What happened
Shares of the clinical-stage immunotherapy company Agenus (AGEN 6.84%) fell by 11.7% during the first three and half days of trading this week, according to data provided by S&P Global Market Intelligence. The biotech's stock has been trending lower ever since it reported fourth-quarter and full-year 2022 financial results last week.
So what
The key issue that appears to be weighing on Agenus' stock is the company's near-term financial outlook. In its Q4 earnings report, Agenus announced that it had exited the most recent quarter with $193 million in cash, cash equivalents, and short-term investments.
While this amount may seem like a lot in absolute terms, Agenus burned through cash at an alarming rate over the prior year. Speaking to this point, the biotech revealed that it had incurred a net loss of $231 million (including a noncash expense of $96 million) over the whole of 2022. Agenus, in turn, may have to consider a public offering at some point this year.
Under normal circumstances, a biotech raising funds via a secondary offering is par for the course. Developing new drugs is a very costly process, after all. However, investors have shown little to no patience for cash-flow-negative biotech companies in this risk-averse environment.
Now what
Is Agenus stock a table-pounding buy on this latest weakness? Unfortunately, the answer is "probably not." Although Agenus could very well book additional revenue from its various partnerships over the balance of 2023, the company is likely several years away from becoming regularly cash-flow positive. That's an unfavorable setup in the current high-interest-rate environment.
