Inovio Pharmaceuticals (NASDAQ:INO) has been one of 2020's hottest coronavirus vaccine stocks. At one point, it was trading 10 times higher than it began the year, due largely to the speed at which it moved its COVID-19 vaccine candidate through the development process and into phase 1 clinical trials.

Now, Inovio shares are nowhere near the peak they hit in June, and the stock appears to be sliding yet again as the broader market withdraws from its summer highs. Does that mean that this is a good time to buy Inovio at a relative discount, or is the company still vulnerable to a wider downturn in the market even if hype continues to build for its coronavirus vaccine candidate, INO-4800? In other words, has anything changed about the company's situation since June that has improved its long-term prospects?

I'm of the opinion that Inovio will probably get hit hard by the ongoing market correction because the stock has shown high volatility even in the absence of news about the company or its competitors. But, with a combined phase 2/3 clinical trial for INO-4800 set to begin soon, it might have a solid chance of bouncing back with equal force. The last few months have also seen Inovio advance in several key areas that are important for its competitive positioning in this race, which means that buying the stock during this correction could be all the more worthwhile.

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Inovio's capabilities have grown, but will it be enough to beat the competition?

Since submitting its phase 1 clinical trial data for INO-4800 earlier this year, Inovio has taken aggressive steps to boost its manufacturing capabilities in anticipation of mass-producing it. In September, Thermo Fisher (NYSE:TMO) agreed to produce about 100 million doses of the vaccine in 2021, contingent on its regulatory approval from the U.S. Food and Drug Administration (FDA) early in the year. The deal was the third of its kind for Inovio in recent months, and also the largest, but the company is still seeking additional manufacturing partners so it can meet the anticipated demand. 

And even with those deals signed, Inovio's manufacturing capacity is still much lower than that of companies with more advanced candidates like Moderna (NASDAQ:MRNA), which is aiming to produce between 500 million and 1 billion doses of its candidate, mRNA-1273, in 2021. So even if Inovio's vaccine is approved, the company will still need to do a lot of work to reach manufacturing parity with its most likely competitors if it wants to capture a significant portion of the market.

Then there's the matter of the clinical trials. In July, Inovio expanded its phase 1 trial cohort, adding 80 new participants to the original group of 40. While this was a positive change that indicated that management was eager to produce high-quality trial data, it still left the company's trial significantly smaller than several others. Despite receiving government funding to the tune of $71 million earlier in the year, it's highly likely that Inovio still doesn't have the resources it needs to conduct trials on the scale of its rivals.

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How Inovio could bounce back from a falling market

Inovio is due to announce the initiation of the next phase of INO-4800 clinical trials by the end of September. This stage will be pivotal, because it may be Inovio's chance to catch up to some of the other companies in the race. If the market's response to that announcement is anything like its response to the company's prior releases, the stock will rise on vaccine optimism. And, if the announcement coincides with a deeper correction, as may be in the works, Inovio could be spared the worst, or potentially grow while its competitors get hammered. Especially if other competitors need to pause their trials for any reason -- as AstraZeneca (NASDAQ:AZN) did, briefly, earlier in the month -- Inovio could reemerge as a front-runner. 

More importantly, moving INO-4800 into its combined phase 2/3 clinical trials will open the door for the company to request additional resources from both the U.S. government and nonprofit benefactors like the Bill and Melinda Gates Foundation. Given that Washington appears to be very willing to spend money in support of the coronavirus vaccine development effort, this situation is in fact quite likely. Inovio could use such infusions of funds to increase the scale of its trials, gain more manufacturing capacity, or both -- but its stock and operational capacity could both grow substantially either way when the news breaks.

In summary, Inovio is probably worth buying in the midst of this stock market correction. Between the imminent favorable tailwinds from its advancing vaccine project and its modest progress over the past few months, the company's future seems brighter than before. But investors should be cautious: Inovio's capabilities still lag those of its rivals, even if its stock rises substantially on upcoming good news.

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.