IOVANCE BIOTHERAPEUTICS & GOOD MATH

A common refrain is “math is the language of nature.”  Did you know that math is also the language of the investment world? But don’t worry, not advanced calculus, complicated trigonometry, not really even Algebra. If you graduated from an 8th grade math class in America, you can score big as an equity investor. 

Iovance Biotherapeutics is an example of a startup company where simple arithmetic makes a big difference to the investment thesis. The young and growing oncology startup benefits from three mathematical facts that are easy to understand, but often missed by less assiduous investors. Let’s take a look. 

The Number 6.4 (Average Price to Sales Ratio) 

According to the NYU Stern School of business, businesses in the biotech sector often trade at an average of 6.4 times their annual revenue.  This is not annual profit, because many of the immature growth companies in this sector are still not profitable. Here, the number 6.4 merely represents the price to sales ratio. 

In the company’s recent 3rd quarter report, management estimated that the company could do about $450 million in sales in the year 2025. This would represent rapid sales growth for the company’s new melanoma drug, Amtgavi. It would also mean that the company’s current market valuation of $3.2 billion is just about fair (Maybe even on the high side). But this valuation totally discounts the realistic growth potential of the company. 

Just this one drug for melanoma could easily quadruple sales over time. Right now, doctors are just experimenting with the drug, and only using it for patients that have failed other, more established therapies. Additionally, the occurrence and recurrence of melanoma skin cancer is expected to explode as the Baby Boomers gets older and older, and their skin becomes ever more worn (Anybody remember what Senator John McCain looked like before he finally passed away?). In fact, respected researchers believe the current total melanoma market could be as high as $6.5 billion today, which could easily double within the next ten years.  This being the case, if Amtgavi could just capture 20% of this market over time, that could easily equal $2,000,000,000 in annual sales. If we apply NYU’s standard multiple, that would make the company worth roughly $ 12 billion, instead of today’s $3 billion.  

Seems like promising math, right? Well, Melanoma is just the beginning for Iovance. 

The Number 17 (Cornucopia of Clinical Trials)

Right now, Iovance is a skin cancer company. But the firm aspires to much more. In fact, the company has at least 17 different ongoing clinical trials for different types of cancer. Some types, such as lung cancer, offer massive multi billion dollar markets where current treatment modalities are sub-optimal, to say the least. 

Iovance is pioneering a new type of cancer immunotherapy called TIL.  Immunotherapy is when elements of your own body are modified and improved to fight cancer. Right now, all of Iovance’s treatments are made specifically just for you, and your cancer. This means that, not only is the company cranking out some exciting new data, but the treatments are far more gentle than the traditional “scorched earth” approach of chemotherapy. It’s just your own cells that came from your own body, so the days of nearly killing the patient, just to save the patient, are coming to an end. 

If just ONE of Iovance’s dozens of clinical trials really works out, we could easily add another $10 billion in sales over the coming years. So, then, combining that theoretical ten billion with the very likely growth of Iovance’s already approved melanoma therapy, the shareholders could easily own a company doing $20,000,000,000 in revenue a year. Remember, if we apply NYU’s metrics, that would mean the company could eventually be valued at $90 billion, as opposed to today’s $3 billion. 

It may seem hard to imagine a small biotech growing a cancer empire as opposed to today’s limited sales with the firm’s limited approved offerings. But, as Wayne Gretzky was quoted as saying, “We don’t skate to the puck. We skate to where the puck is going.” 

The Number 10.6%  (The Rothbaum Factor) 

One man who definitely sees the vision of where Iovance could go, is Wayne Rothbaum. Rothbaum is a well known biotech tycoon, featured in the book “For Blood or Money.”  He is currently the largest single shareholder in Iovance, and a member of the Board of Directors. Owning somewhat more than 10% of the company, he has outsize control over corporate decisions.  He has done nothing but buy shares in the company for a long time. 

While Mr. Rothbaum is certainly a well known, experienced, biotech investor, he is still just one man. But his presence means that Iovance doesn’t have to worry about running out of money, or worry about a lack of capital for expansion. Rothbaum is a billionaire several times over, and additionally, has rock solid connections all over Wall Street. Even though the company currently has enough cash on hand to fund operations until at least the middle of 2026, Rothbaum’s presence de-risks the situation for other investors. As long as Rothbaum is on board, the chance of this young biotech going broke is almost nil. 

When we add up the numbers, an alluring bottom line emerges. A company valued in such a way as to ignore the firm’s very real growth prospects. A research pipeline stocked with exciting innovations for some of the world’s most widespread diseases. And a powerhouse lead shareholder who brings a lot of investment capital to the table. 

Featuring an awful lot of pluses, and few minuses, Iovance could be a powerful way for a biotech investor to multiply her money.