Is This Beaten-Down Stock a Millionaire Maker?

Key Points

• Iovance Biotherapeutics has proven to be an innovative biotech.

• However, the stock has declined significantly over the past year, partly due to its risk profile.

• Too much would have to fall Iovance's way for the stock to be a millionaire maker.

Over the past two years, Iovance Biotherapeutics (NASDAQ: IOVA), a small-cap biotech company, has made significant clinical and regulatory progress. However, the stock has also plunged over this period -- shares are currently trading for less than $2 apiece. Penny stocks tend to be risky, but Iovance Biotherapeutics has an exciting approved product and several potential catalysts that could jolt its stock price.

If Iovance Biotherapeutics' long-term plans come to fruition, the stock could skyrocket from current levels and deliver the kinds of returns over the next two decades (or so) that could help one become a millionaire. How likely is that to happen? Let's find out.

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An innovative approach to treating cancer

Iovance Biotherapeutics' claim to fame is that it developed Amtagvi, a medicine for advanced melanoma (skin cancer). There are at least two important things to note about this product. First, it is manufactured from patients' tumor-infiltrating lymphocytes (TILs), a type of white blood cell that destroys cancer cells. Second, Amtagvi became the first medicine of its kind approved by the U.S. Food and Drug Administration for the treatment of metastatic melanoma.

It's not surprising, then, that Amtagvi's sales have been growing at a good clip. Iovance Biotherapeutics expects to generate $275 million this year (at the midpoint) after racking up $164.1 million in revenue last year. The company's long-term strategy seems simple enough. It is currently seeking approval for Amtagvi in other regions, after which it will look to earn label expansions for the medicine.

Then, Iovance Biotherapeutics will work on developing other TIL-based therapies. If all of that happens without a hitch, Iovance Biotherapeutics could, indeed, generate life-changing returns from its current levels.

Will Iovance's breakthroughs be enough?

Suppose one invests $100,000 in Iovance Biotherapeutics today. It will take a compound annual growth rate of 12.2% to get to $1 million in 20 years, which is above the S&P 500's historical return. It's hard to bet on Iovance Biotherapeutics accomplishing such a feat despite its Amtagvi-related success. The medicine was a significant breakthrough and could achieve blockbuster status at some point. Even so, one issue with Amtagvi is that it is a complex medicine to administer.

The procedure requires collecting patients' cells, which are used to manufacture the therapy. It takes 34 days for the manufacturing work to be completed. Further, Iovance Biotherapeutics recently revised its guidance downward from between $400 million and $450 million for fiscal year 2025. It did so because it had miscalculated the timeline for the activation of authorized treatment centers where Amtagvi is administered.

Launch dynamics are complex for any medicine, but they are even more so for therapies like Amtagvi. This factor significantly complicates matters for Iovance Biotherapeutics, making the stock less attractive, as it impacts its revenue and earnings potential. In the meantime, the company estimates that it only has sufficient cash to keep the lights on until the second half of 2026. That's before we account for other obvious potential issues.

Consider that a lot would have to go right for Iovance Biotherapeutics to perform well through the next two decades. It will need to record consistent clinical and regulatory wins. Setbacks, particularly with otherwise promising products or pipeline candidates, will sink its stock price. That's the risk biotech investors have to live with, and the risk is far higher when dealing with a smaller drugmaker like Iovance. Perhaps Iovance Biotherapeutics will perform well regardless, but it's hard to bet on that happening, considering it has yet to establish itself.

The company currently has only two products on the market, remains unprofitable, and has only enough cash for the next two and a half years, facing some uncertainty due to the complexity of the therapies it markets. Between potential clinical trial failures, regulatory rejections, and the possibility that Iovance Biotherapeutics may have to resort to dilutive financing, the stock appears far too risky for most investors. It's worth keeping Iovance Biotherapeutics on your watchlist and considering investing small sums in the stock if its prospects improve.

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Prosper Junior Bakiny 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.