Inovio Analyst Downgrades COVID-19 Vaccine Developer, Says Risk Higher After Rally

Inovio Pharmaceuticals Inc INO shares have rallied strongly in late June, moving from $14.27 on June 19 to $31.25 on July 25, translating to a stellar gain of about 110%.

Much of the upside stemmed from a $71-million DoD contract award for its COVID-19 vaccine delivery device.

The Inovio Analyst: H.C. Wainwright analyst Raghuram Selvaraju downgraded Inovio from Buy to Neutral and removed the price target. 

The Inovio Thesis: Inovio shares have risen 746.9% since Jan. 23, when it announced initial CEPI funding for its DNA vaccine against the novel coronavirus, compared to a mere 18.4% rise by the SPDR S&P Biotech XBI, Selvaraju said in a Monday note. (See his track record here.)

Inovio's COVID-19 vaccine candidate INO-4800 is now valued by the market at roughly $4 billion, the analyst said. 

"We believe the risk/reward ratio for Inovio has increased significantly as many open questions remain, including the strength and duration of neutralizing antibodies and T cell responses that may be generated in human trials and the effective protection the vaccine may demonstrate in animal challenge studies."

The skepticism is primarily due to the fact that there is no approved human vaccine for any type of coronavirus and that no DNA vaccines have been approved yet for human use, he said. 

Selvaraju did not rule out upside from current levels. Any potential upside, hinges on the following, the analyst said: 

• Positive clinical data from human and animal challenge studies
• Evidence that the immunity lasts sufficiently
• Superiority of the DNA vaccine to competing vaccination approaches
• Inovio's ability to obtain market authorization, supply its vaccine sustainably and at an affordable price, while also enabling a reasonable profit margin
• Long-term persistence of the pandemic itself

H.C. Wainwright noted that the interim Phase 1 readout of the DNA vaccine is due this month, with Phase 2/3 studies likely to start in summer.

INO Price Action: Inovio shares were down 5.44% at $28.35 at the time of publication Monday. 

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