On Aug. 7, Tango Therapeutics (TNGX 1.50%) reported its second-quarter earnings, and by Aug. 11, its shares were up by a shocking 126%. Its earnings update didn't make any waves; this is a pre-revenue biotech company, and it didn't report any stunningly positive clinical trial data. Nor is it on the verge of doing so.
So why is the market so enthusiastic about this stock right now, and should you be thinking about buying it? Let's start by answering the first question.
Why did Tango Therapeutics' stock go vertical?
The mystery of Tango's share price movement is that it didn't announce anything new or make any filings with the SEC on Aug. 9, when its stock started flying. But, on Aug. 10, it announced that it would be selling 15.5 million of its shares to a group of private investors, generating proceeds of close to $80 million.
The stock continues to rise in the aftermath of that, which suggests the market is warmly receiving the prospects of adding to the company's $310 million in cash, equivalents, and marketable securities as of Q2. Management estimates it had enough money to continue operating into 2026 before the private stock placement, so its runway is now even further out. For a young biotech stock, that's quite bullish.
In terms of its pipeline, Tango currently has three early-stage clinical trials in phase 1/2, and it plans to start another similar trial before the end of the year. All of its programs are precision oncology treatments which may be useful in addressing a number of different cancers characterized by solid tumors.
Its medicines aim to destroy cancer cells by targeting certain vulnerabilities, specifically their inactive tumor suppressor genes. Healthy cells have operational tumor suppressor genes that prevent them from becoming cancerous, so there is a limited risk of a medicine having off-target activity that'd cause side effects. Put differently, because cancer cells tend to have deactivated or otherwise inert copies of the genes that code for a swath of cellular anti-cancer mechanisms, they also have exploitable weaknesses.
Tango's approach is similar to commercialized therapies made by other developers that use roughly the same mechanism of action, so it isn't much of a stretch as far as biotech platforms go. But, as cancer medicines tend to have lower rates of success in clinical trials than other medicines, investors should understand that this company is very risky, and it is almost guaranteed that at least one of its attempts will fall short. With such a sharp run-up in its shares, if one of its clinical trials hits a bump in the road soon, it could be very bad for shareholders.
Is Tango Therapeutics worth buying yet?
The question of whether to buy shares of Tango Therapeutics is largely one of whether you have the risk tolerance for investing in biotechs of its maturity in general. For an early-stage biotech business, it's well-capitalized, which makes it less risky than cash-strapped competitors. Likewise, its platform isn't attempting to develop moonshot oncology treatments so much as it's attempting to translate previously successful scientific approaches into updated therapies. That's also less risky.
Furthermore, its drug development collaboration with Gilead Sciences means that it could realize as much as $6 billion in milestone payments in the coming years. It could also eventually co-commercialize up to five programs with Gilead, evenly splitting the costs and proceeds. Having a relatively powerful and well-heeled collaborator is another point in this stock's favor.
But there's little reason to invest in it right now specifically, even if its risk profile is appealing. It won't have new meaningful clinical data until 2024, and getting a drug approved for sale is at least a handful of years away. If the waiting and the risk of shares dropping sharply don't bother you, this is indeed a solid biotech to buy, though there's no rush. On the other hand, if you aren't in the market for a risky investment, it's best to look elsewhere.
