Amid Biotech Pitfalls, this Stock Has Outperformed NVDA in the Last 3 Months
Image courtesy of 123rf.com

Amid Biotech Pitfalls, this Stock Has Outperformed NVDA in the Last 3 Months

In the last three months, this biotech stock outperformed Nvidia (NVDA) by over 3x.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Biotech stocks, especially of smaller companies, are notoriously risky investment exposures. Because their bread and butter is drug development, its complexity cannot be easily accounted for. 

Although the Center for Drug Evaluation and Research (CDER) approved 86% of new molecular entities (NMEs) in 2022, they must pass multiple clinical phase trials. According to a study from Biotechnology Industry Organization (BIO) Industry Analysis and BioMedTracker (BMT), the FDA, on average, approved nearly 9% of Phase I in the early 2000s. 

Additionally, the probability of success (PoS) shifts depending on the use of biomarkers in patient selection, according to the 2019 Biostatistics study. During those trying times, biotech companies must carefully balance their limited budgets until a drug pipeline hits the jackpot, as recently happened with Legend Biotech’s (NASDAQ: LEGN) CARVYKTI for bone marrow cancer.

The added complexity of biotech investing is financial. By the time Pfizer (NYSE: PFE) paid $43 billion for oncology firm Seagen (SGEN) in December 2023, the stock had gained 70% value on a yearly basis, from $124 to $212 per share. This indicates that behind-the-scenes dealings can cut short potential upside for retail investors.

Given these factors, what is ImmunityBio (NASDAQ: IBRX) ‘s status as a prospective biostock candidate?

ImmunityBio’s Claim to Fame

Founded in 2014 in San Diego, California, ImmunityBio is a clinical-stage biotech firm. As its name suggests, it specializes in immunity-enhancing therapies and vaccines. In particular, the FDA approved ImmunityBio’s Anktiva this April. The drug is designated an FDA Breakthrough Therapy, as it activates the body’s T-cell immune system to attack tumor cells.

In combination with ImmunityBio’s Bacillus Calmette-Guérin (BCG) vaccine, Anktiva (N-803) is set to treat non-muscle invasive bladder cancer (NMIBC) from mid-May. For investors, bladder cancer is fairly common, at an average rate of 18.2 per 100,000, with 75-80% of newly diagnosed cases classified as NMBIC.

In 2024, Anktiva’s addressable market in the US is 83,190, as estimated new cases by the Surveillance, Epidemiology, and End Results (SEER) program under the National Institutes of Health (NIH). Of course, this doesn’t account for cases in which life expectancy varies according to stage. For example, stage 0 has a 98% five-year survival rate, while stage III bladder cancer has a 46% five-year survival rate.

The new drug’s recommended dosage is once per week for six weeks, with a potential follow-up after three months. Anktiva’s pricing strategy is set at around $35,800 per dose, potentially generating around $1.1 million in revenue, including course and maintenance. 

ImmunityBio’s Financials

On May 9th, ImmunityBio delivered its Q1 2024 earnings. Typical of smaller biotech startups, the firm reported a $134.1 million net loss, substantially higher than the $116.6 million net loss in the year-ago quarter. In share terms, this was a $0.20 net loss per common share (basic and diluted).

However, operating expense losses decreased from $111.9 million to $95.2 million during the period. ImmunityBio left the quarter with $133.3 million in cash, cash equivalents, and restricted cash ($334k). 

The company’s liabilities remained flat at $1.091 billion from the year-ago quarter. This puts the debt-to-equity ratio at a high negative 1.161, confirming that the company has more debt than assets. However, this is not that surprising for the capital-intensive biotech sector.

Against the industry average of 24.83, ImmunityBio’s price-to-earnings (PE) ratio was -8.2 in 2023 and estimated -10.83 for 2024, per Nasdaq data. With the rollout of Anktiva and BCG, the P/E growth forecast in 2024 is 24.75. The latter PEG value is determined by dividing the P/E ratio by the expected future earnings growth rate.

ImmunityBio’s Price Moves and Forecast

Over a one-year period, IBRX stock is up 165%, or 62.8% year-to-date, firmly leaving the penny stock territory in March. From the 52-week low of $1.25, IBRX shares are now 550% up at $8.12 per share.

However, this is still 23% lower than the 52-week high of $10.53, suggesting some room for growth ahead of the Anktiva launch. Nasdaq’s aggregated forecast data suggests an average price target twelve months ahead of $6 per share. WSJ’s average price target is more optimistic at $7.50 per share. 

Is your investment exposure typically short-term or long-term? Let us know in the comments below.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.