Inovio Bulls Could Use a Shot of Good News Inovio (NASDAQ:INO) stock is staging a mini-rally over the last five days in advance of what is expected to be a mixed earnings report. Analysts are forecasting negative earnings per share (EPS) of 20 cents.

Inovio (NASDAQ:INO) stock is staging a mini-rally over the last five days in advance of what is expected to be a mixed earnings report. Analysts are forecasting negative earnings per share (EPS) of 20 cents. This would be a 23% year-over-year (YOY) increase. On the other hand revenue is expected to come in at $1.06 million, a 20% YOY decrease.

The stock is dropping because the United States government announced it was pulling funding for the company's Covid-19 vaccine candidate, INO-4800. That leaves the company with its HPV drug that has recently completed a Phase 3 trial.

If you're an investor that bought INO stock on January 4, 2020 you're still sitting on a 133% gain. However, the stock is down nearly 25% in 2021. Right now, the stock is at an inflection point, and the bulls need some good news.

So You're Saying There's a Chance?

I know we live in a society where words can mean whatever we want. And this is not an attempt to pump INO stock. However in the interest of accuracy it's important to note that the U.S. pulled funding on Inovio's Covid-19 vaccine candidate because of the prevalence of other vaccines.

I don't have to tell you that the United States is not lacking for vaccine supply. In fact, some states are even turning away vaccines because demand is drying up. In other words, the race is over. And from the beginning we knew that some companies were not going to make it to the finish line.

That's not the same thing, however, as saying that Inovio's candidate "didn't work." It was after all in a Phase 2 trial that is going to continue to be funded. And at this time Inovio, which has partnerships with China's Advaccine and the International Vaccine Institute, plans to conduct a Phase 3 trial with participants mostly outside of the United States.

And, the United States has specifically said this announcement does not mean it will discontinue working with Inovio in the future.

I'll say it again for the keyboard warriors, I'm not trying to deliver false hope. But there are some analysts who are taking a victory lap saying that Inovio's vaccine "failed." The reality is we don't know that yet.

A Distinction With a Difference

Some of the more cynical will say that my logic is offering a distinction without a difference. I disagree. The question is one of intent. Was Inovio promising something that they know can't work? Or, is the company delivering a vaccine that requires more testing?

I'd argue the latter. For those that don't know or need a refresher, Inovio's Covid-19 vaccine candidate, INO-4800 is a DNA vaccine. The website Precision Vaccinations describes the vaccine in this way "it contains the plasmid pGX9501 which encodes for the entire length of the spike glycoprotein of SARS-CoV-2."

One of the compelling benefits of this, or any DNA vaccine, is that it can be stable at room temperature for over a year. And it doesn't require frozen transport.

In mid-April, Inovio announced that INO-4800 induced a robust T-cell response against multiple variants of the novel coronavirus. Those results are being peer reviewed, but that doesn't suggest the company has failed.

After all, we never had mRNA vaccines either, but many of you reading this have received one.

One Giant Hurdle Remains

While I have made clear that I don't believe the defunding of Inovio's Covid-19 vaccine should be a reason to abandon INO stock completely, there is one development that bears watching.

In September 2020, Inovio's Phase 2 trial was held up because the FDA had questions regarding Inovio's CELLECTRA delivery device. There is some reason to believe this hold will soon be lifted, but if it isn't it will be a huge setback for the company. The CELLECTRA device features electroportation as its delivery system and would be a game changer. If the ban is upheld, Inovio will have to go back to the drawing board.

Sell in May Or Just Go Away?

Despite my optimism, there are other opportunities for growth, even among speculative investment sectors like biotechnology. Inovio does have an HPV drug, VGX-3100, that is in a Phase 3 trial. But it will likely be 2022 before that drug starts generating revenue for Inovio.

At this point, I can understand holding some INO stock as a long position. The stock does look oversold at the moment. And if the company gets clarity around its CELLECTRA device, there can be an emerging story.

Analysts have a price target of over $17 for INO stock with a low price that is above its current level. That suggests there may not be a lot of downside risk. But growth is not a sure thing either. Weak hands should take profits, but true believers would be wise to wait for more information.

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