Imugene - ripe for the picking, or the taking?On Dec 26, 2023 in...

Imugene - ripe for the picking, or the taking?

On Dec 26, 2023 in an article entitled Biotech M&A Is Back—and So Are Biotech Stocks By Ben Levinson (see https://www.barrons.com) the recent rise in the biotech industry was discussed. It was noted Many biotech stocks, particularly small ones, are reliant on borrowed capital to conduct research as they look for the next big blockbuster drug. So when the Federal Reserve is raising interest rates, that money gets more expensive, and unprofitable biotech stocks get crushed. It’s not a coincidence that the turnaround in the sector has come just as conditions began to turn right for the Fed to consider rate cuts instead of hikes.

The article went on to outline in greater detail recent M&A activity in the sector. In particular the fact that nine of the 20 biotech acquisitions worth $1 billion or more announced so far this year have come since the start of October, according to the website BioPharma DiveExternal link. When I delved into some of this activity further I took a closer look at Bristol Myers decision to acquire RayzeBio in a deal valued at $4.1 billion USD. Out of interest Rayz Bio was assessed by analysts as a sell on November 14 at which time it was trading at around $20. Pity those folk who took the analysts recommendation and sold, for RayzBio is now worth three times that figure (see attached).

What does this all mean for Imugene? Once again we have seen renewed interest in oncology. Companies paying multiples for players with delivery mechanism technology such as RayzBio. ADC’s as you are aware have been on the radar of Big Pharma as well in 2023. But what for biotechs that actually provide the medicine that is actually being delivered? Recently the small Aussie Biotech Neuren has been the beneficiary of overseas interest due to its capacity to assist rare disease patients facing such acute conditions as Rhetts Syndrome. Although a much smaller section of the population is impacted by these illnesses, than those targeted by Imugene’s immunotherapies, Neuren points to the potential upside in getting it right when it comes to providing long term solutions for sick patients where a huge unmet need exists.

I just wonder with the current state of play in the biotech space, the search for new drugs to replace existing blockbusters and the return of capital to the sector as interest rate cuts abate, whether Imugene can survive much longer without a significant player stepping up to either take the company over, or acquire a large piece of the action, in some way shape or form. Whilst proving safe and low in toxicity, one could argue Imugene’s immunotherapies have not established the efficacy parameters required to attract a takeover play. Yet now with Vaxinia results proving as good if not better than expected, I for one cannot envisage a situation in which a hedge fund, sophisticated investor or indeed Big Pharma does not come knocking. The forthcoming JP Morgan Conference may sow the seed among interested parties, with pending Vaxinia results being sure to plant it, in my humble opinion. Proof of concept for Professor Fong’s OV would render the existing low entry prices for Imugene a splash in the ocean for organisations seeking to strengthen their holding in the oncology space.

Video Courtesy of CNBC

Blair Effron, Centerview Partners co-founder, joins 'Squawk Box' to discuss the confidence in corporate America, the state of dealmaking in today's regulatory environment and interest rate uncertainty, the Fed's inflation fight, and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi


According to Fairlead Strategies’ Katie Stockton, more gains could be on their way in the biotech sector. She notes that XBI has broken out above resistance, and is poised for more upside after moving higher off a “flag pattern” this time last week. The ETF relative to the S&P 500 has risen above its 200-day moving average, “supporting a bigger reversal for biotech stocks in the months ahead,” Stockton writes. As long as the Fed continues to cooperate, the gains could flow from larger biotech companies right through to smaller companies such as Imugene. But could Imugene’s relatively small market cap be its own worst enemy in a time when all eyes are pointing toward oncology? At less than $1 billion USD it is ripe for the picking, or should I say taking, when one considers recent acquisitions made in the sector.

Companies are looking at spending more capital. Cap ex is set to rise in 2024. Is Imugene going to be yet another deal swept up in the confidence within the economy, in particular the Biotech industry? M&A overall is down 50% from its high in 2021. Analysts are forecasting a return and rise in M&A in 2024. Uncertainty from COVID and interest rates have resulted in a fall off in M&A. With these uncertainties dissipating confidence is definitely returning to the biotech and M&A sectors. For those looking in search of biotechs with a firm foothold in the oncology arena, should they consider making a play for Imugene?

DYOR Seek investment advice as and when required Opinions only