Investors looking for stocks that can produce swift and dramatic gains recently found what they wanted with Iovance Biotherapeutics (IOVA 3.78%). Over the past three months, shares of the cancer drug developer nearly tripled in value.
Despite an already big run-up, investment bank analysts who follow Iovance closely think there's more upside. A consensus price target of $24.42 on the stock implies a gain of 53% from recent prices.
NASDAQ: IOVA
Key Data Points
Whenever you see eye-popping predictions from Wall Street analysts, it's important to remember that those predictions come with caveats. In the case of Iovance, further gains rely on the successful launch of its new cancer therapy and more.
Why Iovance Biotherapeutics looks like a good investment
On Feb. 16, the Food and Drug Administration (FDA) granted accelerated approval to Iovance's groundbreaking new cancer therapy, Amtagvi.
Iovance's first commercial-stage product is a lot more complicated than a tablet patients can swallow. It's the first cancer drug made from a patient's tumor-infiltrating lymphocytes (TILs). These immune cells are known to naturally surround and attack solid tumors.
Amtagvi earned accelerated approval based on impressive tumor response rates with patients who had already relapsed after treatment with Keytruda or a similar drug. Getting these patients to respond to subsequent therapies is typically a challenge but Amtagvi looks like a powerful new treatment option.
The FDA granted Amtagvi accelerated approval because it shrank tumors for 23 out of 73 evaluable patients and those tumors have been slow to return.
Cell-based therapies that treat blood-based cancers have been around for years but Amtagvi is the first one approved to attack solid tumors. Its approval is currently limited to advanced-stage melanoma patients but expansion could be on the way.
Iovance is testing a candidate similar to Amtagvi tentatively named LN-145 as a treatment for lung cancer patients. In November, the company told investors that a phase 2 trial intended to support an application for accelerated approval should produce topline results in the second half of 2024.
The uptake of Amtagvi doesn't need to be huge to drive blockbuster sales. Iovance set its list price at about $515,000 per patient. If it can move up to the front of the line in melanoma, or LN-145 becomes a popular treatment for lung cancer, Iovance could start bringing in more than $1 billion in annual revenue by 2030.
Why Iovance stock might be too risky for most investors
Don't let the term "accelerated approval" lead you to believe Amtagvi's development has been swift. The clinical trial supporting the FDA's accelerated approval decision began in 2015.
In this case, accelerated means it's been made available before long-term follow-up studies can confirm it provides a survival benefit. Accelerated approvals are rarely rescinded but it can eventually happen if confirmatory trials don't succeed.
Investors shouldn't hold their breath waiting for LN-145 as a lung cancer treatment either. In December, the FDA put its phase 2 trial on a clinical hold after a patient died during the preconditioning regimen.
Newly engineered immune cells generally can't gain a foothold until a patient's existing immune system is depleted with a difficult chemotherapy regimen. This feature alone makes selling cell-based therapies an uphill struggle.
A price tag above $500,000 for Amgatvi, plus expenses related to the required preconditioning process doesn't bode well for Iovance's brand-new sales team. While there's a slight chance that this can become a blockbuster drug, it is a long way from guaranteed.
If your level of risk tolerance level isn't extremely high, this stock is not for you. Its current market cap of about $4 billion means the market already expects rapid development of LN-144, even though the candidate's phase 2 trial is still on hold.
Iovance's market valuation also implies a successful launch for Amtagvi even though independent drug launches are highly unpredictable. Factor in the challenges a brand-new sales team will face when it tries to sell a complex cell-based therapy and the odds of a successful launch are even slimmer than usual for this already risky industry.
Iovance stock could produce market-beating gains in a relatively short time if it can attract a buyout offer. A big pharma company could be convinced that Amtagvi can succeed under its wing, but that's a big risk most investors can't afford to take.
