As the world watches the race for an effective and safe coronavirus vaccine, one company that was leading the charge early in the pandemic has experienced a series of setbacks that could be the result of bad luck, poor planning, or a combination of both. 

Inovio Pharmaceuticals (NASDAQ:INO) has long been a stock that investors considered a lottery ticket. If its DNA-based approach and proprietary drug delivery technology proves effective, the company could revolutionize medicine. However, in its 40 years of existence, it's never had an approved treatment for any disease. Could the wave of funding in biotech be a catalyst for Inovio to finally make the leap, turning the stock into a millionaire-maker?

Hundred dollar bills laying on a surface with a coronavirus mask.

Image source: Getty Images.

A portfolio of possibilities

In developing drugs for human papillomavirus (HPV), cancer, and infectious diseases, Inovio's key differentiator has been its SynCon process. The approach relies on a computer algorithm to design the best DNA sequence for producing an immune response in a virus or a tumor. Further differentiating the company is its CELLECTRA device, which uses an electrical pulse to open cells and increase the amount of engineered DNA that gets in -- a challenge that has limited similar gene-based medicines. Management believes this method increases the expression of the engineered gene in the cell by a factor of 1,000. 

The company has several drugs in clinical trials outside of its COVID-19 vaccine. Inovio's vaccine for HPV-related cancers will have phase 3 data sometime in the first half of 2021. The study began recruiting subjects in mid-2017. The company's drug for head, neck, and cervical cancers was licensed to AstraZeneca (NASDAQ:AZN) in 2015 and remains in phase 2 trials. The company also has a partnership with Regeneron Pharmaceuticals (NASDAQ:REGN) to combat the most common and aggressive form of brain cancer. Management will be reporting data from this trial at a conference on Nov. 20.

Of course, attention is primarily focused on the company's vaccine candidate for COVID-19. The candidate, INO-4800, was purportedly developed three hours after Chinese researchers made the gene sequence of the novel coronavirus public on Jan. 10. If it succeeds, the vaccine would be a leap forward in containing the virus globally, as it can be stored at room temperature for a year. After receiving funding from the Coalition for Epidemic Preparedness Innovations and the U.S. Department of Defense, the vaccine trial was put on hold by the U.S. Food and Drug Administration (FDA) to collect more information about the CELLECTRA delivery device. Management responded to the FDA in October and will hear back from the the agency this month.

Swimming to the other side, or just staying afloat?

Raising funds is a normal process for biotechs, and it's one shareholders expect -- with the promise of FDA approval, sales, and profits somewhere on the other side. At the end of 2007, Inovio had about 44 million shares outstanding. By the end of 2019, that number stood at more than 99 million. By the end of September 2020, it was more than 165 million, with shareholders still waiting for a success. 

With multiple clinical trials pending and a vaccine that could go a long way toward ending a pandemic, investors are wondering whether the company has enough money to get through the expensive clinical trials a vaccine will require. Many biotech investors are familiar with "burn rate," a metric that examines how fast a company is spending its money -- basically, negative cash flows from operations plus capital expenditures. Inovio spent $280 million over the first nine months of this year and had $337 million in the bank as of Sept. 30. Using these numbers, we can estimate that Inovio will run out of cash in about 11 months. If the FDA gives management the green light to start the phase 3 trial of the COVID-19 vaccine in November, 11 months might be enough to get through the study. However, the company is taking no chances. Inovio CEO Joseph Kim says he believes the company has external funding lined up once the FDA hold is lifted. It's unclear whether that funding would come from a lender or a larger pharmaceutical partner.

Opportunity knocks, but should you answer?

Inovio's development of a COVID-19 vaccine was no surprise. The company has a history of not wasting a crisis. In 2009, as the H1N1 swine flu was infecting 61 million Americans, the company leapt into the public sphere touting promising phase 1 results for its vaccine candidate and selling shares to the public to raise money. Of course, that vaccine never made it to market.

Although management says they're not worried about funding, the FDA hold is a serious risk. The longer it takes for the company to start the trial, the more likely it is that competing vaccines will enter the market. If that's the case, it may be difficult to convince people to join a study where they may be getting a placebo when an approved vaccine is available. Even if the FDA lifts the hold, and phase 3 starts enrolling this month, Inovio feels like pure speculation. While the company plans to produce 100 million doses in 2021, it has yet to sign a deal to supply them anywhere. With no deals and no history of success, there are plenty of other stocks -- even vaccine makers -- that have better chances of making you a millionaire.

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.