Agenus Inc. (NASDAQ: AGEN) stock plunged more than 20% in 2017. That followed a 9% drop the previous year. Even worse, over the past 10 years, the biotech has lost more than 70% of its market cap.
With its dismal track record, should investors run for the hills rather than sink money into Agenus? Or is Agenus actually a stock to buy right now? Here are the cases both for and against the biotech stock.
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The case for Agenus
For a small biotech, Agenus claims a relatively deep pipeline. The biotech has four immuno-oncology (I-O) candidates in clinical development. Agenus has two experimental vaccines in clinical studies. And the company is no longer just a clinical-stage biotech, thanks to the October 2017 approval for GlaxoSmithKline's (NYSE: GSK) Shingrix. The shingles vaccine contains Agenus' QS-21 Stimulon adjuvant. GSK is also using QS-21 in its malaria vaccine, which awaits regulatory approval.
One way to determine if a small biotech's pipeline truly has potential is to see which larger companies are eager to collaborate on clinical studies. In addition to its partnership with GSK, Agenus has partnerships with four other big drugmakers.
Incyte (NASDAQ: INCY) is evaluating two checkpoint antibodies originally developed by Agenus, INCAGN1876 (an anti-GITR agonist) and INCAGN1949 (an anti-OX40 agonist). Merck (NYSE: MRK) is researching an undisclosed antibody developed by Agenus. The small biotech forged a deal with Amgen to research drugs based on Agenus' phosphorylated peptide program. Agenus also is working with Belgium-based pharmaceutical company UCB to develop I-O antibodies.
Agenus thinks that it could file for regulatory approval for two of its I-O candidates as soon as the second half of 2019. Pivotal studies evaluating PD-1 inhibitor AGEN2034 as a second-line treatment for cervical cancer and for treating cutaneous squamous cell carcinoma are in progress. So is another pivotal study for anti-CTLA-4 drug AGEN1884 in combination with Merck's Keytruda as a first-line treatment of non-small-cell lung cancer.
Agenus currently has a market cap of less than $400 million. Some on Wall Street thinks the biotech is worth a lot more than that. The average analyst's one-year price target for Agenus is nearly three times higher that the current share price.
The case against Agenus
The biggest knock against Agenus is that there remains a high level of risk with its pipeline candidates. Agenus is still very new to the world of developing cancer I-O drugs, moving five programs into the clinic in just two years. That's lightning fast, relatively speaking.
I-O is also a crowded field. Close to 2,000 immunotherapies are currently in development. Of particular concern is that Agenus is late to the party with its PD-1 inhibitor. Merck's Keytruda and Bristol-Myers Squibb's Opdivo already rule the space, with other big drugmakers trying to claim market share as well. Unless AGEN2034 really proves to be something really special, Agenus could succeed clinically yet still fail commercially.
Agenus has taken to referring to its latest initiative as "Agenus I-O 4.0." While the label is accurate to some extent, it also subtly points to the need for the company to reinvent itself after years of largely unsuccessful efforts.
There's also the fact that Agenus has already received cash for some of its collaborations in advance, decreasing the future financial benefit of these deals. In 2015, the biotech monetized a portion of the future royalties that it could receive from GSK from sales of its shingles and malaria vaccines. Last year, Agenus restructured its deal with Incyte to receive cash up front in exchange for lower future royalties.
More recently, Agenus closed a $230 million royalty monetization with HealthCare Royalty Partners. The good news is that the transaction didn't require Agenus to issue additional stock and cause existing shares to be diluted. However, it's yet another example of its being forced to give up future profit potential for immediate cash needs.
AstraZeneca's big clinical setback for Imfinzi last year demonstrated the risk associated with developing I-O drugs. In my view, risk is the single biggest factor why I'm not convinced that Agenus is a buy right now. Having said that, all Agenus would need is one success in its pivotal studies for the stock to skyrocket. While the risks are high, so are the potential rewards.
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