Inovio Pharmaceuticals (INO) gained over 6.5 percent on Monday, carrying forward momentum that the stock seemed to be building over the course of Friday’s session, in which Inovio opened lower but gained as the day wore on. The gains on Monday didn’t appear to have any specific news item acting as a catalyst as shares opened about even and then slowly built on gains as the day proceeded.
The gains were undoubtedly a welcome break from a lengthy downtrend that hit two months today for Inovio investors. Since hitting its 52-week high of $3.95 a share on March 19, Inovio has beaten a steady retreat, shedding over 45 percent of its value from that peak to yesterday.
Immediately prior to this peak, Inovio has seen its MACD line cross its signal line from above, a classic sell signal. And, over the course of the downturn, the 20-day SMA crossed first the 50-day SMA from above in mid-April and then the 200-day just this last week.
However, a closer look at Inovio should indicate that the company is likely much more promising than the last two months would indicate. Its presence among Equities.com’s Small-Cap Stars indicates that the company has solid fundamental metrics that are typical of a company poised to make big gains.
What’s more, Inovio’s losses largely line up with a broader flight from biotech stocks by the markets that’s been in play since March. Since March 19, the iShares NASDAQ Biotechnology Index ETF (IBB) is off almost 13 percent, representing a broad decline for the entire industry.
It might be important to keep this market-wide decline for biotechs in mind as context for Inovio’s losses. Investors have, for the last two months, been shifting to a risk-off attitude as they flee stocks in general and growth plays in particular. So much of Inovio’s current slide could be placed as being attributable to the trend rather than any sort of specific deficiency with the company.
And Inovio clearly appears to have real potential laying in its product pipeline. Inovio is developing vaccines using synthetic DNA that can be used for preventing or treating a variety of cancers and other infectious diseases. By using synthetic DNA, Inovio’s SynCon® technology has the potential to go above and beyond what vaccines were previously capable of. From the company’s website:
“Rather than being constrained by the paradigm of matching a preventive or therapeutic vaccine to a single pathogen strain, our SynCon® vaccines are based on genetic code for a specific antigen from multiple strains of the target pathogen. Thus, while the SynCon® antigens may not be perfectly (100%) matched to the pathogenic strains, they are designed to protect against multiple existing strains as well as changing strains of a virus. Extensive preclinical data has validated their ability to protect against many strains of a disease; initial human data for our influenza vaccine has also provided evidence of this capability.”
Most notably, Inovio has been developing a treatment for Middle East Respiratory Syndrome (MERS), which emerged in Saudi Arabia in 2012 and has been in the news of late after three cases surfaced in Illinois.
And, should you have a bullish opinion on the company snapping back out of its current slump, you wouldn’t be alone. All five of the analysts with coverage on Inovio have it rated in “strong buy” territory, with Stifel giving the stock a price target of $4 on May 6, 75 percent above its current levels. And that’s relatively bearish when compared to the $6 price target Maxim slapped on Inovio in mid-March (though, it should be noted, just before its current slump started).
So, while Inovio might be struggling at the moment, it’s entirely possible that this is simply a good company getting swept up in a broader market trend. Monday’s gains don’t seem to have a specific news item motivating them and come amidst a 0.86-percent gain for the Nasdaq Comp. and a 1.4-percent gain for IBB and it would seem more than possible that Inovio’s price is currently at the mercy of market forces out of its control. As such, the right news could provide just the catalyst needed to help Inovio break out and differentiate itself from broader small-cap biotech plays.
Regardless, the strength of the analyst coverage and its presence on the Small-Cap Stars should indicate that Inovio is a company with real potential for success. And, if the science ends up going their way, it could mean that this company is poised to do big things.
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