Inovio Pharmaceuticals (INO -2.21%) grabbed investors' attention when it became one of the first companies to begin human trials of its investigational coronavirus vaccine. That was back in April, but the company had set its sights on becoming a major player in the coronavirus vaccine race even earlier. In January, management announced that the company had been able to design its potential vaccine in three hours based on the novel coronavirus's genetic sequence.

Person in suit studying papers on a clipboard.

Image source: Getty Images.

The major risk Inovio and rivals face right now is the performance of their vaccine candidates in late-stage clinical trials. But Inovio in particular faces a few other challenges as well. So, before you buy its stock, here's what you should consider.

Who's at the front of the pack?

From a timeline perspective, Inovio is not in the lead. Nine rival programs have moved into phase 2 or phase 3 trials. Moderna (MRNA 0.02%) and AstraZeneca (AZN -1.41%), which have both started phase 3, are among those closest to the finish line. Inovio plans to begin a phase 2/3 study in September. Unless a handful of competitors stumble, it's unlikely Inovio will be first to market.

That said, timeline isn't everything. If Inovio's potential vaccine reaches commercialization later than others but boasts better safety and/or efficacy results, the company could become the leading player. It may also step into the lead if its product is equal to others, but priced better. So far, Inovio hasn't set a price, but in the recent earnings call, management said the price will be in line with that of "other leading vaccines." Moderna has signed supply agreements in the range of $32 to $37 per dose of its investigational coronavirus vaccine, while Johnson & Johnson (JNJ -0.43%) has agreed to sell its potential vaccine to the U.S. government for as little as $10 a dose.

All of this is to say that investors should focus more on trial data and pricing than the time it takes for Inovio to bring its candidate through clinical trials.

So what does the trial data show?

Inovio stock was flying high, with gains of as much as 717% this year -- until it announced data from its phase 1 study. Shares have lost about 50% since those results were released June 30.

INO Chart

INO data by YCharts

What went wrong? Investors were disappointed that the company didn't reveal more details regarding neutralizing antibodies. This type of antibody is seen as a key element in a successful vaccine, as its role is to block infection.Without details regarding neutralizing antibody levels, it's difficult to compare the performance of Inovio's candidate with that of rivals that have provided those details.

Inovio said full data on the trials is under peer review for publication in a medical journal. Investors should look to that when available, with the hope of learning more about neutralizing antibody levels in trial participants.

No love yet from the government

Operation Warp Speed -- the U.S. government's effort to help bring a vaccine to market by January -- has awarded billions of dollars to clinical-stage biotech companies such as Novavax (NVAX 15.33%) and big pharma players like AstraZeneca. They received $1.6 billion and $1.2 billion, respectively. So far, though, Operation Warp Speed hasn't offered Inovio any such award.

This means that, compared to rivals, Inovio's government funding -- and its overall funding -- remains modest. The Department of Defense gave Inovio $71 million for the manufacturing of a device that delivers the investigational vaccine. And the department offered Ology Bioservices $11.9 million for the production of Inovio's vaccine materials. Including other grants, Inovio has garnered about $110 million so far to support its program. More may be on the horizon, so that is another important point to watch. In the earnings call, management said it was working on obtaining external funding and would announce details soon.

What else is in the pipeline?

Though all eyes are on coronavirus vaccine candidates these days, long-term investors should look to Inovio's entire pipeline before deciding whether to buy the shares. Inovio is still in the clinical stage, but it does have a program beyond coronavirus that may be close to market. The company is set to report phase 3 data in the fourth quarter for its investigational treatment for HPV-associated cervical dysplasia. And Inovio has nine other programs in phase 2 studies.

All of Inovio's candidates involve the same technology, in which computer sequencing reorganizes small circles of double-stranded DNA to produce a specific immune response in the body. Inovio then delivers these DNA plasmids into the skin or muscles. Though success in the coronavirus or cervical dysplasia program wouldn't guarantee success in all programs, it would offer evidence that the technology works in humans.

What does this mean for investors?

All clinical-stage companies working on a coronavirus vaccine represent risk. If the program fails, they don't have other products that can immediately generate revenue. In my book, the fact that Inovio lags behind peers in funding and hasn't yet provided more detailed trial data increases the risk.

Still, I wouldn't be surprised if Inovio shares climb in the coming months. Any positive news about the coronavirus vaccine candidate should offer a boost. But I don't expect lasting gains until some of the issues I've mentioned are resolved favorably. In that case, the aggressive investor who invests now may reap great rewards. More cautious biotech investors, though, are better off watching from the sidelines.