<p>A number of companies have entered the fray when the competition heats up to develop a vaccine against coronavirus from China. Among these companies is Inovio (NASDAQ: INO), whose stock has made some furious price movements recently.
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There is also a new financial contribution to consider, which may prove to be a catalyst for INO shares. Yet this trade is not for the faint of heart.
A grant does not guarantee a successful coronavirus vaccine. Nor will it contain the very volatile action of the share price.
Inovio gets a downgrade
By the end of last week, the Inovio shares had gained a lot of 180% so far. You may have witnessed some huge price jumps among stocks announcing developments against coronavirus vaccines. You may have seen some of them move 50% or even 100%. But 180% is quite extreme and can be difficult to maintain. After all, no company has yet come up with an effective, government-approved coronavirus vaccine.
Against this background, an analyst has issued a warning. Analyst Gregory Renzahe seems to suggest the possibility of developing a successful coronavirus vaccine has already been incorporated into the Inovio stock price:
“In our opinion, COVID-19 attention has helped to reach levels that reflect fair value … [T]His unpredictability of making money on a vaccine as well as the inherent work that INO faces in getting a vaccine across the finish line (regardless of fast tracking) still remains – with software development proving the vitality and profile of INO-4800 clinically, being able to distribute vaccines and devices in a scalable way – and everything together remains a high order. ”
In other words, Inovio has to make a lot of progress to justify 180% price jumps. To say that the current price reflects a “fair value” seems like a polite way of saying that the Inovio shares have no current reason to go up much more.
There is indeed merit to this argument. It is a long and difficult process to get a vaccine approved. In addition, Inovio is not the only company testing a coronavirus vaccine. The competition in this area is plentiful.
Support from a celebrity in the market
In any case, the RBC downgraded the stock from better results than sector performance. This despite the fact that Inovio received a grant of 5 million dollars from the Gates Foundation. The reported purpose of the grant is to help Inovio develop a smart device that can inject the company’s coronavirus vaccine.
Thus, one can say that Inovio has a celebrity endorsement from Bill and / or Melinda Gates. The company has also received $ 9 million in funding from a Norwegian organization called the Coalition for Epidemic Preparedness Innovations.
Sure, $ 14 million in funding is nothing to sneeze at, but remember that funding does not guarantee success. Inovio is a small biotechnology company and none of its products are currently approved.
In addition, Inovio’s financial results for the fourth quarter are not encouraging. During that quarter, the company reported a net loss of $ 37.7 million. This corresponds to a loss of 38 cents per share. This is even worse than the net loss of $ 33 million, or 34 cents per share, from the same quarter last year.
In addition, revenues during the fourth quarter were just under $ 279,000. That’s a sharp drop from $ 2.5 million in revenue generated in the same quarter a year ago.
Takeaway at INO warehouse
It is a brave step for RBC to downgrade the INO share. Still, it makes sense. The stock price is too volatile for most investors to handle. And a cash infusion is absolutely no guarantee of successfully getting a coronavirus vaccine approved.
David Moadel has provided compelling content – and crossed individual lines – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga and (of course) InvestorPlace.com. He also serves as chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Watching the Markets. At the time of writing, he had no position in any of the above-mentioned securities.