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Why Iovance Shares Are Surging

|About: Iovance Biotherapeutics, Inc. (IOVA)

Life can only be understood backwards; but it must be lived forwards.” ― Søren Kierkegaard

Iovance Biotherapeutics (IOVA) is one of a couple of holdings in the model portfolio at the Busted IPO Forum that has surged so far in trading this week.  There are some reasons behind the rally this week.  We explore those and the company's prospects in the paragraphs below.

Company Overview:

Iovance Biotherapeutics (IOVA) is a California based 'Tier 4' biotechnology company that came public in 2010. The company is focused on developing and commercializing novel cancer immunotherapies based on tumor-infiltrating lymphocytes. Their approach to cancer therapeutics is referred to as adoptive T-cell therapy. With this week's surge, the stock has a market cap of approximately $1.5 billion.  The company has made slow but consistent progress advancing its pipeline since coming public.

Source: Company Presentation

What's Behind The Rally?

This week the company provided an update on its infiltrating lymphocyte (TIL) clinical programs in cervical cancer and non-small cell lung cancer (NSCLC).   The company believes its TIL approach has significant advantages in solid tumors compared with others.

Source: Company Presentation

The way this technology is implemented is nicely described below

Source: Company Presentation

In late February, the company's cell therapy candidate LN-145 garnered Fast Track review for the treatment of recurrent/metastatic cervical cancer that has progressed on or after chemo.  LN-145 is currently in Phase 2 development. 

Also helping the stock this week is that Oppenheimer assigned a new Buy rating and $25 price target on IOVA yesterday.  Here is the commentary from that analyst call.

Tuesday, we attended Iovance meetings with institutional clients in Denver. Discussions focused on registrational pathways, market opportunities, and manufacturing for Iovance’s tumor infiltrating lymphocyte (TIL) therapies. Iovance recently dosed the first patient in its registrational trial of lifileucel in melanoma and expects pivotal data in 2H20. Management is taking a path-of-least-resistance approach to gain approvals in relapsed/refractory disease where TIL still outperforms SOC, but believes maximum efficacy can be unlocked in checkpoint-naïve patients and is eyeing label expansion opportunities into earlier settings and/or indications where checkpoint antibodies are not deployed as front-line therapy. Separately, presentations at AACR underscored the need for multivalent cell therapies in solid tumors.”

Analyst Commentary & Balance Sheet:

In addition to Oppenheimer, H.C. Wainwright reissued their own Buy rating and $26 price target and following commentary around its valuation methods.

Valuation and impediments to achieving price target. We reiterate our Buy rating and price target of $26. Our target is based on our clinical net present value (NYSE:NPV) model, which derives its primary value from LN-144 for metastatic melanoma currently. This model allows us to flex multiple assumptions affecting a drug’s potential commercial profile.

Earlier in the week, Chardan Capital maintained its own Buy rating and $20 price target on Iovance.  These were the first new analyst ratings since February 6th on the company.

The company ended 2018 in very good shape as far as its balance sheet is concerned.  Iovance had just over $465 million in cash and marketable securities on the books to close out last year.  The company burned just over a $100 million in cash in 2018 for R&D and operational expenses.

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Verdict:

Iovance continues to advance its pipeline with has multiple 'shots on goal'.  Its pipeline update this week was well received by analysts and the company is in a strong position from a balance sheet view.  We continue to view Iovance as having a favorable long term risk/reward profile.

Option Strategy:

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An efficient way to add exposure to this name is via a Buy-Write order. Using the September $12.50 call strikes, fashion a Buy-Write order with a net debit in the $10.00 to $10.20 range (net stock price - option premium). This mitigates some downside risk and sets up a more than solid potential return for its approximate five and a half month hold period. Option liquidity is decent in this strike price.

No man is rich enough to buy back his past.” ― Oscar Wilde

Thank You & Happy Hunting,

Bret Jensen

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

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Disclosure: I am/we are long IOVA.