Immunomedics' Strengthened Balance Sheet Supports A Compelling Trade Ahead Of Presentations

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 |  About: Immunomedics, Inc. (IMMU)
by: PropThink

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 (NASDAQ: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 (NASDAQ: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.

Disclosure: I am long IMMU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: PropThink is a team of editors, analysts, and writers. This article was written by Jake King. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. Use of PropThink’s research is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein.You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relation ships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. Our full disclaimer is available at www.propthink.com/disclaimer.