In one corner, we have a small and scrappy biotech that has received a lot of attention this year as its stock skyrocketed. In the other corner, there's a big pharmaceutical company that's in a state of transition. It's a matchup between Inovio Pharmaceuticals (INO 3.49%) versus GlaxoSmithKline (GSK 1.60%).
Based on recent performance, Inovio would win in a knockout. Its shares have more than quadrupled in 2020 so far, while GlaxoSmithKline stock is down year to date. But there's a lot more to the story for both drugmakers than their recent stock performances. Which stock is the better pick over the long run?
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The case for Inovio
There's one big reason Inovio has been sizzling hot this year -- its COVID-19 vaccine program. Inovio isn't a stranger to researching coronaviruses. The company was conducting a phase 2 clinical study of an experimental MERS vaccine even before the novel coronavirus that causes COVID-19 reared its ugly head.
These earlier efforts enabled Inovio to rapidly create an experimental vaccine targeting COVID-19 earlier this year. The biotech began clinical testing of the vaccine earlier this month with the first patient dosed on April 6.
Of course, there's still a long way to go for Inovio with its COVID-19 program. The company is much farther along in development with its lead pipeline candidate, VGX-3100. Last Month, Inovio announced positive interim results from two mid-stage clinical studies evaluating the drug in treating anal dysplasia and vulvar dysplasia, two precancerous conditions caused by human papillomavirus (HPV) types 16 and 18. The biotech should report results from a late-stage study of VGX-3100 in treating cervical dysplasia later in 2020.
VGX-3100 isn't the only promising pipeline candidate for Inovio, though. The biotech is conducting phase 2 clinical studies evaluating INO-3107 in treating recurrent respiratory papillomatosis (RRP), a rare HPV-caused disease that results in tumors growing in the respiratory tract. It's also evaluating INO-5401 in combination with Regeneron's Libtayo in a phase 2 study targeting the treatment of brain cancer. INO-5051 is being evaluated in a phase 2 study for treating prostate cancer.
Inovio is focused on other vaccines as well. Its pipeline includes experimental vaccines targeting HIV, Ebola, Lassa fever, and Zika, in addition to its experimental COVID-19 and MERS vaccines.
The company is getting some external help too. AstraZeneca is testing MEDI0457, which combines VGX-3100 with a DNA-based immune activator, in a phase 2 study targeting HPV-caused head and neck cancer.
The case for GlaxoSmithKline
GlaxoSmithKline is well known for its vaccines too. The big difference between it and Inovio, though, is that Glaxo already has multiple successful products on the market.
The big pharmaceutical company's Shingrix shingles vaccine generated huge revenue growth in 2019. GlaxoSmithKline's meningitis vaccines Bexsero and Menveo also delivered double-digit percentage sales growth last year.
Like Inovio, GlaxoSmithKline is also focused on COVID-19. It announced a partnership with Vir Biotechnology in early April to develop multiple drugs and vaccines to treat and prevent the novel coronavirus disease. GlaxoSmithKline is also teaming up with Sanofi to develop a COVID-19 vaccine.
Vaccines aren't GlaxoSmithKline's only area of interest. The company's lineup includes several drugs with fast-rising sales. HIV drugs Dovato and Juluca continue to perform well. Respiratory drugs Nucala and Trelegy Ellipta are big winners. So are cancer drug Zejula and anti-inflammatory drug Benlysta.
Glaxo's consumer business is much larger after the closing of a joint venture last year with Pfizer that combines the two companies' consumer units. This segment also provides some diversification for the big drugmaker.
The company's pipeline includes nine programs awaiting regulatory approval. GlaxoSmithKline has a dozen programs that are currently in pivotal clinical studies.
Another big plus for Glaxo in comparison to Inovio is its dividend. GlaxoSmithKline's dividend yield currently stands at 5.3%, giving the company one of the highest yields among big drugmakers.
Better buy
My view is that GlaxoSmithKline is the better stock than Inovio. The decision boils down to risk. Inovio doesn't have any approved products on the market yet. Although the biotech does have several promising pipeline candidates, there's no guarantee of success. Glaxo, meanwhile, has multiple blockbuster drugs already on the market and a pipeline loaded with late-stage programs along with an attractive dividend.
But even though GlaxoSmithKline gets the nod over Inovio in my view, I don't think that it's a great stock to buy right now. Glaxo's positives are weighed down somewhat by declining sales for several products, including respiratory drug Advair and HIV drugs Tivicay and Triumeq. I think there are other drug stocks that offer a better risk-reward proposition than GlaxoSmithKline does.
