IMU (ASX) Ann: Imugene HER-Vaxx Clinical Trial Collaboration with Merck

Originally posted by Watmighthavben ↑

Todays announcement is big news for Imugene (IMU)

Innovator of the year finalist and Imugene collaborator Professor Pravin Kaumaya stated "combination drugs are the way of the future". And what better drug for Imugene to combine with than the king of the cancer treatment castle, Keytruda.

Merck’s blockbuster cancer drug Keytruda has been called a “franchise in a drug.” Patients rely on it, and Merck depends on it for a substantial amount of its overall revenue. But, as with all good things, the run must come to an end, and Merck’s patent exclusivity on Keytruda expires in 2028.
In 2020, the pharma giant brought in $48 billion in worldwide sales, of which Keytruda made up $14.4 billion. It was an increase of 30% for the immunotherapy, which is approved for melanoma, lung cancer, head and neck cancer, Hodgkin lymphoma, and stomach cancer. iN 2021 Keytruda sales grew to 17.2 billion USD.
If the combination of HER Vaxx and Keytruda is successful in reducing side effects, and extending the life of patients, Merck can extend the life of their wonder drug to 2038. In addition to these significant advatages for Merck the combination drug nextHERIZON may be less expensive than Keytruda to manufacture, appeasing US regulators who are in search of cheaper forms of cancer treatment.
Merck boss Rob Davis said recently having purchased Acceleron for a cool $11.5 US Billion “This is the first step on a journey to continue to build out our pipeline so that we have the ability to grow sustainably well into the next decade . . . We won’t be limited by the balance sheet.”

Once the nextHERIZON trial is underway shortly any signs of efficacy in addition to the safety which is a HER Vaxx trait, shall no doubt have him reaching for his cheque book sooner rather than later. And from where I sit that’s going to look rather healthy on the Imugene (IMU) balance sheet. Particularly when one considers gastric cancer is but one of the cancers treatable by the combination of Keytruda and HER Vaxx.
Imugene is on the way now. Teaming up with the world’s leading drugs and drug manufacturers, who realise how important it is to have safe, cost effective drugs with long patent lives. It’s not going to today, but over time this move shall add dollars $$ to the Imugene share price. Watch the leading US fund managers start circling the wagons now.

Dollars coming Imugene's way

Sales of $17.2 billion USD would net Imugene $8.6 billion USD (i.e., at 50%) per annum in revenue, or approximately $102 billion USD over 12 years (excluding inflation). And one could assume if nextHERIZON was indeed safer than standalone Keytruda there could be even more demand for this combination drug. Merck currently trades at a price to earnings ratio of 26.9. Were Imugene to be able to secure 50% of the nextHERIZON combination drugs revenue don't bother trying to calculate the IMU share price at a PE of 20 or even 30. In that instance, it would be telephone numbers in Australian dollars.

In a more likely scenario when Davis pulls the trigger for Merck and he does decide to acquire nextHERIZON, if they pay 5 times peak sales to acquire 12 years of nextHERIZON revenue, the drugs value could be anything up to $86 billion USD. 50% of that would net Imugene USD $43BN or about $60BN AUD. That's well over 40 times the value of the IMU share price today. Taking a conservative approach Imugene would trade at well over $10 AUD in that scenario, far exceeding my 2022 price target for the stock.

DYO research

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Interesting that Leslie said in the webinar that a simple combination therapy with Keytruda and HER Vaxx may not extend the patent life of Keytruda, only a "new" formulation that combines the two drugs into a single dose. That would certainly be a good reason for Merck to "pull the trigger".

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