What happened

Shares of Inovio Pharmaceuticals (NASDAQ:INO) were tanking by 10.3% as of 11:08 a.m. EST on Tuesday. The decline came after the company provided its fourth-quarter update following the market close on Monday.

Inovio actually had plenty of good news. The company handily beat consensus top- and bottom-line estimates. It also reported positive results from a late-stage study evaluating VGX-3100 in treating precancerous cervical dysplasia.

So why did the biotech stock fall today? Many investors were hoping for more clarity on Inovio's COVID-19 vaccine program. The company said that it expects to complete a phase 2 study of INO-4800 in Q2. It also hopes to resolve all U.S. Food and Drug Administration (FDA) issues related to the device used to administer the COVID-19 vaccine by that time. 

Some investors could also be somewhat concerned about the late-stage results for VGX-3100. Inovio couldn't use the full intention-to-treat population (which includes all participants in the study regardless of what, if any, treatment they receive). Several patients in the group receiving VGX-3100 had missing data. Because of this, Inovio used only evaluable responders in what it called a modified intention-to-treat population. 

Gloved hands holding syringe and vaccine vial

Image source: Getty Images.

So what

Inovio's market cap of over $2 billion is based on expectations of strong growth. Anything that puts those expectations in doubt will cause the stock to fall.

That's what we've seen today. As long as the FDA's clinical hold on the phase 3 study for INO-4800 remains in place, some investors will have doubts about the prospects for the COVID-19 vaccine. Inovio's use of a modified intention-to-treat population in the VGX-3100 study could, for right or wrong, raise some doubts about the prospects for the immunotherapy.

Now what

Those doubts could evaporate in the future. Or they could prove to be well-founded. It all depends on what happens next.

Inovio should report phase 2 results for INO-4800 and answer the FDA's questions about the Cellectra device in the early part of Q2. The FDA will then have 30 days to respond. If all goes well, the company could advance INO-4800 into phase 3 testing in the latter part of Q2.

As for VGX-3100, Inovio is also conducting another late-stage study of the immunotherapy targeting cervical dysplasia. This second study is still enrolling patients. 

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.