Iovance Therapeutics (NASDAQ:IOVA) — which specializes in novel cancer therapeutics — is seeing shares skyrocket more than 35% on Tuesday. A combination of regulatory approval and possible short-squeeze speculation is boosting IOVA stock today.
According to NPR, the U.S. Food and Drug Administration has approved Iovance’s unique oncological solution to treat “aggressive forms of melanoma using immune system cells from a patient’s tumor.” Called Amtagvi, the therapeutic offers a solution for patients whose melanoma “cannot be removed with surgery or has spread to other parts of the body.”
Amtagvi represents the first cell therapy approved by the FDA for solid tumors, per NPR. “The approval of Amtagvi represents the culmination of scientific and clinical research efforts leading to a novel T cell immunotherapy for patients with limited treatment options,” said Dr. Peter Marks, Director of the FDA’s Center for Biologics Evaluation and Research.
Earlier this morning, Iovance also announced an underwritten offering of 23 million shares of IOVA stock at an offering price of $9.15 per share. Gross proceeds of approximately $211 million will be used to support Amtagvi’s commercial launch.
Melanoma occurs when skin cells responsible for pigment production “grow out of control,” per the American Cancer Society. A major risk factor stems from overexposure to ultraviolet light, which can occur from sunlight or tanning beds. While the tumor can be easy to treat when detected early, if not removed in time, melanoma can quickly spread.
As a result, Amtagvi provides hope for patients who suffer from a more advanced stage of the cancer, driving the fundamental case for IOVA stock.
A Short Squeeze May Have Helped Swing IOVA Stock Higher
According to the American Cancer Society, skin cancer is the most common of all cancers in the United States. And while melanoma accounts for “only about 1%” of such cases, it causes a “large majority” of skin cancer-related deaths. Understandably, then, IOVA stock is jumping higher based on a critical need here. At the same time, there may be some market-specific dynamics helping to boost sentiment.
Using data from Fintel, short interest on IOVA stock comes to 19.79% of its float. Additionally, the short interest ratio lands at a moderately elevated 6.03 days to cover. This latter metric represents the number of trading sessions that a trader will need (based on average trading volume of the target security) to unwind or cover their short position.
Of note, a high short interest indicates a direct bearish position. To short a company, speculators must first borrow shares of the targeted enterprise from a broker. Immediately, the speculator sells the shares in the hopes that they will drop in value, thus allowing for reacquisition at a cheaper price. From there, the speculator returns the borrowed amount of shares back to the broker, pocketing the difference as profit.
In theory, it’s a straightforward exercise. But in practice, a northward swing in sentiment can easily panic bearish traders due to the contractual obligation to return the borrowed securities. Therefore, a robust move — like what IOVA stock is printing today — can spark a positive feedback loop.
Why It Matters
Analysts who were early to endorse IOVA stock are enjoying an I-told-you-so moment. Within the past three months, Wall Street experts have rated the stock as a unanimous strong buy. Overall, the average price target for shares clocks in at $24.42, implying more than 90% upside potential.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
