By Jake King
Acquiring non-dilutive capital is always encouraging for a development-stage biotech company, and investors should take note when a company improves its balance sheet without hurting existing shareholders. On Monday, Immunomedics (IMMU) announced the receipt of $16.7M after reaching a settlement with former broker-dealer Bank of America (ongoing since 2009). Following the settlement, we estimate the company's cash and equivalents at approximately $46M, and with an expected cash burn in fiscal 2013 of $23M ($6M quarterly), Immunomedics' operating ramp has been extended materially. PropThink covered Immunomedics at the beginning of March, shortly after the company completed a $14M capital raise; we called the stock cheap then -- it has a market capitalization of $184M -- and now, after improving the balance sheet even more, IMMU has its shoulders above many of its premium-valued oncology peers. Even more interesting for investors, since this cash has come into the company, IMMU has made little move (as of Tuesday late-morning), allowing investors to make an entrance without paying up for the improved balance sheet. While the pipeline still needs validation, IMMU makes a compelling near-term trade given that the company has firmed up its balance sheet and will be making a foray into the presentation realm this weekend at the meeting of the American Association for Cancer Research (AACR).
Oncology developers have been jumping onboard the ADC (antibody-drug conjugate) train of late, and Immunomedics has built its development program around just that -- antibody development. The clinical application of ADCs has been accelerating rapidly, evidenced in-part by a myriad of partnerships in the last year (think Seattle Genetics (SGEN) and Genentech (OTCQX:RHHBY). This weekend, Immunomedics will present six posters at the meeting of the AACR in Washington D.C., and we suspect that more eyes on this under-the-radar company/technology will lift shares in the near-term. The company will present publicly for the first time results from an ongoing Phase I study of IMMU-130 (labetuzumab-SN-38), an anti-CEACAM5 antibody drug conjugate in patients with metastatic colorectal cancer. Although early-stage, new information regarding a clinical candidate should pique interest within the investing community, and further validation of its pipeline will bring new eyes to this story.
Overall, Immunomedics' most anticipated non-cancer trial results won't materialize until the first half of next year, when the company expects data from the 780-patient EMBODY-1 and EMBODY-2 Phase III trials evaluating lead candidate epratuzumab in systemic lupus erythematosus (SLE). Epratuzumab, a monoclonal antibody targeting the CD22 antigens on B-cells, is being tested in cancer indications like Follicular Lymphoma and ALL (Acute Lymphoblastic Leukemia). Further, the company develops clivatuzumab for the treatment of pancreatic cancer, veltuzumab in non-hodgkin's lymphoma and chronic lymphocytic leukemia, as well as milatuzumab in multiple myeloma. You can read details in Mr. Deryugin's write-up from March 1.
Utilizing ADCs in oncology is a relatively novel approach, but pharmaceuticals have taken a notable interest in the technology and we expect poster presentations at the AACR meeting to further Immunomedics' visibility. The stock has remained in a channel since its equity offering in February, but with a fortified balance sheet (the need for capital had pressured IMMU for months) and the AACR meeting this weekend, we expect a breakout above $2.52. That should prompt IMMU to fill its previous gap, and we're looking for $3 in the near-term, resistance on both the weekly and daily. Note that the 200D MA at $3.15 represents a realistic share price in the short-term.
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