A Low-Priced Biotech Is Back in the Bargain Bin – And I’m Adding
This beaten-down small-cap offers rich options premiums, and an attractive setup.
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The markets this past week just started to shake out of some of the complacency around the growing threats from stagflation, or as Doug Kass would say “slugflation.” This was triggered by hotter-than-expected April CPI and PPI readings Tuesday and Wednesday. Oil moved to over $105 a barrel on WTI and climbed near $110 a barrel on Brent Friday.
In addition, the Treasury sold nearly $700 billion of securities to fund the massive federal debt and widening fiscal deficit this week. Included in this slew of new debt issuance were 30-Year bonds priced at just over 5.04%. This is the first time since the summer of 2007 that this bond has had a five handle. This helped spark a selloff in equities Friday.
I remain quite cautious around my portfolio allocation as I have been throughout 2026. Approximately 30% of my allocation is in short-term Treasuries and cash, a much heavier than normal stance. And that was before Friday’s option expiration date, which boosted that cash allocation. Therefore, I have to put some money to work in what I consider an overbought market.
I continue to put this dry powder into equities via covered-call orders that at least provide some downside risk protection. One name I added to Friday during the market pullback was Iovance Biotherapeutics (IOVA), a small-cap biotech concern that I last highlighted on these pages in February.
The shares have given back all of their surge following fourth-quarter earnings results in late February and since peaking in the second week of March. Despite the company’s approximate $1.5 billion market cap, the liquidity in the options against the equity is decent. And the premium in those options is quite lucrative.
As a reminder, Iovance is a commercial-stage biotech concern focused on the development of TIL (tumor-infiltrating lymphocyte) therapies for the treatment of solid tumors. A TIL therapy can leverage components of a patient’s own immune system to effectively fight solid tumors while avoiding side effects inherent in many other cancer therapies. To accomplish this end, a biopsy is performed to extract part of the tumor. The tumor is then fragmented and placed in media that promotes the separation of TILs from the tumor. Once isolated, TIL is then expanded ex vivo. Prior to reintroduction, the patient receives non-myeloablative lymphodepleting chemotherapy to suppress the tumor environment, enhancing the treatment’s effectiveness.
Iovance’s main asset is its second-line melanoma therapy called Amtagvi, which was approved for a subset of individuals with unresectable or metastatic melanoma in early 2024. In so doing, Amtagvi became the first-ever individualized T-cell therapy green lit by the FDA for a solid tumor indication. The therapy is approved in the U.S and Canada, with hopefully the U.K. and Australia approving the therapy this year.
Amtagvi is also being evaluated in a registrational study to treat a cohort of unresectable or metastatic non-small cell lung cancer. The therapy is also in mid-stage development as a potential treatment of advanced endometrial cancer. The therapy has not had the sales trajectory originally projected upon approval, likely due to its over $500,000 price tag. That said, revenues are projected to rise in the mid-30s this year to approximately $360 million.
Iovance is expected to become profitable in 2028. The company has just over $300 million in cash and marketable securities on its balance sheet to get it to that status.
Earlier this month Barclays maintained its buy rating and $11 price target on IOVA. Chardan Capital did the same with a more optimistic $14 price target. The shares currently trade at $3.45 with their recent pullback, putting them back in the bargain bin.
Option Strategy
Here is how one can establish a position in IOVA using a covered call strategy. As a reminder, covered-call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.
Selecting the January $3 call strikes, fashion a covered call order with a net debit in the $2.10 to $2.20 a share range (net stock price – option premium).
This strategy delivers downside protection of about 35% across the trade expiration.
The strategy also has upside potential of nearly 40% over the option duration even if the stock trades down roughly 15% over that time.
At the time of publication, Jensen was long IOVA.
