Updated: Jul 25
Iovance is well-positioned as the key leader of cell therapy in the solid tumor space. The phase 2 lifleucel data in heavily pretreated melanoma and LN-145 data in heavily pretreated cervical cancer demonstrates compelling efficacy. LN-145 received fast track and breakthrough therapy designation in cervical cancer, and is also in phase 2 for HNSCC and NSCLC. Both lifleucel and LN-145 are being tested in combination with Keytruda, which may unlock substantial value in earlier lines of therapy. Iovance also has a strong foundation for scaled-up manufacturing and rapid therapy processing. Given the acquisitions of leading cell therapy companies by big pharma, we think a future buyout is likely, but may not take place until after commercialization. Regardless of acquisition status, we feel that Iovance has the requisite data and infrastructure to succeed independently. We will be initiating a position in Iovance, targeting a 3-4% weight.
We project peak sales of ~$630 M in melanoma for lifleucel, ~$500 M for LN-145 in cervical cancer, and ~$1.8 B for LN-145 in HNSCC due to compelling efficacy in difficult to treat tumors and first-to-market status for cell therapy in solid tumors, resulting in a future valuation of ~$44.50/share, a 42% premium on current stock price.
Lifleucel and LN-145 are widely expected to be approved in their respective indications, and this approval could come as soon as the second half of 2020.
Substantial upside exists if these therapies demonstrate clinically meaningful efficacy in NSCLC, and if entry into earlier lines of therapy through Keytruda combination is achieved.
How smoothly Iovance transitions to full commercialization is a key factor in realizing maximum opportunity, particularly as any acquisitions of Iovance appear more likely after product launch.
Iovance Biotherapeutics is a cell therapy-based company that specializes in autologous polyclonal tumor infiltrating lymphocyte (TIL) production. The key value proposition that distinguishes Iovance from other T cell therapies is developing assets targeting solid tumors in late-stage clinical trials, with the high likelihood of becoming the first T cell therapy to gain approval in these tumor types. Iovance possesses two key assets in pivotal trials:
Lifleucel: This TIL therapy is being trialed in heavily pretreated, PDx-resistant melanoma patients. An ORR of 36% was observed in these patients (improving on standard of care chemotherapy with an ORR of ~10%). 2/66 patients had complete response, with 23 partial responders. These rates were seen across patient segments / prior treatment history. Data was generated in 2L+ patients and includes those who progressed on a PDx therapy. Enrolled patients experienced a mean of 3.3 lines of prior therapy and high baseline tumor burden. Data released during ASCO in late May showed that median duration of response had not been met at 18.7 months, indicating durable efficacy.
LN-145: This therapy is similar to Lifleucel, but is being tested in heavily pretreated cervical cancer, for which it received fast track and breakthrough therapy designation. ORR was 44%, a high benchmark considering these patients had received an average of 2.4 prior therapies. Considering Keytruda (the current standard of care for this population) gained approval in this subpopulation based on an ORR of 14%, we expect LN-145 to be approved. Beyond cervical cancer, LN-145 is already in phase 2 for HNSCC and NSCLC (both as a monotherapy and in combination with Keytruda), which could be extremely lucrative if similar results are seen in these indications. Additionally, phase 1 data in NSCLC showed 2 of 20 patients with complete response ongoing after one year, pointing to a higher probability of success in this indication.
In 2019, Iovance began building a 136 K square foot manufacturing facility in Philadelphia slated for completion in 2021, positioning the company to scale up rapidly for production of their therapies upon approval. Additionally, Iovance has a relatively rapid manufacturing process, with the ability to prepare therapies in 22 days. Overall, in a field that has seen setbacks due to scaling up, Iovance has prepared to avoid these growing pains.
Melanoma: With an overall incidence of ~100 K/year, unresectable/metastatic melanoma represents ~5% of all cases, or ~5 K/year. ~60% receive a second-line therapy, totalling ~3 K/year patients addressable by lifleucel in 2021. Unmet Need: Limited options exist for patients that progress on a PD-1, with ORR of chemotherapy hovering around 10%.
Cervical Cancer: This tumor type has a U.S. incidence of ~13.8 K/year. Approximately ~50% of cases are caught early in progression. Of the remaining 50%, estimations for receipt of 2nd-line therapy vary, with an average of ~35% of patients receiving a 2nd line within 2 years of first-line therapy. This represents a treatable population of ~2.4 K/year in 2021. Unmet Need: Chemotherapy has traditionally been the standard of care in this patient population, with ORR of ~15%. Keytruda was recently approved for this subgroup with an ORR of ~15%, indicating high remaining unmet need.
HNSCC: With an overall incidence of ~45 K/year, metastatic HNSCC represents ~33% of all cases, or ~15 K/year. ~50% are expected to receive second-line therapy, totalling ~7.5 K/year patients addressable by LN-145 with an anticipated launch in 2022. Unmet Need: Current second-line standard of care include chemotherapy, with response rates of ~10%, setting a low bar for improving on current therapies.
Key Inflection Points
Iovance is expecting final results for the pivotal trials in melanoma and cervical cancer by second half of 2020 and expects BLA submission within 2020 as well.
Specifics on when NSCLC and HSNCC phase 2 data will be released have not been shared, and the primary completion data for these studies is set for December 2023. However, we expect additional data on the phase 1 trials to be released sometime in the coming year. If lifleucel can demonstrate an ORR of >20% in NSCLC, we would expect this to be viewed as clinically meaningful and to drive higher valuation.
Yescarta is approved for 3L+ large B-cell lymphoma. Launched in 2017, Yescarta earned $456 M in 2019, and is priced at an annual cost of ~$375 K.
Kymriah, also approved in 2017 for B-cell precursor ALL and in 2018 for large B-cell lymphoma, generated $278 M in sales in 2019. Kymriah is price at ~$375 K for large B-cell lymphoma, and ~$475 M per year for ALL.
Key Stock Drivers
Compelling Clinical Data: Both Iovance assets have demonstrated compelling data in heavily pretreated tumor types with limited alternate options and low bars for clinical efficacy.
Lucrative Expansion Opportunities: There is substantial expansion potential outside of core indications of melanoma and cervical cancer, with ongoing phase 2 trials in NSCLC and HNSCC.
Entering Earlier Lines of Therapy: Combination trials with Keytruda in melanoma, HNSCC, and NSCLC may allow lifleucel and LN-145 to enter earlier lines of therapy, unlocking additional value.
Strong Manufacturing Capacity: Investment in large-scale manufacturing facilities and rapid therapy processing position Iovance to commercialize their therapies upon approval and quickly scale up to meet demand.
Likely Future Target of Acquisition: Given what we have seen with large pharma seeking to enter the cell therapy space through acquisition (e.g., Gilead and Kite Pharma), there is a significant likelihood that Iovance gets bought by a major player. However, given the recent stock offering, this may not come until after commercialization.
Recent Stock Offerings Pricing Iovance at a 30% Discount: Despite releasing positive data in melanoma during ASCO in late May, Iovance’s stock offerings raising ~$600 M have brought the price down from a ~$41 high to ~$31, providing opportunity to acquire shares at what is likely a discounted price.
Cash Burn Rate: Iovance is burning through cash at an accelerated rate, with cash burn increasing by ~62% in 2019. In 2019, Iovance spent ~$166 M and in 2020Q1 spent ~$60 M (2-fold that of 2019Q1), leaving ~$250 M on hand. This prompted a new stock offering in which Iovance closed on ~$600 M in cash to fuel the commercialization process. This should provide the cash necessary to achieve commercialization, but we will be keeping a close watch on rate of cash burn and how it coincides with advancement of commercialization efforts.
Operationalizing Commercialization Efforts: Given that it looks like Iovance will commercialize on its own, building the sales force and other infrastructure necessary to meet sales goals may be challenging for a company with no prior experience. Not much information has been released around salesforce, so we will be watching for any updates here.
Incomplete NSCLC Data: The phase 1 data for LN-145 in NSCLC looks promising, but comes with confounding factors, as select patients were given subsequent treatments combining two chemotherapies with IL-1. Additionally, ORR data was not released. The data coming out of larger trials in NSCLC will likely play a key role in Iovance valuation.
Future Competition from Major Players in Cell Therapy Space: While Iovance has a head start on tackling solid tumors, CAR-T companies are looking toward this market with increasing vigor. If they can solve for the key challenge of inducing CAR-T to infiltrate the solid tumor (e.g., through engineering of immunosuppressive factors), these therapies could pose a threat to Iovance's market share in the future, though this is not likely to occur short-term.
We own shares of Iovance Biotherapeutics. This article expresses our own opinions, not Rhythm Pharmaceuticals’ or any other party’s opinion. We are not receiving compensation for this report. We do not have a business relationship with the company mentioned in this report.