovio's early-stage pipeline includes experimental vaccines targeting Ebola, HIV, MERS, and Zika.

Better buy

Novavax could still emerge as a winner with ResVax and NanoFlu. However, Inovio has many more shots on goal thanks to its deep pipeline. As a result, I think Inovio gets the nod as the better stock right now.

However, both of these biotech stocks remain very risky. I wouldn't recommend either of them at this point. There are simply too many things that could go wrong. I suggest watching Inovio and Novavax from the sidelines until the picture is clearer for their pipeline candidates.

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Stocks Mentioned

Inovio Pharmaceuticals, Inc. Stock Quote
Inovio Pharmaceuticals, Inc.
$1.84 (-7.54%) $0.15
Novavax, Inc. Stock Quote
Novavax, Inc.
$52.11 (0.31%) $0.16

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