Inovio Pharmaceuticals (NASDAQ:INO) shares have surged 109% since the beginning of the year on optimism about the company's work on a vaccine for COVID-19, the illness caused by the novel coronavirus. Inovio isn't alone. As the coronavirus outbreak expanded, now totaling two million cases worldwide, many companies working on treatments or prevention moved into the spotlight.

While it's exciting to see their shares rising now, in some cases -- like that of Inovio -- I'm concerned about what will happen to stock performance once the coronavirus outbreak is over. Inovio shares have already given back some gains. They were up as much as 327% year to date at their peak last month. Does this mean the stock is a ticking time bomb for investors? Let's take a look.

A strand of DNA against a blue background.

Image source: Getty Images.

Inovio focuses on the use of optimized DNA plasmids. Through computer sequencing, these small circles of double-stranded DNA are reorganized to produce a specific immune response in the body. Inovio then delivers these plasmids intradermally or intramuscularly through the company's own hand-held smart device.

The company's most advanced product, VGX-3100, is an immunotherapy to treat precancers and cancers caused by human papillomavirus (HPV). The company has opened more than 40 sites worldwide for the phase 3 clinical trial and expects to report top-line efficacy data by the fourth quarter. Besides the cervical cancer treatment, Inovio has six other candidates in the pipeline, and all in are in phase 2 testing. Disease areas include head and neck cancer, glioblastoma, and prostate cancer.

Data this summer

Inovio also has six other development programs for prevention and treatment of infectious diseases. Most advanced are candidates for HIV and Middle East respiratory syndrome (MERS), which are in phase 2 clinical trials.

The newest entrant to this list is INO-4800, Inovio's investigational vaccine for COVID-19. This month, Inovio announced the launch of a phase 1 trial in healthy volunteers. The study of as many as 40 participants will involve two doses, four weeks apart. Inovio expects initial data on immune responses and safety to be available by late summer. The company said preclinical data was in line with observations in the phase 1 study of its vaccine for MERS, which is also caused by a coronavirus.

As for the financial picture, Inovio is a clinical-stage company so it doesn't have products on the market to provide revenue. Revenue usually comes from research and development agreements. For example, in 2018, ApolloBio made a one-time payment of $23 million to Inovio. The absence of such a payment last year meant 2019 annual revenue declined year over year to $4.1 million from about $30 million. The company reported an annual net loss that widened to $119 million from $97 million.

Inovio started the year with cash, cash equivalents, and short-term investments of $89.5 million, down from $93.8 million three months earlier. Though losses and declining revenue are common among clinical-stage companies, Inovio's cash level is considerably lower than at least two of its peers. Vir Biotechnology (NASDAQ:VIR) and Moderna (NASDAQ:MRNA), also in the coronavirus treatment race, started the year with more than $407 million and $1.26 billion, respectively.

Is Inovio a ticking time bomb?

So now the question is: Can Inovio maintain its share gains? In the near term, more gains may be on the horizon if news from the COVID-19 vaccine trial is positive. Still, short interest in the stock remains close to its highest ever. That means some investors may be betting on the stock's decline. In short selling, investors borrow shares to sell, with the promise to buy them back -- hopefully at a lower price -- at a later date.

Another problem is that share performance so far this year is more strongly linked to coronavirus work than to the company's entire pipeline. That is a worry because it pins all hopes on one program, and the particular program is a big newsmaker today -- but may not be in the future. What I mean by that is, once the coronavirus outbreak is over or once treatments start coming to market, investment interest in coronavirus research programs may wane and Inovio's shares may suffer. Inovio might not exactly be a time bomb, but even a loss of momentum could cause investors a fair share of pain. While Inovio's programs look promising, these near-term trends make it difficult to take a long-term position in the shares.