Iovance Biotherapeutics (NASDAQ: IOVA) investors received great news earlier this year when the U.S. Food and Drug Administration granted it accelerated approval for the company's cell therapy treatment for advanced melanoma, Amtagvi. It gives the business a crucial product to build its operations around.

Growth investors were initially bullish on the news, but in recent months, the stock has started to struggle. While there is a lot more optimism surrounding the company, investors need to be aware that the accelerated approval of Amtagvi may not be enough to make Iovance a slam-dunk buy at this point.

There's a significant risk investors should understand before investing in the healthcare company. Here's why.

Turning a profit could take years

For up-and-coming biotech businesses, the challenge is that it may take a long time before they become profitable. The losses could even increase as a business scales, expands its operations, and looks to take advantage of new opportunities in the future.

Iovance Biotherapeutics generated $31.1 million in sales in its most recent quarterly results (which ended in June) as it has already started to generate revenue from Amtagvi. However, it still reported a sizable net loss of $97.1 million. That was only slightly better than in the prior-year period, when it incurred a loss of $106.5 million despite generating far less in revenue (less than $1 million). Operating expenses have been rising for Iovance, and that trend could continue.

What may be even more of an issue is its cash flow. Over the past six months, the company has used up $220.7 million to fund its day-to-day operating activities. That's not a great situation when you consider that the company finished the period with just $235.1 million in cash on its books. It does, however, have a bit of a buffer, as its short-term investments total $183.9 million. This provides Iovance with some liquid assets, should it need to utilize them. But without a significant improvement in cash flow, that could be a problem for investors.

The risk of dilution is high for Iovance

Without sufficient cash flow to fund its day-to-day operations plus its expansion efforts as it launches Amtagvi in new markets (the U.K., Canada, and Australia are some of the key ones it's focusing on in the near future), Iovance will need to raise money. Often, that means going through the equity markets and issuing stock. That can be preferable to having to raise money through debt, which incurs interest costs.

As of the end of last quarter, Iovance had a fairly clean balance sheet without any long-term debt. Its total liabilities of $195.8 million were far less than its assets, which totaled $964.3 million.

This suggests that share offerings could be the preferred option for Iovance, and if that's the case, investors should be aware of the risk of dilution. As more shares are issued, that will reduce an investor's stake in the business and increase the supply of stock, which often leads to downward pressure on the share price. That's not great news for a stock that's already down more than 30% in just the past six months.

Should you buy Iovance Biotherapeutics stock today?

Iovance has some attractive growth prospects, but this is still a risky investment overall. The company is going to need more cash to roll out Amtagvi to new markets, and that could result in some significant stock offerings in the future.

If you're prepared to hang on to the stock for the long term and are willing to deal with what's likely to be a bumpy ride, this can make for a potentially good investment to hang on to. But you should expect and brace for dilution, as stock offerings could be a regular occurrence.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Iovance Biotherapeutics. The Motley Fool has a disclosure policy.

This Is the Biggest Risk With Iovance Biotherapeutics Stock was originally published by The Motley Fool