DNA vaccine and immunotherapy company Inovio Pharmaceuticals (INO -3.37%) has been a red-hot stock during the opening weeks of 2020. The biotech's push to develop a vaccine against the novel coronavirus, COVID-19, in record time has sparked an avalanche of interest in its stock. One of the big reasons is that Inovio announced last week that researchers at its San Diego facility were able to construct a vaccine for COVID-19 in just a matter of hours after gaining access to the virus' genetic sequence. The company thus hopes to begin human trials for the experimental vaccine as soon as this summer, according to a recent interview with CEO J. Joseph Kim. 

What's the big deal? COVID-19 has already spread to 29 countries, caused over 1,600 fatalities in mainland China, and effectively shut down some major global supply chains. What's more, this deadly respiratory disease exhibits several traits such as an extensive incubation phase that may result in its becoming endemic, similar to seasonal outbreaks of the flu. In other words, COVID-19 may not simply evaporate for the most part like other severe coronavirus strains, such as the Middle East respiratory syndrome. In that event, a vaccine or an antiviral therapy will be absolutely essential in the battle against this highly infectious, and sometimes fatal, respiratory ailment.

A person in a suit holding three yellow wooden blocks that spell out buy in red capital letters.

Image source: Getty Images.

Should investors pounce on Inovio's shares in response to this viral threat? Let's take a closer look at the bull and bear cases for this biotech stock to find out.

A breakdown of Inovio's COVID-19 prospects 

If COVID-19 evolves into an endemic respiratory disease, the commercial opportunity could be quite staggering. Flu vaccines, after all, currently represent a $2 billion a year market. Now, COVID-19 will likely never morph into that kind of behemoth market, but it could very well end up supporting one or more vaccines that generate several hundred million in annual sales, especially if it becomes a serious problem in affluent western nations like the United States. So, in a sense, there is a solid rationale supporting Inovio's 25.7% jump since this viral outbreak began to garner headlines earlier this year. 

The bad news is that Inovio has never actually developed a commercial-stage vaccine. Despite being in business for 40 years, the company is only now on the cusp of generating late-stage data for one of its DNA-based therapies. Specifically, Inovio is slated to roll out top-line data for VGX-3100 as a treatment for cervical dysplasia in the fourth-quarter of 2020.

Another worrying sign is that this isn't the first time Inovio's stock has skyrocketed in response to an infectious disease threat. In 2016, for instance, the biotech's shares took flight after it announced plans to tackle the Zika virus. Per the company's latest clinical update in early 2020, however, its Zika virus product candidate hasn't even made it past a phase 1 trial yet. So investors should probably take this hype over a COVID-19 virus vaccine with a huge grain of salt.  

Time to buy?

If your sole purpose is to own a company likely to benefit from the COVID-19 threat, Inovio probably isn't your best bet. The company has never brought a product to market in four decades, much to the detriment of long-suffering shareholders. Since going public, in fact, Inovio's stock has produced a negative return on capital of 92.7%. Perhaps this story will change for the better with a positive late-stage readout for VGX-3100 later this year. But until then, investors should probably curb their enthusiasm.