Iovance Biotherapuetics Stock Down 50% On Trial Data – Some You Lose

Iovance Biotherapeutics (NASDAQ: IOVA) stock is down 50% premarket as it suffers – clearly rather badly – from trial data for its melanoma treatment. This is one of those truths about clinical stage medical investigation companies – some you'll win and some you'll lose. It just is true that some ideas for treatment don't pan out but that a lot of money has to be spent to show that they don't.

There will be some happy at this of course, the short interest in IOVA was some 13.4% as of last night. That's a $140 million profit to those short-sellers in just the past 12 hours. Which aids in explaining why short selling is as popular as it is. The traditional view is that it's high risk. Which it is, for losses are uncapped while potential profit can only be as large as the initial position. One the other hand such risks do, as we can see here, sometimes work.

The specific problem for Iovance is that their treatment for melanoma has a rather less than hoped for effect. The objective response rate (ORR) was 29% – meaning that the bulk of those treated saw no difference in the cancer progression.

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However, it's not quite true that all is lost here. For drug approval – by the FDA, the one thing that really matters in this field – depends not really so much on the performance of a drug itself. Rather, on the performance compared to other available and authorised treatments for the same problem. This is what the FDA means by effectiveness, one of their tests. Something that's not actually very effective but is a little bit won't gain approval if there's something already out there that is better. On the other hand, if there isn't anything out there then something only that little bit effective might well gain approval.

The point here being that the treatment is for people who have already been treated with other drugs (anti-PD/1.L1 and or BRAF etc) and have not responded well to them. And at that point the number of viable and licensed treatments is zero. So, it is true that these results are disappointing but it's not true that this is – necessarily – enough to prevent FDA authorisation.

We are thus in a middle situation. The 50% fall in IOVA could be seen as an over-reaction to this news. Or, given the hopes being put on this melanoma treatment, perhaps it isn't. We're at an either way point in any useful valuation of Iovance Biotherapeutics that is.

Iovance also has other developments, lifileucel for example, which has gained feedback and encouragement from the FDA. We are not with a one product or one hope company here. Which might indeed make that 50% slive off the corporation valuation a little excessive.

Our likely diagnosis for IOVA stock as a result of this is increased and maintained turbulence as the differing views collide in the marketplace. We could well see a rise after this drop as those who tink it excessive buy in. But that will collide with those thinking that too much of the possible valuation has already gone as a result of the treatment results.