The past nine months have been rough ones to be an Agenus (AGEN 9.41%) shareholder. The stock has collapsed by about 75% from the peak it set last June.
Investment bank analysts on Wall Street who follow the Massachusetts-headquartered cancer drug developer think it's been underappreciated. For example, B. Riley recently reiterated a buy rating for Agenus with a $5 price target.
Agenus shares could deliver an enormous return if they get anywhere near Wall Street estimates. The stock has been trading below $1 per share since the company presented clinical trial results for its lead candidate last October.
Let's weigh arguments for buying Agenus against the apparent risks to see if it's a smart buy at its beaten-down valuation.
Reasons to buy beaten-down Agenus stock
These days, Agenus is a clinical-stage cancer drug developer without any approved products to sell, but this wasn't always the case. It developed an adjuvant that is part of GSK's Shingrix vaccine.
Agenus sold rights to royalties from the Shingrix vaccine years ago, but it still receives occasional cash injections from big pharma partners. For example, Bristol Myers Squibb recently sent Agenus a $25 million milestone payment that was triggered by the start of a phase 2 clinical trial with a lung cancer candidate tentatively named BMS-986442.
BMS-986442 is a bispecific antibody that blocks TIGIT and CD96 receptors on immune cells. The blockade should ignite an immune response to lung cancer tumors. Agenus is still eligible to receive over $1 billion in milestone payments plus a royalty percentage if the candidate succeeds and eventually becomes a commercial-stage cancer drug.
In addition to potentially lucrative partnerships with bigger biopharmaceutical companies, Agenus is developing a next-generation CTLA-4 blocking antibody called botensilimab. Last October, the company told investors that treatment with botensilimab shrank tumors for 17 out of 70 advanced-stage colon cancer patients.
Botensilimab is in a larger phase 2 study with similar colon cancer patients and a control group for making comparisons. Topline results, which are expected in the second half of 2024, could send Agenus stock soaring if they confirm the positive trend observed in the previous single-arm study.
Agenus stock has been beaten down so far that signs of success for either program expected to produce results this year could send the stock soaring. The stock has a tiny $211 million market cap at the moment.
Reasons to avoid Agenus for now
This biotech stock has fallen a long way, but that doesn't mean it can't fall even further. The results we've seen so far for BMS-986442 and botensilimab are good enough to warrant further study but success is a long way from guaranteed.
BMS-986442 is a TIGIT-targeting antibody similar to one called vibostolimab that Merck already tested in a controlled phase 2 study. Adding vibostolimab to standard care failed to stop patients' tumors from growing.
Agenus finished 2023 with $76 million in cash and equivalents after burning through $257 million last year. Management believes its cash position plus subsequent payments from partners like Bristol Myers Squibb will be sufficient to keep operations humming along through 2024.
Without any approved drugs to sell, Agenus will most likely raise capital in 2025 by creating and selling new shares of its stock. If the clinical trial results expected in 2024 don't cause the stock price to soar, Agenus will need to offer hundreds of millions of new shares just to continue operating.
A buy now?
There's a chance that Agenus, or one of its partners will report trial results that rescue its beaten-down stock price in 2024. That said, I'd argue that there's a better chance that its candidates flop, which could leave investors who buy the stock now, with heavy losses. It's better to watch this company's story unfold from a safe distance.
