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What happened

Shares of tiny immunotherapy developer Agenus Inc. (NASDAQ:AGEN) tumbled 44.7% in October, according to data from S&P Global Market Intelligence. A larger-than-expected loss in its third-quarter earnings report overshadowed news that its partner, GlaxoSmithKline (NYSE:GSK), submitted an application for the two companies' partnered shingles vaccine.

AGEN Chart

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So what 

Agenus Inc.'s third-quarter loss spiked 209% over the previous year period to $40.8 million, catching analysts off guard. No investors want to see their company's loss widen, but the results aren't nearly as ugly as they appear to be on the surface. Non-cash expenses, stemming mostly from existing asset value adjustments, increased by $22.7 million in the third quarter compared with the same period last year. As the term "non-cash" suggests, this sort of expense has more to do with accounting protocol than it does the core of the business. 

What didn't help Agenus' stock price last month was a case of election-season jitters for the overall biotech space. The industry-tracking iShares Nasdaq Biotechnology ETF sank 11.5% last month. Even news of an on-schedule application submission from GlaxoSmithKline for a shingles vaccine Agenus is partnered on wasn't enough to perk up the latter company's stock with the sector-wide dark cloud overhead. 

Now what

If Glaxo's Shingrix earns a widely expected approval, Agenus is entitled to at least 10 years of royalties from sales expected to reach about $1 billion annually at its peak. If approved, Shingrix will challenge Merck & Co.'s Zostavax, which generated $749 million in sales last year. The two vaccines haven't been tested head-to-head, but Shingrix showed some impressive results in studies supporting its application that could quite feasibly help it gain traction in the commercial setting.

During the third quarter, Agenus also noted a $4.9 million increase in expenses related to advancing its clinical-stage pipeline. The biotech has a cancer vaccine in mid-stage clinical development, and a GITR agonist in early-stage clinical studies. Expenses related to these programs are split between Agenus and its partner Incyte

Agenus is also advancing a CTLA-4 antagonist through early-stage clinical studies with intentions of combining it with an anti-PD1 drug, which will probably be Keytruda through an existing collaboration with Merck. Yervoy from Bristol-Myers Squibb is another CTLA-4 antagonist, which recently earned approval for treatment in combination with anti-PD1 Opdivo for treatment of advanced skin cancer. Bristol's combo provides a yardstick to measure success for a potential combination study with Agenus' candidate of the same class. With so many irons in the fire, and a market cap of around $345 million at recent prices, my hunch is that Agenus is seeing some overblown pessimism.