IOVA - Iovance: Robust Fundamental Improvements

Summary

• In the latest conference call, Iovance Biotherapeutics, Inc. management seemed quite confident in their ability to complete the rolling of BLA for lifileucel by this quarter.
• I believe that previous management concerns relating to Dr. Fardis' departure are overblown by Wall Street.
• The current Iovance Biotherapeutics, Inc. management is betting heavily on the success of their novel cancer drug (tumor-infiltrating lymphocytes) with their own cash.

The intelligent investor is a realist who sells to optimists and buys from pessimists - Benjamin Graham (Warren Buffett's mentor).

Author's Note : This is an abbreviated version of an article originally published in advance inside Integrated BioSci Investing for our members.

In biotech investing, you'd only need a few stocks that deliver multiple folds upsides to achieve an envious record on Wall Street. Asides from finding multi-bagger from growth biotech, you can find huge winners in a turnaround situation. Typically, these companies have some temporary obstacles that caused them to lose most of their market valuation. Nonetheless, the share price tends to rebound extremely aggressively as turnaround efforts become fruitful.

That being said, Iovance Biotherapeutics, Inc. ( IOVA ) encountered management concerns as well as regulatory setbacks. As various signals are indicating a successful turnaround, I believe that you should revisit this stock. In this research, I'll feature a fundamental analysis of Iovance and share pertinent developments.

Figure 1: Iovance chart.

About The Company

As usual, I'll present a brief corporate overview for new investors. If you are familiar with the firm, I suggest that you skip to the subsequent section. I noted in the prior article ,

Operating out of San Carlos, California, Iovance is focused on the innovation and commercialization of stellar medicine to deliver hopes in seemingly hopeless cancers. As a therapeutic pioneer, Iovance harnesses the power of Tumor-Infiltrating Lymphocytes ("TILs") to expand its pipeline of "smart medicines." As you will see, leveraging TILs is an ingenious way to ramping up key immune cells in your body to decimate cancers. Interestingly, this novel treatment is applicable to a variety of solid tumors, including melanoma, cervical, head and neck, and non-small cell lung cancers ((NSCLC)).

Figure 2: Therapeutic pipeline.

Lifileucel's Therapeutic Merits

As a personalized medicine, Lifi is being developed by harvesting T cells from the patient's tumor. As "the Generals" of the body's natural defense (i.e., immune) system), T cells play a crucial role in rallying the troops to fight cancers. Given that tumors suppress the body's defense, T cells are limited in their efficacy against cancers. As such, your body is at a disadvantage without intervention. By expanding T cells outside the body and reintroducing them via TILs, you give your body the advantage that it needs to knock out cancers.

Figure 3: TIL's mechanism of action.

Supporting Clinical Data

As you can appreciate, the data for Lifi is quite robust. That is to say, the Objective Response Rate (i.e., ORR) for Lifi in the C-11-01 (Cohort 2+4) trial demonstrated a remarkable 31.4% rate. In the Disease Content of resistant melanoma, that's extremely strong efficacy. Simply put, there isn't much hope for such patients without TILs.

Figure 4: Strong Lifi's efficacy.

Another metric that you can use to gauge efficacy is the Duration of Response (i.e., DOR). Cancers are notorious for evolving to escape immune detection. Therefore, treatment often becomes obsolete over time with the cancer relapses. From the figure below, you can appreciate that over 41.7% of patients on Lifi continue to post responses beyond the 2-year period.

Figure 5: Lifi's stellar DOR.

Potential Market

When you view the solid tumor market as a whole, you can expect it to be vast. After all, over 90% of all cancer cases are solid tumors. In the USA, there are 1.7M new cases each year. Due to an increasingly sedentary lifestyle and rising longevity, you should see cancer incidence on the rise.

For Lifi's first indication (i.e., metastatic melanoma), there are only 325K new cases each year. Other first and second-line drugs already exist. Despite that Lifi gives the patient the best chance of survival, being the last-line drug put it at a marketing disadvantage. Therefore, unless Iovance prices Lifi at a huge premium (i.e., at least $150K), it'll be difficult to generate meaningful sales. However, Lifi can gain additional label expansions to aggressively ramp up blockbuster sales.

Figure 6: Solid tumor market.

Manufacturing Facility Ready

As you can imagine, Iovance is like an army readying to march at what is likely upcoming FDA approval. The company already built a leading cellular therapy center at Navy Yard Philadelphia. As the fruit of an $85M investment, the facility is huge (standing at 136 square feet). As such, the infrastructure can accommodate a huge patient volume each year (i.e., over 10K+ patients).

Figure 7: Expansive manufacturing infrastructure.

Insider Accumulation

In light of the previous management's departure, I believe that the current management has been proving their solidarity and the quality of their company. From the figure below, the management has been aggressively accumulating shares. You can say that it's their way of stating, they believe in their upcoming success and the quality of their drugs (TILs).

As a general trend, insider purchases are a great sign of upcoming success. Notably, biotech insiders tend to sell their shares. As such, you cannot make a meaningful conclusion based on that activity. Nevertheless, when a company insider aggressively purchases their stock, they must believe in their company and the drugs. Else, they would not be throwing away their money.

As shown on OpenInsider , the Director (Wayne Rothbaum) acquired 10M shares at $6.50 for a total of $65M on December 22, 2022. Viewing the figure below, Iovance's insiders have been quite busy accumulating shares. None have been disposing of a single stake.

Figure 8: Insider transactions.

Financial Assessment

Just as you would get an annual physical for your well-being, it's important to check the financial health of your stock. For instance, your health is affected by "blood flow" as your stock's viability is dependent on the "cash flow." With that in mind, I'll analyze the 3Q2022 earnings report for the period that concluded on September 30.

Given that I already went into detail about the finances in the previous article, I'll briefly summarize key findings here. Notably, the research and development (i.e., R&D) registered at $72.5M compared to $65.3M for the same period a year prior. Additionally, there were $99.6M ($0.63 per share) net losses compared to $86.1M ($0.55 per share) net declines for the same comparison. About the balance sheet , there were $366.6M in cash. Against the $100.3M quarterly OpEx, there should be adequate capital to fund operations into 3Q2023.

Potential Risks

Since investment research is an imperfect science, there are always risks associated with your stock regardless of its fundamental strengths. More importantly, the risks are "growth-cycle dependent." At this point in its life cycle, the biggest risk for Iovance is that Lifi might not gain FDA approval in late 2023. There could also be more regulatory delays. The departure of Dr. Fardis could indicate more unknown risks. Furthermore, the upcoming capital raise can significantly put a dent in Iovance's share price.

Final Remarks

Though Iovance was rocked to the core by Dr. Fardis' resignation , there are signs that this company would make a highly successful comeback . The Iovance Biotherapeutics, Inc. management team doubled down on their investment in the company with their own cash. The ongoing rolling BLA filing of Lifi for metastatic melanoma is set to complete this quarter. The management seems quite confident during their earnings conference call. The manufacturing build-out is complete and able to accommodate large patient volumes. Aside from the first indication, Lifi is poised to become the solution for many other solid tumors. The market is vast.

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