Inovio Pharmaceuticals (INO -4.25%) has enjoyed a remarkable year so far by any standard. The biotech is in the thick of the race to develop a COVID-19 vaccine. It has made significant progress with its other pipeline candidates. Inovio's shares have skyrocketed close to 350%. The biotech even ranks among the top 100 most popular stocks (and one of the top 3 most popular coronavirus stocks) on the fast-growing Robinhood trading platform.

But while Inovio has indeed deservedly received a lot of attention in 2020, its future remains uncertain. A lot could happen to derail the company's fast track to success. Here are the three biggest risks that Inovio faces in the near term.

Blue street sign with "risk ahead" printed on it

Image source: Getty Images.

1. Failure to secure funding for its COVID-19 vaccine 

Most of the leading COVID-19 vaccine candidates have received significant government funding and/or supply deals. But Inovio hasn't.

Sure, the company won $71 million from the U.S. Department of Defense to manufacture its Cellectra devices used in administering COVID-19 vaccine candidate INO-4800. Inovio also received $22.2 million from the Coalition for Epidemic Preparedness Innovations (CEPI) to support early stage testing of INO-4800 in the U.S. and South Korea. And the Bill & Melinda Gates Foundation gave the biotech $5 million to testing and produce its Cellectra 3PSP device. However, all of that combined is chump change compared to the money that several other COVID-19 vaccine makers have received.

Inovio CEO Joseph Kim said in the company's Q2 conference call that Inovio is trying to get external funding to support its large phase 2/3 clinical trial of INO-4800. But that isn't the biggest hurdle for the company. Kim also stated that a top priority is to obtain external funding for manufacturing doses of INO-4800. As of now, Inovio is on track to make around 1 million doses of the COVID-19 vaccine candidate by the end of this year. It hopes to produce 100 million doses in 2021. 

The company should be able to fund the late-stage study of INO-4800, even if it has to conduct another stock offering. However, additional money is absolutely necessary to crank up manufacturing. Failure to secure these funds could be a big blow.

2. A flop for INO-4800 in phase 2/3 testing

An even more obvious risk for Inovio is the possibility that INO-4800 could flop in phase 2/3 testing. Of course, the vaccine candidate must first advance to the next phase of testing first. Inovio hasn't received a green light from the FDA yet, although Kim said in the Q2 call that the company is in discussions with the FDA on the design of the phase 2/3 study and hopes to begin the clinical trial in September.

There are a couple of ways that INO-4800 could stumble in phase 2/3 studies. It could simply prove to be ineffective at preventing infection by the novel coronavirus that causes COVID-19. The vaccine candidate could also potentially cause serious adverse reactions.

3. Disappointing results for its pivotal VGX-3100 study

While INO-4800 is in the limelight right now, Inovio's lead pipeline candidate is VGX-3100. The company is currently evaluating VGX-3100 in a pivotal phase 3 study in treating precancerous cervical dysplasia. Inovio expects to announce results from this study in the fourth quarter of this year. 

Don't underestimate how important those results will be for Inovio. Before the COVID-19 pandemic struck earlier this year, VGX-3100 was the top story for the biotech. If the drug is unsuccessful in treating cervical dysplasia, it could raise concerns about the potential for VGX-3100 in other indications. The outlook for AstraZeneca's phase 2 studies of MEDI0457, which combines VGX-3100 with a DNA-based IL-12 immune activator, could also be diminished.

Real risks, real opportunities

These are all real risks for Inovio that just might cause the biotech stock to crash if things don't go well. The company doesn't have much control over the outcomes in any of the three scenarios.

On the other hand, Inovio also has real -- and huge -- opportunities ahead of it assuming there are no missteps. If INO-4800 is overwhelmingly successful in late-stage testing, the biotech could even withstand a major disappointment for VGX-3100.

For now, Inovio remains a speculative pick. Most investors won't be comfortable with the high level of risk associated with the stock. Aggressive investors, though, might find Inovio an attractive bet with its market cap below $2.5 billion. That bet could pay off in a major way. Inovio could also be a big loser. The next few months will be decisive, one way or another.