While the rest of the stock market tumbled in response to spreading coronavirus concerns, shares of Inovio Pharmaceuticals (NASDAQ:INO), Novavax (NASDAQ:NVAX), and Co-Diagnostics (NASDAQ:CODX) went soaring skyward during the week ended Feb. 28. All three of these biotechs are developing tests and vaccines that could eventually be used to protect billions of people from potentially fatal COVID-19 infections.

Despite developing products that the world is clamoring for, these are extremely risky stocks to buy right now. Are any of them worth the risk at the moment?

A doctor holds up a blood filled vial labeled coronavirus.

Image source: Getty Images.

1. Co-Diagnostics: COVID-19 diagnostic launched 

Shares of this forward-looking molecular diagnostics company rocketed 334% higher last week, as investors made big assumptions about future sales of its new COVID-19 test.

On Feb. 24, Co-Diagnostics received a CE mark for its Logix Smart Coronavirus COVID-19 Test. The certification allows Co-Diagnostics to market its blood-based diagnostic throughout the EU. 

Co-Diagnostics began shipping out copies of its coronavirus detection kit weeks ago, for research purposes. Now that the company can actually market its diagnostic product, significant sales could be around the corner.

Co-Diagnostics' market cap spiked to $330 million last week, which is a tall perch to fall from if the company can't convince investors its coronavirus test will deliver significant sales for years to come. Before getting too excited, it's important to realize the company finished the third quarter of 2019 with just 21 employees in Salt Lake City. During the first nine months of 2019, the company's next-generation diagnostic services generated $106,408 in net sales, just $42,608 of which came from sales of testing products.

It's been around two and a half years since Co-Diagnostics made its stock market debut, which makes it an infant compared with the vaccine developers on this list. 

A woman in a white coat and surgical mask holds out a blue gloved hand, as if ordering someone to stop.

Image source: Getty Images.

2. Novavax: A 33-year itch

This clinical-stage vaccine developer has lost a whopping $1.3 billion since its inception in 1987. Despite decades of losses, some investors still expect a marketable product to emerge from its pipeline. Last week, Novavax stock more than doubled after the company told investors about progress developing a vaccine to protect against COVID-19 infection.

Novavax has already used its proprietary nanoparticle technology to produce multiple vaccine candidates, which isn't nearly as impressive as it sounds. Before those vaccine candidates are given to a single person, they'll be tested in animal models.

Nanovax could be ready to choose a candidate to advance into human trials in the spring, but it will be just one of many COVID-19 vaccine candidates in clinical-stage testing. Since investigators can't speed up the process by exposing people to a potentially lethal virus, clinical-stage trials are going to take a long time and there's nothing anyone can do about it.

Novavax will almost certainly take advantage of its recently inflated market value to raise more capital, but successfully launching a COVID-19 vaccine ahead of the competition is a tough prediction to deliver with a straight face.

Virus prevention

Image source: Getty Images.

3. Inovio Pharmaceuticals: A step ahead

This clinical-stage vaccine developer traces its roots all the way back to 1983, although it's been unsuccessfully developing new vaccines to treat infectious disease and cancer since 2000. Despite significantly less experience in the vaccine development business, Inovio appears at least a step ahead of Novavax.

Shares of Inovio popped 14% higher last week despite a lack of news flow specific to the company's COVID-19 vaccine development effort. In January, the Coalition for Epidemic Preparedness Innovations (CEPI) awarded Inovio up to $9 million to develop a coronavirus vaccine.

Inovio will use its CEPI grant to fund animal-stage testing and a phase 1 clinical trial for a COVID-19 candidate the company already has picked out, INO-4800. The company's previous coronavirus vaccine, INO-4700 worked well enough during a phase 1 clinical trial with MERS-infected patients to justify advancing the candidate into mid-stage tests.

Inovio's COVID-19 vaccine program is far ahead of Novavax and its peers, but that doesn't make the stock significantly less risky. It's probably best to wait for clear signs of efficacy before assuming Inovio's vaccine candidate can succeed.

Stay safe out there

New diagnostic tools and vaccines could go a long way toward containing the coronavirus that has caused at least 87,500 COVID-19 infections, 7,000 of which were confirmed outside of mainland China. Co-Diagnostics might sell a lot of testing kits in the months ahead, but Inovio and Novavax won't be able to produce evidence of efficacy for their vaccine candidates until 2021 at the earliest.

Until we've seen more clinical evidence or COVID-19 test sales that suggest one of these companies will actually generate a significant profit, it's best to watch their stories unfold from a safe distance.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.