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Shares of Agenus Inc. (NASDAQ: AGEN), a clinical-stage immuno-oncology company, fell 13.6% in July according to data from S&P Global Market Intelligence. Investors viewed a clinical-trial failure reported by AstraZeneca as a harbinger of sorrow for similar candidates in its own pipeline.
Aside from an adjuvant featured in GlaxoSmithKline's shingles-vaccine candidate, Agenus Inc.'s future hinges on success for new drug candidates that inhibit a cancer cell's ability to exploit the CTLA-4 and PD-1 immune-response checkpoints. This is why the market beat up Agenus when AstraZeneca reported its combination of tremelimumab, which blocks CTLA-4, and Imfinzi, which blocks PD-1, failed to provide a significant survival benefit compared to standard chemotherapy for previously untreated patients with stage-four lung cancer.
Agenus Inc.'s anti-CTLA-4 candidate, AGEN1884, and its anti-PD-1 candidate, AGEN2034, are in early-stage clinical trials, so it's far too early to know if they'll eventually disappoint. Last month's market beating, which has spilled over into August, is simply a case of guilt by association.
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Checkpoint inhibitors work extremely well for some patients, but investors are right to worry that their application might be far more limited than previously imagined. That said, Agenus is a tiny company compared to AstraZeneca, which dipped a bit less than Agenus last month.
Beyond CTLA-4 and PD-1, the company could also see some high-margin royalty revenue from Incyte, if either of the GITR and OX40 checkpoint-inhibiting candidates that the big biotech licensed from Agenus succeed in the years ahead. Plus, Agenus Inc.'s QS-21 Stimulon adjuvant is a component of a shingles vaccine that's awaiting a decision from the FDA. If the agency gives Shingrix a widely expected green light, the royalties alone could just about justify Agenus Inc.'s tiny $398.5 million market cap.
Checkpoint inhibitors might hit a ceiling, but that ceiling is high enough to give Agenus multi-bagger potential over the long term.
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