Shares of Iovance Biotherapeutics(NASDAQ: IOVA) have collapsed by about 47% from the peak they reached shortly after the company's first drug earned approval this February. Unfortunately, one of the Wall Street analysts who cheered for the young drugmaker following the accelerated approval of that drug is losing confidence.
On July 29, Piper Sandler analyst Joseph Catanzaro downgraded his firm's rating on Iovance to neutral from overweight. He also slashed his price target on the stock to $10 from $19.
Right now, plenty of investors who bought this stock following the approval of Amtagvi are looking at Catanzaro's change of heart and wondering if they should cut their losses or hang on to their beaten-down shares.
Before you make any knee-jerk reactions to Wall Street analyst notes, let's look at what has gone wrong for Iovance and how its situation could improve.
Why Iovance was downgraded
Iovance's lead drug earned approval from the Food and Drug Administration (FDA) this February. Unfortunately, Amtagvi is not an easy-to-swallow small molecule or even an injectible protein. It's a collection of autologous immune cells called tumor-infiltrating lymphocytes, or TILs.
Amtagvi is manufactured in batches of one from a small amount of TILs found in tumor biopsies. Unfortunately, getting a viable sample that can be used to manufacture a dose of Amtagvi isn't guaranteed, and it seems that many patients who want the treatment aren't receiving it.
In May, Iovance reported more than 40 treatment centers authorized to infuse patients with Amtagvi had enrolled more than 100 patients. Catanzaro downgraded the stock because more than four-fifths of enrolled patients at six treatment centers he surveyed still hadn't received a dose of Amtagvi by the end of June.
A slow rollout of Amtagvi shouldn't have caught anyone by surprise. In addition to a complicated manufacturing process, providers also need to deplete each patient's immune system before the TILs in a dose of Amtagvi can gain a foothold in their bone marrow. This is a big problem because the drug is approved to treat generally frail patients who have already relapsed or failed to respond to previous therapies.
Iovance priced Amtagvi at $515,000 per patient, so just a handful of disappointed patients can be the difference between reaching sales forecasts or missing them by a mile. With the vast majority of enrolled patients going untreated, according to Catanzaro, a disappointing second-quarter earnings report seems likely.
Can Iovance stock rebound?
Before getting too excited about what Piper Sandler had to say after surveying six treatment centers, investors should know that in June, an analyst from Stifel surveyed 20 treatment centers. According to Stifel, treatment center capacity appeared strong enough to handle market demand.
Amtagvi is a relatively effective option for advanced skin cancer patients who have relapsed after treatment with a PD-1 blocker such as Keytruda from Merck. That said, it's hardly a miracle cure. In the trial that led to its approval, it shrank tumors for 23 out of 73 evaluable patients who received the recommended dosage. There were 10 patients still responding to the treatment 12 months after their initial response.
While 10 long-term responses out of 73 might seem like a pretty good result for pre-treated cancer patients, it's important to realize the study started with 111 enrolled patients who underwent a tumor biopsy. This group was whittled down to 73 mostly due to Amtagvi's complex manufacturing process. Since these were skin cancer patients, obtaining viable tumor samples was relatively easy compared to most types of cancer.
In the second quarter, Iovance resumed enrolling lung cancer patients who failed previous PD-1 treatment into a trial. Given the difficulty it had obtaining viable tumor samples from skin cancer patients, it's best to play wait-and-see before making any assumptions about its lung cancer program.
If Amtagvi's initial launch is as disappointing as Piper Sandler suggests, this company's future relies on successful results from the ongoing phase 3 Tilvance-301 trial. This study is enrolling newly diagnosed skin cancer patients and treating them with a combination of Amtagvi plus Keytruda.
A high-risk stock
Iovance has been beaten down a long way from its previous peaks, but it still has a $2.5 billion market cap. Definitive results that show an Amtagvi-Keytruda combo is better than Keytruda alone could more than double this company's market value, but it's a long way from guaranteed.
Management thinks an interim look at Tilvance-301 tumor responses could support accelerated approval of Amtagvi plus Keytruda as a first-line melanoma treatment. That could be the case, but we won't know how valuable the combination treatment is until we have outcome data, which isn't expected until 2028.
If you have already seen your Iovance Biotherapeutics stock tank, hanging on until the Tilvance-301 results are ready is the right move. Investors considering buying this stock should understand that it's only appropriate for industry-savvy investors with a huge risk tolerance, and a lot of patience. For the rest of us, watching Amtagvi's story play out from a safe distance is best.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Iovance Biotherapeutics and Merck. The Motley Fool has a disclosure policy.
