- One of these companies took the spotlight when it became one of the first to bring a coronavirus vaccine candidate into human trials.
- The second company here is working on 10 potential coronavirus products.
- The challenge both companies face is they are lagging behind rivals – so they may struggle to gain market share.
Investors using the Robinhood platform are known for seeking out stocks that may make big share moves in a short period. As a long-term investor, I'm more interested in stocks that will steadily climb over time. But sometimes these two strategies can converge. A stock may skyrocket for one particular reason -- but also offer reasons for steady gains farther down the road.
These days, Robinhood investors are piling into shares of coronavirus stocks, including Inovio Pharmaceuticals (INO 2.83%) and Sorrento Therapeutics (SRNE.Q). Both are among Robinhood investors' top 100 most popular holdings right now. Inovio and Sorrento shares gained earlier this year among optimism about their coronavirus programs, then slipped. Now the question is whether more potential for share gains lies ahead.
Inovio grabs attention
Inovio grabbed investors' attention this spring when it became one of the first coronavirus vaccine developers to launch human trials. The shares soared 890% from the start of the year to their peak in June. Then some investors, disappointed by the lack of details in clinical trial data, abandoned the shares. Unlike rivals, Inovio didn't report the neutralizing antibody levels of its phase 1 study participants. These antibodies are seen as key since they block infection.
More recently, the U.S. Food and Drug Administration placed Inovio's planned phase 2/3 trial on partial clinical hold. The regulatory agency had questions about the trial and the device Inovio uses to deliver its vaccine candidate.
Then, in November, the situation brightened. The FDA lifted its hold on the phase 2 portion of the trial. The good news here is the program is back on track -- for now.
But big risks remain. The FDA still hasn't lifted its hold on phase 3 as Inovio continues to answer the regulators' questions. There, the risk is the FDA won't allow phase 3 to proceed. Inovio, like its rivals, also faces the risk that the vaccine will fail or produce mediocre results in late-stage trials.
Of course, if the vaccine candidate makes it successfully through to emergency use authorization (EUA) or approval, the stock surely will gain. But its vaccine capacity may hold it back. Inovio can only produce 100 million doses per year. That's compared to rivals like Moderna that can produce 500 million to one billion.
Sorrento's 10 programs
Sorrento has 10 coronavirus programs in the pipeline. They range from tests to treatments to virus prevention. The closest to market are two tests. The FDA is reviewing the COVI-TRACK antibody test for an EUA. Antibody tests determine whether a person has had the virus. Sorrento soon plans to file for an EUA for COVI-TRACE, which identifies active infection.
Sorrento also has an antibody designed to neutralize the virus and a stem cell treatment for respiratory distress in phase 1 trials. And finally, in phase 2, Sorrento is examining a small molecule drug that addresses cytokine storm or out-of-control inflammatory response. The other coronavirus candidates are in preclinical studies.
With all of these irons in the fire, Sorrento might seem like the best coronavirus stock yet. But I have a few concerns. The FDA has already granted EUAs to nearly 300 coronavirus tests. In this crowded market filled with big players like Abbott Laboratories, it will be difficult for Sorrento's tests to stand out.
The same problem may happen with the antibody candidate. The FDA has already granted EUAs to larger rivals Eli Lilly and Regeneron Pharmaceuticals for their antibody treatments. If Sorrento's antibody is eventually approved, it will probably have to show superiority to gain market share.
I'm more optimistic about Sorrento's candidates addressing cytokine storm and respiratory distress. Those are problems that haven't been solved -- and ones linked to serious illness. But I'm interested in seeing more clinical data and progress in the program before committing to Sorrento stock.
So, should you follow Robinhood investors?
Inovio and Sorrento shares may jump (or drop) as the companies announce coronavirus program news. That means a quick gain or loss might be on the horizon for short-term investors. But if you have a long-term view, you shouldn't follow Robinhood investors into these biotech stocks. We don't have a clear picture of what the future might bring for these companies.
For investors with an appetite for risk, however, it may be worth putting Sorrento on your watch list. The earlier stage coronavirus programs may eventually bear fruit -- and that's where Sorrento, and investors, may gain down the road. But right now, it's too early to place bets.