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Shares of Inovio Pharmaceuticals (NASDAQ:INO), a drug development company focused on creating vaccines to treat cancer as well as infectious diseases, tumbled 23% in September based on data from S&P Capital IQ amid mixed news.

The silver lining for Inovio came on Sept. 21, 2015 when it announced that the U.S. Defense Advanced Research Projects Agency exercised its option to have Inovio conduct additional clinical research into a possible Ebola vaccine. The option will carry a $24 million payment, and it comes on top of the $21 million DARPA paid Inovio earlier this year. To exercise the option Inovio needed to demonstrate that its DNA-based monoclonal antibody treatment was successful in preclinical studies, and that it was approved for human clinical trials.

However, one thing to consider here is that Inovio is no lock to succeed with its Ebola research. Its peers are about a full year ahead in terms of clinical research, and the Ebola outbreak in Africa has largely waned. With vaccines largely dependent on government orders and outbreaks, an Ebola cure from Inovio is no guaranteed moneymaker.

Also, Inovio Pharmaceuticals found itself crushed by commentary made by presidential candidate Hillary Clinton. In September, Clinton offered up her prescription drug reform proposal which entailed capping the out-of-pocket expenses of consumers purchasing eligible drugs, and using the scope of the government to negotiate better deals with drugmakers. This is meaningful because Inovio's cancer immunotherapy products are primarily focused on a narrower patient pool than traditional cancer-fighting drugs like chemotherapy. It means Inovio's vaccines would probably command a high price point, and would thus be squarely targeted by Clinton's proposal.


Source: National Cancer Institute. 

But, after Inovio's shellacking in September is the stock now a buy?

I believe the answer to that question largely depends on your investing horizon. If you're not considering Inovio as a five-year hold, at minimum, then I don't believe you're giving your investment (or Inovio's game plan) an opportunity to play out.

On the surface, there's certainly promise here. VGX-3100 has performed well in midstage studies as a treatment for cervical dysplasia associated with human papillomavirus 16 or 18, meeting its primary endpoint and causing a statistically significant drop in disease grade for a larger percentage of patients than in the control group. If VGX-3100 can succeed in late-stage studies, and if Inovio can continue to attract large-scale partners, it would go a long way to validating the company's pipeline.

Additionally, Inovio has an exceptionally long cash runway now that I suspect extends into 2019 (but is of course dependent on whether or not it undertakes new clinical studies). Investors in Inovio still may need to be concerned about share dilution from time to time, but likely don't have to worry about financing concerns for a few years.

At less than $6 Inovio does offer an intriguing risk-versus-reward for seasoned biotech investors, and I believe it's worth a deeper dive for investors with a high tolerance for risk.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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