Investors can't discount the possibility that the field of cellular medicine is a little overhyped right now, but the potential is huge.

Researchers are toiling away at the bench and in the clinic to determine the best cell types to use as a starting point for a therapy, the best ways to engineer them, and the best time and dosing regimen for administering them to patients. It'll take time to figure all of that out, and some approaches (and companies) will prove to be a dead end, but cellular medicines promise to drive a step change in health outcomes. 

Two companies with unique and promising approaches are Fate Therapeutics (FATE 1.16%) and Iovance Biotherapeutics (IOVA -1.07%). The former is developing a pipeline leaning heavily on natural killer (NK) cells, while the latter has collected promising results for tumor infiltrating lymphocytes (TILs). After recent data updates, investors might consider them two of the top biotech stocks to buy right now.

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The first substantial results were impressive

On the one hand, Fate Therapeutics is certainly ambitious. It lists 13 different programs in its pipeline. On the other hand, most of those programs are still in the discovery or pre-clinical stages. That forced investors to take a cautious approach with the stock for much of 2019, although that changed following a presentation at the annual meeting of the American Society of Hematology in December. 

Fate Therapeutics presented the first clinical data for FT516, an NK-cell-based drug candidate being investigated as a treatment for certain blood cancers. A bone marrow biopsy of the first individual with acute myeloid leukemia to complete one cycle of treatment (three once-weekly doses of the drug candidate) showed no evidence of disease. There was no evidence of leukemia cells in blood tests, either. Importantly, the individual achieved recovery in neutrophils (a type of white blood cell) without help from growth factor treatment. 

The company also reported that a dose-escalation study of FT500, an NK-cell-based drug candidate being investigated as a treatment for advanced solid tumors, was well tolerated in the first 12 individuals treated in a phase 1 trial. The drug candidate aced multiple safety and tolerability metrics, including the avoidance of cytokine release syndrome, neurotoxicity, and graft-versus-host disease -- all of which have been common limiting side effects among first-generation cellular medicines. 

While the recent updates for FT516 and FT500 only represent early-stage results, investors are cautiously optimistic that Fate Therapeutics is on to something with its approach. On paper at least, NK cells boast several important advantages over first-generation immunotherapies based on T cells. For instance, NK cells can be dosed more than once and are less likely to trigger severe dose-limiting toxicities. They can even be combined with T-cell-based immunotherapies or monoclonal antibodies to amplify the benefits of treatment. The early results don't necessarily confirm those advantages beyond all doubt, but they were about as good as investors could have hoped for at this stage.

That makes Fate Therapeutics an exciting stock for investors with a long-term mindset. The business has shot up to a market valuation of $1.9 billion in early 2020, but given the depth of its pipeline and its leadership position in NK-cell-based immunotherapy, the potential far exceeds that. It remains a risky stock overall, but with $303 million in cash at the end of September, the path to the next stock-driving clinical results is relatively de-risked. 

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Multiple regulatory applications are on the way in 2020

Iovance Biotherapeutics is also working to broaden the pool of cell types used in immunotherapies with TIL-based drug candidates. TILs play an important role in a healthy immune system, but can be tricked by rapidly mutating cancer cells. The company has developed processes for growing hardier TILs that are less likely to be thwarted by tumor defenses.

The two most-advanced drug candidates, lifileucel and LN-145, have demonstrated promising results in clinical trials investigating their potential to treat advanced melanoma and advanced cervical cancer, respectively. In a recent phase 2 trial, lifileucel triggered a response in 36% of individuals with advanced melanoma, including 41% in individuals who were resistant to commonly used anti-PD-1 therapies.  On a positive note, the median duration of response had not been reached at the median follow-up of 11.3 months. 

In early 2020, Iovance completed the enrollment of a fourth cohort in the phase 2 study for lifileucel in advanced melanoma. That puts the company on track to file a biologics license application (BLA) with the Food and Drug Administration sometime this year and, in a best-case scenario, earn regulatory approval before the end of 2020. Even if that timeline doesn't hold, the results collected to date against one of the deadliest cancers bode well for eventually earning marketing approval. It would become the first immunotherapy approved to treat solid tumors. 

Iovance Biotherapeutics expects to file a separate BLA for LN-145 in advanced cervical cancer before the end of 2020, which is also expected to earn regulatory approval.

Equally important, the company has begun laying the groundwork for its future. The pre-commercial biopharma is developing the industry's first peripheral blood lymphocyte (PBL) immunotherapy, giving it two novel cell types in development. Iovance also recently landed an exclusive license to use TALEN gene editing tools from Cellectis to develop engineered TILs, which could accelerate research timelines and lower development costs. 

All of that gives investors plenty to look forward to. Iovance Biotherapeutics owns two drug candidates that are expected to earn regulatory approval by 2021 at the latest, and exited September with over $360 million in cash. And it has made moves to keep up with the fast pace of innovation in the biopharmaceutical sector. That's exactly what investors with a long-term mindset (and who don't mind taking on stocks with above-average risk profiles) should be looking for.