Cell therapies are increasingly being added to drug pipelines across the biopharmaceutical industry, but Iovance Biotherapeutics (NASDAQ:IOVA) was one of the first movers with its tumor-infiltrating lymphocytes (TILs). In fact, the company is likely to earn marketing approval for two drug candidates in 2021.
The upcoming transition to commercial operations is a big milestone for the business and shareholders, especially if revenue ramps to levels that allow for operating income and positive cash flow. While the biotech stock has performed relatively well in 2020, some of the excitement has waned. Investors initially hoping for an acquisition have come to acknowledge recent moves suggest Iovance Biotherapeutics plans on remaining a stand-alone company.
Given all of the moving parts, is this biopharma stock a buy?
The argument in favor
Iovance Biotherapeutics wields the most valuable asset a development-stage biopharma can have: solid data. Each of the company's two most advanced drug candidates, lifileucel in advanced melanoma and LN-145 in cervical cancer, have delivered encouraging results.
In late 2019, the company reported that a late-stage study of lifileucel in advanced melanoma found an objective response rate (ORR) of 36.4%. Among the 66 patients taking part in the clinical trial, 22 (33%) had tumor shrinkage and two (3%) had no evidence of disease. Another 29 (44%) had stable disease and only nine (14%) saw their cancers progress. Nearly all responders achieved a reduction in tumor burden of at least 30% and the total disease control rate (DCR) was 80%. The median duration of response had not been reached at 18.7 months of follow up.
It was a remarkable result considering the lack of viable treatments for metastatic melanoma, which remains one of the deadliest cancers. The final patient of a pivotal trial was enrolled in January 2020. That puts Iovance Biotherapeutics on track to submit a biologics license application (BLA) for lifileucel in advanced melanoma before the end of 2020.
That might not be the only BLA with the company's name on it to slide across the desk of regulators this year. Iovance Biotherapeutics expects to file a marketing application for LN-145 in cervical cancer before the end of 2020, too.
In a small study, LN-145 demonstrated an ORR of 44%. Among the 27 patients treated with the cell therapy candidate, nine (33%) had tumor shrinkage and three (11%) had no evidence of disease. Eleven (41%) had stable disease and only four (15%) saw their cancers progress. Similar to lifileucel in advanced melanoma, most responders saw their tumor burden decline at least 30% and the total DCR was 85%.
The results are impressive. The best cervical cancer treatment available on the market today demonstrated an ORR of 14% in its pivotal trial. Across the industry's pipeline, the next-best ORR from a development-stage asset is just 27%.
Simply put, Iovance Biotherapeutics is well-positioned for success with lifileucel and LN-145. The cell therapy candidates could achieve peak annual sales of about $1 billion in advanced disease indications, although the company is studying their effectiveness as earlier-line treatments options and in combination with other therapeutic agents.
The argument against
It's easy to be bullish on Iovance Biotherapeutics. The business ended March with $251 million in cash and raised another $603 million in gross proceeds from a stock offering in June (that transaction signaled the company won't be acquired). The company's top two drug candidates are likely to earn marketing approval in 2021. They have a combined peak annual sales potential of $1 billion, which makes the company's market valuation of just $4 billion appear as a relative bargain for investors with a long-term mindset.
Right now, Iovance Biotherapeutics appears well ahead of any other treatment options in advanced melanoma and advanced cervical cancer. That supports the ability to generate healthy levels of revenue for years following market launch. But investors must confront one risk that could derail the long-term investment case: the pace of innovation in biopharma.
More specifically, the single-biggest risk facing the technology platform is the manufacturing process. Iovance Biotherapeutics harvests tissue samples from a patient, sends them to a centralized location, isolates the TILs, grows them to a sufficient density, and then sends them back to the patient's location for infusion. The end-to-end process time is 22 days -- relatively fast compared to the company's prior-generation process. To ensure quality control, the company is building an $85 million manufacturing facility in Philadelphia that will be operational in 2021.
The problem is the manufacturing process might soon be considered outdated. The ideal cell therapy would be generated from a master cell line, not harvested from individual patients, and be made available off-the-shelf. It makes for a manufacturing process with fewer steps, significantly lower costs, and without the need to delay treatment for patients. It also allows for allogeneic cell therapies, which means a patient could receive multiple doses of treatment. Lifileucel and LN-145 can only be administered once.
In other words, Iovance Biotherapeutics could be faced with considerable competition from next-generation, off-the-shelf cell therapies by the end of the decade. If that occurs, then it's possible lifileucel and LN-145 never reach the peak annual sales potential predicted today.
This cell therapy pioneer has a bright future
As far as cell therapies go, TILs have several advantages compared to T-cell receptors and T cells. Those unique qualities have been reflected in the encouraging results collected for lifileucel in advanced melanoma and LN-145 in cervical cancer. Both cell therapy candidates appear poised to earn marketing approval in 2021.
The impressive outcomes for the company's two lead drug candidates and the distance between them and the next-best treatment options are enough to make Iovance Biotherapeutics stock a buy. It could be quite some time before other industry assets best either TIL therapy, and that doesn't account for the potential of lifileucel or LN-145 to be used in combination therapies, which could enhance already impressive outcomes.
While harvesting samples from individual patients isn't ideal and puts the company's pipeline at risk of disruption from next-generation cellular medicines, it's possible for Iovance Biotherapeutics to chip away at that disadvantage. The company is developing a third-generation manufacturing process to reduce end-to-end process time from 22 days to 16 days. It's also developing gene-edited TILs, which could be safer, more effective, and easier to manufacture compared to current-generation assets. Additionally, there's no reason TILs couldn't be manufactured in an off-the-shelf manner, although those drug candidates would be required to progress through lengthy clinical trials to earn marketing approval.
Therefore, the long-term risk presented by the pace of innovation is something investors cannot ignore, but there's time for Iovance Biotherapeutics to address it. This stock is a buy.