Are These 2 Dark Horse Vaccine Makers Worth the Risk?
George Budwell, The Motley Fool
June 16, 2018
The vaccine market presently ranks as the fourth most valuable therapeutic area within biopharmaceuticals, according to a new report by EvaluateGroup. However, this high-value market has been historically dominated by big pharmas like GlaxoSmithKline, Merck, and Pfizer, making it next to impossible for investors to get in on the ground floor of a promising clinical-stage vaccine-maker.
Compounding matters further, the few publicly traded vaccine specialists available to investors at the moment have been fraught with clinical setbacks and lengthy development delays that have crushed their share prices. That being said, Inovio Pharmaceuticals (NASDAQ: INO) and Novavax (NASDAQ: NVAX) are two pure vaccine plays that might be able to finally break free of this long-term downtrend. These dark horse vaccine makers, after all, are reportedly developing two of the most valuable experimental vaccines in the industry right now.
A vaccine vial and a syringe behind it.
Image Source: Getty Images.
Should investors put their faith in these two underdogs? Let's dig deeper to find out.
A hidden gem?Over the last five years, Inovio's shares have shed over 80% of their value due to the company's painfully slow pace of development for its lead vaccine candidate, VGX-3100, which is presently in late-stage testing as a treatment for certain forms of HPV infections of the cervix in adult women. And while this experimental DNA vaccine does have the potential to generate substantial sales as the first nonsurgical treatment for precancerous cervical lesions, the company's slow-boat approach to development has resulted in multiple secondary offerings over the years that have dramatically increased the number of outstanding shares.
INO Chart
INO data by YCharts.
Nevertheless, Inovio does offer a rather juicy value proposition now that VGX-3100 is a little over a year away from generating top-line data. The lowdown is that analysts think that VGX-3100 can generate a healthy $622 million in sales by 2024 -- that is, if it's ultimately approved for its first indication in or around 2020.
As biotechs with an FDA-approved product tend to trade at a price-to-sales ratio of at least 3, Inovio's market cap could realistically balloon upward into the $1.8 billion to $2 billion range within the next few years. Put simply, Inovio's upside potential from here appears to be something in the neighborhood of a staggering 450%.
Why is the market discounting this stock so deeply? The stark reality is that DNA vaccines like VGX-3100 have performed poorly in late-stage trials, resulting in zero FDA approvals for these third-generation vaccines in humans. Whether VGX-3100 can be the first to break this trend remains to be seen, but the odds are against it.
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