Picking stocks with a relatively narrow timeframe in mind -- and with a particular performance expectation -- can be tricky. Most investors can distinguish between bad, good, and even-better investment prospects. But it's impossible to know exactly how well a stock will perform, or when it will perform well. That's why Warren Buffett's favorite holding period is simply "forever."
However, every now and then, the proverbial planets line up. That is to say, it becomes clear that a company is on the cusp of massive and sustained growth, with its stock poised to follow suit.
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Iovance Biotherapeutics(NASDAQ: IOVA) is one such company right now, entering a decade of incredible growth. Here's why aggressive investors might want to use the stock's recent weakness as a buying opportunity.
Iovance Biotherapeutics, up close and personal
Iovance isn't a household name... at least, not yet. With a market cap of only around $1 billion, it just doesn't turn many heads. Its current lack of profitability doesn't help stoke investor interest, either.
As veteran investors can attest, though, a company's size isn't nearly as important as its growth trajectory. That's where Iovance Biotherapeutics shines. Analysts exoect revenue to rise by more than 180%, to $762 million, this year, and then grow another 45%, to $1.1 billion, next year, pushing the biotech company out of the red and into the black in the process.
Data source: StockAnalysis.com. Chart by author.https://stockanalysis.com/stocks/iova/forecast/
This explosive growth comes with a critical footnote. The company's first-ever drug approval only materialized early last year. Specifically, its Amtagvi won an accelerated approval from the U.S. Food and Drug Administration (FDA) as a tumor-infiltrating lymphocyte (or T-cell) immunotherapy for metastatic melanomas that didn't respond to PD-1 blocking antibodies, making it the first such permitted treatment for any solid tumor. The enormous year-over-year comparisons mostly just reflect the newness of the treatment option.
Still, there's a long growth runway ahead well beyond 2027's expected top line of $1.1 billion, and subsequent swing to a profit of $0.50 per share.
Leveraging a superior science
Like most other biopharma companies, this one isn't stopping with just the treatment of solid tumors that aren't responsive to PD-1 treatments. Amtagvi -- also called lifileucel -- is currently being tested in 12 different clinical trials. Some will likely work. Others probably won't. But all those efforts should show enough efficacy to make them worth their cost.
While the idea of customizing a patient's own immune cells to fight their particular cancer isn't new, it's a complicated process that's only recently become refined enough for approval. While hundreds are in development, there are only about a dozen approved T-cell drugs currently available to U.S. cancer patients, and only one tumor-infiltrating lymphocyte. That's Iovance's Amtagvi, underscoring how impressive the drug truly is.
Yet, immunotherapy is arguably the shining star of oncology's future. Industry research outfit Precedence Research believes the cancer immunotherapy market alone is set to grow at an average annual pace of 10.6% though 2034, when it will be worth $338 billion. For perspective, the entirety of the oncology market right now is in the ballpark of $200 billion. Driving much of this incredible growth is the fact that immunotherapies are considerably more expensive than most first-line treatment options are at this time, since each cancer patient's cancer treatment is tailor-made.
Iovance Biotherapeutics won't be the only player in the immunotherapy space, or even the biggest. It will be an important player within this space, though, given that it already has the lead within the tumor-infiltrating lymphocyte sliver of the tumor market, with several other clinical trials of the proven drug already underway.
The time is now
All this begs the question: If this biotech company's know-how is so compelling and marketable, why is the stock dancing with new multiyear lows after falling more than 90% from its early 2021 peak?
It's not quite as outrageous as it seems to be on the surface, if you understand how many stocks of up-and-coming biopharma companies trade.
To put it simply, this stock's poor performance since 2021 is mainly due to its exceptional performance in 2019 and 2020. That's when Amtagvi's potential approval first began to firm up, particularly in light of the FDA's willingness to designate it as a breakthrough therapy for cervical cancer. This designation accelerates a drug's regulatory review process when the agency feels a new, better treatment option is needed. It's also an unspoken vote of confidence in the therapy's underlying T-cell science.
However, market enthusiasm outpaced the likely extent and timing of commercialization. Shares have been correcting this mistake ever since.
Except, in the same way the bulls were overzealous then, the selling since 2021 has taken on a self-sustaining life of its own, causing the bears to overshoot their downside target.
This selling also seems to have finally run its full course as well. While near a new multiyear low, the sellers don't seem ready or willing to push this ticker below 2023's low, when things weren't nearly as promising for Iovance Biotherapeutics as they are now. This may be a sign that the tide is finally taking a slow turn for the better, reflecting the company's rapidly improving fundamentals.
This might help. Despite this stock's lingering lethargy, the analyst community isn't discouraged. Most of them currently rate Iovance stock as a strong buy, and their consensus price target of $20.55 is more than 500% above the stock's present price. That's not a bad way to start out a new 10-year position in this beaten-down name.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Iovance Biotherapeutics. The Motley Fool has a disclosure policy.
