Friday was a strong day for the stock market as major market benchmarks powered higher. Economic growth and solid prospects for a continuing recovery from the recession of 2020 led market participants to keep committing money to stocks despite worries over potential tax increases. The Dow Jones Industrial Average (^DJI -1.29%), S&P 500 (^GSPC -0.78%), and Nasdaq Composite (^IXIC -0.70%) reversed Thursday's losses and remained near their all-time record highs.


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Data source: Yahoo! Finance.

Yet investors also got a harsh reminder of what can happen when a promising company that's participating in one of the most important initiatives on the planet fails to keep up with its competitors. Shareholders in Inovio Pharmaceuticals (INO -6.40%) learned that lesson the hard way on Friday, but it won't be the last time that first-movers score big wins while laggards end up losing big.

Four vials labeled COVID-19 vaccine.

Image source: Getty Images.

Is the race over for Inovio?

Shares of Inovio Pharmaceuticals plunged 25% on Friday. The move came after the biopharmaceutical company got bad news on its efforts to join the elite group of companies with viable vaccines for COVID-19.

The U.S. Department of Defense informed Inovio that it would no longer provide funding for the phase 3 segment of its INNOVATE clinical trial of its INO-4800 COVID-19 vaccine candidate. Inovio referred to "the increasing availability of vaccines authorized for emergency use" in the U.S. as the primary motivation for the removal of funding. Although the federal government agency clarified that it wasn't weighing in on either Inovio as a company or INO-4800 as a potential vaccine, it nevertheless said that the rapid deployment of other vaccines reflected the "fast-moving environment" in which it has to make decisions about funding.

Inovio was clear to note several things. First, the Defense Department will continue to fund the phase 2 portion of the company's U.S. trials. Second, the decision doesn't affect other work that Inovio is doing with the U.S. government. Moreover, Inovio is working with international partners to do a phase 3 trial outside the U.S., with the hopes of meeting the needs for COVID-19 vaccines worldwide. And finally, Inovio hopes to further its INO-4802 vaccine candidate, which could eventually assist in fighting current and future COVID variants.

An opportunity or an also-ran?

The question for Inovio investors is whether the price of the stock already reflects no positive outcome for the company on its COVID-19 prospects. Shares now trade at their lowest point since March 2020, and while they're still above pre-pandemic levels, Inovio likely deserves some credit for the proof-of-concept that it's essentially delivered over the next year. Even modest success with a global vaccine rollout could prove lucrative. Yet investors question whether Inovio will see the profits that justified sending the stock above the $30 per share mark briefly last summer.

Meanwhile, those companies that were faster off the mark have remained successful. Moderna (MRNA -2.21%) is likely the best example. Its stock has climbed tenfold since late 2019 and has held onto its gains throughout the U.S. vaccine rollout as more countries turn to Moderna for vaccine supplies.

Inovio might not be out of the global fight against COVID-19, but it took a big blow on Friday. That's a stark reminder that at least in some cases, it really does make a big difference whether a company is first to come up with a key solution to a problem.