IMU - Flying under the radar, but for how long?When you live...

IMU - Flying under the radar, but for how long?

When you live underneath the radar

There's no way that you're ever gonna get far

So get hip

Hahahaha

With a listing on the small ASX market, one could reach the conclusion Imugene has been able to fly under the radar of leading biotech players, when its comes to M&A activity. But for how much longer?

Novartis makes a play for $2.9 billion USD

For those out of the loop Novartis is beefing up its oncology arm by laying out 2.7 billion euros ($2.9 billion) in cash to acquire MorphoSys, the companies announced after market close Monday. See https://www.fiercebiotech.com/biotech/after-incytes-commercial-buy-novartis-shells-out-eu27b-newly-re-clinical-morphosys for more. $2.9 billion USD is a hefty chunk of change for the Morphosys portfolio which includes among other things a drug designed to treat a rare disease, and another in the early stage of development.

Recent articles note that with MorphoSys’ marketed med out of the equation, Novartis is poised to pick up pelabresib, a therapy being tested in combination with Incyte’s Jakafi (ruxolitinib) in patients with myelofibrosis. The Swiss pharma giant is also set to receive tulmimetostat, an early-stage dual inhibitor of the EZH2/EZH1 proteins currently being pitted against solid tumors and lymphomas in the clinic. The MorphoSys website states that Tulmimetostat (CPI-0209) is an investigational next-generation dual inhibitor of Enhancer of Zeste Homolog 2 (EZH2) and EZH1 designed to counter abnormal gene activity that may contribute to cancer development and progression, as well as drug resistance. Just before Imugene’s Vaxinia received a regulatory leg up, back in September 2023 the U.S. Food and Drug Administration (FDA) granted Fast Track designation for tulmimetostat. The designation was for the treatment of patients with advanced, recurrent or metastatic endometrial cancer harbouring AT-rich interacting domain containing protein 1A (ARID1A) mutations and who have progressed on at least one prior line of treatment.

Imugene’s Monil Shah has not announced or alluded to any M&A activity at present with respect to Imugene’s existing oncology pipeline, despite Vaxinia’s recent regulatory stimulus. That said it goes without saying bidding wars are becoming more and more commonplace in Big Pharma land, as large players seek to strengthen their oncology pipelines through M&A plays. In 2024 with little low hanging fruit on offer they are unable to sure up their dwindling pipelines with drugs targeting volume cancer indications i.e., lung, breast and colon cancer. More often than not they are resigned to fighting it out over either delivery mechanisms such as ADC’s, rare disease exponents, or early stage investigational candidates. Novartis isn’t the only player stalking the MorphoSys pipeline. Both Novartis and Incyte have preexisting ties to the oncology specialist MorphosSys, with Novartis taking over a MorphoSys preclinical cancer program in 2022 and Incyte partnering on MorphoSys' sole commercial product, the lymphoma med Monjuvi.

“We are excited about the opportunity of bringing pelabresib, a potential next-generation treatment combined with ruxolitinib, to people living with myelofibrosis, a rare and debilitating form of blood cancer,” Novartis Chief Medical Officer Shreeram Aradhye, M.D., said in Monday’s release. “With the planned acquisition of MorphoSys, we aim to further strengthen our leading pipeline and portfolio in oncology, adding to our capabilities and expertise.”

For the record Novartis plans on forking out over five (5) times Imugene’s closing share price yesterday. Those shorting IMU or indeed those counting on a re rate should take a closer look at the deal to compare or indeed contrast Imugene’s existing pipeline to that of MorphoSys, for an inkling of where the market is at today. Today it’s not all about existing commercial drugs, for they are unavailable to pursue. Pre revenue acquisitions are the main game in at town at present, as we enter a period of resurgence in biotech M&A. During downturns in the biotech sphere all the bells and whistles are available for those wishing to acquire and invest in revenue producing drugs, but in upturns such as those we are experiencing in early 2024, slim pickings are on offer, with patent cliffs and a lack of substantive oncology pipelines in play.

Where does this leave Imugene (IMU -ASX)? In a pretty good place I would suggest. fiercebiotech.com reports that coming off one of the worst periods for IPOs in recent history, analysts have insinuated the first two offerings from biotechs this year are proof that the sector is on the road to recovery. They note that in the past two days there have been some stellar IPO results with CG Oncology and ArriVent both cashing in on their back-to-back upsized IPOs, netting a combined $555 million. CG saw its share price nearly double on the first day of trading, opening at $19 a share and closing out Thursday on $37.17. As Yaron Werber, M.D., Managing Director and senior research analyst for T.D. Cowen’s biotech team told Fierce Biotech in an interview yesterday “There have been 18 years with a positive initial start to the year out of the last 24,” . “And in 14 out of those 18 years—or 78% of cases—the sector ends up up for the year.”

Much of the confidence in 2024 stemmed from the JP Morgan Healthcare Conference in early January this year, where leading biotech analysts left feeling brimming with confidence in the investment prospects within the industry. Shall any of this pent up exuberance translate into real value for IMU? Let’s wait and see. Who knows whether Imugene is on anyones radar at present. But if the money being thrown around by those pursuing broader product pipelines when it comes to oncology is anything to go by, one would have to assume Imugene could be set for a re rate some time in 2024. Novartis is not the only big fish swimming around in search of deeper waters. On current valuations Imugene looks pretty cheap compared to those such as Morphosys, whose shares soared more than 40% on Monday. In a sign of what can happen when you do enter someones radar, the European stock is up more than 60% of late. Is Imugene worth five (5) times its current value to the right player, or players? Is it worth more than the MorphoSys pipeline was to Novartis? I guess you need to do your own research on their assets to answer those questions.

We dance underneath the radar…

Who knows what places a biotech stock on the radar of a larger player? It could be any number of factors. In many instances, as with MorphoSys’ Tulmimetostat or Imugene’s Vaxinia, it could have something to do with where the FDA is heading. The January 29 decision by the FDA when it came to CAR T products noted that while their recommendations specifically focused on CAR-T cell products, much of their guidance could be applied to other genetically modified lymphocyte products, such as CAR natural killer (NK) cells or T cell receptor (TCR) modified T cells. Now from where I’m sitting such guidance may well place Imugene’s recently acquired Azer cel technology under the radar of those seeking an escape from what appears an ever increasing problem for those engineering modified, as opposed to allogeneic T cell therapies. Reading between the lines Novartis themselves were once and still are a leader in the development and manufacture of autologous T cells.

It all makes for interesting times ahead doesn’t it. I’m beginning to think that when it comes to flying under the radar, the recent JP Morgan Conference may well have blown Imugene's cover.

DYOR Seek investment advice as and when required Opinions Only