It isn't over yet, but 2023 has given Wall Street a lot more to be excited about than 2022 did. Signs of a soft landing for the U.S. economy have pushed the S&P 500 index up nearly 20% this year.
The benchmark index is up sharply this year, but we aren't in bull market territory yet. To make that distinction, the S&P 500 needs to rise about 5% higher.
The major market indexes are up, but not every growth stock has followed suit. This means there are still some terrific, albeit under-the-radar, businesses out there with share prices that undervalue their assets by a mile.
Right now, Iovance Biotherapeutics (IOVA 0.87%) stock can be purchased for a fraction of its true value, at least according to investment bank analysts on Wall Street. The consensus price target on the stock implies a gain of 219% in 2024. Even a relatively conservative estimate from Goldman Sachs suggests the stock can shoot 88% higher over the next 12 months or so.
Why Wall Street's pounding the table on Iovance Biotherapeutics stock
Iovance Biotherapeutics is pioneering a new approach to cancer treatment that uses the power of naturally occurring immune cells called tumor-infiltrating lymphocytes. An application for its first drug, called lifileucel, is under review by the U.S. Food and Drug Administration (FDA).
Immune checkpoint inhibitors such as Keytruda have been life savers for patients with melanoma and other solid tumors. Unfortunately, many who receive them still experience disease progression. Wall Street is excited about Iovance because it looks like its cell-based therapy can become a new option for hard-to-treat patients who relapse despite standard care.
During a clinical trial supporting the application currently under review, a subgroup of patients with cases of advanced mucosal melanoma that worsened despite treatment with checkpoint inhibitors showed eye-popping results. At a median follow-up of 35.7 months, lifileucel shrank tumors for half of the subgroup, including one patient who achieved complete remission.
Shrinking tumors is a step in the right direction, but it isn't much good if the disease comes roaring right back. Among the six patients with advanced mucosal melanoma who initially responded to treatment with lifileucel, four were still responding at the 24-month checkup. In other words, it looks like this treatment gives patients who have run out of options a strong chance for long-term survival.
The FDA is expected to announce an approval decision regarding lifileucel as a treatment for melanoma on or before Feb. 24, 2024. Melanoma could be just the beginning, too. The company is also enrolling cervical cancer patients into a clinical trial that could support an expansion in the not-too-distant future.
The Wall Street analysts who set lofty price targets on Iovance are assuming lifileucel will inspire a huge buyout offer from a big pharmaceutical company that wants to expand its oncology presence. Given the mergers and acquisitions activity we've seen recently, it's not a farfetched proposition.
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Is Iovance Biotherapeutics a good investment now?
Lifileucel might excite oncologists and Wall Street analysts, but sales will likely be muted, because this isn't a prescription that can be filled by your everyday pharmacy. A new batch of lifileucel must be manufactured from stem cells after those cells have been harvested from each new patient.
Sales of complex cellular cancer therapies have been improving slowly since the FDA approved Yescarta from Gilead Sciences in 2017, but they're still low enough to make big pharma think twice before making any buyout offers. Gilead currently markets two cell-based cancer therapies with sales that reached a combined $1.4 billion in the first nine months of 2023.
At recent prices, Iovance Biotherapeutics sports a $1.6 billion market cap. The company has no products to sell yet, and its cash balance dwindled to $428 million at the end of September after it lost $328 million in the first nine months of 2023.
Iovance said that all pre-approval inspections of clinical sites and manufacturing facilities have been completed successfully. While this is likely true, investors should understand that we only have the company's side of the story. The FDA can't comment on pending drug applications, even if applicants make misleading statements to investors.
If the FDA delays approval of lifileucel, again, this stock will fall hard. Analysts aren't wrong to predict a big gain in 2024, but this stock is only appropriate for investors with a high tolerance for risk.
