It isn't easy being a drugmaker without any drugs to sell. As shareholders of these two biotech stocks have learned recently, it isn't easy to own shares of clinical-stage drugmakers, either.  

Shares of these formerly high-flying biotech stocks crashed this year in response to serious setbacks. Recent setbacks aside, though, these drugmakers have given investors a lot more to be excited about than their recent stock market valuations would suggest. Let's dig in a little further to see if they could be bargain opportunities right now.

Company (Symbol) Loss in 2021 Market Cap
Iovance Biotherapeutics (IOVA -3.50%) 54% $3.3 billion
Axsome Therapeutics (AXSM 3.32%) 73% $815 million

Data source: Yahoo! Finance.

Iovance Biotherapeutics

Long-term Iovance Biotherapeutics investors have had to exercise a lot more patience than they probably anticipated a few years ago. This clinical-stage immuno-oncology company produced successful clinical trial data for its lead candidate, lifileucel a couple of years ago. Sadly, the FDA still hasn't started reviewing an application package the company should have finished assembling a long time ago.

Two lab workers share a smile.

Image source: Getty Images.

Treatment with lifileucel involves more than injections or pill swallowing. Each patients' tumor-infiltrating lymphocytes (TIL) must be collected, then allowed to multiply before they're reinfused. In May, Iovance stock tanked after the FDA held up the development of lifileucel citing unsatisfactory potency tests that prove the final manufactured version of lifileucel jibes with the version used in clinical trials.

Iovance Biotherapeutics' CEO abruptly stepped down after it became clear the company wasn't nearly as close to launching its first drug as investors thought it was. New management thinks lifileucel's potency assay woes can get worked out in time for the company to submit an application to the FDA in the first half of 2022.

Iovance's lifileucel debacle was an enormous disappointment, but it doesn't change the compelling data this company's TIL-based therapy candidates have produced so far. It could be just a matter of time before Iovance gives the market a reason to drive its stock into the clouds.

Axsome Therapeutics

For more than a decade, U.S. physicians have prescribed an antidepressant called bupropion more than 20 million times per year making it one of the most popular generic drugs around. Clinical stage drugmaker, Axsome Therapeutics was one of the top-performing stocks of 2019 thanks to successful clinical trial data for its lead candidate AXS-05. I like to think of this as "bupropion plus" because it's a proprietary combination of bupropion plus the key ingredient in over-the-counter cough suppressants, dextromethorphan. 

During a pivotal trial supporting AXS-05's new drug application, 47% of major depressive disorder (MDD) patients treated with AXS-05 achieved remission compared to 16% of patients who received bupropion on its own. With results like these, investors had been expecting speedy approval of an MDD application currently under review that has a proposed action date of Aug. 22.

Scientist working under a fume hood.

Image source: Getty Images.

Axsome Therapeutics stock recently plunged after the company disclosed troubling news from the FDA that could delay the company's first commercial launch indefinitely. According to Axsome, the agency identified deficiencies that preclude discussion of labeling details.

The company hasn't responded yet because the FDA hasn't provided any details regarding the deficiencies. If I had to guess, though, I'd say there's a manufacturing issue unrelated to AXS-05 itself. It could also be a case of FDA site inspectors getting stretched too thin to review Axsome's facility because of pandemic-related travel restrictions.

Bargains now?

A $3.3 billion market cap at the moment, says expectations for Iovance Biotherapeutics are still pretty high. Before buying this stock just remember it still has a long way to fall if management has to announce another delay. 

One way or another, Axsome Therapeutics probably isn't going to launch its first drug in 2021, but it's probably worth a lot more than its present valuation suggests. In addition to AXS-05, the company submitted a new drug application to the FDA for its second lead product candidate, AXS-07 near the end of June.

By the end of August, we should know if the FDA will begin reviewing AXS-07's application to become a new treatment for millions of Americans who suffer from migraine headaches. It might take an extra year for Axsome Therapeutics to make the transition from clinical-stage biotech to one with a product to sell. One way or another, though, this company is probably worth a lot more than its present stock price suggests.