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Summary

  • Imminent Presentation at Prestigious Annual Meeting of the American Society of Clinical Oncology (ASCO) Could Re-ignite the Stock.
  • Existing, Evolving Data Demonstrating ICT-107’s Superiority to the Existing Standard of Care.
  • Extremely oversold situation offers an exceptional risk-reward ratio - especially in the very near-term.

I recently realized gains of approximately 400% on Galectin Therapeutics (NASDAQ:GALT) and faced the joyous dilemma of finding another speculative biotech to add to the fund portfolio. As the readers of my GALT article on March 27, 2013 may recall, the stock was trading at $3.29 per share after a substantial 25% pullback the prior week. The price action in GALT at that time reminds me of my new pick, ImmunoCellular Therapeutics (NYSEMKT:IMUC). Like GALT, IMUC recently sustained a large pullback and is now trading at approximately 55% below its December 2013 levels. The following will support my belief that IMUC is extremely oversold and why it offers an exceptional risk-reward ratio - especially in the very near-term.

THE COMPANY

ImmunoCellular Therapeutics, Ltd. is a clinical-stage biotechnology company that is developing novel cancer vaccine immunotherapies for the treatment of brain, ovarian and other solid tumors. Their product candidates are based on a next-generation dendritic cell (DC) vaccine technology that stimulates a potent immune response to antigens associated with both cancer cells and cancer stem cells (CSCs), which are primary drivers of tumor growth and recurrence. Advanced manufacturing allows the production and storage of multiple vaccine doses from a single process, offering notable advantages over existing manufacturing methods in terms of cost-effectiveness, efficiency and convenience.

Their lead product candidate, ICT-107, is currently being evaluated in a randomized, double-blind, placebo-controlled, multicenter phase II clinical trial in patients with newly diagnosed Glioblastoma Multiforme, which is the most common and most aggressive malignant primary brain tumor in humans, involving glial cells and accounting for 52% of all functional tissue brain tumor cases and 20% of all intracranial tumors.

ICT-107 is the superior GMB treatment in that the dendritic base is non-toxic and costs much less. These factors are critical when patients are contemplating their quality of life in the time they have left versus furthering their pain and suffering with highly toxic chemotherapeutic chemical drugs

In addition to ICT-107, IMUC is developing two other DC vaccines:

  1. ICT-121 is a DC vaccine that targets CD133, an antigen commonly associated with CSCs. IMUC is supporting an investigator-sponsored phase I clinical trial at Cedars-Sinai Medical Center in Los Angeles, which was initiated in August 2013.
  2. ICT-140 is a DC vaccine that targets seven different antigens associated with ovarian cancer, including ones expressed by CSCs. The company plans to conduct an exploratory phase II clinical trial in ovarian cancer at four sites in the US, and expect to begin this trial in 3Q 2014.

THE PRICING OPPORTUNITY

On December 11, 2013, IMUC announced that ICT-107 achieved a statistically significant improvement in progression-free survival(PFS) in patients with newly diagnosed GBM, but statistical significance was not achieved for overall survival (OS). The stock slid over 80% off its November high of $4.00 to a December low of $0.72. This is because investors know that OS remains an important criteria for studies being conducted on cancer drugs, but it was an extreme over-reaction to the data and it completely overlooks the remaining, likely possibilities for IMUC. The key points I believe the market has yet to factor into the price of the stock are as follows:

Existing, Evolving Data Demonstrating ICT-107's Superiority to the Existing Standard of Care

IMUC's Phase II study demonstrates with statistical significance that GBM patients live longer without disease progression when treated with ICT-107. Patrick Wen, MD, Director of the Center for Neuro-Oncology at The Dana Farber Cancer Institute and Professor of Neurology at Harvard Medical School, and an investigator on this trial, said, "The progression-free survival data look promising in this study. To my knowledge, this is the first time a placebo-controlled immunotherapy trial in glioblastoma has demonstrated a statistically significant improvement in a clinically relevant measure, such as progression-free survival. We await additional data to evaluate the effect on overall survival (OS)."

As noted by Bioworld, PFS "data come years ahead of OS data, providing the opportunity to more quickly assess and, if applicable, allow patient access to drugs. Additionally, PFS may better illustrate the actual effects of a drug, since it is less influenced by subsequent treatments and other long-term factors that can skew OS." I strongly believe that the progression-free survival result will portend improvement in the OS result as IMUC has continued to collect and incorporate more survival data.

My belief is supported by later results of the earlier Phase I trial published November, 2013 wherein eight of the sixteen participating patients survived more than five years post-diagnosis, and seven of those eight still alive at the time of publishing with lengths of survival of up to 82.7 months. Furthermore, four of the eight still remain progression free and six of the eight patients were free of progression for more than five years. These results prove superior when compared to the current standard of care represented by Merck's (NYSE:MRK) temozolomide, with median length of survival of 15 months after diagnosis (See New England Journal of Medicine 352 (10): 987-96), and with only ten percent (versus 50% in the aforementioned IMUC data) surviving for more than five years.

As concerns IMUC's stock price, the market fails twofold in that it: 1) fails to acknowledge the fact that PFS data often precedes OS data, and 2) fails to consider the FDA's approval of numerous drugs based solely on PFS endpoints. One well-known example is Genentech's (DNA) Avastin for breast cancer. In fact, there are at least 10 cancer drugs approved by the FDA without an increase in OS. Those include Amgen's (NASDAQ:AMGN) Vectibix, Eli Lilly's (NYSE:LLY) Gemzar, Onyx Pharmaceutical's (NASDAQ:ONNN) Nexavar, Glaxo Smith Klein's (NYSE:GSK) Votrient, and Pfizer's (NYSE:PFE) Sutent.

Success Overseas Irrespective of FDA Approval Minimizes Downside

On February 25, 2014 ICT-107 attained orphan drug status in the European Union. The European Medicines Agency (EMA) has long used PFS as an acceptable endpoint for the approval of first-line cancer drugs. Thus, even if ICT-107 is not approved in the U.S., it can still succeed overseas.

Imminent Presentation at Prestigious Annual Meeting of the American Society of Clinical Oncology (ASCO) Could Re-ignite the Stock

On April 21, 2014, acceptance at American Society of Clinical Oncology (ASCO) was announced and represents a significant, positive signal of interest by the Oncology community. Andrew Gengos, ImmunoCellular Chief Executive Officer. "We are looking forward to discussing the ICT-107 phase II results with key opinion leaders in the neuro-oncology community during, and in conjunction with, our presentation. We anticipate presenting updated overall survival results for both the whole trial population and key predefined sub-groups, as well as important immunological analyses that can provide insights relative to vaccine potency and response. This larger and richer data set will be the basis for informing our phase III design and execution strategies. Presentation scheduled for Sunday, June 1."

According to ASCO policy, only… "Abstracts of superior quality will be selected by the ASCO Scientific Program Committee for presentation...and for publication in the 2014 ASCO Annual Meeting Proceedings, a supplement to the Journal of Clinical Oncology…Abstracts will be judged solely on the data submitted. Statements such as "further data will be presented" are strongly discouraged and will decrease the likelihood that the abstract will be selected for presentation at the Annual Meeting." In my conversation on May 16, 2014 with a representative of IMUC, I was told that the company is in a "quiet period" wherein they are not currently making any public statements as they are currently in possession of updated data. This further confirms Mr. Gengos' positive representations about the availability of OS data for presentation.

ASCO's stringent standards for presentation and publication, in conjunction with the strong statements of IMUC's CEO make the June 1, 2014 presentation a likely catalyst for an extreme upside break-out. Moreover, in the event the OS data falls flat statistically, it's my belief that the current stock price already factors that in - making the downside risk relatively miniscule compared to the upside.

KEY STOCK STATISTICS

Insider Buying

All insider trades since December, 2013 have been purchases. Notably, CEO Andrew Gengos, purchased 27,000 shares in December, 2013. Also SVP and Strategy Director, Anthony Gringeri, and Director Gary Titus purchased 25,000 and 18,000 shares, respectively.

Cash/Debt

Investors know that it is critical for biotechnology companies to have adequate funding. IMUC has a healthy cash balance of $25 million relative to its cash burn rate of approximately $2 million per quarter, and it has no debt. Further, IMUC has approximately $0.40 per share in cash.

EXPECTATION:

As of 4/30/2014, shares short were 7.1% of the float. A dramatic short squeeze coupled with heavy accumulation could be sparked by any one of the following events:

  • ASCO presentation on June 1, 2014
  • Positive indications on end-of-Phase II discussions with the FDA
  • Positive indications on Phase II discussions with the European Medicines Agency
  • Enrollment of patients in the ICT-140 Phase II ovarian cancer trial

I find IMUC an excellent speculative biotech buy that is primed to rise. Investors should recall its $4 November level prior to the aforementioned December, 2013 announcement. Also, the $9 target Roth Capital had on the stock prior to that announcement is noteworthy.

Disclosure: I am long IMUC. 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: This is not an offer to buy or sell securities. There is no guarantee of any performance and you should consult with a qualified investment advisor before investing.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Source: ImmunoCellular Therapeutics: Potential Near-Term Upward Spike