Biotech stocks tied to coronavirus vaccine development have been soaring lately, but buying stocks just because they've been going up is a good way to quickly lose a lot of hard-earned money. While all three of these biotech stocks could fly much higher if the SARS-CoV-2 vaccines they're developing are quickly proved effective, this is a big step that we can't reasonably expect either of these companies to take. 

Here's why investors want to watch their stories play out from a safe distance.

Company (Symbol) Year of Incorporation Accumulated Deficit Trailing 12-Month Net Loss Market Cap
Inovio Pharmaceuticals (NASDAQ:INO) 2001 $772 million $123 million $4.1 billion
Moderna (NASDAQ:MRNA) 2016 $1.62 billion $506 million $22.3 billion

Data source: company SEC filings and Yahoo! Finance.

1. Inovio: Not a closer

This year, shares of Inovio have soared around 760% because investors are highly encouraged by the company's swift COVID-19 pandemic response. Within hours of receiving access to the novel coronavirus' genetic sequence, Inovio had a DNA vaccine candidate, INO-4800, ready for pre-clinical testing. By April, Inovio quickly moved INO-4800 into a clinical trial and injected the vaccine candidate into the arms of 40 healthy volunteers.

COVID-19 vaccine vial.

Image source: Getty Images.

Inovio's ability to produce clinical-stage DNA vaccine candidates in response to infectious disease outbreaks is remarkable, but investors should know this company's never actually produced any evidence its DNA vaccine technology actually works. Inovio's been developing DNA medicines since 2001, but the company doesn't have anything to show for it except $772 million worth of accumulated losses and a scrap heap for new drug candidates that lose their fizzle in mid-stage clinical trials.

Expecting a vaccine candidate Inovio threw together in a few hours to go the distance after the same company failed to get anywhere with previous candidates targeting Zika, Ebola, HIV, MERS, and more doesn't make any sense. That hasn't stopped the stock market from driving Inovio's market cap to $4.1 billion at recent prices. While there's an outside chance that Inovio finally got it right with INO-4800, uninspiring mid-stage data leading to heavy losses is a more likely scenario.

2. Moderna: Concept unproven

Compared to Inovio, this company's just getting started in the vaccine development business, but it's already a champion at raising capital without showing investors anything to get excited about. Injecting people with strands of messenger RNA (mRNA) that contain instructions for the production of therapeutic proteins is an old idea that Moderna and a growing number of mRNA-focused peers have chased at great expense without any remarkable successes to date.

Moderna began injecting patients with its SARS-CoV-2 vaccine candidate, mRNA-1273, in a phase 2 clinical trial in May. This isn't the first mRNA candidate from Moderna to begin a phase 2 trial, but it could be the first phase 2 study we see any data from.

In February 2018, Moderna's collaboration partner, AstraZeneca (NYSE:AZN) began a 33 patient phase 2 study with AZD8601. This is a candidate discovered by Moderna that gets injected into the hearts of heart failure patients to improve the grafting process associated with coronary bypass surgery.

Three rolled-up pieces of U.S. currency are weighted on a balance beam opposite four stacked letters that spell out the word risl.

Image source: Getty Images.

The trial protocol calls for efficacy measurements at up to six months following treatment, but AstraZeneca still hasn't reported any. Beginning biotech investors should know that trial results reported later than expected almost never impress if they're reported at all.

Last July, Moderna began its second study with mRNA-4157 in combination with Keytruda, a drug on pace to generate around $16 billion in revenue for Merck (NYSE:MRK) this year. It's going to be years before the phase 2 trial can produce long-term survival data to see if patients treated with mRNA-4157 plus Keytruda fare better than those treated with Keytruda and a placebo. What we know now is that Moderna sponsored the trial, and not its deep-pocketed collaborator.

Not a smart bet

Despite burning through a combined $2.4 billion already, neither of these companies has reported successful results from a late-stage trial with a new drug candidate yet. The disturbing lack of progress so far doesn't necessarily mean that their unproven technology will remain unproven forever, but it makes buying their shares at these inflated valuations a risk that nobody should be willing to take.