For the benefit of all the newcomers to Imugene, a re paste of some comments posted last year when Roth initiated coverage, with a 13c target, then a 20c follow up target, now a 43c target.
The Roth research coverage was excellent, yet if you tweak the modelling variables the outcome target price changes dramatically.
1. Change the discount rate from 35% to 15% , keeping all the other assumptions the same , the npv , price valuation =~ 0.26c
2. The modelling assumes income royalties on all sales of 15%.From Big Pharma perspective buying out Imugene completely and keeping 100% of all revenues, results in higher cashflows and a NPV of 0.86c
3. 100% of sales and a 15% discount rate equates to npv ~ $1.70 Clearly they have left plenty of upside on the table for further adjustments as things develop.Market share, including sales out to 2037, the exchange rate, could all be revised less conservatively and generate a higher valuation.13c is purely a starting point not an endpoint.Replimune hits another all time high intra day price $54.85... and the Asx still has not figured it out. IMU Price at posting: 9.2¢ Sentiment: Buy Disclosure: Held
Follow up commentary in April: The biggest Anomaly in the Roth 20c Valuation/ Assumptions!!!
Very surprised there has been no genuine discussion of this glaring anomaly or omission. The Roth 20c price target is made up by calculating the Net Present Value of the anticipated royalties on future sales streams, using a 15% royalty rate. It is plainly there for all to see.
So ignoring for the time being all of the other assumptions and variables used to arrive at 20c, the fact is the Full Value of the company’s assets should reflect the NPV of 100% of future sales revenue. If Big Pharma wants to own the pipeline assets outright 100%, and therefore retain 100% of all future revenue, the target valuation has to be adjusted to reflect this. You don’t need a Harvard MBA to realise 20c for 15% becomes $1.33 for 100% before factoring in any costs of upfront expenditure to commercialisation.
Considering the original valuation has completely omitted any upfront and milestone license income in the revenue stream, these could be offset with development costs if looking at the full NPV . Same company, same assumptions, partial valuation 20c versus full valuation $1.33 . 15% Vs 100%
For the sake of the exercise, Allowing for $1.5 billion as a round figure for development costs, the NPV for 100% of future sales as modelled becomes approx $1.06. Allowing $2.5 billion costs, ie $830million each for HerVax, Pd1Vx, CF33, completing huge numbers of patients in Phase 3 trials, still arrives at a figure of 89c for 100%
Changing the unrealistic 30% discount rate used by Roth to a far more reasonable 15%, changes the full value NPV to approx. $1.80- $2.00, and this is still only using the extremely low market penetration figures and five years of projected sales . ( see the original Roth modelling) . Reminder ; the discount rate is a reflection of cost of capital, in a world of all time low interest rates, or commercial lending rate to Big Pharma, 15% may even still be judged as having a too wide margin in it.
Anyone can make their own calculations as to what that full valuation might look like using predictions of sales that are any fraction of the existing sales for Herceptin and Keytruda and factoring whatever might be considered a fair growth in up take and eventual “Peak Sales” over twelve years not five. Factor in far deeper sales if “in-house combos” are proven to be most effective , as per existing lab studies.
Clearly the analyst must have a firm belief that partnership and licensing deals will be the way of the future and as such he is just using modelling for a 15% cash cow. Given the FDA is zeroing in on pre approved drugs that are not living up to promise when used “off label” , most of which are drugs that IMU’s pipeline will be able to replicate , either alone or in combinations, with far greater safety, it is only fair to consider if Big Pharma want outright 100% ownership they will be paying 100% full price of all future value. And there has been plenty of recent industry news of late indicating Merck, Glaxo and others are starting to feel the pinch with their pipelines, sales, and competitive advantage going forward. Why wouldn’t one of them come out swinging with a monster bid to own the entire BCell platform in a knock out blow. And pay us full price not a measly 15% of its full value .
20c is merely a stepping stone., It will soon be dust, as the market begins to understand the enormity of our pipeline and how it sits in the current landscape of Immuno oncology. HerVax and Pd1Vax data have been really incredible yet the current market valuation is like a rating for a 10% chance of success for B Cell, and zero recognition or value for CF33. .......................................... So fast forward to today, glad you reached this far. Take note of the latest Roth update, they now use a discount rate of 20% . Was only a matter of time.
And if 43cents per share is now their target valuation for a15% slice of the company, the simple mathematical fact is that 100% equates to $2.86 if Big Pharma wants the whole of Imugene's assets.
My personal view: that would be a fair price for just the B Cell platform based of data seen so far, and anticipated strong PFS for HerVaxx coming very soon.
Coming up with a valuation for the entire OV platform including the Cd19 Car T addition is beyond me right now. Let it prove itself with solid data as trisks commence, let ALL the Big Pharma come and dance the dance. Growth, innovation, disruption : Priceless.
IMU Price at posting:
36.5¢ Sentiment: Buy Disclosure: Held
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