The eleventh hourHaving read the tea leaves and assessed...

The eleventh hour

Having read the tea leaves and assessed Imugene’s standing with shareholders it appears as though it’s now or never for the IMU board, should they wish for a smooth ride through this years AGM. Having discussed a full dance card, golden geese and thunder in times past, the IMU board have witnessed their stock fall five times more than leading biotech and stock indices over the last year. Despite having released a huge number of price sensitive announcements, appearing in leading cancer conferences the world over, and ensuring they have up to if not over 4 years worth of cash in the bank, shareholder returns have not eventuated. Value for shareholders equates to a rise in the share price, as opposed to a never ending extension to the company’s product pipeline.

Can Imugene turn things around?

The question begs, “What does the IMU Board have in their war chest to turn things around for disgruntled shareholders on the verge of a mutiny at this years AGM?” I guess when we consider statements from the company Chairman Paul Hopper, to the effect of “most developing drugs are purchased toward the end of Phase 2 clinical trials," then Her Vaxx would be the best place to start. Having completed a Phase 2 trial with OSR read outs and published results announced the week before last, Her Vaxx is in a prime position to be either out licensed, acquired or partnered with a Big Pharma suitor. Added to which it is now close to a year into another Phase 2 clinical trial, this time with Keytruda, a blockbuster drug with FDA approvals in multiple cancer indications. The trial is due for a readout of results toward the end of this month. With exceptional Phase 2 safety results, an outstanding P. Value ratio and proof the B cell vaccine extends life by up to six months over and above the standard of care already achieved at Phase 2 level, Her Vaxx is primed for box office sales when ultimately approved by the FDA. Therefore the board should be expecting the Chief of Business Monil Shah and his team to meet their KPI’s and deliver a sale now, in order to alleviate some pressure from not only them, but from the fledging IMU share price. It’s simply come to that point now, shareholders have heard all the rhetoric, listened to the “follow the science" spiel and been understanding of the patience required to hold biotech stocks, but now they want a commercial result. The situation is akin to following a football team, paying your membership fees and then turning up for years of losses. Sooner or later you become tired of the “we’re in a rebuilding phase” dialogue, and you start looking around for who is to blame. Then the coach is sacked, a new coaching staff are appointed along with team personnel changes, and you move on down the track.

Monil Shah was appointed to the Imugene executive team over two years ago now. At the time Imugene executive chairman Paul Hopper noted “Monil adds a critical business development capability to our senior management team, and we are pleased to welcome him to Imugene.” To date shareholders have been privy to no new business development deals other than supply agreements with Roche, for the development of their PD1 Vaxx vaccine, and ABL to supply CF33 and Vaxinia to the group. Taking into account there have been collaborations with Eureka Therapeutics, Celularity and now Arovella, in addition to combination trials with Blincyto (Amgen) and Keytruda(Merck), I note as of yet no commercial deals or partnerships have come to fruition. Now over two years since his business development appointment, Monil Shah is preparing to talk on behalf of Imugene (IMU-ASX) at the forthcoming Bio Shares Convention in Hobart on July 24 of this month. At that time Imugene shareholders are certainly not going to stomach yet another generic presentation from their company, for they want action, not words. With a list of safety results and efficacy signals as long as the South Esk, Tasmania’s longest river, Imugene should be in position to close out substantial deals for their B cell technology, including Her Vaxx, with a view to focussing on the jewels in their crown, Vaxinia and Oncarlytics. If indeed they are incapable of returning value to shareholders from their B. Cell assets, then clearly out licensing deals for their oncolytic virus platform to either Car T players or Big Pharma suitors must be placed on the agenda urgently. Shareholders are now demanding value, and are not prepared to sit around and wait for it, as they have been shoved from pillar to post for too long now, at the mercy of the ASX 200 and all that comes with it.

Imugene - scientific success and commercialisation

The management team at Imugene have done an outstanding job of developing their products and pipeline. When one considers the recent FDA Approval for in human trials of their Oncarlytics Platform, which Hopper stated as late as last week “could be a game changer for solid tumours," or the speed at which their flagship Vaxinia Trial in to up to 100 patients is progressing, they definitely have the runs on the board when it comes to accomplishing their scientific goals. However these notable achievements and developments have failed to trigger a rise in the IMU share price. Whilst shareholders respect the hard work and efforts of the management team at Imugene, sooner or later the buck has to stop with someone when it comes to share price accountability, and 9 times out of 10 times it stops with the Board of the public company in question. Blaming macroeconomic conditions, market forces and competitive landscapes simply doesn’t cut it, for it’s a level playing surface and everyone is swimming in the same ocean. Shareholders are looking to keep their own heads above water, they’re certainly not interested in the demise of others they happen to be in the water with. Therefore science aside, it’s clearly time for Imugene to press the commercialisation button now, in July 2023. They have the territorial rights in place for their innovative products, their initial clinical trial results have received accolades from health professionals and medical professionals the world over. There are no limitations when it comes to compliance or product safety records. They have an experienced team of professionals in place to deliver their products to market with the assistance of a marketing suitor. It’s simply a matter of doubling down now and executing an agreement, having someone sign on the dotted line, accepting the cheque and returning value for shareholders.

No doubt there can and could be countless arguments over the quantum of a such an agreement. “Its too little, too soon, not what we expected, not what I would have voted for or couldn’t we have waited” are all genuine concerns which come to mind. But from speaking with shareholders on a regular basis, the overwhelming majority of opinion seems to lye in the camp of “its long passed the time for an IMU deal to be done.” The details and size of the deal are not the issue here, according to many, it’s now simply a matter of delivering a deal, well before the forthcoming AGM.

Shareholder expectations

Are shareholders being unreasonable in demanding such a commercial outcome? Hasn’t team Imugene done enough? There have been scores of price sensitive announcements since the stock hit a high of 62 cents over 18 months ago. Why are management being blamed for such a fall from grace? It’s surely got nothing to do with them, shareholders may argue. It’s more to do with macroeconomics, wars, inflation and interest rates, many may suggest. And whilst these arguments may hold water for a while, over time investors come to realise the ASX 200 has risen 7 percent over the past year, whilst their own ASX 200 stock has fallen by over 5 times that figure. The opportunity cost of their money, the ability to turn a dollar elsewhere is staring to weigh on their conscience. Shareholders are not out of line in requiring results. Whereas stocks have traditionally been viewed as a 3 to 5, if not 7 year investment, now shareholders are investing in search of annual returns. When shareholders don’t see value for money they start looking around at where their money is being spent, and if indeed its value for money. Not unlike a football team member, they don’t mind paying players good money when they are winning, but when they are losing, well that’s a whole new ball game. Last year at the AGM Imugene decided to pay their team a lot more money when it came to salaries and stock options. Although at the time their was but a mild push back from shareholders, undoubtedly at this years AGM these benefits shall be hauled over the coals as it were. Shareholders are never up for period when their own pay packet has diminished. As an example the guardian.com recently posted of a biotech shareholder revolt over at Glaxo Smith Kline (GSK) wherein they noted “GlaxoSmithKline today faces an ignominious revolt against the controversial pay policy that allows chief executive Jean-Pierre Garnier to walk away with $36m [£22m) if he loses his job at Britain's largest pharmaceutical company. At what promises to be a heated annual general meeting, the company will reveal the outcome of a knife-edge vote in which 50% of shareholders are thought to have either voted against its remuneration report or abstained.The rebellion threatens to be the biggest staged by investors at a leading company since the government gave shareholders the right to vote on pay policies for the first time this year in an attempt to keep a lid on boardroom excess” (See https://www.theguardian.com/business/2003/may/19/executivepay for more.)

But at what level would IMU shareholders be happy for the IMU share price to reside at, to avoid similar disquiet? To answer this we would need to assess when the big players such as Blackrock, Vanguard, State Street and Norges Bank joined the IMU register. Assuming many were in around the 2021 capital raise at 30 cents in August 2021 a price of either 30 cents or somewhere north of that would be sufficient in my opinion. Although they would not have seen a return on equity in over two years they would take into account the Nasdaq Biotech has barely risen in a similar time frame.

Speaking of the Nasdaq Biotech Index, I recognise the fact it is up in value year on year, albeit ever so slightly, at the same time as Imugene has fallen considerably in value. These outcome beg the further question ‘Why is Imugene not listed on the Nasdaq bourse, and why indeed has it taken so long for Imugene to list there?’ This is a good question which must be answered by the Chief of Business at the forthcoming Bio Shares Conference. From where I sit US, European and Asian investors would salivate at the prospect of participating in Professor Yuman Fong’s game changing technology, that promises to provide a solution to the huge unmet need of patients with solid tumours. During the past year we have seen time and time again companies similar to Imugene, in often smaller market segments, with little or no revenue, realising outstanding gains based on price sensitive announcements such as the FDA oncarlytics approval to commence in human trials. As an advocate for listing on the Nasdaq for years now I for one shall be seeking an answer to this question in the month of July. Come clean and provide IMU shareholders with clear direction pertaining to the prospect of an Nasdaq listing. If it is not on the agenda NOW, why is the company hiring dissectors and personnel such as Kim Drapkin and Mike Tonroe?

Can Imugene deliver the goods this July?

I believe many consider Imugene to be in a strong position now the dust has settled on their initial Her Vaxx Phase 2 trial. Given the major players at Team Imugene have a track record of taking 15 drugs to market via the FDA route, the market could vote with confidence Her Vaxx is soon to be administered to Her 2 positive patients worldwide. If Her Vaxx yields even half the revenue Herceptin, Roche’s Her 2 blockbuster did, then Imugene is well placed to cover the 30 cent share price to avoid a mutiny at this years AGM. On Friday last at a time when 183 stocks fell on the ASX 200, IMU was one of 5 that stayed steady. This to me indicates an acknowledgement from the market July is forecast to be a much stronger month for IMU, than June 2023 was. With Professor Fong speaking of Vaxinia’s prowess in killing tumours in late 2022, followed by statements he was seeing “unequivocal signs of cancer killing in humans’, over four months ago now, the stage is set for his visit to deliver the 30 cent baseline needed to avoid shareholder dissent. And once gain in my opinion I think he is going to deliver for Imugene shareholders this month when he returns to our shores. During his recent visit Imugene Managing Director and CEO spoke of not wishing to “steal his thunder’. Given that was four months ago now I would be more than confident Yuman is in a position to elicit a few claps of his own thunder.

In Conclusion

In conclusion irrespective of the ongoing dismay at what the IMU share is, as opposed to what many shareholders rightfully believe it should be, I am of the belief July is set to deliver the goods for IMU shareholders. I have respect and admiration for Professor Fong combined with an understanding of the professionalism present within The City of Hope cancer research facility in California. I am acutely aware of the need for Big Pharma to revitalise their dwindling product pipelines, and am confident Monil Shah and his representatives can ink a commercial deal for one or more of Imugene’s innovative products. The disquiet stemming from shareholder ranks is justified. No-one can sit by and watch an asset fall in value by 50, 60 or even over 80 percent in value without feeling concerned if not alarmed. Yet at the same Team Imugene have delivered on their promise to create compelling science for cancer patients.

At present there is a perfect storm surrounding the Imugene landscape. They have a product pipeline capable of meeting a huge unmet need, that being the ability to treat solid tumours in cancer patients. Imugene CEO Leslie Chong reiterated two weeks ago their virus is “working in solid tumours”. At the same time we have Big Pharmaceutical companies living on the edge as they are running out of oxygen. Existing products such as Keytruda and Herceptin (mentioned herein) are set to run out of patent coverage in the near term. As we know pipeline setbacks are a key deterrent for biotech companies, given the exorbitant cost of developing drugs using expensive technology. Whilst most drugs and therapies take years to gain a regulatory nod, Imugene is in the unique position of being able to apply for FDA approval to “fast track” their drugs, given their safety profile and the prospect of acceptance as “breakthrough medication”. Therefore with all things being equal, Imugene is surely close to commanding not only interest, but dollars from a Big Pharma market keen to extend their product runway in the lucrative field of oncology. As an Imugene shareholder I like you wait with bated breath as the IMU story continues to unfold in the weeks ahead.

DYOR Seek investment advice as and when required Opinions only