As COVID-19 outbreaks continue to spread around the world, biotech stocks working on possible treatments have become all the rage. Inovio Pharmaceuticals (NASDAQ:INO) has been one of the hottest biotech stocks on the market, with shares continuing to see dramatic price swings in both directions as the COVID-19 pandemic continues to spread.

Although there's a lot of excitement surrounding this company, Inovio has its fair share of critics, including one of the most well-known short-seller outfits, Citron Research. What does this mean for investors? Is now a good time to buy into this hot biotech, or should you put your money somewhere else?

A person holding a vial with a COVID-19 label on it.

Image source: Getty IMages.

Inovio's pipeline

Inovio has a clinical pipeline that's reasonably diverse. This includes candidates treating viruses (including HIV, Ebola, Middle East Respiratory Syndrome, Zika), prostate cancer, head and neck cancer, and glioblastoma (an aggressive form of brain cancer). One promising drug candidate is called VGX-3100, which treats a type of abnormal cell growth associated with human papillomavirus (HPV) called HSIL (high-grade squamous intraepithelial lesions). Currently, VGX-3100 is undergoing one phase 3 and two phase 2 trials, with results expected this year

Inovio started making serious waves when the Coalition for Epidemic Preparedness Innovation (CEPI) awarded a $9 million grant to help develop a COVID-19 vaccine. It wasn't the first time that CEPI picked Inovio to work on a viral vaccine, as the organization had previously awarded a $56 million grant to develop a vaccine against Lassa fever as well as MERS.

Since then, Inovio's been one of the hottest coronavirus stocks on the market. Additional organizations, such as the Bill and Melinda Gates Foundation, have also made contributions to Inovio to help accelerate the development of a delivery system for the company's COVID-19 vaccine, INO-4800.

Are the vultures circling?

Inovio said it managed to develop a potential vaccine in just three hours after COVID-19's genetic sequence became known. In addition to stating that INO-4800 will move ahead to phase 1 trials in April, the company said it plans to manufacture 1 million vaccines by the end of the year for clinical testing and emergency use.

However, Citron Research singled out Inovio on Monday, claiming that the biotech company should be investigated by the Securities and Exchange Commission (SEC) for some of these claims. Shares of Inovio fell nearly 50% following this statement as the market reacted.

A an arrow on a chalkboard that's been erased and redrawn to go downwards.

Image source: Getty Images.

Besides this initial tweet, however, Citron hasn't published anything else substantial in terms of accusations or research against Inovio. While short-sellers likely made off with a fair chunk of cash following this news, there isn't anything substantial in terms of proof or accusations to justify this stock plunge except for Citron's reputation.

What about the competition?

A bigger threat to Inovio comes from potential competitors. Its main rival in the COVID-19 vaccine market is Moderna (NASDAQ:MRNA), which is developing an mRNA-based vaccine for the virus.

Although both companies are working on a vaccine, the underlying methodology behind how they work is different. Inovio's INO-4800 is a traditional DNA-based vaccine, while Moderna's candidate, mRNA-1273, is an mRNA-based treatment. Although still highly experimental, these types of treatments are supposed to be faster and more efficient than their DNA-based counterparts.

Simply put, DNA can only be found in the nucleus of the cell, which means that its harder to access. mRNA (also known as messenger RNA) can be found traveling all across the cell, hence being easier to access.

This would suggest that Moderna's candidate has the edge over Inovio's. However, Moderna's treatment is still experimental, with this COVID-19 vaccine being the first time that the company has tried to treat a virus of this type. While it does have a vaccine candidate against Zika, there are quite a few differences between COVID-19 and Zika, including the means of transmission (Zika is spread primarily via mosquito bites).

On the other hand, Inovio already has experience in developing a vaccine against a very similar virus, MERS. INO-4700 is currently in phase 2 trials against MERS and has shown to be effective so far. The fact that Inovio has already had some degree of success creating a vaccine for MERS -- which is technically a type of coronavirus -- bodes very well for its COVID-19 vaccine.

Looking into the financials

Inovio recently published its much anticipated fourth-quarter financial results. As to be expected for what's essentially an early-stage biotech stock, Inovio's revenues came in at a mere $289,000 for the quarter. This is much lower than the $2.5 million in revenue seen last year.

Net losses, as expected, were quite high, coming in at $37.7 million. The real issue is Inovio's cash position. With only $89.5 million on its balance sheet -- less than three quarters worth of financing at the current rate of expenditures -- the company doesn't have much financial breathing room.

Of course, given the amount of attention surrounding its stock, I honestly don't think Inovio will have trouble raising more funds from investors, whether they be from the private or public sector. Regardless, Inovio is still a largely unprofitable stock with a small cash position that would otherwise be a little alarming for a normal biotech company.

What should investors do?

Inovio Pharmaceuticals is easily one of the most volatile stocks on the market right now. Even relatively mild news, such as its recent Q4 results, was enough to send the stock plunging 28%. Of course, these are exceptional circumstances right now, and with COVID-19 showing little sign of slowing down, it's understandable why everyone's paying attention to this stock.

While there's a lot of potential upside to Inovio, I think it's just too volatile to recommend for most investors at the moment. This is a stock that's going to be a favorite among speculators and short-sellers for quite a while, and unless you consider yourself one of those two, now might not be the best time to start buying.