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Inovio Pharmaceuticals, Inc. – founded back in 1983 in the US, is a pharma, health and biotechnology company focusing on the development and manufacturing of DNA medicines to treat infections, cancer, and other diseases such as human papillomavirus. The main focus areas are HPV, immuno-oncology, infectious diseases, and viruses like COVID or Zika. There are several products offered by the firm that are currently in different stages of testing. The company has its own funded products as well as medicine that is being funded by outside partners such as World Health Organization or AstraZeneca, to name a few.
The company sets its purpose to stay innovative in developing medicine to help save lives in ways that are currently not applied. Most of the senior management and executive team are either Ph.D.s, business professionals or M.D.s. The company has 260+ employees at the moment.
Inovio did an IPO back in 1989 with an initial price of USD 53 per share traded on the NASDAQ stock exchange. The company saw its peak stock price in February 2000 at a value of close to USD 118 per share. Currently, the stock is trading around 1.9 as we write this, which compared to its initial IPO price is about -96% performance. The current market capitalization (market cap) of Inovio is around USD 461 million making the company a small-cap stock.
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Inovio Pharmaceuticals (INO) Stock Forecast 2023
The company reported its Q3 results with a significant positive surprise given the fact that the market was expecting a larger net loss than what was actually reported in its bottom line. At the same time, the firm had significantly higher revenue than what was anticipated by the investors. The bottom line surprise was partially driven by the increased revenue numbers, as well as relatively lower costs associated with research and development for Q3 2022 compared to other quarters.
Although investors reacted positively supporting higher stock price after the earning results were published in mid-November 2022, it didn’t last long because of some negative news regarding the discontinuation of two product lines due to unfavourable testing results in phase 1 and phase 2. Thus the price is back to the previous levels even slightly lower than the levels seen before due to the overall market sell-off driven by recent positive economic data and anticipation of further rate hikes by the Fed to fight inflation.
It is expected that the company will keep the revenue and earnings for Q4 2022 on a similar level based on market and analyst expectations.
In its annual report, the company highlighted that the cash runway which is showing the time period the firm can be in business until its cash balance becomes zero is estimated to be Q1 2025. This means that the company has about 2 years to make some profit from its products otherwise it might run out of cash.
Looking at the new product pipeline of Inovio, the company has only 2 products that are currently in phase 3 testing and might get some approvals within the next year. The other 3 pipelines have finished phase 2 and would still need to get clearance for phase 3. While the rest are currently undergoing either phase 2 or are at lower stages of the testing.
Given the product pipeline schedule as well as the short time period remaining for the cash runway, the company is in a dangerous position to be. The stock price will be significantly dependent on the positive news from the testing phases which might support further stock price increase, otherwise, the company will burn the cash in hand within 2 years.
On the fundamentals side, given the negative bottom line, profitability ratios such as return on assets (ROA) and return on equity (ROE) are negative and those have been reducing deeper into the negative territory over the years. Given the slightly better bottom line for Q3, this is an indicator that the assets and equity of the company reduced for Q3 2022.
On the liquidity side, the company is keeping its liquidity ratios on healthy levels reporting current and quick ratios of more than 3.5 for Q3 2022 which indicates that the firm will have no problems at the moment with meeting its short-term liabilities in case there is such a need.
Solvency or leverage ratios such as debt to assets are at healthy levels as well since the company is financed mostly by equity capital and has a relatively low amount of debt on its balance sheet.
So overall the company is in a healthy state from the balance sheet standpoint, while it seems that the investors want to see some positive bottom line for the company to support the price increase in the long run.
On the technical side, the relative strength index or RSI (a technical indicator for identifying whether the stock price is oversold or overbought) has a downward trajectory but is below the mid area which indicates that the current price is considered oversold.
Similar to RSI the moving average convergence divergence (MACD) indicator provides further support to believe that in the next couple of trading sessions we might see further price decline given that the bear market hasn’t been finalized yet for the stock.
Similarly to RSI, the Bollinger Bands are showing higher price volatility and the current price is in the oversold territory.
Despite the negative news and sell-off of the stock price, the 1-year projection by some analysts covering the stock is a minimum of USD 2 per share which is about +8% increase from the current level.
Inovio Pharmaceuticals (INO) Stock 2022
In 2022 the stock price of Inovio dropped by more than 60% with no major sharp declines but rather a gradual reduction in value over time partially due to the macroeconomic conditions and partially because there was no positive news on the product testing phases and there was instead negative bottom line over the quarters.
On May 10 2022 there was a somewhat sharp decline in the price which was associated with the negative earnings surprise in quarterly financial reporting. Also, news about the resignation of the former CEO and the appointment of a new one being active immediately was probably not well accepted by the market.
INO Stock 2021
Early 2021 was more volatile for the company since it had large spikes at the beginning of the year but later it reversed to the stable 2022 levels. End of January 2021 the company offered a new public offering of USD 150 million in shares which was positively accepted by the market giving the stock price more than 70% spike in early February.
However, this price level didn’t last long since the market returned to its early 2021 price territory in March which was partially driven by the fact that an insider exercised derivative positions and sold the stocks.
In late April the company’s stock price saw another drop in price due to the news that the US government stopped funding its COVID-19 vaccine study. Afterward, for the rest of 2021, the price was overall less volatile and closed the year with about -47% performance for the year.
INO Stock 2020
2020 was a positive year for the stock since the company saw a couple of peaks in the stock value over the year. The first jump in price is visible in early March thanks to the news that the company is accelerating the timelines for the COVID-19 vaccine. But again it didn’t last too long since another news regarding an insider selling the positions caused the value to drop to its previous levels.
Another jump in the price happened at the end of April when the news on the COVID-19 vaccine was that the company received additional grants and that it was being backed by the Bill Gates foundation to finish the patient enrolment.
A large jump in the price near the end of June was supported by an additional USD 71 million contract the company signed with the US Department of Defence to speed up the production of some of its smart device pipelines.
Afterward, the stock price gradually decreased for the rest of the year but managed to close the year with more than +170% return.
Conclusion
Inovio stock had a significant reduction in value since its IPO and the current state of the company is that in case it keeps losing money for the foreseeable future – for the next two years to be more precise, it might burn entire cash reserves that it currently has – assuming there are no additional fundings provided. This is because most of the company’s product pipelines are under various stages of testing phases and are draining the revenue due to high research and development costs.
Although the balance sheet is strong at the moment unless the company comes up with a robust strategy and a plan for its product pipelines the stock price is going to hover in the same territory or even lower till there is some positive news or achievements in terms of the testing phases. Nevertheless, the analysts covering the stock expect the price to grow at least by 8% within the next 1 year.
FAQ
Why the company is burning so much cash?
The product pipelines are currently under different phases of testing which is causing the company to spend a significant amount on research and development leading to net loss and hence draining the cash account.
What will happen if the company doesn’t have new funding and no positive news on testing phases?
In such a situation if the company keeps losing money with no positive outcome from new pipelines and existing ones, then the company might get out of the business or be acquired by another firm.
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