Positive Zika Vaccine Update May Ignite Inovio Short Squeeze

Shares of Inovio Pharmaceuticals Inc INO spiked as high as $7.64 in early Wednesday trading following an update from the company on its Zika vaccine study.

Inovio reported that the company has seen a robust immune response to the Zika vaccine in human volunteers not infected with Zika. The vaccine is still in Phase I testing.

While the positive results are certainly good fundamental news for Inovio stock, a short squeeze is likely responsible for some of the big move.

Inovio’s short interest has been steadily declining in the past three months ahead of Wednesday’s vaccine update. Short interest in the stock hit an all-time high roughly a year ago, but remains elevated to this day.

According to shortsqueeze.com, Wednesday’s update caught a number of short-sellers off guard. Inovio has a relatively high short percent of float of 18.6 percent. The stock has more than 12.8 million shares held short with 13.6 days to cover.

Many of these short sellers may be betting that larger rivals, including Sanofi SA (ADR) SNY, GlaxoSmithKline plc (ADR) GSK and Takeda Pharmaceuticals will beat Inovio to the Zika vaccine market. However, news that Inovio is making progress with its vaccine could set the stage for a short seller’s worst nightmare – a buyout.

For now, short sellers must decide whether the update was bullish enough for the company to close out their positions. If the answer is yes, Inovio could be in for an extended short squeeze.