During the initial onslaught of the COVID-19 pandemic, few investment sectors received a respite. Among the lucky ones stood the pharmaceutical and biotechnology segments. But that only applied to those firms that took a risky pivot toward coronavirus-related antibodies and vaccines. For oncology specialist Janux Therapeutics, it was about the worst thing that could happen to the company and its ambitions for an initial public offering (IPO).
But with new coronavirus infections plummeting, demand for cancer therapies increased. Not surprisingly, the Janux Therapeutics IPO received tremendous fanfare, shooting 42% higher from its initial offering price.
Janux Therapeutics Financial History
Through a cursory look at Janux Therapeutics’ financial statements — page 84 of its Form S-1 filing with the Securities and Exchange Commission — you’ll notice that the company generated no collaboration revenue in 2019 and 2020. To be fair, it did post $380 million in top-line sales for Q1 2021 but that doesn’t take away from the revenue blanking in 2 consecutive years.
Should you then be worried about JANX stock and its upside potential? Admittedly, in most situations, you want to see some type of growth in your investments. Here, not only are you getting shut out on the revenue front, net losses expanded from $4 million in 2019 to nearly $6.8 million in 2020. When you trade in the speculative portion of the biotech arena, this dynamic is par for the course.
In other words, JANX stock is an aspirational play. Should the underlying company deliver encouraging clinical results for its pipeline therapeutics, you can reasonably expect Janux shares to soar. If not, the biotech cemetery features plenty of names that failed to live up to their promises. Nevertheless, the reason why Janux’s cash on hand continues to increase is investor belief in the oncology firm’s proprietary technology in sparking innovations in immunotherapy.
Therefore, no discussion about Janux Therapeutics is complete without mentioning its brief but robust private funding campaign. Over 3 rounds, the company raised $192.4 million. In its most recent round on April 20, 2021, Janux raised $125 million from lead investor RA Capital Management, a privately held venture capitalist firm.
Janux Therapeutics Potential
As mentioned earlier, Janux Therapeutics enjoyed an outstanding debut, exceeding prior expectations for its IPO. Still, the current environment for public market debuts has been a tricky one. Several new entities — particularly special purpose acquisition companies (SPACs) — enjoyed remarkable upswings only to worryingly shed market valuation later. In turn, panic begets panic, inspiring clusters of shareholders to hit the exits.
Undeniably, IPOs in the biotech space and especially for aspirational companies with little to no revenue history pose substantial risks to the buyer. However, Janux benefits from several catalysts that you should keep in mind before making a firm decision.
First, the underlying business may indeed be a game-changer as its biggest investors assert. Janux specializes in advanced immunotherapies, which according to the American Cancer Society stimulates or boosts a patient’s immune system to find effective and smarter ways to fight cancer. Specifically for Janux, the company researches and develops third-generation immunotherapies: drugs that stimulate a targeted response against malignant tumors only (i.e. non-accumulation of drugs throughout the body).
Second, fading U.S. cases of COVID-19 present an organic uptick opportunity for JANX stock. According to a September 2020 study by the Centers for Disease Control and Prevention, 4 in 10 adults in this country reported avoiding medical care because of coronavirus-infection concerns. Obviously, this was a catch-22 situation. Avoiding care imposes great health risks, but so too does coming down with COVID-19 if you have comorbidities.
But with the risk of infection exponentially down, more patients will likely seek care for their chronic conditions, buttressing Janux’s business. In addition, the pandemic itself provided a goldmine for antibody production research, which is relevant for the biotech firm’s pipeline.
How to Buy Janux Therapeutics (JANX) Stock
For the retail investor, IPOs present an intriguing mixture of opportunity and risk. Because underwriters of public market debuts usually ignore average buyers for institutional investors due to profitability reasons, you tend to be the last in line. And that means you end up paying a higher price for these fresh issues.
On the other hand, as a retail buyer, you can carefully assess whether an IPO is right for you or not. Institutional participants don’t have that luxury since they can’t risk offending underwriters by being choosy.
Also, the retail approach is easy. If you already know how to buy stocks, you can jump in right away. If not, follow the simple steps below.
Step 1: Pick a brokerage.
A brokerage acts as an intermediary between the buyer (you) and the seller. Though middlemen entities tend to attract criticism, in this case, brokers perform a valuable service. Without them, you’d have to buy shares directly from the issuing companies, which would be a cumbersome process.
Initially a complex environment, the internet and connectivity technologies sparked the rise of online “self-serve” discount brokerages. Today, you have plenty of options to choose from. Further, competition forced the standardization of financial incentives such as commission-free trading.
Ultimately, you are free to pick the platform that best suits your needs and lifestyle. Below is a list of best brokers to consider.
Step 2: Decide how many shares you want.
While seemingly mundane, deciding your share count is a vital step because it represents your risk-reward profile. A higher share count exposes you to more profitability but in turn greater risk should your target stock fail to deliver.
Take some quiet time to strategize your share count. Certainly, you want to avoid making decisions based on the noise and emotions of an open market session.
Step 3: Choose your order type.
Before placing your wager, take a moment to understand these market concepts:
- Bid: The bid is the maximum price a buyer will offer. It is always lower than the ask.
- Ask: The ask is the minimum price that a seller will accept. It is always higher than the bid.
- Spread: The difference between the bid and ask price, the spread also offers information about market liquidity and risk. Narrower spreads suggest higher liquidity and lower risk due to buyer availability, while wider spreads indicate lower liquidity and higher risk.
- Limit order: Use a limit order to trade stock at a specific price. Please be aware that no guarantee exists regarding limit-order fulfillment.
- Market order: To buy shares at the prevailing price, place a market order. The terms are least favorable to you: buy orders will execute on the ask while sell orders execute on the bid.
- Stop-loss order: Investors place stop-loss orders to automatically exit at a predetermined price or the next available price, whichever comes first. During a gap-down session, a stop-loss may fill below your predetermined price.
- Stop-limit order: A stop-limit order only fulfills at a predetermined price, preventing negative surprises. However, continued volatility will leave your stop-limit order hanging unfulfilled.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
For limit orders, follow the same steps while including your desired execution price.
Don’t let anyone tell you any differently, biotech IPOs with limited revenue history pose tremendous risks. But with Janux Therapeutics, its proprietary immunotherapy pipeline could revolutionize how medical doctors treat cancer through targeted responses against malignant tumors. The company’s innovations have attracted top-tier venture capitalists, putting their money (and reputation) on the line for JANX stock.