IMU (ASX) From the desk of the Professor (Ken)

Originally posted by microcapguru ↑

All...Its been a while but here you go....Thanks Ken!!

Imugene 2.0

Last Wednesday's announcement hit me like a ton of bricks. It seemed to me that Imugene had reached a new, pivotal inflection point. Up until then my focus has been on evaluating Imugene's IP on a one-off basis. Mentally tallying up the perceived market value of each product. Staying up-to-date with the competitive landscape. And so on. With Imugene's cell therapy deal they have now put together enough pieces to become a key player in immuno-oncology. The mini Genentech that Leslie once talked about.

The immuno-oncology ecosystem is dominated by the various cellular therapies: from CAR Ts, antibody drug conjugates (ADCs), to bi-specific T-cell engagers and so on. While they are all promising drugs, the key to good clinical outcomes is the development of complementary therapies/treatments that are able to ameliorate a "cold" immuno-suppressive tumor microenvironment. I think of a cancer tumor body as an enemy castle that's (hopefully) under attack. In this analogy the good guys (the immune system or cell therapy) are the attackers. The microenvironment is the castle wall fortifications, archers and moat; the collective defense of the tumor.

In order to win the battle--killing the cancer--you will need to to break through those toughened tumor defenses. Punch enough holes in the defenses so the immune system or a cell therapy can march in, overwhelm and eradicate the cancer. Imugene has a very powerful therapeutic agent designed perfectly for this battle and it's called CF33.

CF33 Oncolytic Virus
Most of us consider CF33 as a straight-up cancer killer. A "drug" capable of completely eradicating advanced metastatic disease, single-handedly. That's not how I view CF33. I view CF33 primarily as a powerful viral agent able to effectively destroy the tumor's defenses against attack by the patient's immune system. In other words, CF33 tilts the tumor microenvironment positively thus favoring the tumor's attackers. Turning a cold tumor hot.

This action enables the patient's immune system to recognize and attack the tumor as it would any foreign body. And just as importantly--CF33 clears the way for cell therapies to attack and clear the cancer. That's not to say that CF33--i.e., Vaxinia and Checkvacc--don’t have exceptional cancer killing power on its own because it does but it’s just that their clinical benefits are greatly enhanced when combined with other therapies. For example, Vaxinia paired with Keytruda is especially meaningful for patients with advanced metastatic disease. If you or a loved one was stricken with metastatic cancer this is the way you'd want to go.

We should really think about CF33 as a kind of drug amplifier. It's able to substantially boost the efficacy of any cell therapy. CF33 works by blunting chemical barriers that normally inhibit the actions of a cell therapy by sounding the fire alarm bell for the immune system; raising a general call for reinforcements--for more warriors. CF33 viral particles circulate throughout the body, moving like tiny ninjas--infiltrating and attacking tumor cells from the inside thus knocking down tumor defenses. With RenovoRx’s TAMP (Trans-Arterial Micro-Perfusion) therapy platform oncologists can deliver CF33, in large doses into places impacted by anatomical barriers. To quote a song by Martha and the Vandellas, “nowhere to run to, baby, nowhere to hide”...

OnCARlytics
CF33 is certainly an amazing therapeutic. On its own it will no doubt produce life-saving results in early-stage disease settings. Much like AZT did for people with AIDs, CF33 will allow many people to live much longer with a good quality of life. Many will be cured. Unfortunately, many cancers are discovered very late in the game and are already metastasized. CF33 on its own may not be able to keep up with accelerated cancer growth. In the end it's a numbers game. How fast are tumor cells multiplying versus the rate of viral killing.

This is where OnCARlytics comes into play. It has all of the clinical benefits of "plain" CF33. OnCARlytics is just CF33 "in drag" in this respect. When a patient is given an OnCARlytics injection it will go to work internally infecting, killing, tearing down tumor defenses and mobilizing the immune system to engage in battle. That's step one. Next comes step 2: painting CD19 protein targets on the surface of tumor cells. Then comes step 3: injecting the patient with a powerful CD19 therapeutic that will hunt down and destroy any tumor cell with CD19 flags painted on its surface. It's a one-two-three punch combined effort.

For the first time ever patients will likely achieve exceptional, unheard of cancer cure rates. And because OnCARlytics (much like Vaxinia and Checkvacc) engages the patient's immune system it should produce a durable response. OnCARlytics will induce immunological memory for the particular cancer. When (not if) the cancer reemerges the patient's immune system should quickly recognize and aggressively attack and clear the cancer; long before it has a chance to grow or spread.

The Big Picture
The licensing of Azer-cell from Precision Biosciences was certainly a coup. With a single deal Imugene has supercharged the value proposition of the OnCARlytics platform. Let's assume that the OnCAR19 trial delivers the expected clinical results. What would the next steps be? Clearly finding a pharma partner to commercialize it; to help bring it to market.

Before acquiring the Azer-cell asset, Imugene would have had to select from a pool of potential pharma candidates that had a complementary CD19 drug or otherwise be willing to partner with a competitor who had a suitable CD19 drug. There aren't that many big pharmas out there that fit this particular bill. This is especially true when you consider the expertise required to manage the complex chemistry involved in producing CAR T-cell drugs. This expertise is something that a pharma may not have in-house but something Imugene has acquired from the license agreement.

Not only has Imugene dramatically expanded the number of potential suitors by offering a complete turnkey solution they have also lowered the startup cost for the pharma partner. With a state-of-the-art precision manufacturing facility the acquiring pharma will substantially lower their overall integration effort. They could even choose to operate this cell therapy program as a standalone operation or product division. A profit center complete with plant, staff and key expertise.

The New Roadmap
But even these substantial benefits still miss the big picture. Precision Biosciences is a premier gene editing company. They've developed a platform (ARCUS) that is able to perform complex precision genome editing (inserting or deleting genes) on live tissues. They work with big pharma outfits like Eli Lilly and Novartis who are using ARCUS to develop novel gene therapies. So it's best to think of their platform as enabling other companies to develop novel, cutting-edge cell therapies. Azel-cell is simply an example of what can be achieved with their ARCUS platform.

Imugene has now got their hands on this amazing platform and the people who know how to use it. They have serious plans to advance the OnCARlytics platform well beyond what is in play today. In their July investor presentation (on page 33) Yuman Fong layed out their future plans for all to see. Calling the approach an universal platform for tumor targeting, providing:

"New targets for synergistic actions with engineered cells (Car-T, NK-Car), Bispecific T-cell engagers, ADCs. Goal: No off-tumor or off-target effects."

They've laid out a clear two-pronged strategy.

To support a new class of genetically engineered cell therapy products.

To genetically modify CF33, producing new virus variants that enhance the efficacy of an associated cell therapy.

OnCAR19 was a genetically modified CF33 variant designed to enhance the efficacy of CAR T-cell drugs for solid tumors. Imugene plans to select even better tumor targets--from an efficacy and safety standpoint--and genetically engineer both CF33 and the cell therapy and in turn piece together both parts of the puzzle.

Between Yuman Fong and Saul Priceman they've got all the necessary talent to produce new CF33 genetic variants. With the Precision staff they now have expertise for engineering new cell therapies as well. When Imugene picks their next tumor target they'll likely have the in-house skills to produce a complete turnkey drug package. Make no mistake boys and girls this is rocket science that is breath-taking in scope. Especially when you consider Imugene's size (with a headcount somewhere around 20 people!) and their starting point.

Does the Deal Make Sense?
I have to admit that I was caught off-guard and puzzled by the timing of the cap raise. I didn't understand why they couldn't pay the initial $8 million out of pocket and do the cap raise later, after they got the (expected) Vaxinia results. Nobody likes to see their position diluted. But I trust management so I didn't chew so hard on the real question: was what they bought worth the price paid?

I haven't done the math but as per PH himself stated its a modest 6.6% dilution. While I'm not a financial type (so this may be the wrong way to view it), it seems to me you should ask yourself a simple question: will this deal increase the company's value/market cap/etc more than 6.6% in the medium term. If it does then job well done. And if not...

My crystal ball says that this deal should easily double the value to an acquiring pharma. Remember, Imugene will not be around as a public company for much longer as per LC. IMO, they're very likely to be acquired within the next 3 years. So the valuation question should take the point-of-view of an interested pharma. In other words, how will pharma-world view the contribution of this new asset? Has the eventual takeover price (and the SP at that point in time) been substantially raised because of this deal? IMO, the answer is a resounding yes.

Cap Raise Timing
As to the question about timing I think there are two paths to understanding their cap raise rationale.

Point one: Biotechs should always raise money, whenever they can, whenever there's a credible need for capital. This is a truism of this sector. Something unexpected always comes up (remember Covid). Trials always take waaaaay longer than planned. And who knows, maybe an amazing deal shows up unexpectedly. In the end you'll always wish you had raised the cash. Right or wrong this is the general thinking.

Someone on Hot Copper used the analogy that all biotechs go through a "valley of death" at some stage in their cycle. A very apt metaphor as most biotechs don't make it out of the valley because they run out of money. The alarming failure rate for biotechs gives this notion real credibility. Why did Precision decide to license Azer-cell and give up on pursuing further drug development? Ironic but simple: it was a cash crunch that drove them. They're knee deep in that valley. They can't raise the money so they voted to extend their cash runway by the only means available to them. At least Imugene has been smart enough to avoid this kind of calamity and not be at the mercy of a pharma lusting after some of Imugene's IP.

Point Two: I believe that the Vaxinia trial has not achieved its optimum dosage. I certainly expect Imugene to report "good" results at the SITC conference in November; especially if they report on cohort 4. But the market is expecting results that show Vaxinia "obliterating" patient cancers. Patients being cured. Walking on water. I think they'll be able to show clear, consistent, dose-dependent improvements. Strong clinical gains, cohort to cohort. But I believe the November results won't be strong enough to sway investors, given their expectations. Just a feeling, as I certainly don't know how it will actually turn out. Likewise, I think management concluded it would be too risky to depend on the Vaxina results in November to push the SP in the right direction.

Why the disconnect in expectations? I believe investors are responding to management's overall optimism. In fairness, I believe management's optimism is based on Vaxinia's therapeutic index: the incredible range of safe dosage levels. They may be able to safely increase Vaxinia dosing by a hundred fold (maybe more) before adverse effects show up. With safety concerns out of the picture, management knows that achieving an amazing result is simply a matter of dialing up the dose. Will it be the cohort 4 dose or the cohort 8 dose? We'll have to wait and see.

**********
As always, these are just my opinions and thoughts about these matters. I haven't done a very deep dive yet, so no doubt there will be one or more things that I got plain wrong. So be careful of the wet paint! Each investor must evaluate the known facts and make their own judgements and investment decisions. Always DYOR.

Ken

Expand

A great summary & thanks for taking the time

Yes lots of confusion around IMU ....... but likely
many many very exciting scenarios .

I'm still thinking that there may be a major interest that might take bite at IMU.....
The upside numbers are potentially huge .

It could come from completely left of field ....... all the IP IMU have is potentially ground breaking ..... existing Big Pharma will be reluctant to champion anything that threatens their immediate future revenue streams.

I don't think my optimism is delusional .......

Meanwhile ..... we await more communication from IMU on the most recent events

VA

(20min delay)
Last 42.5¢		Change 0.000(0.00%)		Mkt cap ! $93.34M

Open	High	Low	Value	Volume
40.5¢	42.5¢	39.0¢	$106.6K	262.9K

No.	Vol.	Price($)
1	559	0.425
2	3352	0.405
2	8480	0.400
2	27492	0.395
7	50406	0.390

Price($)	Vol.	No.
0.435	16517	2
0.440	37511	6
0.445	25172	7
0.450	53142	5
0.460	7692	2

From the desk of the Professor (Ken), page-3

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