Inovio Pharmaceuticals (INO -2.46%) is easily one of the most volatile stocks on the market, thanks in no small part to the company's COVID-19 vaccine, INO-4800. With the company promising to produce about 1 million vaccines by the end of the year for testing and emergency use purposes, there's plenty of excitement surrounding this stock right now.
However, some industry experts think Inovio's COVID-19 vaccine won't be the blockbuster that many investors are making it out to be. Let's find out exactly how much money Inovio can make from this vaccine, and whether that by itself would make this stock a buy.
What makes Inovio so special?
Inovio has a broad pipeline of vaccine candidates. However, a big part of the company's appeal is its past experience in creating vaccines for viruses similar to COVID-19. Besides its HIV, Zika, and Ebola candidates, Inovio has a MERS (Middle Eastern Respiratory Syndrome) vaccine, INO-4700, which has shown in clinical tests to be effective in treating patient symptoms.
Some COVID-19 treatments that have been effective so far, such as Gilead Sciences' antiviral drug remdesivir, were previously designed to treat one of these viruses before being retested for COVID-19. The fact that Inovio already has some measure of success treating another type of coronavirus is very encouraging for the upcoming INO-4800 vaccine.
This past experience with MERS is likely one reason Inovio has received so many grants. Back in January, the Coalition for Epidemic Preparedness Innovations (CEPI) selected Inovio for an up to $9 million grant to develop a potential COVID-19 vaccine. More recently, the Bill and Melinda Gates Foundation contributed an extra $5 million to help accelerate the development of a COVID-19 vaccine delivery system.
What's the potential market size?
There are many variables to consider when trying to figure out the potential market size for a COVID-19 treatment, so it's not a simple task. Inovio's management hasn't shared a price it would charge for its COVID-19 vaccine, but it would likely be similarly priced to other respiratory infection vaccines. Other COVID-19 vaccine developers, such as Moderna (MRNA -0.10%), have expressed similar sentiments in the past, so it wouldn't be surprising if Inovio prices INO-4800 competitively to its rivals.
Prevnar 13, a common pneumonia vaccine, is not a bad comparison, considering that COVID-19 produces pneumonia-like symptoms in patients as well. The total cost for Prevnar 13 is about $800 per person. If COVID-19 vaccine producers price their treatment similarly -- or even a bit less -- that is still a massive market, considering the tens of millions of people who would be interested in a vaccine that protects them from getting the virus.
The European Union's population as of 2018 was about 513 million. Even if only half of that population decided to take a preventative COVID-19 vaccine, that would still be more than 250 million people. If we assumed a $700 price point for a vaccine, that would amount to a total hypothetical market of $17.9 billion in just the EU alone.
Of course, this isn't accounting for a number of other variables, such as competition. However, even if Inovio ends up capturing just a tenth of the market for a COVID-19 vaccine, that would still amount to nearly $2 billion in sales from the EU alone. Considering that the company reported only $289,000 in income for the quarter (along with a net loss of $37.7 million), a multi-billion-dollar surge in income would be a home run for Inovio.
Are there reasons to be skeptical?
Despite this, some Wall Street analysts aren't as enthusiastic about the stock as could be imagined. RBC analyst Gregory Renza downgraded Inovio from a sector outperform to a sector perform last week, saying that even if INO-4800 turns out to be a success, it won't be a long-term revenue driver for the company.
There are a few reasons why this might be the case. Although Inovio has said that it's trying to produce 1 million vaccine doses by the end of the year, that's still a far cry from providing for the tens of millions (if not hundreds of millions) of people around the world who could want a vaccine. Whether or not Inovio is capable of manufacturing enough vaccine and distributing it is something worth pondering.
There's also the question of whether competitor vaccines could prove to be superior. Whereas Inovio's vaccine is a traditional, DNA-based treatment, Moderna's COVID-19 vaccine uses mRNA instead. While still experimental, mRNA-based treatments could prove to be the future of vaccines, with some science suggesting that they are more efficient as well as easier to develop than their DNA counterparts.
While Moderna doesn't have the same experience as Inovio in treating similar viruses such as MERS, basing its vaccine on mRNA technology could end up giving it a technological edge over its competitors. It's still too early to say how either companies' vaccines will turn out, given that they are both just entering clinical trials right now, but the question of competition is a tangible threat for Inovio right now.
What should investors do?
Although Inovio's COVID-19 vaccine has a lot of promise, investors should keep in mind that the company has a number of other candidates as well. Most notably, Inovio has an HPV (human papillomavirus)-related vaccine known as VGX-3100 that's currently in late-stage clinical testing with one stage 3 trial and two stage 2 trials ongoing.
It's also worth noting that despite Inovio's market cap, which has surged to over $1 billion, the company is still a clinical-stage biotech stock. Revenues are almost nonexistent right now, and cash is running out at a fast rate. With just $89.5 million on its balance sheet, Inovio has only a couple quarters' worth of funding before it will need further financing.
While it might be tempting to buy Inovio merely as a speculative COVID-19 play, I still think there's too much volatility surrounding this stock right now for most investors. There are other coronavirus stocks that are better picks at the moment. and