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Company Profile

ImmunoCellular Therapeutics Ltd. (NYSEMKT:IMUC) is a clinical stage biotechnology company with a focus on the development of peptide based vaccines which utilize immune-based techniques to treat and diagnose cancer. More specifically, their vaccines target cancer stem cells; they are also developing cellular immunotherapies to fight cancer associated antigens, and monoclonal antibodies to diagnose and treat several different cancers.

The company concentrates its efforts on using its immunotherapies to treat glioblastoma, a common type of brain tumor. Fortuitously, these therapies are also applicable to multiple other cancers: pancreatic, colon and breast due to their similar epitopes on their distinct cells. Their technologies are innovative as they activate a patient's own immune system to help fight different cancer antigens.

IMUC is currently conducting a Phase II trial of its lead glioblastoma fighting vaccine, ICT-107. The trial will be complete when 64 events have been reached. The consensus seems to be that ImmunoCellular Therapeutics will present Phase IIb topline data of ICT-107 within the next few weeks (4 to 12). Indeed, the company itself has stated that they anticipate the trial will be completed by the end of this year. This data exclusively concerns their dendritic cell vaccine which targets glioblastoma antigens and cancerous stem cells.

Long Term Fundamental Analysis

If the clinical trials are successful, this vaccine has the capability to reach over $700 million in sales according to current estimates. However, these estimates are inaccurate as they only consider the potential US sales while overlooking the huge potential of the international market. This significant oversight is having a very negative effect on IMUC's current and estimated future valuations. The US market generally only accounts for about 30% of global sales for this type of product. Therefore, even while remaining conservative, a more accurate sales estimate projection would be closer to the $1.4 billion range.

Since the current market valuation does not reflect this potential, I postulate that IMUC is considerably undervalued. In fact, at the current valuation, the market also seems to underestimate the probability that the trial outcomes will be positive. Conversely, the fact that the data from the Phase 1 study were so persuasive should by itself justify a higher risk/reward valuation. Even with the small sample size of patients included in the Phase 1 study, the demonstrated 16.9 months median PFS and 38.4 months median OS are undeniably impressive.

Ignored Short Term Opportunity

Another fact that seems to be ignored by the company's current valuation and its investors is the potential for speedy approval. Indeed, it would not be impossible for this vaccine to gain approval after completion of the current Phase 2 trial, we have to remember that glioblastoma is currently an unmet need, the current treatments are outdated and lack efficacy.

One need only remember "Marqibo" the cancer fighting injection product by Talon Therapeutics which gained accelerated approval from the FDA after completing their Phase II trial with 65 patients. A rapid buyout quickly ensued. IMUC's vaccine has already demonstrated results that surpass the minimal evidence of improvement over standard of care that Talon was able to muster.

The FDA has a history of being more liberal with approvals when it comes to these types of aggressive illnesses, and rightly so. If the data of IMUC's Phase II trial is as impressive as its Phase I results, accelerated approval will be a definite possibility.

According to the accelerated approval provisions contained in both the FDA's Guidance for Industry Expedited Program for Serious Conditions - Drugs and Biologics and section 506(c) of the FD&C Act, the FDA may grant accelerated approval to:

a product for a serious or life-threatening condition . . . upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or an effect on a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

For example, accelerated approval has been used extensively in drug development for a variety of cancers and human immunodeficiency virus (HIV) disease-diseases in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstrate a clinical or survival benefit.

These documents explain in great detail the requirements necessary for accelerated approval (my comments are italicized):

  • Qualifying Criteria for Accelerated Approval
  1. Serious Condition: FDA does define cancer as a serious condition
  2. Meaningful Advantage Over Available Therapy: Current treatments are outdated and lack efficacy
  • Accelerated Approval Endpoints
  1. Surrogate End Points: Not applicable
  2. Intermediate Clinical Endpoints (clinical endpoints that can be measured earlier than an effect on irreversible morbidity or mortality): FDA expects that most demonstrations of clinical benefit would be a basis for traditional approval.
  • Evidentiary Criteria for Accelerated Approval
  1. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval: For safety, the standard is having sufficient information to determine whether the drug is safe for use under conditions prescribed, recommended, or suggested in the proposed labeling.
  2. Whether an Endpoint Is "Reasonably Likely to Predict" Clinical Benefit: Preventing death - extending life in a clinical trial is likely to predict the same clinical benefits
  • Conditions of Accelerated Approval
  1. Promotional Materials: All this means is that promotional materials must be submitted to the Agency for consideration
  2. Confirmatory Trials: For drugs granted accelerated approval, postmarketing confirmatory trials are generally required

Therefore, if the topline data presented upon completion of the trial is in line with expectations, accelerated approval should be granted. Considering the fact that IMUC's investor base seems to be largely composed of retail investors, this probable outcome has largely been ignored and thus the stock price is grossly undervalued.

Actionable opportunity

Even after an impressive 37% gain so far this year, IMUC's current stagnant underestimated valuation creates an actionable opportunity for current and would be investors.

For long term investors, it is also noteworthy that all of the analysts currently covering this company are unanimous in their recommendation of IMUC as a Buy with an average target price of $9.00.

Source: ImmunoCellular Therapeutics' Accelerated Approval Potential