Questions Arising Over Iovance Biotherapeutics' Share Value
A year ago, shares of Iovance Biotherapeutics (IOVA) started skyrocketing following the Food and Drug Administration's approval of Amtagvi as a treatment for unresectable or metastatic melanoma. Despite this, the stock's value has been steadily declining, plummeting by 32% over the past six months. Currently, shares are worth just over $6, which is a far cry from its high of over $18. So, what's keeping investors from jumping on this potential buy?
The Financial Woes of Iovance
The downward spiral began in early November when Iovance released its latest quarterly results, revealing a significant discrepancy between its revenue and expenses. While the company reported "significant demand" for Amtagvi, sales only reached $58.6 million for the quarter, falling far short of the $147.6 million in expenses. This pattern of negative operating margins and high expenses has been a constant for Iovance, making profitability a distant dream.
Moreover, Iovance is burning through cash at an alarming rate. Over the past three quarters, the company has spent a total of $279.7 million on its day-to-day operations, leaving it with only $397.5 million in cash, cash equivalents, and investments. With more expense-heavy years ahead as Iovance commercializes Amtagvi and expands to new markets, Iovance's cash reserves may not last long.
Dilution and the Fear of More Stock Offerings
To make matters worse, Iovance has been drastically increasing its share count to secure the funding it needs to grow. Investors are concerned that more stock offerings are inevitable, creating a large supply of shares and putting downward pressure on the stock price. Unless the stock sees a wave of bullish sentiment and buyers, this could mean a prolonged period of decreasing stock value.
Is Iovance Worth the Risk?
Iovance's bleak financial picture may paint a grim picture, but it's not all bad news. The company is still in its growth stage, and Amtagvi could potentially generate up to $846 million in revenue by 2029 based on analyst predictions. Additionally, Iovance is still conducting clinical trials to further develop lifileucel, which offers more opportunities for growth and revenue generation.
If investors are willing to take on some risk and are patient enough to wait out the storm, Iovance could be a lucrative buy at its current modest valuation. However, given the financial challenges and the competitive biotechnology sector, it's not a risk-free investment by any means.
Investors might be hesitant to invest due to Iovance's notable financial difficulties, such as the persisting negative operating margins and substantial expenses. Additionally, the company's rapid depletion of cash reserves could necessitate more stock offerings, potentially diluting shares and pushing the stock price down further.