For some little ones biotechnology, the race to develop a COVID-19 vaccine represented an opportunity to secure funding and establish partnerships that could serve as lifelines long after the pandemic. Two companies that have been eager to take advantage are Innovation Pharmaceutical products (NASDAQ: INO) and Wax species (NASDAQ: VXRT). Despite limited progress and long-standing legal problems, the shares of both companies are dramatically higher than when the virus emerged just over a year ago. For investors willing to take the risk, there are a few comparisons that can help determine which is the better stock to buy now.
Vaccines against COVID-19
In June, Vaxart reported encouraging data in early animal experiments. Its vaccine candidate, administered in the form of an oral tablet, had produced antibodies in mice and reduced weight loss and swollen lungs in infected hamsters. Not much new information was available until the company’s vaccine candidate recently passed its safety-focused phase 1 trial without serious side effects. Unfortunately for shareholders, the data did not indicate that protective antibodies were generated. The stock immediately fell nearly 60%.
Inovio also published early results from animal experiments in June. The company proclaimed its vaccine candidate protection in mice and the lack of serious adverse safety incidents in its own Phase 1 trials in humans. That was just a week after securing $ 71 million from the Department of Defense to scale production of its Cellectra devices, the company’s handheld gadgets that deliver its gene-based medicine via an electrical pulse. Data from this phase 1 study were not released for six months. When it was announced, the stock had fallen 70% from the June peak.
None of the companies appear to be ready to deliver a viable vaccine to COVID-19 anytime soon. While Inovio entered Phase 2 before Thanksgiving and hopes to move to Phase 3 early this year, Vaxart is only now entering Phase 2, where the company will try to determine the most effective dosing regimen. Fortunately for the couple, they are also developing treatments for other diseases.
Other programs on the way
Both companies are researching the application of their respective drug delivery technologies to several diseases in addition to COVID-19. Vaxart has performed early work on norovirus, human papillomavirus (HPV) and a cold virus that can be serious in infants. However, its primary focus is on seasonal flu. Its monovalent influenza vaccine, which is only targeted at the H1 strain, performed slightly better than the leading influenza vaccine in a phase 2 trial. The study was supported by $ 15.7 million from the Office of Biomedical Advanced Research and Development Authority (BARDA). The company divided this success into a partnership with Johnson & Johnson unit Janssen to develop a universal influenza vaccine. Although it may take several years until the pill is available, it may dominate the market for the approx. 49% of Americans currently receive the flu vaccine each year. In fact, the ease of taking a pill is likely to increase this percentage significantly.
Inovio has many more disease targets in its portfolio of drugs, including several types of cancer. Across the many programs, most of its partnerships are with nonprofits, although the company has an HPV program with AstraZeneca and one to target a rare form of brain cancer with Regeneron. Unlike Vaxart’s single-phase program beyond Phase 1, most of Inovio’s Phase 2 programs with a drug targeted at HPV are currently in Phase 3 trials. Management expects a reading for this survey in the first half of this year.
The credibility of the management team
Vaxart announced that it was part of the U.S. Government’s Operation Warp Speed (OWS) program on June 26. Less than a month later, the stock increased by 570%. Despite suggesting otherwise, it was the company does not selected to receive funding as part of the OWS program. It was simply invited to participate in preliminary studies of animals.
One stakeholder took advantage of the confusion. Less than three weeks earlier, Armistice Capital, a hedge fund that owned 29% of the company, had changed an agreement that allowed it to buy shares for pennies. When the stock spiked, they simultaneously bought the shares on the cheap and sold them, getting $ 200 million in pocket and essentially leaving their stake. Due to the actions and timing, Vaxart is the subject of an investigation by both the Department of Justice and the Securities and Exchange Commission.
Inovio has its own history with confusing announcements that have led the stock higher. CEO Dr. Joseph Kim claimed in a television interview in February and until March that the company had only developed a COVID-19 vaccine in three hours. After criticism, the company clarified that it had only developed a design for the vaccine. A number of shareholder cases followed.
Not one who shyes away from promotion, called Dr. Kim his company “world leader in coronavirus vaccine development” at a White House meeting in March between President Trump and pharmaceutical leaders. By June 23, when Inovio secured its funding to utilize several of its electronic drug delivery units, the stock was already 500% larger for the year. One week later, the company announced that it was part of OWS and the shares continued to rise and at one point registered a 1000% gain in 2020. OWS had already announced its finalists for vaccine development earlier this month and Inovio was not listed among them.
If you have to choose one
None of the companies offer a predictable future or a clear path to a COVID-19 vaccine. Although Inovio has many more drug candidates further ahead in the clinical trial process and expects a large Phase 3 reading this year, delivery of these drugs requires a complex electronic device. It is difficult to see widespread use of this technology without a particularly unique medication or disease treatment. The SARS-CoV-2 virus offered this option, but the window appears to be (at least partially) closed.
On the other hand, Vaxart is focused on one of the most prevalent diseases in existence, one that causes up to five million serious diseases a year. Combine the fact that about half of Americans already get a flu vaccine each year with perhaps the easiest drug delivery mechanism ever, and the ingredients are available for massive uptake. For the long-term potential and gigantic market opportunity, Vaxart may offer the better potential reward for those willing to take significant risks and wait years for the little biotechnology to prove itself.
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