The times they are a changin’
When Bob Dylan traversed his way through middle America in his youth down toward New York he played in small rural towns, honky tonk bars and along the side of the road to a captive audience. But initially it was a small audience. Then as his voice slowly became heard his influence grew, with his lyric striking a resonance amongst a disillusioned youth and country with a yearning for change. Parallels with Dylans journey can be drawn with the small Australian biotech Imugene, growing up in a world with a hunger for change. The public, medical fraternity and regulators are tired of the current status quo in the field of cancer research. Cancer is one disease they have been unable to treat successfully to without wreaking havoc on the human body. Horrific side effects, horrendous costs and eventual death are all too common in communities crippled by lung, breast, bowel and cancers that are destined effect up to one in two of us during our lifetime. Imugene like Dylan is not interested in being heard, or upon seeking stardom and the accolades that come with medical awards. Just as Dylan was happiest in the comfort of his own home behind a picket fence out of the limelight, Imugene continues to quietly and confidently follow their science without the hubris and fanfare of others in this space.
Today the macroeconomic world too is changing. Demand pull inflation is slowly losing the battle to cost push inflation. Higher interest rates and Central Bank monetary policy worldwide is slowly quelling the demand for elastic goods and now inflation is starting to be driven by increased costs of production, including higher oil and energy prices in combination with higher wages. The USA is still heavily dependant upon Russia for their oil supply. Meanwhile the Saudi’s appear unable to increase capacity enough to fill the void in supply created by the current Russia/Ukraine conflict. Hence higher oil prices are anticipated to continue as the winter approaches in both the US and Europe. Meanwhile inflation is being fuelled by a need for individuals to increase their real wages as their purchasing power is being significantly marginalised by the rising cost of living. The only real positive appears to be the concerted effort being made by the Federal Reserve in the US to walk the tightrope between suppressing inflation whilst at the same time avoid a recession. Although a recession is on the cards, with a steady hand on monetary policy the Fed may indeed be successful in avoiding a deep and prolonged recession in the worlds largest economy.
Having fallen off a cliff in early 2022 the Biotech Index has shown strong resilience of late during the recent turmoil in equity markets and it too is starting to capture its own voice, as the pendulum continues to swing between safety and risk, cash and equities, bonds and stocks, fixed interest and growth, term deposits and shares. Whichever way you carve up the investment pie a flight to safety in times of a GPD slowdown equates to a retreat in riskier asset classes such biotech stocks. Though markets are starting to appreciate that whilst healthcare products aren’t not the recipients of inelastic demand from the public, they are in the main not as effected by economic slowdowns as many other consumer items. People still visit their local pharmacy or drug store to stock up on their prescription medication. They buy vaccines in the wake of epidemics and flu season, and they continue to purchase products with a view to improving their overall good health. Big Pharma recognises this through their ongoing desire to purchase assets in order to increase their market share in this lucrative sector. Mercks recent attempts to acquire the US listed Seagen Inc. is but one example of the strength and continued resilience of the biotech sector to stave off market forces. Whilst posting a quarterly revenue of 424.06 million USD in September 2021 Seagen posted a net income of -$293.85 million USD. That still didn’t stop Merck from wanting to dish out close to $40 Billion USD for Seagen, an American biotechnology company focused on developing and commercializing innovative, empowered monoclonal antibody-based therapies for the treatment of cancer.
It could be said Dylan was in the right place at the right time to capitalise on the groundswell of discontent permeating throughout America in the mid 60s. Disillusioned youth reacting to authority, power and domination were crying out to be heard and who better to tell their story than an unassuming middle American folk hero with an inane sense of the human condition at that time. For Dylan did not simply have lyrics to tighten his quiver, he had soul, coupled with an ability to transcend the every day and look beyond toward a future where every man, woman and child had a place in the world, irrespective of their vocation, social standing, colour or creed. Unfortunately healthcare in the US is yet to reach such lofty heights. Unlike gasoline and guns, the right to everyday healthcare in the US is reserved for the affluent minority who can actually afford healthcare. Therefore the constant search for cheaper more cost effective health care solutions when treating illnesses such as cancer is of the essence. The need to relieve communities of the side effects resultant from the existing cancer treatment regime is just as profound.
Enter immunotherapy and Imugene. It could be argued that Imugene did not just arrive at the right place at the right time in a cancer treatment market striving for change. Not unlike Dylan one could argue Imugene are themselves effecting change. With a vast array of novel cancer treatment therapies in their quiver to arm their bow, Imugene are at the forefront of cutting edge technology, empowering the human body to strengthen immunity, fight existing cancer cells and ultimately develop a resilience to this debilitating disease. Imugene’s treatment arms are safe, easy to administer and at a fraction of the cost of the existing standard of care. Blood cancers, carcinomas and solid tumours are all on Imugene’s radar as they tackle not just rare and uncommon cancers, but the majority of cancers present in society. And not unlike Dylan their own voice is beginning to be heard, as medical publications, practitioners and cancer conferences begin to spread the Imugene word.
The times are a changin’ on the IMU front as well, when it comes to the everyday movement of the company's share price. Just as the medical fraternity is waking up to the length and breadth of Imugene’s pipeline, so too are overseas investors. The pendulum is slowly swinging away from shorting the stock, toward going long on IMU. To close out a short position and go long on a stock one effectively has to purchase two stocks, the first to cover their initial short position, the second to purchase a share with a view to going long on the stock. Therefore with every cent rise in the IMU share price there is pent up demand from not only those wishing to not close out their short position, but from those wishing to go long on the stock. Remember things begin to occur a whole lot faster than would otherwise be the case were there not so many shorts in the system. The buy side builds, the supply side falls away and the price starts to tick up at a rapid pace. At present the problem for shorter’s of IMU is exacerbated by the news this week that innovator Pravin Kuamaya shall be presenting new data pertaining to his ingenious PD1 Vaxx at the forthcoming IASLC 2022 World Conference on Lung Cancer (WCLC 2022) from 6-9 August 2022 in Vienna, Austria. That doesn’t give shorter’s of the stock much time to rework their books in order to take advantage of the much anticipated upswing in the IMU share price following on from Kaumaya’s presentation.
Dylan eventually sold millions of records to Americans and consumers worldwide. His voice continues to resonate with future generations as they come to terms with the new challenges facing a society coming to grips with change. The public are without doubt the overwhelming beneficiaries of an artist whose work set the standard when it came to lyric writing. Likewise Imugene is endeavouring to set the standard in the field of immunotherapy as patients search for a change to the existing standard of care, in search of a less oppressive treatment regime that is both consumer friendly and easier to administer. If Imugene can succeed in creating a safe and efficacious cancer treatment regime at a time when the world is crying out for much needed answers to the questions surrounding cancer, they too shall succeed in changing the lives of millions when it comes to cancer treatment for generations to come. The short term ebbs and flows in share price shall then assume their rightful position as background noise, in a world where patients achieve not simply a longer life, but a better quality of life, upon being diagnosed with cancer.
Opinions only - not investment advice - DYOR
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