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Imugene

Imugene Limited (ASX: IMU) - IMMUNOTHERAPY PLATFORM

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.

  • 16 Jul 19
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Kibaran Resources

Kibaran Resources Limited (ASX:KNL)

Kibaran Resources Limited (“Kibaran” or “the Company”) is well down the path to implementation of a vertically integrated graphite business supplying a number of markets outside of China. This includes traditional uses and the developing lithium-ion battery (“LiB”) anode market, the latter of which some forecast will result in a eight fold increase in demand for natural flake graphite for batteries by 2025. The Company’s key asset is the 100% owned (through wholly owned Tanzanian subsidiary TanzGraphite) Epanko Graphite Project (“Epanko”) in Tanzania, which is fully permitted and has binding offtake agreements thus far with German and Japanese customers for ~44,000tpa of the planned 60,000tpa of proposed high-quality graphite concentrate production. Kibaran is now working towards finalising financing following a hiatus (now ended) in the development of Epanko, with the potential for first production by 2021. Delays were initially due to conforming with the rigorous bankable feasibility study (“BFS”) and other requirements associated with sourcing funding out of Europe and complying with the IFC Equator Principles, however satisfaction of these requirements has resulted in a rigorous study and robust, financable project. Delays were also caused due to the well publicised changes in the Tanzanian Mining Law - this affected Kibaran (and a number of other companies) in that the issuing of Mining Leases (ML) was held up for over twelve months; Kibaran has now been issued with a Letter of Guarantee effectively extending the life of the Epanko Mining Lease from 2025 to 2035, which is a requirement of the senior debt financiers in that it matches the term of the ML with that of the debt financing, and which now allows for the recommencement of financing negotiations. The second key part of the strategy is downstream processing of graphite to purified spherical graphite (“SpG”), a key component of LiB anodes. This has involved the setting up of the EcoGraf business, which has also included the development of an environmentally friendly proprietary SpG purification process, that has been successfully tested on graphite from Epanko and a number of 3rd parties globally. Purified SpG has been used to produce “in-spec” battery anode material that has been successfully tested by a number of anode manufacturers. The development of EcoGraf has continued in parallel with Epanko, with a pilot plant now operating in Germany. Plans are for a staged expansion up to a production of 20,000tpa purified SpG by 2021, with further expansions possible thereafter. The nature of the business is that plants will have the flexibility to be able to be set up in locations to suit the markets, and with the potential to be able to be developed in association with strategic partners. KEY POINTS Ready to go: With the recent Letter of Guarantee on the Mining Lease, Kibaran is now in a position to finalise funding and progress Epanko to development and production; EcoGraf is currently underway, with the Company now considering attracting a strategic partner to help fund the commercial development of the SpG process. Offtake in place: Binding offtake agreements are in place with quality partners; this includes an 20,000tpa agreement with Thyssen-Krupp that could supply ~30% of the German refractory market, 10,000tpa with a German trader and 14,000tpa with Sojitz, a major supplier to the non- Chinese battery markets in Japan and South Korea. Forecast strong market growth: Graphite markets are forecast to grow very strongly over the foreseeable future, largely driven by the growth in electric vehicles; one outcome of this is that end users will be looking to supply outside of China, which currently controls the market. Quality resources with upside: Mineralisation at Epanko is of high quality, and suitable to supply most markets; in addition, there is considerable upside potential for future operational expansions. The Company also has a strategic holding and Resource at Merelani-Arusha in the north of Tanzania, which has the possibility to be a future producer. Success with EcoGraf: Results to date suggest that EcoGraf will be able to be successfully developed commercially, and being an ethical and green non-HF purification technology, products should have broad market appeal. Experienced personnel: Company personnel have extensive and successful experience in the resource sector (including graphite), and have a significant stake in the Company. Active work programme: We expect to see milestones being met over the near to mid term, thus leading to material news flow. Valuation: We have a base case valuation/six month price target of A$0.64/share for Kibaran, calculated on a share structure diluted for funding of Epanko and EcoGraf and graphite pricing adjusted slightly upwards to reflect changes in pricing since release of the BFS. This is predicated on menaingful progress at both the Epanko and EcoGraf projects.

  • 07 Jul 19
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Perpetual

Perpetual Credit Income Trust (ASX: PCI) - Income - Asset Manager

For. more information please visit www.independentresearch.com.au OVERVIEW The Perpetual Credit Income Trust (‘the Trust’ or PCI) is proposed to list on the ASX in May 2019 and is seeking to raise between a minimum A$150m and a maximum $400m (with the ability to accept $40m in oversubscriptions). The Trust will be managed by Perpetual Investment Management Limited (the ‘Manager’) and its highly experienced eight person specialist credit and fixed income team led by Michael Korber. The Trust is based on an unconstrained credit strategy that seeks to generate stable monthly income at a target level equivalent to RBA Cash Rate plus 3.25% p.a. (net of fees), the equivalent of 4.75% p.a. currently. The Manager will endeavour to do so through a flexible investment strategy that allows active portfolio positioning in order to focus on the most attractive credit and fixed income opportunity set focused on Australian securities and offshore securities issued by global participants in the Australian market. The Trust is managed similarly to the Perpetual Pure Credit Alpha Fund, which has consistently delivered on its performance objective and generally been top decile performance within the unconstrained / diversified credit global peer group average since its inception in February 2012. While the unconstrained nature of the strategy may, on the surface, appear to introduce greater risk, the intention is quite the contrary - it is designed to mitigate risk and be conducive to a more consistent income profile over time with limited downside risk. The Perpetual Credit and Fixed Income team are pioneers in Australian Credit with Michael Korber launching one of the first Australian corporate bond funds in Australia in 1997. The team is highly experienced across the credit and fixed income asset class spectrum, has a long tenure of investing together and is well resourced. The portfolio will be diversified by asset type, issuers, credit quality, maturities, country of issuance and capital structure and will be based on a ‘core/plus’ strategy, with at least 30% investment grade and a maximum 70% in high yield and loans. The portfolio is constructed based on a long-standing, rigorous and repeatable fundamental investment approach, that ultimately seeks to understand the financial strength of debt issuers. INVESTOR SUITABILITY The Trust is seeking to pay a stable and consistent monthly distribution and to do so with a strong emphasis on capital preservation and downside risk mitigation. We note that historically the Pure Credit Alpha Fund, which has a very similar strategy and returns objective, has delivered strongly on effectively the same objective since inception. The unconstrained nature of the investment strategy tied with active portfolio positioning with respect to the most attractive opportunity sets across a broad range of credit and fixed income assets and up and down the credit spectrum and capital structure positions the Trust as a one-stop fixed income solution for debt and credit instruments for Australian retail investors. Further, it represents a key point of difference with a number of fixed income and credit LITs that have been issued on the ASX over the last 12-months, which are intentionally specialist strategies. More broadly, the Trust has the ability to fill a gap in many portfolios, with Australian retail investors being heavily underweight the fixed income asset class, and hence provide diversification benefits. In the current environment, we also note that the asset class is not subject to the political risk of equities (potential abolition of franking credits for zero and low tax rate investors) and property (potential abolition of negative gearing). RECOMMENDATION IIR ascribes a “RECOMMENDED PLUS” rating to the Perpetual Credit Income Trust. IIR has conviction in the Manager’s ability to at least achieve the stated investment objectives over the foreseeable future. This is based on a comprehensive, proven and repeatable investment process, a highly qualified investment team, strong risk-management processes, and a long-term track-record of generating alpha (partly by mitigating downside risks in less benign market environments). We believe the investment processes, with a strong emphasis on downside risk mitigation, accords well with the investment objective of stable and consistent

  • 07 Jul 19
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