Why IMU is a multi multi bagger, page-4352

This time last week I noted the ASX listed Imugene (IMU) was due for a rerating. At the time I sensed those endeavouring to swim against a rising tide were finding it increasingly difficult to do so in the wake of pending trial results, forthcoming drug combination announcements and the continued development of the companies IP, partnerships and existing pipeline. Investors, the medical community and Big Pharma were slowly coming to the realisation that Imugene have the medical researchers, innovators and intellectual property to figure prominently in the immunotherapy space. More importantly they were coming to the rightful conclusion that Imugene posses the passion, patience and professionalism, to make it happen.

But enough about Imugene and their people, I shall devote time to IMU and their personnel later in this post, when we decide to play a game of chess with Big Pharma. For now the essence of this post is put simply “a rising tide lifts all boats”. And put simply, the field of immunotherapy is not just lifting all participants, as it were, it’s fast becoming the hottest game in town. For it is meeting, in the words of Imugene’s erstwhile CEO Lesley Chong, a huge unmet need. Let’s take a closer look, (and in doing so a quick scrawl of the internet might help).

Immunotherapy treatment in fighting cancer

Just 10 years ago, only two cancer drugs had surpassed the threshold required for blockbuster status. Now, all of the top 10 oncology drugs are selling well over $1 billion each year. The road for innovating new cancer drugs is still long (around 10 years on average from patent filing to regulatory approval), and the cost is still high (about $650-700 million per approval, according to analysis by JAMA Internal Medicine). But the payoff for pharma companies in oncology is reaching altitudes like never before. EvaluatePharma estimates that the $91.9 billion the industry has currently invested into clinical oncology drug development will result in $78.2 billion in net present value (NPV).

Immunotherapy treatments are currently transitioning from being last lines of defense to offering bigger, earlier breakthroughs. So-called immuno-oncology (IO) drugs are relatively recent innovations: They enlist a patient’s immune system in the fight, giving it marching orders to tackle cancer cells (rather than directly attacking tumors, as radiation and chemotherapy do). Under the right circumstances, the best IO performers can make traditional chemotherapy or surgery far more effective, or potentially even replace them, in treating many cancers.

fortune.com notes this new paradigm has fostered tremendous optimism among doctors and patients—and among pharmaceutical firms. IO drugs were roughly a $22 billion business in 2019. Morningstar analyst Damien Conover estimates that figure will rise to $43 billion by 2023. But it could soar far higher if some therapies prove to have wider applications. (The range of potentially IO-treatable cancers has widened dramatically.)

Dr Steven Kao, a Medical Oncologist at the Chris O'Brien Lifehouse recognises that checkpoint inhibitors such as Keytruda and Opdivo are the main form of immunotherapy being used today. In a podcast recently with the Cancer Council in Australia he noted one big advantage is the practical side of how these newer drugs are actually administered. “Most are given by intravenous drip during a day visit to a treatment centre, while some are available as tablets that you take at home. It’s not as scary as people think. The environment is as relaxed as possible, there are chairs or beds. The nurse puts in a cannula. Medication infuses into a drip. Then you go home.” He says.

Cancer in the US and immunotherapy

The total number of those diagnosed with cancer in the U.S. is growing. Estimates from PwC show that the number of cancer patients in the U.S. this year will swell to about 18 million — up 31 percent over 2010. And of course, cancer actually consists of hundreds of different diseases, giving the industry a wide array of oncological indications to target.

PwC estimates that 34 percent of the 15,267 pharma assets in development are related to cancer — a 30 percent increase over 2013 — as companies target a mushrooming global oncology market that could reach $230 billion by 2024.

With its resources mobilized at an unprecedented rate, pharma is gearing up to usher in the next generation of cancer treatments that are smarter, more targeted and potentially more curative than ever before.

Much of the value in oncology is being driven by pharma companies shifting away from the “big five” tumors — breast, lung, colorectal, prostate and gastric — and instead targeting rarer cancers. The McKinsey Cancer Center estimates lower-incidence tumors will account for about 50 percent of oncology revenue this year.

The scientific momentum behind today’s top-selling immunotherapies picked up speed just decades ago.The big turning point came when researchers honed in on the ability of antibodies to unleash the immune system’s killer T-cells on cancer. In particular, scientists discovered that certain “checkpoint” proteins, such as PD-1, are found on T-cells. Cancer cells then cleverly release a protein that binds to PD-1, creating a reaction that stops the T-cells from attacking cancer. Today’s generation of “checkpoint inhibitors” are now able to bind to proteins like PD-1, and block the cancer’s own proteins, to kick the immune system back into gear.

Investing in immunotherapy

And investment funds are realising the potential in investing in this new form of cancer treatment known as immunotherapy. Loncar Funds in the US have a Cancer Immunotherapy ETF offering exposure to a basket of companies that develop therapies to treat cancer by harnessing the body's own immune system.They too recognise the fact that immunotherapy is a transformational field within the biotechnology space that may have a foundational impact on cancer care. CNCR seeks to support this important work and its positive impact on society.The fund seeks to develop immunotherapies that are more effective than traditional medicines and may deliver a better quality of life. In doing so they invest in innovative immunotherapy companies who may be making a difference for courageous patients who battle cancer. It is their hope that focusing on immunotherapy in this way will drive more awareness and investment in their direction while giving investors exposure to one of the most innovative segments within the biotech industry.

Big Pharma and Immunotherapy

But it’s not just investment funds seeking to cash in on this new biotech revolution known as immunotherapy. Leah Rosebaum of forbes.com notes that though the pandemic has been much of the healthcare world’s focus over the past year and a half, new innovations in fighting cancer are still very much the focus of the world’s biggest pharmaceutical companies. She says that several industry analysts are most excited about the prospect of new immuno-oncology drugs.

These drugs, which help the human immune system recognize and fight cancer in the body, often turn out to be blockbusters. For example, Keytruda, Opdivo and Darzalex were among the top bestselling drugs of 2020. An immunotherapy drug can easily cost more than $100,000 per patient, and treatments are often doubled up for maximum benefit. They are huge revenue drivers, but they are also showing incredible promise in defeating hard-to-treat and advanced cancers.

Analysts at Cowen, Morningstar and SVB Leerink told Forbes that some of the biggest news this year surrounds a new drug from Bristol Myers Squibb called relatlimab. The company has tested this drug in combination with its drug Opdivo in patients with untreated metastatic or unresectable melanoma. Phase 3 clinical trial data from these tests will be presented during the conference. Both drugs are “checkpoint inhibitors” that are used to help immune system cells distinguish between healthy and cancerous cells. Opdivo is already a BMS superstar—last year it raked in $7 billion in revenue, making it the company’s third-highest-earning brand.

In March, BMS revealed that the combination of relatlimab, which targets a checkpoint called LAG-3, and Opdivo work twice as well together to treat melanoma patients compared to Opdivo alone. “It’s an impressive benefit,” says Daina Graybosch, an analyst at SVB Leerink.

And despite Covid-19, sales of Roches own blockbuster Tecentriq in 2020 were actually up 55%, the company reported in its 2020 financials report. Total sales of the drug totaled $3 billion, and approval for a new disease could boost those numbers even further. Chinese pharmaceutical company I-Mab currently in its U.S. phase 1 clinical trial of antibody drug uliledlimab is also one to watch, according to Louise Chen, an analyst at Cantor Fitzgerald. Used in combination with Roche’s Tecentriq, it showed good safety and tolerability in patients with advanced cancer. Though uliledlimab is also a checkpoint inhibitor, it has a different mechanism of action than other antibodies on the market and could be more effective than first-generation checkpoint inhibitors. The data looks good so far, but experts caution that more evidence is needed from phase 2 and 3 trials. “Physicians that we have spoken with believe that the target is promising,” a brief from Cantor Fitzgerald says, “but need to see more data to assess the opportunity.”

Keytruda and combinations

Merck & Co.’s Keytruda, a PD-1 checkpoint inhibitor, wasn’t the first approved drug to use this mode of action, but in the last few years, it has become the most dominate. Although it was first approved to treat melanoma, Keytruda has since racked up approvals for a number of notable indications such as non-small cell lung cancer, gastric cancer and esophageal cancer. Some analysts predict that annual sales for Keytruda could one day reach $27 billion — a higher mark than any other drug in history.

Keytruda was also one of the first drugs approved by the U.S. Food and Drug Administration for a tumor agnostic indication, meaning that it can be used to treat tumors with a specific biological makeup, regardless of where in the body the cancer originated.

But its not all plain sailing for these blockbuster drugs, as they strive to reduce their costs of production and side effects. The answer, according to nature.com, may lye in creating better combination drugs. The challenge for researchers developing combination regimens is to increase response rates and the durability of response without substantially increasing side effects, and companies are faced with a smorgasbord of potential combination options as the science around them continues to evolve. “Pharma companies are still being thoughtful about where they want to make their immunooncology investments, but it’s much broader than in a lot of other therapeutic areas,” said Ben Bonifant, a partner at Triangle Insights Group, a strategy-consulting firm. Every tumor type and position in a therapeutic sequence is being investigated. “The strategy is to fill in the entire matrix,” he said.

“ Nobody knows exactly what the killer combination will be ”

And what about CAR T’s

In May of this year Imugene and City of Hope, a world-renowned independent cancer research and treatment center near Los Angeles, announced they had entered into a licensing agreement for the patents covering a novel combination immunotherapy. The therapy unleashes a CD19-expressing oncolytic virus to enable CD19-directed chimeric antigen receptor (CAR) T cell therapies to target solid rumors, which are currently otherwise difficult to treat with CAR T cell therapy alone.

The worldwide exclusive license of the patents covering the cell therapy technology, which includes CF33-CD19, known as onCARlytics™, or an agent that tags cancer cells for CAR T cell destruction, was developed at City of Hope.

The process of extracting a patient’s blood cells, re-engineering them in a laboratory so that they can identify and destroy cancer cells, and then re-inserting them into the patient’s body, is known as CAR T therappt. Two versions of Car-T, made by Gilead and Novartis, are on the market after trials of the treatments showed they could extend the lives of even the sickest blood cancer patients — some of whom had been given just weeks to live. An experimental version, being tested by Johnson & Johnson and Nanjing Legend, a Chinese biotech group, has shown promise in patients with multiple myeloma. However, the laborious manufacturing process, which involves producing a bespoke Car-T for each patient, has resulted in some of the highest prices for treatment in the history of drugmaking. Novartis charges $475,000 for a round of Car-T. The high price and cumbersome production means the treatments will probably be used only for the most severe patients, according to analysts.

Imugene is currently partnering with the US based Cellularity to develop an off the shelf Car T product that is much less exppensive than current treatments. Cellularity are developing an allogeneic placental T cell platform derived from the postpartum human placenta. Placental T cells are engineered with CAR expression, and knockout of endogenous T cell receptors (TCR) termed P CAR-T. This in combination with Imugene’s existing oncolytic virus and CD19 program could “make front page news” when trial results are announced later in 2022, according to Celularity Head Bob Harari. Whilst Chang Liu, the Head of Eureka, another recent IMU partner in this space, believes Imugenes Oncarlytics when combined with Eureka’s Artemis product, could be a game changer in treating the holy grail of cancers, solid tumours.

And then there’s TIGIT’s

As outlined in my previous posts Imugene are developing vaccines for CTLA-4, TIM3, LAG3 and TIGIT that will form a combination immunotherapeutic platform for developing cancer cures.

Drugs targeting a protein called TIGIT have caught the industry's attention, with some of the world's largest drug companies now rushing into the space. Researchers hope TIGIT-targeted drugs can improve existing treatments when used with other immunotherapies. The hope is these combinations will help more patients and provide longer-lasting benefits in fighting off cancer, ultimately expanding the utility of cancer immunotherapy.

The number of TIGIT-focused programs in development has nearly doubled in the past few years, growing from 13 in 2017 to 25 in 2020, according to the Cancer Research Institute.

TIGIT's leader is the company that literally discovered the protein. Genentech, the California biotech powerhouse now owned by Roche, first identified TIGIT and published research in Nature in 2008 showing the TIGIT protein suppressed T cells. T cells play a vital role in the immune system. They fight foreign invaders, including viruses and cancerous tumors. But the body produces certain proteins, like PD-1 and TIGIT, that normally stop T cells from overreacting. But having too many of these proteins will hinder the immune system from fighting cancer.

Soon after, Genentech started to develop a drug that can block the TIGIT protein. Roche unveiled the first human results for a TIGIT drug in May 2020, showing its antibody, called tiragolumab, helped treat lung-cancer patients. That drug is now in several mid- and late-stage trials for lung, pancreatic, esophageal, bladder, and head and neck cancer.

Close on Roche's heels are a number of large drugmakers. Merck, Bristol Myers Squibb, Gilead Sciences, and GlaxoSmithKline either are testing their own TIGIT drugs or have struck deals with biotechs for access. Merck's drug, called vibostolimab, is the next-most-advanced TIGIT drug behind Roche's compound. The New Jersey company is testing the drug in combination with its PD-1 blocker Keytruda, which made $14 billion in 2020 sales. A combo with TIGIT could extend Keytruda's value and even further expand sales. Vibostolimab started late-stage testing this year, with Merck launching two studies in lung cancer.

Whilst GSK became the latest pharma to jump into the TIGIT space, paying $625 million up front for ITeos' TIGIT drug in June. The deal came about two months after ITeos presented early human data in lung cancer for EOS-448. GSK hopes to start combination studies in 2022 that combine the drug with its own PD-1 blocker called Jemperli.

Imugene and immunotherapy

Genentech was worth $100 billion before the $223 billion Roche acquired the company in 2009.

At the time Leslie Chong, was the clinical program lead at Genentech Inc. – the company which sells Herceptin ® – a similar and complementary drug to Imugene’s (Ursula Wiedermann invented ) Her Vaxx. Imugene, the company Lesley now runs has been encouraged by Her Vaxx Phase 2 Clinical trial results, so much so she has tabled a further 3 to 4 combination and sponsored trials for the Her 2 expressing drug. Another product Imugene is developing is PD1 Vacc. PD1 Vacc competes in the same immunotherapy space as the aforementioned Merck owned wonder drug Keytruda, the cash cow that has transformed not just the survival odds of thousands of patients but also the pharmaceutical company’s fortunes. However, with the Keytruda drug poised to lose patent protection in 2028, recently-appointed Merck chief executive Rob Davis must find new treatments to plug an eventual decline in sales when rivals launch cheaper versions.

But its not just about B cell therapy and Tigits, or oncarlytics for that matter. Imugene has acquired and patented to 2037 a novel oncolytic virus known as CF33, from the City of Hope, an acclaimed cancer research centre. Its chair of the dept. of surgery, Professor Yuman Fong, is the inventor of this new OV, known as CF33, which in pre-clinical trials has shown to be more efficacious than most OVs, including, potentially, Cavatak. It shrinks injected tumours with very low doses, whilst also shrinking non-injected distant tumours. Its potential application also spans many cancer types.

Big things are expected of CF33 in its current hase 1 clinical trials, in which the first patient was dosed on October 20 of this year.

Who’s buying in the immunotherapy space?

Okay so Merck is on the look out for a road map forward beyond Keytruda. And Roche is looking to build upon sales of Herceptin and attain increased market share. But let’s take a quick look at actual mergers and acquisitions that have taken place recently in the immunotherapy and oncology space.

Gilead Sciences, Inc. (Nasdaq: GILD) and Forty Seven, Inc. (Nasdaq: FTSV) announced in late 2020 that they had entered into a definitive agreement pursuant to which Gilead will acquire Forty Seven for $95.50 per share in cash. The transaction, which valued Forty Seven at approximately $4.9 billion, included Forty Sevens lead product candidate, magrolimab, with the acquisition anticipated at the time to strengthen Gilead’s immuno-oncology research and development portfolio. Magrolimab is a monoclonal antibody in clinical development for the treatment of several cancers for which new, transformative medicines are urgently needed, including myelodysplastic syndrome (MDS), acute myeloid leukemia (AML) and diffuse large B-cell lymphoma (DLBCL). The investigational therapy targets CD47, a “do not eat me” signal that allows cancer cells to avoid destruction thereby permitting the patient’s own innate immune system to engulf and eradicate those cancer cells. Forty Seven presented promising results of a Phase 1b study of magrolimab in patients with MDS and AML at the American Society of Hematology meeting in December 2019. Magrolimab has the potential to be a first-in-class therapy.

More recently the Big Pharma Pfizer’s deal for a cancer-drug developer Trillium Therapeutics signals that big drugmakers might not be as worried about some long-term risks and market cap’s in play as many investors in our local market appear to be. In August this year Pfizer paid 3 times the closing share price for Trillium Therapeutics, whose cancer drugs (like Merck, Roche, Bristol Myers Squib and other Big Pharma owned drugs), could be a potential combination partner for Imugene’s Her Vaxx in the future. Pfizer expects their oncology products this year to outsell the heart and other primary-care medicines the company was long known for. Though according to the Wall Street Journal in 2019, despite their obvious successes, Pfizer has struggled in the new immuno-oncology arena. At the time its primary drug in this category was Bavencio, developed with Darmstadt, Germany’s Merck KGaA and approved in 2018 for two rare cancers, metastatic Merkel cell carcinoma (mMCC) and locally advanced or metastatic urothelial carcinoma (UC). It failed in four late-stage trials for other cancers, however. Therfore part of Pfizer’s strategy—like most companies in the oncology space—is to focus on combination therapies that use multiple drugs.

In August this year Pfizer agreed to buy Trillium in a stock deal worth $2.3 billion USD. Trillium is an immuno-oncology company with two lead proteins in clinical trials that could serve as checkpoint inhibitor. Trillium’s portfolio includes biologics that are designed to enhance the ability of patients’ innate immune system to detect and destroy cancer cells. Its two lead molecules, TTI-622 and TTI-621, block the signal-regulatory protein α (SIRPα)–CD47 axis, which is emerging as a key immune checkpoint in hematological malignancies. TTI-622 and TTI-621 are novel, potentially best-in-class SIRPα-Fc fusion proteins that are currently in Phase 1b/2 development across several indications, with a focus on hematological malignancies.

The Pfizer acquisition with much love from investors in both companies. Find out why by watching this presentation (Courtesy of Motley Fool), unfortunately I could not upload it but the link to the You Tube video is here. I highly recommend you watch it!

https://youtu.be/T_XtKbc4CqY

Interesting is it not? Pfizer paid three times the closing share price Trillium was listed at before the merger was announced. Maybe investors are not assessing the appropriate market capitalisation of stocks in this space. Ring any bells for another stock you may have invested in?

And what for the future in immunotherapy?

Well basically given the rest of the world has gone digital, why not cancer treatment?

In this arena Pfizer may well be leading the way. Pfizer are currently working with cancer patients to achieve better outcomes. In its 2018 report, “New dynamics in the pharmaceutical oncology market,” PwC points to Pfizer’s Oncology Together program as a case study in how pharma can leverage emerging technologies and data. The program connects cancer patients with “care champions,” who can assist with overcoming various daily challenges, such as transportation or cost issues. With its LivingWith app, Pfizer’s program also helps patients take notes at doctor appointments, track data from wearable devices and see inspirational stories from other cancer patients. Although the app can be used by patients using any treatment, Pfizer is still able to leverage the data to develop a better understanding of the patient experience and outcomes.

“Companies can strengthen their relationships with oncology patients by surrounding them with digital support. Tracking more health data ... can help pharma companies understand where new opportunities lie,” PwC states.

So have you got the picture now? Are you picking up what I’m putting down, as the kids more than half my age say to me in that mocking tone that drives me straight back to the keyboard.

The immunotherapy field is on the rise. And Imugene has their tentacles deep in the core of the markets B cell, onclytic viral, oncarlytic, TIGIT, CD19 and the Car T space. Big Pharma just wants to wait on some Imugene results to dot a few more i’s and cross a few more t’s and its game, set and match. And with an Imugene CEO whose ultimate goal is to add value to her shareholders, who understands that if she follows the science, the value will come, it’s just a matter of time.

From an analytical perspective it’s akin to a game of chess. Imugene playing chess with Big Pharma. And if Imugene were to sit around the chess table against Big Pharma for the “Shareholder prize” in 2021, I for one think they’d make a worthy competitor.

Investing in Imugene

What are the analysts saying?

IMU

In recent months many investment firms came out with both sell’s and buy’s on Imugene (IMU). In the AFR in mid July of this year, when IMU was trading at aproximately half the price it is today, two investment firms were asked their opinion, Lets recap on what they said then:

Imugene (ASX:IMU)

James Marlay: We might kick things off with some of the really strong performers, I’m going to start with Imugene, market cap $1.2 billion. Shane, it had a great year, more than doubled. Buy, hold or sell on Imugene?

Shane Fitzgerald: Imugene for us is a sell. It’s got a very novel modality it’s going down for its solutions, it’s drugs. However, it’s a very early stage business. Only one of its drugs is in stage two clinical trials; the others are in stage one, even preclinical really. So for that valuation, given there’s so much road still ahead of this business, we think it’s pretty full at the moment, so we would say it’s a sell.

James Marlay: Emanuel, cancer therapies, obviously a huge and very attractive market. Attractive to the directors, that bought some shares a little bit earlier on this year. Are you buying with the directors or are you a hold or a sell?

Emanuel Datt: I’m a sell as well, James. I think Shane hits the nail on the head when he says that this is an early-stage drug company. And I think investors have to keep in mind that drug development is a risky process. Only about 10 per cent of drugs actually progress all the way through the whole clinical trial phase through to regulatory approval. And I think at over a billion dollars in market cap, it’s very expensive for us.

In September 2021 Bell Potter recommended a Buy on Imugene, here’s what they said:

Investment View: Upgrade to Buy (Spec), Valuation raised

2 September 2021

Speculative

Bell potter : The key changes to earnings include the 6% dilution to shares on issue from the recent $90m capital raise. The company now has c. $130m in cash. We have

increased the clinical trial spend in the period FY22 – FY25 and now expect IMU will

spend at least $30m annually on development. The long dated years of the DCF have

been amended to include potential future revenues from the onCARlytics program,

now expected to commence clinical trials in FY23. Valuation is raised to $0.52 from

$0.25 and we upgrade to Buy (Spec). The potential of these new therapies may be

attractive to future development partners.

Last week Roth Capital partners came in with a buy of Imugene. Here’s what they said:

IMU.AX: Solid Tumor Partnership with Eureka

Therapeutics, Raising PT to AUD0.62

Roth Capital : IMU has partnered with Eureka Therapeutics to combine IMU's onCARlytics oncolytic virus with Eureka's Artemis anti-CD19 T cell therapy in an effort to treat solid tumors. The collaboration is currently preclinical, but the broader Artemis platform has been tested in early stage clinical trials. We have increased our price target to AUD0.62 from AUD0.43, mostly given our view of the strong science that supports IMU's choice of internal programs to prioritize and choice of technologies with which to partner.

Marcus today listed Imugene as a BUY and in conclusion noted the following :

https://marcustoday.com.au/2021/11/buy-hold-sell-imugene-asx-imu/

Marcus today : With almost no fundamentals and all treatments in the clinical stage of the process, it is a difficult company to value. You are paying for future earnings and volatility comes part and parcel. It doesn’t generate any revenue from product sales and isn’t expected to for a little while. Its CAR-T cell therapy has been described as a blockbuster drug and while the program will likely take years to develop any comment on effectiveness is expected to garner a lot of interest. Bell Potter pointed out a US$11.9bn deal Gilead inked with Kite Pharma in 2017 as a gauge for possible upside. The company will be very sensitive to updates with the AGM on November 19 the next key source of information. Another point to consider is that while the treatments all sound fantastic, none are guaranteed commercial success. You need to believe in the long-term story and you should expect to hand over cash on that journey as well. Capital risings are how it stays operating and researching. Treatments don’t pop up overnight and take years to be developed and approved so sentiment can be easily influenced by market forces and the heard losing interest given such an emphasis is placed on future growth. Several milestones are dotted throughout the next 12-24 months, IMU needing to essentially feed the market updates to ensure appetite is elevated. Not a stock for a value investor. It is speculative and like most biotech companies, has massive upside but patience is necessary. It is an easy story to buy into and it is encouraging to know management has done it before and brought a drug from bench to bedside. The price is also expected to be supported by the index inclusion. Speculative BUY.

Should you invest $1,000 in Imugene Ltd right now?

Motley Fool : Before you consider Imugene Ltd, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Imugene Ltd wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

au.investing.com : the technical analysis illustrates a STRONG BUY for Imugene, with moving averages and technical indicators highlighting 12 and 9 buys and 0 and 0 sells respectively.

Investing in Imugene

What’s Watmighthavben saying?

IMU

Speculative

Upgrade Buy to $1.50

Price Target in 2022 : $2.00

Watmighthavben : Having previously spent years being a financial advisor for major financial institutions, and then subsequently owning and managing investment advisory firms, I am acutely aware of the need to “start where the investor is at”, and of the need to assess ones own risk profile before making investment decisions. And I am conscious of the fact IMU definitely does not fit every investors profile, given its speculative nature and absence of dividend payments (i.e., revenue). By making an investment in the biotech industry one must realise volatility is relatively high in contrast to more traditional market sectors, such as banking, value and consumer staples. Retail investors need to seek investment advice where necessary and do their own research, whilst sophisticated investors can make their own assumptions.

In my opinion the arguments made to sell Imugene are weak. As this article exemplifies the drugs being trialled by Imugene are far from novel when one considers their counterparts are being used in conjunction with the standard of care worldwide. Imugenes’ PD1 Vacc (comparable to Keytruda and Opdiva) and Her Vaxx (comparable to Herceptin) follow widely used immunotherapy practices. Whilst their initial safety and efficacy lend themselves to multiple combinations with existing immunotherapy drugs and standard of care treatments.

And this argument Imugene is early stage is fast running out of steam. The vast array of Intellectual Property owned by the organisation that has been trialled extensively preclinically (for in some instances over two decades) is rapidly making its way into Phase 2 and combination trials. And if recent Big Pharma speed to market is any indication some of Imugene’s drugs are a hairs breath away from manufacturing. It is now a matter of fact that in November 2020 their Her - Vaxx Phase 2 trial was actually reduced in time by The Independent Data Monitoring Committee (IDMC) who confirmed a favourable survival outcome with no added toxicity for HER-Vaxx combined with SOC chemotherapy over chemotherapy alone and therein advised to lower the number of patients required for study completion. As The “Wall Street Journal” notes “for decades, most drugs for critical illnesses passed through a standard battery of tests before regulators allowed them onto the market. A smaller portion were “fast tracked” to make them available to patients sooner. Now that dynamic has flipped. Most drugs are released faster than ever through federal programs expediting their approval.” nature.com notes “Any fears that COVID-19 could affect drug approvals should be put to rest by the 14 new drugs greenlighted by the FDA in the first three months of 2021 (Table 1). This total beats the 12 approvals recorded this time last year and far exceeds the 7 approvals in Q1 2019.

Whilst the targets set by Bell Potter and Roth Capital appear extremely conservative when one considers the need for the latter to continually discount cash flows in their assumptions. Why? The facts outlined at the commencement of this article would suggest if anything a need to increase cash flow estimates based on current market trends in the medical fields of immunotherapy and oncology, and on estimated Calendar Annual Growth Rate (CAGR) forecasts for this sector.

My price target for Imugene (IMU) in 2022 would be $2.00, and I would be recommending a BUY at present to $1.50. Given (1) the companies existing intellectual property, (2) long product patent life and (3) initial results in their existing B cell drugs in Phase 1 and Phase 2 trials in conjunction with (4) the dosing of the first patient in their CF33 PDL1 trial and (5) the acquisition in June of the Oncalytics platform and (6) with in excess of $110 m cash at bank to develop their pipeline and continue ongoing research $1.50 AUD appears fair market value for IMU in my opinion.

(7) The potential for out licensing of their B cell platform (see recent Forty Seven and Trillium acquisitions above for price reference points in USD) and (8) the advent of trials with Celularity and Eureka in 2022, offer investors the opportunity to reach my price target or $2.00 in the 2022 calendar year.

Whilst (9) their future drug pipeline and (9) the potential for further oncarlytics partnerships and drug combinations, given their outwardly promiscuous corporate nature offer investors additional blue sky from an investment perspective.

Personally I would like to see a licensing deal cut for some if not all of the companies B cell platform with potential milestone payments and future dividends based on drug sales (i.e., of Her Vaxx and PD1). In my opinion the ability to return an extraordinary dividend payment from an up front Big Pharma payment is suitable for long term holders who have invested for years without a tangible return outside of capital gains. To ask them to trade their stock, continually pay for the exercising of options and trigger capital gains events when selling is not ideal if a profitable Big Pharma deal is on the table and can be struck. If additional funds from a licensing deal can be retained in the company for the development and manufacturing of CF33 and their Oncarlytics platform, then I believe that is a strategy to be well worth considering.

But that said in the end strategies and Big Pharma deals are something I’d prefer to leave to the IMU Board and their capable personnel. For me corporate strategising is akin to a game of chess, and given my son often beats me at the game, I’d rather defer at this point in time to the Board.

Imugene playing chess with Big Pharma

So hypothetically, who would win in a game of chess between Imugene and Big Pharma you may well ask?

My money’s on Imugene, and here’s why:

Well for a start Imugene have a King with noble Kingsmen. The Imugene King, Chairman Paul Hopper, having spent years scouring the University hallways and hospital wards in the home of immunotherapy, the US, appointed a team of Kingsmen second to none. Innovators Pravin Kaumaya, Yuman Fong and Saul Priceman are lauded leaders in the field of cancer research. With each of their drugs “shooting the lights out” in preclinical trials. Not to mention Hoppers other appointments. Let’s just take a look at one of them, to gauge the strength of Kingsmen the King surrounds himself with (i.e., courtesy of finfeed.com) Michael Caligiuri, whom Hopper appointed in 2019, is a world-renowned cancer researcher. Professor Caligiuri was appointed to the Imugene Scientific Advisory Board (SAB) at the time when he was President of the City of Hope National Medical Center in Los Angeles and holds the Deana and Steve Campbell Physician-in-Chief. In 2017, he was elected president of the American Association for Cancer Research (AACR), the world’s largest cancer research organisation. He is a physician whose clinical work has focused on leukemia and lymphoma, and has designed and conducted clinical studies for over 1500 leukemia and lymphoma patients.

Since 1990, over 100 students have trained in the Caligiuri laboratory and have received over 200 awards for their research.

IMU’s managing director and CEO, Leslie Chong, said at the time : “It is a great honor for Imugene to have such a distinguished scientist join our team. Dr Caligiuri has devoted his career and his scientific discoveries for the benefit of millions of patients whose lives have been impacted by cancer.”

“He is a prodigious researcher with over 380 published works to his name, and I am sure his contribution to Imugene will be profound.”

Caligiuri also commented on his appointment: “I am pleased to join the Scientific Advisory Board of Imugene. I am familiar with their B-cell peptide vaccines from my time at Ohio State University, and look forward to being part of the team to advance the technology through the clinic.”

Caligiuri brings with him an impressive body of experience. From 2009-2011, he served as president of the Association for American Cancer Institutes (AACI), and was the president of the Society of Natural Immunity from 2014-2017.

And turning from the King what about the Knights on the Imugene chess team, directors Axel Hoos and Dr Jens Eckstein? Both have traversed the chess board with leading Big Pharma’s for decades now. Dr Eckstein alone has over fifteen years of experience in VC funding clinical stage biopharmaceutical firms, companies ripe for the taking by their opponents, Big Pharma. Whilst if chess is as suggested “a game of complete information”, then who better to suit up with than the Knight Axel Hoos. His knowledge of clinical trials and the oncology space is perhaps second to none.

The Horses in the Imugene chess team cannot be underestimated either. For if chess is a game where “you don’t give up something for nothing”, who better to have on your team than in house leaders with the extensive clinical development experience and business acumen of Dr Rita Laeufle (Chief Medical Officer) and Monil Shah (Chief Business Officer), respectively.

And if as they say ”there is no luck in chess”, why not turn to experience. The Rooks on the Imugene team, Directors Charles Walker and Dr. Lesley Russell, have more than 25 years of international operational and leadership experience with a number of established and emerging pharmaceutical companies across multiple therapeutic areas including oncology and haematology.

As to the the Bishops on the Imugene team? Put simply there are none. In chess Bishops capture opposing pieces by landing on the square occupied by an enemy piece. Yet for Imugene there are no enemies, including Big Pharma.

Let’s not forget the Imugene Queen, Lesley Chong. Her undoubted corporate promiscuity is lending Imugene itself to countless dance partners and valuable partnerships. Yet privately she remains fiercely loyal to both shareholders (her people), and her King.

Though checkmate for me comes in the Imugene King’s move to acquire immense value for Imugene, without having to pay for it up front with cash. Hoppers strategy of issuing options and shares for innovators and indeed himself was ingenious. For no start up could ever afford the cash cost of acquiring immensely valuable Intellectual Property such as Yuman Fong’s CF33. On the open market in the US the acquisition cost would have been more than the current Imugene share price alone. Yet by offering shares in consideration for an extensive array of immunotherapy platforms, Hopper was able to sneak under the guard of Big Pharma, and coerce the worlds leading cancer innovators, his ultimate Kingsmen, in the process.

But what for the Pawns Ben? You well may ask. Well the pawn is the least powerful piece on the Chess board. And unfortunately in our game of chess Big Pharma assumes the ultimate role of pawn. By waiting too long for the science to appear they missed the opportunity of a lifetime, to take back the King and Queen of immunotherapy (from Imugene) and move forward once again.

But as they say in the classics, “Thanks for playing”.

Do your own research, and seek investment advice where necessary.