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Why Inovio Pharmaceuticals Stock Sank in October

What happened

According to S&P; Global Market Intelligence, shares of the DNA vaccine maker Inovio Pharmaceuticals (NASDAQ: INO) shed 8% of their value last month. On the bright side, this high single-digit decline wasn't the result of a negative clinical or regulatory event specific to the company.

Inovio's shares, by contrast, appear to have simply followed the broader biotech industry lower last month, evinced by the poor performance of the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) in October.

INO Chart

So what

Biotech investors were reminded of just how risky these type of equities can be last month when Celgene Corp.'s (NASDAQ: CELG) experimental Crohn's disease treatment, GED-301, unexpectedly went belly-up in a late-stage trial. This single clinical setback rippled through the entire industry, bringing down the iShares Nasdaq Biotechnology ETF -- and its individual components like Inovio -- along with it.

Now what

Inovio took a particularly hard hit last month probably because it's a clinical-stage biotech that trades according to the sentiment of retail investors for the most part. Unfortunately, the retail crowd appears to have lost its appetite altogether for risky biotech stocks in the wake of Celgene's clinical setback, and Inovio took it on the chin, so to speak, because the company currently occupies the deep end of the risk pool at this stage of the game.

The long and short of it is that Inovio is at least a few more years away from producing a top-line readout for its experimental cervical dysplasia vaccine, VGX-3100, that could transform it into a commercial-stage operation with an actual revenue stream. Until then, this speculative equity is likely to remain on the volatile side.

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George Budwell owns shares of iShares NASDAQ Biotechnology Index. The Motley Fool owns shares of and recommends Celgene. The Motley Fool has a disclosure policy.


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