INOVIO Pharmaceuticals Inc (NASDAQ: INO) is having a horrible start to the trading session this morning after the company announced that the United States government will no longer fund its COVID-19 clinical activities. Here’s what’s going on:
US Pulls INOVIO Funding
As mentioned above, INOVIO Pharmaceuticals is falling more than 30% in the market this morning after the company said that the United States Department of Defense will no longer fund its Phase 3 segment of the INNOVATE trial.
The trial was designed to assess the safety and efficacy of the company’s COVID-19 vaccine candidate, INO-4800.
In the release, the company said that the US government made the decision based on the increasing availability of vaccines authorized for emergency use. In the note to the company, the government had the following to offer:
The decision results from the changing environment of COVID-19 with the rapid deployment of vaccines. This decision is not a reflection of the awardee or product, rather a fast-moving environment associated with the former Operation Warp Speed on decisions related to future products.
INOVIO went on to explain that the decision doesn’t impact the other work the company is doing with the government. Nonetheless, the company is looking to global collaborators to continue its work on the Phase 3 trial as well as the evaluation of Phase 2 safety and immunogenicity data.
A Painful Response In The Market
Just minutes after the announcement was made, the stock market responded in a big way. At the moment, the stock is down around 30% on the news, but that painful response might be overblown for multiple reasons:
- INO-4800. INOVIO has no intentions of discontinuing the development of its COVID-19 vaccine. While the US government won’t be funding the activity anymore, the potential for the vaccine to become a hit, should it be approved is great. Moreover, with the vaccine in Phase 3 development, many catalysts may be on the horizon.
- Other Assets. Prior to COVID-19, INOVIO was already working on multiple clinical-stage assets for various rare and life-threatening conditions. It’s unique approach to medicine may make these treatments blockbusters, providing a great long-term opportunity.
- Markets Overreact. It’s no secret that price movements in the market tend to happen through a series of overreactions. While the news was painful, the more than 30% drop is a clear overreaction in my opinion.
Based on these key points, the declines in the stock are bringing INO to a significant undervaluation, making today’s declines an opportunity for those who want to get in on the future of this company.
The Bottom Line
The fact that the United States government pulled funding for the company’s COVID-19 trial is upsetting news. However, as is usually the case in the stock market, the movement we’re seeing in the value of the stock is likely an overreaction, offering a discounted opportunity to get in on future gains.