Nearly everyone, at some point in their lives, has an involuntary connection to an articulate, and well-crafted, turn-of-phrase. For some, it is the unforgettable last words of a dying loved one. For others, it may be a piece of invaluable advice which came at the most needed of times. For a few, these cherished verses may have manifested themselves in the lyrics of a favorite song. Regardless of the origin of these words, the end result is the same; they have become impossible to forget, and to some extent, have shaped the people we have become. For me, personally, one such phrase came from my former economics professor in college. He was addressing the class in regards to the correlation between personal identity, and investment priorities, when he stated the following;
"If you want to know what type of a person a man is, simply look at his portfolio."
As a 20 year old student, that statement was intriguing and insightful. As the years have gone on however, it has become a philosophy which plays a considerable role in my professional life. There is a remarkable quantity of truth in those 18 words. How we invest is largely a reflection of who we are. To some people, a "long" investment is 30 days; to others, it is a decade. To some, "risk" is embraced for the prospect of an equitable reward. For others, "risk" should be pathologically avoided, even if doing such minimizes potential returns. Who we are, how we see the world, and what we value, all manifests itself in how we invest. This is the very premise for the contended value of behavioral finance theory in investment strategy, and financial engineering.
This brings us to an applicable question; what is a speculative stock? Certainly, this can be answered any number of ways. By the book, the term "speculative" is defined as follows;
- Engaged in, expressing, or based on conjecture rather than knowledge. Synonyms include; conjectural, theoretical, hypothetical, notional, and abstract.
- (Of an investment) involving a high risk of loss. Synonyms include; risky, hazardous, unsafe, uncertain, and unpredictable.
All credit due to the dictionary, that about covers it. A speculative stock is one which requires an investor to possess no less than a moderate degree of risk tolerance, and a considerable amount of forward looking faith. These types of investments aren't for everyone. For the risk averse, dividend focused, asymmetrical seeking, value investor, a speculative stock likely carries with it all the appeal of a Monday morning colonoscopy. However, for the investor seeking out a high risk, high reward, growth oriented, potential laden investment, a speculative stock is the instrument of preference. No sector of the equities market better provides these types of opportunities than the biotechnology sector.
It is there, within the biopharmaceutical realm, where one finds a highly speculative investment opportunity worthy of consideration. The company presenting this opportunity is Immune Pharmaceuticals (OTCQX:IMNP), and for the patient and risk tolerant investor, it is worth examining further.
A Cursory Overview of Immune Pharmaceuticals
Immune Pharmaceuticals is an Israeli company which is headquartered in the United States. In other words, the company's origins and research facilities are located in Israel, but the corporate headquarters are located in Tarrytown, New York. This has been the case for the company since late 2012, when Immune completed a reverse merger with the U.S. based biotech company EpiCept. As a result of this merger, the once privately held Immune procured public listings on exchanges in the United States and Sweden. This maneuver, as was viewed by Immune and their executives, provided the company with the financial wherewithal to further advance their programs and drug candidates. Moreover, as it pertains to EpiCept, who were suffering from financial hardships at the time, it provided them with a capable partner who could integrate their assets and technology into the collective framework. It was a mutually advantageous collaboration. Immune got exposure and direct access to U.S. investors, and EpiCept procured financial betterment and potential upside from the Immune pipeline moving forward.
Dr. Daniel Teper, the original founder and CEO of Immune, remained in his position following the merger. Mr. Robert Cook, the former CEO of EpiCept, became the Chief Financial Officer at Immune. Both men are capable professionals, whom possess a track record of experience, and achievements, at reputable entities and institutions.
Dr. Teper holds his Doctor of Pharmacy Degree from the University of Paris-Sud, and his MBA from INSEAD Business School. He speaks four languages, and has worked previously at highly regarded pharmaceutical entities. These entities include, but are not limited to, GlaxoSmithKline (NYSE:GSK), where he served as the V.P. of Marketing and Sales in France, and Sanfoli-Aventis (NYSE:SNY), where he was the Chief Operating Officer of Delagrange Laboratories. He also led various firms and agencies whom offered strategic consulting services to biotechnology companies.
Mr. Cook earned his Bachelor of Science Degree in International Finance from American University in Washington D.C. He spent 18 years working for Chase Manhattan (NYSE:JPM) where he held a variety of corporate finance and capital market positions. For six years following his tenure at Chase, he then worked for GE Capital (NYSE:GE) as a Vice-President of one of their capital market subsidiaries. Following those years, Mr. Cook served as the Executive Vice-President of the Pharmos Corporation (OTCPK:PARS) prior to his time at EpiCept; which has since merged with Immune.
Immune Pharmaceuticals and Its Pipeline
Immune Pharmaceuticals employs, by their own definition, "a personalized approach to treatment, developing novel, highly targeted, antibody therapeutics to improve the lives of patients with inflammatory diseases and cancer." The company is developing monoclonal antibodies, and ligand-conjugated Nanoparticles based products, for a broad range of therapeutic applications. These applications include solid tumors, hematological malignancies, autoimmune diseases, inflammatory diseases, and infectious diseases. Of course, a better understanding of what "monoclonal antibodies" and "ligand-conjugated nanoparticles" would assist in understanding what the company is doing. Thus, a further overview is warranted.
Monoclonal antibodies are monospecific antibodies that are made from identical immune cells, which are clones derived from a unique parent cell. In other words, a cell from an organism is gathered, reformulated, cultured, and then harvested for its antibodies. A simple diagram can be seen directly below which represents the method by which monoclonal antibodies are produced;
Monoclonal antibodies can be manufactured for almost any substance and/or organism as a means to detect, target, and purify or treat, that entity. As a result of ongoing research into monoclonal antibodies as a therapeutic instrument, they have become a highly regarded novelty of treatments currently in development. These developments include treatments being designed for various autoimmune disorders, allergic diseases, and cancer.
As it pertains to ligand-conjugated Nanoparticles, the description is likely best provided in its simplest terms. Consider for a moment that you are a patient suffering from cancer. Your therapy is frequent, and in high doses. Obviously, when you are treated regularly, and at considerable quantities, the probability of significant side-effects is further increased. The lack of pharmacological selectivity to diseased cells, indiscriminate drug toxicities, and undesired medicinal concentration, all adversely affect the treatment efficacy and tolerability. In other words, the treatment doesn't always hit the mark. Sometimes, healthy tissue is damaged by the process of delivering medicine to the diseased tissue. Thus, the quantity of medicine needed to treat the disease is not always delivered to the problematic area in its full concentration. Of course, this then results in more treatment, to get more medicine to the right place, which causes more lethargy in patients, and more potential damage to healthy tissue. It can be, in some instances, a vicious cycle.
Therefore, innovative pharmaceutical solutions are needed to ensure delivery of cytotoxic drugs specifically to the tumor, without causing systemic damage to healthy tissue and other bodily organs. This is where polymeric nanocarriers, particularly nanoparticles, have been studied and researched as a potential solution to these issues in the treatment of various cancers. Nanoparticles can be biocompatible, adapted to specific needs, well tolerated, and deliver high drug payloads while targeting tumors. This targeting strategy is based on the molecular recognition of tumor biomarkers, which are over-expressed on cancer cells, via specific vector molecules conjugated to the surface of the drug carrier. These vector molecules dictate the carrier's bio-distribution, and its biological affinity to the desired site of action. It is like delivering the medicine with a GPS system, which doesn't release the treatment until it reaches its destination. It enables highly targeted and location specific drug release. A diagram below further expands on this premise;
So, these are the two methods being researched and employed at Immune. Thus far, the progress has been encouraging, albeit expensive. The company's lead compound is Bertilimumab, also known as CAT-213. This developmental treatment is based largely on eotaxin-1, which is a key mediator in inflammation, angiogenesis, and neurogenesis. Eotaxin-1 is a key regulator of eosinophil function. While this is a beneficial component of natural immunity, the accumulation, and overproduction, of eosinophil's in tissue can be detrimental. Such in the case, often times, in a variety of inflammatory related ailments. CAT-213 can regulate, and/or interfere with, this accumulation and overproduction. As a result, the drug is currently a candidate for a variety of treatment needs, including the potential to be effective against ulcerative colitis, crohn's disease, severe asthma, chronic obstructive pulmonary disease, verneal keratoconjunctivitis, atopic keratoconjunctivitis, ovarian cancer, and multiple dermatological ailments.
Immune has also developed drugs based on a treatment method technology utilizing the NanomAbs Platform. This platform was designed predicated on four basic modules;
- PEGylated polymeric nanoparticles, which acts as a scaffold which protects the drug from premature elimination or off-target effects.
- Proprietary linker molecules, which are embedded within the PEGylated polymeric nanoparticles, and connect the mAb to the rest of the particle.
- Anti-cancer drug, which is incorporated within the PEGylated polymeric nanoparticles.
- Therapeutic mAb, which mainly functions as a targeting ligand by binding to a specific tumor antigen.
Immune has prioritized the development of treatments which employ these four modules. Specifically, in accordance with their website, the company speaks of ferritin targeted combination therapies;
"Immune Pharmaceuticals has prioritized the development of Ferritin targeted combo Gemcitabine Paclitaxel NanomAbs. Total ferritin increased and shifted towards acidic (H-rich) ferritin in the serum of patients with various malignancies such as colon cancer, testicular seminoma, breast cancer, squamous cell carcinoma of the head and neck. In research anti-Ferritin NanomAbs showed marked affinity and improved efficacy for specific tumors such as pancreas and NSCLC. The combination of two drugs induces synergistic anti-tumor effect, while the targeted delivery specifically to tumor cell reduces undesired effects."
The company's full pipeline can be seen directly below;
The Art of Speculation
Immune, thus far, is largely unfollowed. To date, as far as I can tell, there is only one analyst following the company; LifeSci Advisers, LLC. That coverage was initiated on December 10, 2013, and thus far indicates no ratings of any kind, nor any applicable price targets. The coverage, to date, although thorough, appears to be more of a speculative and watchful eye, as opposed to a comprehensive and investment oriented determination. This is not surprising given the company's current stage in its evolution. Immune's most recently reported quarterly financials indicate struggles similar to the majority of other clinical state biotech's. Assets are minimal, revenues are virtually non-existent, costs are high, cash flows are negative, and future equity offerings are all but a forgone conclusion. Earnings per share are negative, price ratios are out of whack, and the company's margins resemble something out of a science-fiction movie. For any value investor who makes decisions based on metrics and fundamentals, Immune is a non-option. However, for the speculative investor, there are multiple signs of encouragement and future progress.
Immune has a number of milestones upcoming;
• Data is expected from the Phase Two trial for CAT-213 in bullous pemphigold in the first half of 2014
• Data is expected from the Phase Two trial for CAT-213 in Crohn's Disease in the first half of 2014
• Talks regarding partnerships for AmiKat are ongoing, and could be concluded in 2014
• Data is expected from the Phase Two trial of CAT-213 in ulcerative colitis the first half of 2015
• The filing of an IND, and the initiation of a Phase One trial for NanomAbs, is expected the first half of 2015
Moreover, the company has recently been approved for an uplisting to the NASDAQ OMX First Premier exchange in Stockholm. This is a considerable step for the company's growth and further establishment of legitimacy. In addition, unlike many comparable clinical stage biotechnology entities, the company is not wildly volatile. Immune maintains a beta of 1.71, has less than 3 million outstanding shares, maintains minimal short interest, has 9% of its shares held by institutional investors, and 14% of its shares held by insiders. All of those attributes bode well for the company, its intentions, its future, and its shareholders. These types of considerations are fuel for the speculative investor.
Any investor familiar with sector knows two things emphatically; first, clinical stage biotechnology entities play by their own rules, and secondly, those rules tend to be slightly different for each individual entity. When one invests in a company at this stage, more often than not, speculation is all they have. These companies are not the same "blue chips" that were renowned by generations past. There are no dividends here, no intrinsic value, and no true enterprise value; yet. An investor here is essentially making a bet on potential, science, leadership, and innovation. They are not evaluating metrics and analyzing run rates. In fact, fundamentally, there is probably a distinct difference between investing and speculating. Investing is the act of anticipating future success largely predicated on current and past achievement. Speculating is the act of predicting future accomplishment solely predicated on impending advancements, breakthroughs, and innovations. Investors and speculators are undeniably different breeds.
Immune as an Investment Vehicle
For the speculator, Immune is attractive for various reasons. The science they employ is exciting and cutting-edge. The addressable markets in their pipeline could potentially venture well into the billions. The current entry price, at these levels, is affordable for prospective shareholders of all capital positions. Furthermore, the company is in possession of significant intellectual property. Immune holds the exclusive worldwide license for NanomAbs technology from the Hebrew University of Jerusalem. However, a potential investment into Immune also carries significant risk.
First of all, despite being a clinical phase biotechnology entity, the company's financials cannot be ignored completely. Developing drugs is an expensive business, and many other companies have previously suffocated under the weight of overwhelming financial pressure. Secondly, the biotech sector, and its addressable markets, is highly competitive. Take for example the development of Immune's treatment "AmiKet" for chemotherapy-induced peripheral neuropathy. That is a 500 million dollar market in the U.S. alone, and there are currently no drugs approved for its treatment. As a result, many companies are clamoring to be the first on the market. For example, Dara Biosciences (NASDAQ:DARA) is developing "KRN-5500", a drug also designed for chemotherapy-induced peripheral neuropathy. Also, Wex Pharmaceuticals, a member of CK Life Sciences (OTC:CKLSF), is developing "TXX", yet another competing treatment. For every drug in development in Immune's pipeline, there are a handful of other companies competing to get there first. Lastly, Immune is a small company, with only a handful of full-time employees. In the event, for any reason, that any one of those employees left the company, or became incapable of continuing their contribution to it, the consequences for Immune could be detrimental.
The life of a speculative investor is often an isolated one. Most conservative investors, cut from a more traditional mold, tend to disregard speculators as reckless, desperate, or audaciously hopeful. Maybe there is some truth in that perception, but it is not, by any means, the whole truth. Speculative stocks are high risk, and they do require a well above average sense of hope. However, that does not make them an instrument of desperation or recklessness. Speculative stocks offer something that more established entities do not; the opportunity for explosive growth. The only things that are required are patience, fortitude, an above average risk tolerance, and a little serendipity. Speculative stocks have succeeded before; it is not unprecedented. Some, in fact, have turned paupers into millionaires. Is Immune one of those opportunities? Honestly, I don't know. It could be, but to project that sort of possibility would be both irresponsible and misleading on my part.
What is known is this; Immune is a rather inexpensive stock, employing exciting science, and developing a considerable pipeline. The company is taking steps to improve its visibility, and its financial position. The CEO, and the CFO, have tangible, relevant, and considerable experience. Immune's NanomAbs technology is licensed exclusively to them. Also, when compared to similar entities, a sizeable number of shares at Immune are held by insiders and institutions. If one is going to assume a position in a speculative stock, these are the types of protections and attributes one looks for. However, no matter how enticing or exciting any speculative stock may sound, prospective shareholders must keep something in mind. The road to profits is likely long and unsteady. A position assumed here would likely take 3-5 years to fully mature, and would endure some challenges along the way. So before you jump in with both feet, or start in on your own due diligence, make sure you possess the patience required to reap the benefits of such an investment.
Additional disclosure: It is advised that all prospective investors complete their own relevant due diligence prior to initiating an investment into any company detailed herein, or on any other web based platform.