Immunomedics Gets a Lot of Things Right

Immunomedics (IMMU) has had an outstanding year. The small New-Jersey based company has produced some of the biggest growth in the microcap sector and has seen its shares more than double since January (Human Genome, OncoGenex Standout Smallcaps So Far in 2009, October 1,).

What Immunomedics appears to have got right is the multiple targets it has for hard-to-treat disorders using its proprietary monoclonal antibody technology. However, the shares, which peaked in August on the back of positive phase IIb lupus data for epratuzumab, have in recent weeks lost a little ground as investors, pleased with the so far spectacular results, have hastened to take profits.

Although there are currently few sales forecasts for epratuzumab for Immunomedics in lupus, or any of the other indications it is being developed in, the recent interest in lupus following Human Genome Sciences’ (HGSI) Benlysta data and the huge potential for any successful lupus drug could see more analysts turning their attention and forecasting models towards the company. However, analysts are predicting that UCB, which in-licensed the drug in the lupus setting in 2006 for a now cheap looking $206m, could see sales of $64m for the drug by 2014.

Rituxan rival

Alongside the impressive lupus data, what also appears to have caught investors’ eyes is the group’s humanised anti-CD20 antibody, veltuzumab, which is currently being developed by the company in non-Hodgkins' lymphoma (NHL), immune thrombocytopenic purpura (ITP) and rheumatoid arthritis with partner Nycomed, and could be a challenger to Roche’s (RHHBY.PK) Rituxan (rituximab).

The advantage the drug appears to have over Rituxan is the fact that it is humanised and not a chimeric antibody like Rituxan, meaning it should be less immunogenic, giving it a better safety profile, especially important in a disorder such as NHL where patients could need repeat dosing.

Veltuzumab has also been shown to be effective at much lower doses than Rituxan, up to four times smaller doses, which should also help its safety profile. Additionally, according to investment bank Brean Murray, Carret & Co, even at comparable dose sizes the drug can be administered at a much faster rate than Rituxan, cutting back on the time patients have to spend in hospital.

An 81-patient phase I/II trial in NHL has already shown that the drug is effective in people who have either relapsed on chemotherapy or on Rituxan. Given the strength of the data many are expecting the company to initiate a phase III trial for the drug in this indication before the end of the year.

To ensure that the drug will have the best chance of success it would make sense for Immunomedics to compare it head-to-head with Rituxan in combination with chemotherapy to at the very least establish non-inferiority. If veltuzumab does show itself to be equally as effective as Rituxan and its current safety profile extends to the larger phase III trials, that and its shorter administration time could ensure that it takes a sizeable slice of market share from Rituxan, which last year had sales of $5.48bn.

Data catalysts

Alongside NHL veltuzumab is also expected to report full phase II results in ITP. If these are strong then it is certain that phase III trials will follow in the first half of 2010, which could cause the shares to rise again.

This event would also underline what a good investment the company has been for Nycomed, which in July 2008 in-licensed worldwide non-cancer rights for the drug for $620m, which included a $40m upfront fee and up to $580m in milestones, escalating double digit royalties and the option to co-promote the drug in ITP.

But given Immunomedics' promising looking pipeline and its antibody platform that can keep pumping out more antibodies, it might beg the question how much longer the company will remain independent, especially given that for the likes of Nycomed, buying out its partner at even these inflated share price levels would be much more economical than paying out all the future milestones (M&A spotlight on antibody companies, July 24).