There's so much excitement around me Ivans Biotherapeutics (NASDAQ:IOVA) The company's stock price has increased more than 40% since the beginning of the year. Investors and analysts alike believe this mid-cap biotech stock has further upside potential over the long term. But for now, the company remains very unprofitable and only recently received regulatory approval for one of its treatments.
Below, we take a look at what the business will look like five years from now, whether it has the potential to be profitable, and whether the stock is worth investing in now.
Is there a possibility of more approvals?
Iovance investors got great news in February when the Food and Drug Administration approved Amtagvi (lifileucel), the company's cell therapy for unresectable or metastatic melanoma. Having an approved treatment in the portfolio is a significant milestone for a company, and there could be more to come for Iovance.
The company has a number of ongoing clinical trials involving Rifilucel and another drug, LN-145, for other types of cancer. These include cervical cancer, head and neck cancer, and non-small cell lung cancer. Iovance has more than a dozen clinical trials underway, many in Phase 1, but the company could have many more approved treatments in its portfolio within five years.
However, investors should be careful not to take that for granted. Cancer drugs and treatments have much lower success rates in clinical trials than other therapeutic areas. This means that while it is positive and encouraging that he has received one Iovance approval, it does not necessarily indicate that more approvals will follow.
Will Ivans' fundamentals improve in five years?
In its latest financial results, covering the last three months of 2023, Ivans reported a net loss of $116.4 million. And although it's starting to turn a profit (of $500,000), it has a long way to go to get out of the red. Research and development (R&D) expenses totaled $87.5 million in the prior quarter, and selling, general and administrative expenses were approximately $30 million.
The challenge for companies is to scale their operations and move forward with clinical trials, which become larger and more expensive at later stages. For example, in 2023 Iovance incurred R&D expenses of his $344 million compared to his $295 million the previous year.
Now that Amtagvi has received approval, help is on the way. Analysts predict that the treatment could generate $846 million in revenue by 2029 and will eventually become a blockbuster drug. Depending on how aggressively it invests in R&D and how well Amtagvi rolls out, the company could turn a profit over the next five years.
One concern, however, is cash flow. Over the past three years, Iovance has burned through more than $882 million of his business just in day-to-day operating activities. And last year, he burned through $362 million, a 24% increase from the previous year. Iovance ended his 2023 with just under $280 million in cash and short-term investments, which is clearly not enough to support that high cash burn rate. The company announced a stock offering earlier this year, and will likely need to do more over the next five years.
Is Iovance stock a buy today?
I am optimistic that Iovance's financial position will be much better in five years, and that another treatment could be approved by then. But it could be a tough road to get there, given the company's large cash burn and the potential for multiple initial public offerings in the interim.
Although this looks like a promising healthcare stock, you may want to hold off on buying Ivans stock until it finds a realistic path to profitability and positive cash flow. Given its hefty $3 billion valuation, there's already some optimism priced into the stock at this point.
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David Jagielski has no position in any stocks mentioned. The Motley Fool is affiliated with and recommends Iovance Biotherapeutics. The Motley Fool has a disclosure policy.
What will Iovance Biotherapeutics' stock price be like in 5 years? Originally published by The Motley Fool
