When it comes to biotechs, Moderna (MRNA -0.05%) is the standard to beat. With its market cap expanding sharply from near $5.3 billion in late 2019 to over $62 billion today, the stock has been a tremendous winner for its early investors. And that's why people are on the lookout for a repeat performance, perhaps from a very similar company called Inovio Pharmaceuticals (INO 0.29%).
On the surface, Inovio is very much in the same position that Moderna was before the pandemic. With a market cap close to $900 million, it doesn't have any recurring revenue or any medicines that are approved for sale, and its coronavirus vaccine program is what originally put it in the limelight in 2020. What's more, its development platform is strikingly similar to Moderna's. But does that mean it'll be able to wow investors in the same way?
This is a typical pre-product biotech
Aside from its coronavirus candidate, Inovio's biggest appeal is its DNA medicine platform. In theory, the platform can rapidly develop and jump-start the manufacturing of new medicines that are subsequently safe and effective.
In terms of its clinical-stage projects, it has two coronavirus vaccines in phase 3 trials, four other infectious disease programs, a trio of immuno-oncology projects, and a handful of others.
But although Moderna's coronavirus candidate advanced through clinical trials to get commercialized with hardly any incident, Inovio ran into a regulatory hurdle that took more than a year to completely navigate, causing it to lose the vaccine race.
And since then, its stock has yet to recover.
If there's any hope for Inovio to become the next Moderna, it'll need to commercialize its coronavirus vaccine and start raking in revenue. Then, it'll need to do something far more difficult: differentiate itself from its larger competitor.
Are DNA medicines the next mRNA medicines?
Differentiation is going to be hard for this vaccine stock because, in principle, Inovio's medicines use a similar scientific approach to Moderna's.
Whereas Moderna's vaccines are comprised of a lipid nanoparticle that carries messenger RNA (mRNA) into a patient's cells after injection, Inovio uses a special device called the Cellectra, which inserts circular strands of DNA into a patient's skin cells directly. From there, broadly speaking, both platforms aim to get the patient's cells to produce viral antigens that will in turn be recognized by the immune system and prompt a response from it that builds immunity.
Both systems enable manufacturers to easily customize the genetic sequence they include in their shot. That means Inovio's vaccine could be as easy to update to account for new viral variants as Moderna's is.
Like the larger company, Inovio has already initiated the development of a new jab that's specific to the omicron variant. And the active ingredients for both types of medicine are relatively inexpensive to manufacture.
However, Inovio's medicines may have a couple of advantages that Moderna's don't. Doses of its jab are expected to be shelf-stable at room temperature for more than a year, which dramatically simplifies the logistics of vaccine distribution and storage. It's also possible that the Cellectra device might be more efficient at delivering DNA than Moderna's lipid nanoparticles are at delivering mRNA.
Ultimately, that could lead to the company's DNA medicines being cheaper to produce and administer. But that's unlikely to matter if Moderna can develop medicines for the same indications more rapidly with its vast advantage in resources. Whereas Inovio had trailing research and development expenses of $183.2 million, Moderna's topped $2.1 billion.
Inovio's moment might not be over, but it's not a stock for everyone
With no real moat to protect the market share of its future products from players like Moderna, even a victory with its coronavirus candidate might not be enough to propel Inovio to the same heights as the mRNA company. Still, that doesn't mean it's doomed to be a poor investment.
If its coronavirus jab gets out the door, Inovio will start to realize far more revenue than ever before, and it'll have more cash to invest in making new medicines. Especially if management opts to focus the pipeline on areas where powerful competitors aren't going, the business could build a profitable niche for itself.
Nonetheless, this is a risky purchase at the moment. If you're interested in speculating, it might be right up your alley, but in my view, it's quite a stretch to assume that it'll become the next Moderna anytime soon.