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ASX:IMUOTC:IUGNF
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Imugene upgraded to Buy and target price boosted to 52 cents by Bell Porter on back of capital raise and new HER vaxx trials

The clinical-stage immune-oncology company is sitting on $130 million in cash, and Bell Porter sees Imugene spending at least $30 million annually on its development program.

Imugene Ltd upgraded to Buy and target price boosted to 52 cents by Bell Porter on the back its capital raise and three new HER vaxx trials
Future revenues beyond the short-term forecast period, now include heavily discounted revenues from onCARlytics

Imugene Limited (ASX:IMU, OTC:IUGNF) has received another boost with news that broker Bell Porter has upgraded the company’s shares to a Buy (Speculative) from a Hold and more than doubling its target price from A$0.25 to A$0.52.

This comes on the back of the company’s A$90 million capital raise exercise, as well as three new HER vaxx trials and the development work on the onCARlytics program. 

The clinical-stage immune-oncology company is sitting on A$130 million in cash and Bell Porter sees Imugene spending at least A$30 million annually on its development program.

HER-vaxx progress

The broker noted that Imugene had announced the initiation of the next leg of its clinical program for the development of HER-vaxx.

Three separate studies will be initiated, with each in gastric cancer to study the efficacy of the drug in early, mid and late-stage disease.

“As previously speculated, these studies will involve combinations with both PD1 and PDL1 I/O drugs, “ Bell Porter said.

These multinational Phase 2 trials will target specific populations of patients either before or after treatment with trastuzumab, the standard of care drug in the US.

“We were pleased to see that the company is not planning a head-to head-study vs trastuzumab in first-line therapy as we consider that such a trial would have carried extraordinarily high risk.

“Such a trial would have taken many years and required tens of millions of dollars of investment.”

Bell Porter said the plan not to include a head-to-head trial was “clever,” adding “head-to-head trials are rare because the risk of failure is too high. Drug developers generally find a path to market that avoids such is high-risk approach as is the case here.”

Clinical trial results

Bell Porter also welcomed the results of the hazard ratio on the secondary endpoint of progression-free survival (PFS) in its Phase 2 gastric cancer trial.

The HR of around 0.72 was equivalent to that produced by Herceptin (trastuzumab) in earlier studies, albeit the result was not statistically significant.

PFS is not thought to be a precursor to overall survival (OS) in this indication. Earlier OS data from interim results had indicated a five and a half month survival benefit.

The final OS data is due in 2021 or early 2022.

The clinical program outlined here provides Imugene with more options for the development of HER-vaxx and may attract interest from partners, Bell Porter added.

onCARlytics program

Imugene recently announced an exclusive strategic partnership with Celularity to explore the therapeutic potential of the combination of CF33-CD19 and Celularity’s CD19 targeting chimeric antigen receptor (CAR) placental-derived investigational T-cell therapy, CyCART-19.

Pre-clinical in vitro and in vivo combination studies are expected to commence in 2021 and once the first indication is identified, Imugene intends to apply for an IND to commence a human trial.

“We expect further research collaborations of this nature with a variety of CAR-T products including autologous versions of CAR-T,” Bell Porter highlighted.

The proof-of-concept work will be conducted over the course of the next year (in vitro/ in vivo) and will be instructive for the future of this development therapy.

The onCARlytics program is still early stage but with immense potential and Bell Porter looks forward to its progress in preclinical work over the next 12 months.

Why buy?

Bell Porter highlighted the key changes to its outlook on the company - the 6% dilution to shares on issue from the recent capital raise and its $130 million cash pot.

“We have increased the clinical trial spend in the period FY22 – FY25 and now expect IMU will spend at least $30m annually on development.

“The long-dated years of the DCF have been amended to include potential future revenues from the onCARlytics program, now expected to commence clinical trials in FY23.

“The potential of these new therapies may be attractive to future development partners,” the broker added.

Future revenues

Future revenues beyond the short-term forecast period, now include heavily discounted revenues from the development of a future onCARlytics drug.

Although the development work in onCARlytics remains pre-clinical and the company does yet have a product to take into the clinic, this may change over the ensuing 12 months.

The potential market for a CAR-T effective in solid tumours is conservatively estimated as a multi-blockbuster drug.

The key changes to earnings include the dilution from the recent capital raise, a significant reduction in the risk rating attached to the HER-vaxx program and inclusion of long-dated revenues from the onCARlytics program, inclusive of modest assumption around pricing, effect size and share of IP rights.

The OnCARlytics program is likely to take several years of development from this point before there is a clear signal of efficacy in humans, hence it carries a large discount for risk.

“Nevertheless, any sign-off efficacy is likely to generate immense interest in this asset …”

Bell Porter also said it was “mindful” of the US$11.9 billion paid by Gilead in 2017 for Kite Pharma with the key assets being Kite's Lead CAR T Therapy Candidate, Axicabtagene Ciloleucel, which at the time was under Priority Review in the US and Expedited Review in the EU.

Quick facts: Imugene Limited

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Price: 0.48 AUD

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