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Imugene secures speculative buy recommendation from Bell Potter

HER-Vaxx is Imugene’s lead cancer immunotherapy candidate and is currently treating patients in a phase 2 study in gastric cancer.

Imugene Ltd - Imugene secures speculative buy recommendation from Bell Potter
The phase 2 study is expected to report in the second half of this year

Imugene Limited (ASX:IMU) is a clinical stage immuno-oncology company developing two B-cell cancer immunotherapies HER-Vaxx and PD1-Vaxx, and two oncolytic viruses Vaxinia and CheckVacc.

The B-cell immunotherapies are an exciting new class of cancer therapy with the potential to become the most significant development in oncology since the approval of the fist immune checkpoint inhibitor drugs.

Oncolytic viruses also have enormous therapeutic potential against cancer. Preclinical studies of oncolytic viruses have shown highly encouraging results in patients with triple negative breast cancer, an aggressive subtype of breast cancer with limited targeted treatment options.

Bell Potter has commenced coverage on Imugene with a Buy (Speculative) recommendation and a valuation of 5 cents per share (current price: 3 cents).

Following is an extract from Bell Potter’s research report:

The Future Of Cancer Therapy

Imugene is a clinical stage Australian biotechnology company. It has two core technologies both of which have been in-licensed from offshore developers.

HER-Vaxx and PD1-Vaxx are B-Cell cancer immunotherapies. These are an exciting new class of cancer therapy with the potential to become the most significant developments in oncology since the approval of CAR-T therapy. HER-Vaxx is the lead candidate and is currently treating patients in a phase II study in gastric cancer. The drug target cells which over express the HER-2 receptor – being the same target as the blockbuster monoclonal antibody (mAbs) drugs Herceptin and Perjeta. The investigators believe the B cell immunotherapy approach will have significant advantages of over the synthetic mAb’s including far higher tumour specificity and safety. The response rates in the dose escalation study were highly encouraging with all patients on the maximum dose seeing a sustained anti-tumour response. The phase 2 study is expected to report in 2H2020.

The second asset is a pre-clinical oncolytic virus (OV). OV’s have steadily gained in popularity over the last decade with numerous pharma groups investing in the technology. CF33 is a form of the Vaccina virus. Versions of the virus have been used for more than 100 years as a platform for vaccines. It is safe for use in humans and the preclinical studies based on human cells lines were encouraging. The virus was developed by scientists at the City Of Hope (COH) in Los Angeles. COH is leading an investigator sponsored study in triple negative breast cancer while the company expects to commence a phase 1 study across a range of solid cancers within the next few months.

Initiate coverage with Buy (Speculative)

The company has numerous data points over the next one to two years. Cash reserves are ~A$36 representing up to 2 years of cash runway. Valuation is $0.05 and we commence coverage with a Buy (Speculative) recommendation.

Investment Thesis

IMU has a pipeline of four potential new drugs which we summarise as follows.

Vaxinia and CheckVacc are oncolytic viruses targeted towards a variety of solid cancers.

HER-Vaxx and PD1-Vaxx are B-cell cancer immunotherapies. These are an exciting new class of cancer therapy with the potential to become the most significant development in oncology since the approval of the fist immune checkpoint inhibitor drugs.

The second asset class are oncolytic viruses. IMU acquired the rights to develop this asset from the City Of Hope (COH) hospital in Los Angeles, California. The company paid a token sum for the asset and we understand this was largely because of Chairman Paul Hopper’s influence along with that of world renowned virologist and advisor to the company Dr Len Post. Mr. Hopper’s track record as Chairman of Viralytics (VLA) together with the availability of senior members of the scientific team from that company were important factors in the selection of IMU as a development partner. Not surprisingly the terms of the in-license deal with COH including commitments on timing and R&D budget.

This note focuses on the two most advanced clinical candidates being Vaxinia (CF33) and HER-Vaxx. We provide further detail on the clinical program later in the report, suffice to say we expect the company should be in a position to commence three phase I studies over the course of the next 12 months (from May 2020).

The single asset in the clinic HER-Vax showed a promising response rate in a single phase 1b study. An interim safety readout from the phase II study was announced on 4 May 2020 where the Independent Data Monitoring Committee (IDMC) recommended the study continue without modification.

Over the course of the last 5 years (being the time period over which the company began developing B cell cancer immunotherapies) IMU has raised a total of $41m, relative to its market capitalisation of $125m.

As described in figure 1 above, the level of protection over the company’s intellectual property is high. All of the drugs in development are novel and IMU either owns the composition of matter patent or has the exclusive global rights to develop and market the drug.

The company has $36m in cash which we estimate represents ~2 years of cash runway.

Quick facts: Imugene Ltd

Price: 0.034 AUD

ASX:IMU
Market: ASX
Market Cap: $150.48 m
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