Inovio Pharmaceuticals (NASDAQ:INO) has been grabbing a lot of headlines over the past few weeks, mostly thanks to its involvement in the race to find a vaccine for COVID-19. The company claimed to have come up with its potential vaccine, INO-4800, in a mere three hours after Chinese researchers publicly published the genetic sequence of the SARS-CoV-2 virus that causes COVID-19. Inovio initiated a phase 1 clinical trial for this vaccine in early April.

The study initially enrolled 40 volunteers and was supposed to test the vaccine's safety and immunogenicity. Four out of the original 40 participants did not complete the study. Three of them tested positive for COVID-19, indicating that they contracted the virus before enrolling in the study. Another participant dropped out of the study because of reasons "unrelated to safety or tolerability."

The company recently reported interim data from this study that did not impress investors (more on that below). As a result, the stock is down by more than 30% since June 30.

Still, Inovio is up by about 477% since the year started. Is it time for investors to sell the company's shares? Or is the stock worth holding on to -- or even buying? 

INO Chart

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INO-4800's phase 1 clinical trial results 

According to Inovio, the interim results for its phase 1 clinical trial for INO-4800 were positive. There were no severe adverse reactions to the vaccine. The most common adverse reaction, which 10 patients experienced, was redness on the skin where the vaccine was administered -- but that only warrants the lowest level of severity, grade 1. The trial thus seemed to suggest that safety is not a major concern. The company also said that 34 of the 36 participants (roughly 94%) demonstrated an immune response six weeks after receiving INO-4800.

But some key details were lacking in Inovio's published data. Specifically, the company did not share information about how many of the patients produced neutralizing antibodies or T-cell responses. T-cells are white blood cells that bind to and kill infected cells.

The lack of essential information in Inovio's press release announcing these results prompted several analysts to downgrade the company's stock. Roth Capital's Jonathan Aschoff downgraded the stock from neutral to sell, giving it an $11 price target and noting that the data Inovio released was "very limited."

Given that Inovio's shares are worth $19.73 apiece at writing, this price would represent a significant downside from its current levels.

Nurse with her hand on her chin and a pensive expression on her face.

Image source: Getty Images.

Inovio is dealing with other complicating factors. Several companies seem to be making solid headway in their quest to develop a vaccine for COVID-19. For instance, Pfizer recently released positive data from a phase 1/2 clinical trial for its investigational COVID-19 vaccine, BNT162b1, which it's developing in collaboration with BioNTech. AstraZeneca and Moderna have two advanced vaccine candidates that are regarded as leaders in this race

Yet all may not be lost for Inovio. The company announced that it will join the U.S. government's Operation Warp Speed program, an initiative that seeks to accelerate the development of a vaccine for COVID-19. Inovio's investigational vaccine will be part of a nonhuman primate (NHP) challenge study that will test the efficacy of several vaccine candidates. Inovio's participation in this operation could help turn its recent misfortune around. 

Should you scoop up Inovio's shares?

Several other factors could impact Inovio's future.

First, while Inovio currently has no products on the market and doesn't generate much revenue ($1.3 million during the first quarter), it's unlikely to run out of funds. The company has landed several lucrative partnerships and contracts with third parties over the past few months.

On June 23, the company announced that it had entered a $71 million contract with the U.S. Department of Defense (DoD) to scale up manufacturing of its Cellectra 3PSP smart devices. The DoD will also buy a quantity of Inovio's Cellectra 2000 devices. Both the 3PSP and the 2000 administer Inovio's investigational COVID-19 vaccine.

Second, only one of Inovio's many pipeline candidates has begun a phase 3 clinical trial. The candidate in question is VGX-3100, a potential vaccine for several types of cancer. 

Inovio's performance will largely depend on its COVID-19 efforts. Considering the not-so-great interim data from its phase 1 study -- and the fact that other companies are much further along in their efforts to develop a COVID-19 vaccine -- it's hard to put much confidence in Inovio's stock at the moment.

In short, I think it's best to sell Inovio's stock. Of course, the company's shares could recover, but even if they do, there's no telling whether some other news will cause them to crash again. There's too much uncertainty surrounding this biotech stock right now. It's best to watch how things unfold from a safe distance.