Immunomedics (IMMU) $3.00

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1 The Biotech Stock Review Los Angeles / Chicago / New York September 15 th, 2016 Immunomedics (IMMU) $3.00 Epic Short Squeeze Inflection Point Nears, as Company Moves Further into the Clinical Trial Process for SacGovite IMMU-132. Patients and doctors have been waiting for these targeted therapies against TNBC. Now the first ones are in the clinic. I can t tell you how exciting this is. These drugs or ones very much like them could be game-changers for triple-negative breast cancer. Jennifer Diamond, MD University of Colorado Cancer Center. The B i o t e c h S t o c k R e v i e w. c o m Page 1

2 $12 Price Target. For most of the past dozen years, Immunomedics (IMMU) has been a wonderful trading vehicle. Fun for investors who bought near or under $2.00, but not so much fun for investors who bought at or near $5.00. For the record, the shares were trading at the equivalent of $40 in the spring of While those investors may never see the light of day, we re forecasting a price of $12 (yes, somewhat out of the air, adding were just good at this) via a combination of news of partnering and a short squeeze, which would provide a bountiful 4-fold potential return for speculators who venture in near $3.00. The company has a current market value of $288 million (modest in our opinion) with 96 million shares outstanding. While the company has a lot going for it (four programs into late Phase II) what seems to fuel the enthusiasm of investor most, is sacituzumab govitecan - which we coined SacGovite to give our spell-checker a well-deserved rest. On February 5 th 2016, the company announced that SocGovite had received Breakthrough Therapy Designation from the FDA for the treatment of patients with triple-negative breast cancer (TNBC) who have failed at least 2 prior therapies for metastatic disease. TNBC is a very serious disease, with an annual incidence estimated to be about 40,000 people, 20,000 for metastatic TNBC (mtnbc), in the United States, and with a median survival of months and median PFS of 2-3 months for mtnbc. Yes, deadly. More about that later. That news sent the stock from a prior week low of $1.60 to a high of $2.50 creating paper losses for shortsellers near $16 million - with 17 million shares short, compared to 23 million shares short more recently (8/31/16) and twenty-five days to cover. Background. University of Colorado Speaks. SacGovite IMMU 132 ASCO FIASCO. Breakthrough Therapy Designation. Summary The B i o t e c h S t o c k R e v i e w. c o m Page 2

3 BACKGROUND. What initially spurred our interest in the Company, was news in early 2015 that an offering of $85 million in convertible notes was oversubscribed by $15 million, giving the company a $100 million war chest to develop its programs. What furthered our interest are the increasing odds of a partnership involving their flagship program, SacGovite IMMU with each announced new release of its effectiveness and lack of toxicity, the most recent announced on August 18th. Even more impressive with the financing, was the fact that the initial conversion price of the Convertible Notes ($5.11) represented a premium of approximately 27.5% to the $4.005 per share closing price of Immunomedics' common stock on February 5, Hats off to Goldman Sachs and Jeffries & Co., taking a week to both announce and complete the raise. While they burn cash (spending $53.5 million, $41.7 million and $33.7 million for programs during the fiscal year ended June 30, 2016, 2015, and 2014, respectively), they still have $50 million remaining and have made impressive advances in the past two years with the funding. With regards to how long that will last: We plan to spend approximately $42 million to $44 million during fiscal 2017, commented Michael R. Garone, Vice President Finance and Chief Financial Officer. Based on this projection, we believe our current funds are sufficient to continue operations and budgeted research and development programs, which include preparations for a Phase 3 confirmatory trial of sacituzumab govitecan in triple-negative breast cancer, preparations for commercial manufacturing of sacituzumab govitecan, the continuation of the Phase 2 study of sacituzumab govitecan in certain select solid cancers, and the continuation of the Phase 1 trial of IMMU-114, for at least the next twelve months. Mr. Garone added, We are pursuing strategic licensing or collaboration agreements as a potential source of financing to initiate the Phase 3 confirmatory trial of sacituzumab govitecan in triple-negative breast cancer, to manufacture sacituzumab govitecan for Phase 3 and commercial supplies, and to fund other research and development programs continuing or planned beyond fiscal What really made us sit up and pay attention though, was this recent great article from the University of Colorado the day of the ASCO-FIASCO (June 3 rd ). Unfortunately, a plunging stock price (see below) following a negative article from TheStreet.com, totally drowned out the U of C reporting. We love that the U of C report was written in a style investors could grasp, versus laden with medical jargon. UNIVERSITY OF COLORADO SPEAKS. Here is an excerpt (6/3/16) editor bolded: University of Colorado Cancer Center researcher Jennifer Diamond, MD, is an investigator on three clinical trials of targeted therapies against triple-negative breast cancer (TNBC), two of which were presented at the American Society for Clinical Oncology (ASCO) Annual Meeting 2016 and one of which The B i o t e c h S t o c k R e v i e w. c o m Page 3

4 was presented just prior to the meeting. Each therapy uses a distinct strategy influenced by the immune system and all three have real potential to extend the lives of women whose cancers have progressed after previous treatments. This is a disease in real need of a breakthrough. There s really not any drug specifically approved for triple-negative breast cancer, says Diamond. By definition, TNBC lacks estrogen and progesterone receptors and the overactive HER2 that drive other forms of the disease. These three cancer drivers also present doctors with targets useful in controlling the disease, for example tamoxifen and fulvestrant block a cancer s ability to drive its growth with estrogen. Because TNBC lacks a known primary driver, doctors have lacked targets for new treatments, instead largely depending on decades-old chemotherapies, surgeries and radiation techniques. Now the first generation of targeted therapies for TNBC may have arrived. The first study, presented before ASCO, reports the phase I/II clinical trial of the drug IMMU-132, which was recently granted breakthrough status by the FDA, meant to speed the approval of the most promising new drugs. IMMU-132 is an antibody-drug conjugate meaning that it is, in fact, two distinct pieces linked together. In this case, the drug is a molecule related to the chemotherapy irinotecan. And the antibody is a molecule that binds to the protein Trop2, which is overexpressed in about 80 percent of all TNBC. The strategy is to use this Trop2 antibody to help the chemotherapy find and target the disease, Diamond says. The approach is similar to the mechanics of the immune system in which an antibody recognizes the surface proteins of a bacterium or virus and then directs a T cell to target invaders. (Only, in the case of this antibody-drug conjugate, irinotecan replaces the T cell as the agent responsible for killing unwanted cells.) Sixty TNBC patients treated with IMMU-132 had an average of five prior rounds of therapy, meaning that their heavily pretreated cancers had proven especially resistant to therapy. In this notoriously difficult group, the overall response rate was 33% and the median duration of response was nearly 11 months. Six months later, 48 percent of patients tumors remained stable or better, with one complete response, meaning that after treatment, this woman s aggressive breast cancer became undetectable. Many cancers are slow-growing and so when you see stable disease in trials of these cancers, you don t know if it s due to the treatment or to the fact that the cancer was going through a more dormant period. That s not the case with triple negative breast cancer. This is a fast-growing disease and so seeing prolonged periods of stability is a very positive result, Diamond says. The combination of atezolizumab and nab-paclitaxel is currently being tested in a Phase III clinical trial in triple-negative breast cancer. The B i o t e c h S t o c k R e v i e w. c o m Page 4

5 In total, these three trials represent the transition of TNBC targeted therapies from years of work in the laboratory to promising results in the clinic. IMMU-132 is the closest to approval, but vantictumab and atezolizumab may also prove helpful. These three trials also demonstrate the clinical usefulness of strategies targeting cancer along the spectrum of immunotherapy, from the spot-on immunotherapy IMMU-132 that recruits T cells against tumor tissue, to approaches that are influenced by the mechanics of the immune system but do not directly coopt its resources to fight cancer cells. Patients and doctors have been waiting for these targeted therapies against TNBC. Now the first ones are in the clinic. I can t tell you how exciting this is, Diamond says. These drugs or ones very much like them could be game-changers for triple-negative breast cancer. Full Article. SACGOVITE - IMMU 132. IMMU-132 is currently in a phase II trial, which Immunomedics expects to report on at some point during the next couple of months or October/November. This could be D-Day for investors - or if statistically insignificant numbers are reported, D-Day for short-sellers. And while the drug has performed well to date -unfortunately, we won t know until we know. Positive news on SacGovite s later stage trials in our opinion, could lead to a partnership to take the ball to the ultimate goal-line of commercialization and a significantly higher stock price. In addition, in our opinion, investors will not be able to acquire a significant stake within seconds of partnering news - anywhere near $3.00 per share as short-sellers cry, Katy bar the door. The clock is ticking. The company in its most recent 10Q also stated the following: While sacituzumab govitecan and labetuzumab govitecan are circulating in the blood stream, our novel and proprietary ADC linking system keeps SN-38 conjugated to the antibody and in an inactive form, thereby reducing toxicity to normal tissues. The clinical safety and efficacy results obtained with sacituzumab govitecan and labetuzumab govitecan suggest that this half-life is long enough for the ADCs to reach their targets on the surface of tumor cells, without causing significant harm to the rest of the body. More importantly, the ph-sensitive nature of the linker allows the continuous release of SN-38 from the tumor-bound ADCs, regardless of whether the ADC is internalized or remains on the surface of the tumor cell leading to a locally enhanced concentration of SN-38 within or near the tumor. We believe this selective delivery enhances SN-38 s bioavailability at the tumor, which may improve efficacy while also reducing toxicity...the major toxicity was neutropenia, which was manageable, and did not result in cessation of therapy. PRECLINICAL STUDY PUBLISHED. On August 18 th, the Company reported the following published in Molecular Cancer Therapeutics. The B i o t e c h S t o c k R e v i e w. c o m Page 5

6 The objective of this preclinical study was to explore the use of known inhibitors of ABC transporters for improving the therapeutic efficacy of sacituzumab govitecan by overcoming SN-38-resistance. Human breast and gastric cancer cell lines were first made resistant to SN-38 by continuously exposing them to increased concentrations of SN-38 over a period of approximately 2 years. The two SN-38- resistant cell lines were shown to be 50-fold less responsive to SN-38 than their parental cells. Treatment of both SN-38-resistant human cancer cell lines with known inhibitors of ABC transporters restored toxicity of SN-38. More importantly, when sacituzumab govitecan was combined with YHO , an inhibitor of ABC transporter, in mice bearing SN-38-resistant human gastric cancer cell line, a statistically significant 64% improvement in median survival was achieved in comparison with untreated animals (P = ). Sacituzumab govitecan alone had a 29% improvement in median survival, while YHO showed no effect on its own. Although irinotecan plus YHO improved the survival of the mice, it did not reach significance (P = ). Commenting on these preclinical results, Cynthia L. Sullivan, President and Chief Executive Officer stated, These in vivo results suggest that suitable inhibitors that are tolerated well by the host animals can overcome ABC resistance and that the resistant tumor lines can become appreciably responsive to IMMU-132 and to a lesser extent to irinotecan. Ms. Sullivan added, We are pursuing further work to address the feasibility of preclinical testing for such drug resistance as a predictive bioassay to select patients who should receive ABC-blocking therapy with IMMU-132, in order to enhance the potency of IMMU-132 in cancer cells that are intrinsically or become resistant to SN-38. ASCO FIASCO The shares of the Company are still trading 60% below the ASCO FIASCO. Despite it not being a big deal, in our opinion, it is worth reviewing because of the affect it had on the share price. Here s our take. Basically, Immunogenic was invited to present at the American Society of Clinical Oncology (ASCO). ASCO similar to many publications has a desire to report breaking news meaning they want first dibbs, which enhances their reputation for having exclusive news and connections. So if a company has huge news prior to the ASCO meeting, they better embargo it until the ASCO meeting. They have to make a choice. Please shareholders, or please ASCO. Immunomedics apparently wasn t aware of the policy or careless in thinking how serious ASCO is about demanding exclusivity. The B i o t e c h S t o c k R e v i e w. c o m Page 6

7 Excited to announce its progress and success with shareholders and the medical community, the Company in April issued a press release, posted the presentation slides on its web site and discussed the data with investors on a conference call. As it should have in our opinion. In fact, they presented a slew of positive information during March and April - issuing six updates including news that they would be presenting at a competing conference, held by the American Association for Cancer Research. When ASCO discovered that (not sure when they actually discovered it) the night before the presentation (somewhat bizarrely waiting until the last minute) they cancelled them, leaving the presenter sitting in his room to watch movies. Rules are rules. Two headlines appeared the next day. Despite ASCO Mishap, Data Still Intriguing for Sacituzumab Govitecan in TNBC from ONClive read by 1000 s of Oncology professionals and Immunomedics Kicked Out of Prestigious ASCO Cancer Conference from TheStreet.com - read by 1000 s of Wall Street investors. The outcome was rather predictable. Run for cover. ONCLive felt bad for the Company, quoting the Cynthia L. Sullivan, president and CEO, Both we and our many investigators involved are disappointed that our excellent therapeutic results, achieving an interim median survival of about 14 months, may not be presented at this meeting. These results are very encouraging for TNBC patients.. TheStreet put a more sinister spin on it. Here s how TheStreet described it:..immunomedics was caught trying to sneak old, previously presented clinical data on its triple-negative breast cancer drug IMMU-132 and for that transgression, Immunomedics was kicked out of the most prestigious and closely watched cancer conference of the year. Old? It was data released two months earlier. Hardly old. So there you have it. ASCO refused to let them present. Nothing with regards to the validity or importance of the clinical trial data just that they had released it a couple months earlier. BREAKTHOUGH THERAPY DESIGNATION (BTD). A lot of investors are familiar with orphan drug status, but not so much with BTD. On July 9, 2012 the Food and Drug Administration Safety and Innovation Act (FDASIA) was signed. FDASIA Section 902 provides for a new designation - Breakthrough Therapy Designation. A breakthrough therapy is a drug: intended alone or in combination with one or more other drugs to treat a serious or life threatening disease or condition and The B i o t e c h S t o c k R e v i e w. c o m Page 7

8 preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If a drug is designated as breakthrough therapy, the FDA will expedite the development and review of such drug. All requests for breakthrough therapy designation will be reviewed within 60 days of receipt, and FDA will either grant or deny the request. On February 5 th of this year, the Company announced that its lead investigational antibody-drug conjugate, sacituzumab govitecan, or IMMU-132, has received Breakthrough Therapy Designation from the FDA for the treatment of patients with triple-negative breast cancer (TNBC) who have failed at least 2 prior therapies for metastatic disease. From the related press release: We believe Breakthrough Therapy Designation for IMMU-132 further validates this potential therapeutic for patients with TNBC, and we are delighted to receive this important recognition, commented Cynthia L. Sullivan, President and Chief Executive Officer. We continue to assess partnering opportunities while completing the scale-up manufacturing and regulatory activities for an international, randomized, controlled, registration trial in TNBC, based on the Special Protocol Assessment agreement that was already granted by the FDA, she added. Ms. Sullivan further stated: IMMU-132 is also in Phase 2 trials in patients with advanced, heavilypretreated, non-small-cell lung cancer, small-cell lung cancer, and urothelial cancers, where encouraging results have been observed. The Trop-2 receptor targeted by this antibody-drug conjugate has increased expression in a large number of solid cancers. To date, we have enrolled about 300 patients with diverse cancer types. Separately Chau Cheng of Immunomedics stated, Our next goal is to partner it out," Cheng said of the program, though Immunomedics is not offering a time line. For now, the firm is busy scaling up manufacturing a process that "takes a little longer" since the product requires three makers: one for the antibody, one for the drug and one to put them together. No targeted therapy exists yet for TNBC, and chemotherapy is the main strategy now. "Typically, the response rate for initial chemotherapy is very good, but the majority of patients will relapse, and once they relapse, there's nothing out there. Jefferies analyst Chris Howerton said he and colleagues "believe a PFS benefit [in the phase III trial] of greater than 3.5 months in relapsed/refractory metastatic TNBC patients could be approvable in this setting. On the business-development side of the story, management suggested talks are progressing with partners," he wrote in a research report. "However, unlike in the past, Immunomedics seems to be considering the possibility of pursuing a phase III clinical trial on their own. In our view, moving forward with a partner is a preferable path, given both the possibility of leveraging the asset to other indications (i.e., lung cancer) and the current market conditions for capital-raising. The B i o t e c h S t o c k R e v i e w. c o m Page 8

9 As a result, we look to a potential partnership announcement as a key stock-moving catalyst during 2016." He also noted that "accelerated approval can include approval based upon a surrogate marker (such as PFS) and/or priority review, which translates to a six-month review of a new drug application vs. the standard month review process." David Goldenberg, Chief Scientific Officer, said during the conference call on earnings that he could not "tell you anything specific about [would-be] partners or where we are, but we certainly are sharing with all the candidate companies our trial design and getting inputs from potential parties, because obviously we don't want to be locked in and then have a partner that thinks it should be done differently. Having said that, we are moving forward in all the steps necessary to move this forward expeditiously, which means selecting a candidate, clinical trials, a company, and working with opinion leaders, and of course, making enough commercial product for a phase III trial available at the time we're ready to start." Jefferies' Howerton fretted over Immunomedics' cash situation given the lack of a partner, saying the "financing overhang muddies path forward for IMMU-132, keeping us on the sidelines." SUMMARY. So not to complicate the story or delve too deeply into the science, we have a 30-year-old company in later stages of clinical trials which is significantly below its recent high, knocked down from news totally unrelated to the efficacy or toxicity of its lead candidate drug. Immunomedics said in the statement that the data is was scheduled to present at ASCO was different than what the company discussed at a separate meeting in April. Among 60 patients reported on in the trial, two saw their cancer vanish and 15 others had a confirmed partial reduction, according to data from the company. The company said it had planned to present data on a subset of those patients. But what s done is done and in our view, as we are just now initiating coverage, what s done has presented us with an attractive entry point opportunity. While more studies are needed to confirm the drug s use in earlier stages of breast cancer and to compare its efficacy to the standard of care, it does work, there s no question, said Aditya Bardia, the lead researcher of the trial. They have one year of cash and can either pull off another $100 million raise or partner up. We ll vote for partnering up and creating a little heartburn for the shortsellers. Yes that says 25 days to cover. The B i o t e c h S t o c k R e v i e w. c o m Page 9

10 Top Institutional Holders: RECENT WALL STREET RECOMMEDATIONS. 06/21/2016 Immunomedics, Inc. was downgraded to market perform by analysts at Wells Fargo. 06/06/2016 Immunomedics, Inc. had its buy rating reiterated by analysts at Jefferies. They now have a $5 price target on the stock. Several hedge funds have recently made changes to their positions in IMMU. A.R.T. Advisors LLC purchased a new stake in shares of Immunomedics during the first quarter valued at $402,000. First Light Asset Management LLC purchased a new stake in shares of Immunomedics during the fourth quarter valued at $2,612,000. Marshall Wace LLP purchased a new stake in shares of Immunomedics during the fourth quarter valued at $2,631,000. Panagora Asset Management Inc. raised its stake in shares of Immunomedics by 36.5% in the first quarter. Panagora Asset Management Inc. now owns 874,754 shares of the biopharmaceutical company s stock valued at $2,187,000 after buying an additional 233,852 shares during the period. Finally, venbio Select Advisor LLC purchased a new stake in shares of Immunomedics during the first quarter valued at $2,626,000. The B i o t e c h S t o c k R e v i e w. c o m Page 10

11 INSTITUITONAL ANALYST INC. NY - CHICAGO - BEVERLY HILLS ROLAND RICK PERRY, EDITOR. Roland@institutionalanalyst.com Past performance of other companies added to Institutional Analyst s various newsletters or otherwise mentioned in its research reports, newsletters or communication is no indication of future performance of any current of future companies mentioned. This publication is a Corporate Profile and may not be construed as investment advice. This profile does not provide an analysis of the Company s financial position and is not a solicitation to purchase or sell securities of the Company. Readers should consult their own financial advisors with respect to investment in this or any company covered by the Reviews. An independent financial analyst should verify all of the information contained in this profile with the profiled company. Institutional Analyst, Inc. the parent company of the The Biotech Stock and Stem Cell Stock Review is an investment research and public relations firm, which has not been compensated for this reportin preparing this profile, the Publisher has relied upon information released from the company, which although believed to be reliable, cannot be guaranteed. This profile is not an endorsement of the shares of the company by the publisher. The publisher is not responsible for any claims made by the company. You should independently investigate and fully understand all risks before investing in this and any company profiled or covered by the publisher. The majority of biotech companies have factors, which create an uncertainty about their ability to continue as a going concern. These concerns are typically related to financing (or lack of), competitive environments, lack of operating history and operating at loss levels which is typical of most start-ups. These statements can be found in their most recent 10Q filings and should most definitely be read. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements which are not historical facts contained in this profile are forward looking statements that involve certain risks and uncertainties including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products or services, government approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the Company s filings with the securities and Exchange Commission. roland@institutionalanalyst.com The B i o t e c h S t o c k R e v i e w. c o m Page 11