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Full Report can be accessed on www.independentresearch.com.au IMU BOOSTS IMMUNOTHERAPY PLATFORM WITH THE ACQUISITION OF ONCOLYTIC VIRUS CF33 Imugene Limited (ASX: IMU) is a clinical stage biotechnology company seeking to develop a range of novel immunotherapies to enhance the efficacy of cancer treatments. The company has announced its intention to acquire the exclusive licence to the oncolytic virus CF33 to add to the existing platform which targets the development of B cell peptide vaccines. KEY POINTS Acquisition of Oncolytic Virus CF33: IMU has annonunced the acquisition of Vaxinia Pty Ltd (Vaxinia) and the exclusive licence to the oncolytic virus CF33 from the City of Hope Cancer Centre (COH) in Los Angeles, subject to shareholder approval. CF33 is currently in the pre-clinical phase of development with IMU seeking to commence Phase I trials in 1H’2020. Under the terms of the licence agreement, IMU will acquire the exclusive rights to develop and commercialise CF33, for which it has agreed to pay COH licence fees comprising an upfront fee, annual maintenance fees which are creditable against future royalty payments, performance based consideration linked to the achievement of certain milestones and commercial outcomes, net sales based royalty payments, and sublicencing fees. IMU will also acquire 100% of the shares of Vaxinia. IMU will pay Vaxinia shareholders an upfront cash payment of $462,500 and $1.619m fully paid ordinary IMU shares based on the 7-day VWAP of the share price prior to announcing the deal. The shareholders of Vaxinia will also be eligible for additional share based payments based on the achievement of performance related milestones. The acquisition of CF33 has the potential to add significant value to the company with interest from big pharma being driven by research that highlights the therapeutic benefit of oncolytic viruses when combined with other immunotherapies. HER-Vaxx Commences Phase II Clinical Trials: The company has commenced a Phase II study of HER-Vaxx targeting patients with HER2-positive metastatic gastric cancer. The study will measure the response of 68 participants who will be randomised into two groups: 1) HER-Vaxx in combination with standard chemotherapy, and; 2) standard chemotherapy alone. The results from the Phase II study are due to be complete in 2020 and will provide a greater insight as to the efficacy of HER-Vaxx in cancer treatments. In early July, the company presented the 266 day results of the continued treatment of subjects from the Phase Ib that were given the highest dose of treatment at the European Society of Medical Oncology (ESMO) conference. Whilst only a small sample, the results presented were positive and provide a level of optimism for the Phase II trials. PD1-Vaxx to Commence Phase I Clinical Trial: The company is seeking to commence a Phase I clinical trial for PD1-Vaxx in 2020 after encouraging results from the pre-clinical studies. PD1-Vaxx seeks to produce an alternative to the existing commercialised monoclonal antibody immune checkpoint inhibitors. The trial will focus on patients with lung cancer. The company will seek to progress to a Phase II trial in the event the results from the Phase I trial are favourable. Partnering Opportunities: The immunotherapy market is currently experiencing significant growth with the use of immunotherapies becoming an important addition to the standard of care in oncology. The successful trials of IMU’s therapies will provide significant potential partnering opportunities. The opportunities are increased through the potential use of IMU’s treatments in combination with existing commercialised immunotherapies to potentially improve response rates without increasing toxicity. Investment View: IMU is a speculative investment with the ability to generate value for shareholders primarily dependent on the success of the clinical trials and the ability of the company to sell/licence its products to big pharma. The company will be seeking to generate interest from big pharma for its three leading candidates - HER-Vaxx, PD1-Vaxx and CF33 (if the acquisition is approved by shareholders). The company has suffiicient capital for the upfront acquisition costs and announced clinical trials, however, in the event the company does not generate interest in a timely fashion the company will likely have to raise capital which may dilute existing shareholder positions. The acquisition of CF33 would provide the potential for significant value add with a number of deals being done at the early stage of clinical development of oncolytic viruses. One notable deal was the acquisition of Viralytics Limited (ASX: VLA) by Merck & Co. Inc., for a total consideration of AUD$502m ($1.75 per share). This represented a 160% premium to the one month weighted average share price of VLA. This deal is of particular note given the Executive Chairman Paul Hopper was the Chairman of VLA. While we believe there to be significant upside potential from an investment in IMU, there remains significant risks.
Imugene Ltd
Imugene has agreed to acquire a worldwide exclusive licence for a highly potent, chimeric oncolytic poxvirus known as CF33. The company proposes to progress CF33 into a Phase I safety study in 2020, including a cohort treated with CF33 in combination with a checkpoint inhibitor. This strategy is similar to that pursued by Viralytics, which was acquired by Merck for A$502m in 2018 after conducting studies of its Cavatak oncolytic virus in combination with Merck’s checkpoint inhibitor, Keytruda. The CF33 acquisition strengthens Imugene’s immunooncology pipeline, which is currently focused on B-cell vaccines. As the CF33 deal is a related party transaction and therefore contingent on shareholder approval, we maintain our published valuation of A$159m or 4.4 cents per share.
Imugene presented positive clinical Phase Ib data for its HER-Vaxx B-cell vaccine at American Association for Cancer Research (AACR) conference earlier this month. Vaccination successfully broke immune tolerance and stimulated production of HER2-specific antibodies in a dose-dependent fashion; the antibodies inhibited a key component of HER2 signalling. Imugene has initiated a randomised Phase II study of HER-Vaxx in gastric cancer with interim results expected in 2020. It is on track to initiate a Phase I study of KEY-Vaxx, a B-cell vaccine that aims to induce production of antibodies that block PD-1 signalling, in Q419. We increase our valuation to A$159m or 4.4 cents per share.
Imugene has in-licenced a pipeline of B-cell vaccines that complements and advances its in-house programme. The deal has brought forward significant value-creation opportunities while maintaining Imugene’s focus on B-cell vaccine technologies. It accelerates the key PD-1 and PD-1/HER2 combo programmes by two years compared to its original pipeline. The company is well funded to accelerate key clinical studies for the newly combined pipeline. Our valuation is A$147m or 4.1 cents per share.
Imugene will test its reformulated therapeutic cancer vaccine, HER-Vaxx, in gastric cancer at trial sites in Asia. The Phase Ib/II trial is expected to start in mid-2016. HER-Vaxx aims to replicate or improve on the combination of two proven therapeutic antibodies, Herceptin and Perjeta (Roche). Imugene aims to gain a major pharma deal following Phase II data in the buoyant cancer immunotherapy area. A$3.0m raised in October gives it sufficient funds to undertake the Phase Ib component of the trial.
Imugene has developed a more potent formulation of its therapeutic cancer vaccine, HER-Vaxx, which will be tested in a Phase Ib/II trial in gastric (stomach) cancer in H215. HER-Vaxx could replicate or improve on the combination of two proven therapeutic antibodies, Herceptin and Perjeta (Roche), which significantly improves survival in breast cancer and may do so in gastric cancer. Imugene aims to gain a major pharma deal following Phase II data in the buoyant cancer immunotherapy area.
