What happened

Shares of Inovio Pharmaceuticals (NASDAQ:INO) were jumping 8.9% as of 11:09 a.m. EDT on Wednesday after rising as much as 23.6% earlier in the day. Investors appear to be more confident about Inovio's potential to receive federal funding for its COVID-19 vaccine candidate INO-4800 after two developments on Tuesday.

First, Inovio announced that it had signed a letter of intent with Thermo Fisher Scientific (NYSE:TMO) to manufacture 100 million doses of INO-4800 in 2021. Second, AstraZeneca (NASDAQ:AZN) revealed that it has temporarily paused a late-stage clinical study of its coronavirus vaccine candidate AZD1222 after a participant experienced a severe adverse reaction.

Bottles labeled "COVID-19 vaccine" and syringe on top of $100 bills

Image source: Getty Images.

So what

Inovio hasn't received a large funding commitment from the U.S. government's Operation Warp Speed (OWS) program so far. However, the company is farther along in clinical testing with INO-4800 than some other drugmakers that have received significant funding from OWS. One potential reason why that's the case is that in the past Inovio's capacity for manufacturing INO-4800 was only a fraction of the capacity of others in the race to develop coronavirus vaccines.

Now, though, Inovio's deal with Thermo Fisher Scientific could change the dynamics. The capability to produce 100 million doses of INO-4800 just might catch the attention of OWS or the governments of other countries hoping to secure COVID-19 vaccines.

At the same time, the potential safety issue with AstraZeneca's COVID-19 vaccine candidate could spur OWS to consider adding another investigational vaccine to its roster of funded programs. The U.S. committed $1.2 billion in funding to the big drugmaker in May to secure 300 million doses of AZD1222. 

Now what

There's no guarantee that Inovio will receive significant funding for INO-4800. But it's certainly a possibility. The most important thing for the biotech stock right now isn't funding, though; it's the initiation of a phase 2/3 study for the investigational COVID-19 vaccine. Inovio hopes to receive a green light from the FDA to begin this study this month. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.