Why Inovio’s Positive Q4 Update Did Not Impress Investors
Inovio Pharmaceuticals (NASDAQ: INO) stocks are up nearly 25% year-to-date. That’s great, except the stock is up over 90% in early February.
Investors hoping for good news got some with Inovio’s fourth-quarter update after the market closed on Monday. However, the biotechnology stocks still slipped more than 5% at one point in after-hours trading. What happened?
By the numbers
Let’s start with Inovio’s fourth quarter results. The company reported revenue of $ 5.6 million, a significant jump from revenue of just $ 279,000 a year earlier. That result also exceeded analysts’ average estimate of $ 1.11 million.
Inovio reported a fourth quarter net loss of $ 24.3 million, or $ 0.14 per share. This reflects a significant improvement over the company’s net loss during the prior year period of $ 37.7 million, or $ 0.38 per share. It was also better than Wall Street’s consensus estimate of a net loss of $ 0.22 per share.
Biotech cash also looked much better than a year ago. Inovio Inovio ended the fourth quarter with cash, cash equivalents and short-term investments totaling $ 411.6 million. This was an increase from a cash stock of $ 89.5 million at the end of 2019.
Beyond the numbers
Frankly, investors don’t really care about Inovio’s bottom line. Beating analyst estimates up and down when revenue is only a few million dollars doesn’t matter much.
However, Inovio has had other big news. The company reported that VGX-3100 met primary and secondary endpoints in an advanced-stage study targeting precancerous cervical dysplasia. In the primary endpoint of histopathologic regression of high-grade squamous intraepithelial lesions (HSIL) combined with virologic clearance of human papillomavirus (HPV) -16 and / or HPV-18, 23.7% of patients receiving VGX-3100 responded compared to 11.3% in the placebo group.
Inovio also said there were no serious treatment-related adverse events in the late stage study. He noted that most of the adverse events that occurred were “self-resolved and were considered mild to moderate.”
With good results (although not really significant) in the fourth quarter and positive results for VGX-3100, why did the stock fall? Perhaps because many investors are focused the most on Inovio INO-4800’s COVID-19 vaccine candidate and didn’t like what they heard about it.
Inovio expects to complete its Phase 2 study of INO-4800 in the second quarter. The company reiterated that it plans to resolve U.S. Food and Drug Administration (FDA) issues with the Cellectra device used to deliver the vaccine by the end of Phase 2 of the study. Until these issues are resolved, Inovio will not be able to move the INO-4800 to the advanced stage of pivotal testing.
The company also said it is evaluating the impact of new coronavirus variants on INO-4800. Additionally, Inovio announced that it is developing next-generation vaccine candidates that could target both current and future variants of the coronavirus.
What awaits Inovio? There are very different points of view, to say the least.
Oppenheimer analyst Hartaj Singh believes Inovio could more than triple in the next 12 months. My Motley Fool colleague Sean Williams, on the other hand, reflected the opinion of many naysayers with his recent article referring to Inovio as a “dangerous” stock to avoid.
These two perspectives cannot be right. We’ll probably have to wait until Inovio is able to move forward with an advanced stage study of INO-4800 and has positive results from that study to find out which is right and which is wrong.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.