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Biotech Forum: Today's Option Play

|About: Iovance Biotherapeutics, Inc. (IOVA)

There is a time for many words, and there is also a time for sleep.” ― Homer, The Odyssey

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Death, so called, is a thing which makes men weep, And yet a third of life is passed in sleep.” ― George Gordon Byron

Today we revisit Iova Biotherapeutics (IOVA) which has picked up a couple of positive analyst 'shout outs' over the past week.  The company's pipeline is also progressing and the stock looks interesting, both for accumulation and a possible option strategy which we will highlight after the analysis on the company that appears in the paragraphs below.

Company Overview:

The California-based firm was founded in 2007 and formerly known as Lion Biotechnologies (LBIO).  The company is focused on developing unique cancer immunotherapies based on tumor infiltrating lymphocytes {TILs}. The stock currently has a market capitalization of approximately $1.25 billion and the shares trade just under $14.00.  The stock is off around 30% from highs set earlier this year.

Pipeline:

This 'Tier 4' concern has a diverse and mostly early/mid stage pipeline that is progressing nicely as can be seen below.

Iovance's platform/discovery process is based on TILs isolated from the patient’s tumor following resection. The cells are then expanded to billions in vitro and away from cancer’s immune-suppressing effects. These  potent TIL are then infused back into the patient, who has been preconditioned to remove all suppressing influences.

In May of this year Iovance garnered orphan-drug designation from the FDA for autologous tumor infiltrating lymphocytes for the treatment of cervical cancer with a tumor size of greater than 2 cm in diameter.  The company has several compounds in early stage Phase 2 development.  Most are in enrollment phase which can be seen by clicking here.

Analyst Commentary & Balance Sheet:

Oppenheimer assigned an Outperform rating on IOVA this morning after the company recent presented at the analyst firm's oncology conference in Boston.  Here is the color from that new rating

Wednesday, we sat down with Iovance management at Oppenheimer’s Boston Oncology Summit. In 3Q, Iovance expects to announce feedback from the FDA regarding the regulatory path for LN-144 in melanoma, which could serve as a major catalyst for IOVA shares. In a best-case scenario, the agency could follow a precedent set by CAR-T products and consider accelerated approval of LN-144 based on response rate and six-month follow-up from the single-arm Phase 2 trial (C-144-01), which is currently enrolling. In this case, Iovance could be in a position to file a BLA before the end of 2019, well ahead of our expectations. Additionally, management intends to provide clinical updates from ongoing trials of in 4Q." 

Last week, Chardan Capital reissued its own Buy rating and $30 price target on Iovance Biotherapeutics with the following commentary

We now affirm our conviction view, seeing renewed opportunities for vast share price upside after a recent stock pullback. (On page 2 of this research, we highlight the vast opportunity in refractory melanoma.) Iovance’s recent pullback in stock performance may be due to a misunderstanding from erroneous reports regarding rights to TILs, and therefore presents a buying opportunity ahead of data readouts. We note the pullback coincided with the recent publication in a case study from Steven Rosenberg’s group at the National Cancer Institute (NYSE:NCI) demonstrating remarkable efficacy of autologous TIL therapy in a patient with chemorefractory breast cancer. However, it was erroneously reported in multiple news outlets that Gilead (unrated) subsidiary Kite had signed an agreement for rights to the technology.

Finally, on June 8th Wells Fargo also maintained a Buy rating and $23 price target on this stock.  The company ended the first quarter just under $300 million in cash on hand after it raised just over $160 million via a secondary offering in January.  The company has guided it expects to end the 2018 fiscal year with between $190 million to $200 million of cash in the tills.

Verdict:

The company addressed its near and medium term funding needs in January.  Iovance also possesses multiple 'shots on goal', is getting increasingly positive analyst coverage and its pipeline continues to progress.  It should be noted that given the early/mid stage status of Iovance's pipeline, the company is years away from potential commercialization. A small or 'watch item' holding within a well diversified biotech portfolio seems warranted at this time, especially with an entry point significantly under the stock's 2018 highs.

Option Strategy:Image result for Stock Purchase

An alternative way to accumulate an initial stake or to increase exposure to IOVA is via a Buy-Write order. Using the December $15.00 call strikes, fashion a Buy-Write order with a net debit of $11.75 to $12.00 (net stock price - option premium). This mitigates some downside risk and sets up a more than solid potential return for its roughly five month 'hold' period.  Liquidity is so-so, meaning you may have to submit this order more than once although my buy-write order was filled at a net debit of $11.75 earlier today.

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Thank You & Happy Hunting,

Bret Jensen

Founder, The Biotech Forum, The Busted IPO Forum & The Insiders Forum

Disclosure: I am/we are long iova.