Inovio shares fall 8.8% a week after ‘positive’ Covid-19 vaccine trial result

Inovio Pharmaceuticals’ share price in see-saw

US drug manufacturer Inovio Pharmaceuticals Inc saw its share price plunge as much as 7.5% within the first hour of the market opening on Monday 06 July 2020.

Eventually, the stock hit an intraday low of US$19.70 per share at around 10:25 ET, based on IG data.

However, market sentiment on the stock swiftly changed just two hours later, with shares doing a 180 to hit an intraday peak of US$21.85 – even higher than the previous session’s closing price of US$21.45 per share.

What caused the Inovio stock to fall?

There are two possible reasons for the Inovio sell-off on Monday.

The first, as IG market strategist Pan Jingyi noted on 30 June, ‘an overbought situation certainly looks the case’ for the stock, suggesting that Inovio shares are overvalued at present.

Inovio’s current price-to-book (P/B) ratio also supports this theory. Inovio stocks have a P/B ratio of 17.75 as of 06 July, which is nearly five points above its five-year P/B ratio average of 13.16. This value is despite Monday’s share price decline.

Furthermore, prior to its Covid-19 vaccine candidate INO-4800 making headlines as a cure frontrunner, Inovio had a P/B ratio of less than 9.00.

As US investment firm Maxim Group Naureen Quibria previously noted, ‘the success of INO-4800 is priced into shares’. Quibria downgraded Inovio from a ‘buy’ to ‘hold’ last Thursday 02 July.

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Another possible reason for Inovio’s price decline on Monday could be an ongoing class action lawsuit that was filed in the Eastern District of Pennsylvania court on behalf of a group of Inovio shareholders, according to Philadelphia Magazine.

The plaintiffs alleged that the company’s CEO J. Joseph Kim’s public statements regarding its Covid-19 vaccine candidate INO-4800 were in violation of certain sections of the Securities Exchange Act of 1934.

They also argued that those statements – made in early-March – had caused Inovio’s stocks to become unpredictable, burgeoning 400% one day, and then crashing by the same amount less than a week later.

What’s the outlook on Inovio shares?

IG’s market analysis show that ‘buys’ formed 56% of all trades on the Inovio counter on Monday, with ‘sells’ comprising the remainder of trades.

Meanwhile, 92% of IG client accounts with open positions in this market expect the price to rise, with the remaining 8% of IG client expecting the price to fall.

Additionally, Pan said that while downsides appear unlikely for the stock at present, short-term price fluctuations are to be expected in the interim – at least until full trial results are announced.

‘Much like any drug that goes through the key clinical trial stage, if the efficacy, safety and other issues comes into question, that could lead to a price reaction,’ Pan noted.

‘In this case for INO, which had fuelled high hopes of a Covid-19 development and seeing funding from (the) DoD, any disappointments could lead to a substitution effect with other vaccine developer candidates,’ she added.

Looking further ahead, Pan concluded that with vaccine development widely expected to be a long-drawn process, ‘optimism here could support prices for the pool of vaccine developers awaiting breakthroughs’.

On Tuesday 30 June, Inovio announced ‘positive’ interim results for INO-4800’s phase one trial. It said that 94% of Phase 1 trial participants demonstrated overall immune responses at Week 6 after two doses of INO-4800 in trial with 40 healthy volunteers in preliminary analyses.

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