Immunomedics, Inc. (NASDAQ: IMMU) is a clinical-stage pharmaceutical company. The company’s principal area of investigation is monoclonal antibody-based products capable of treating cancer, autoimmune disorders, and other diseases. Immunomedics’ portfolio of products consists of antibody-drug conjugated (ADCs) that are designed to deliver a specific payload of a chemotherapeutic directly to the tumor while reducing overall toxic effects to the patient. The company’s most advanced product candidate is IMMU-132 (sacituzumab govitecan), an ADC that has received breakthrough therapy designation from the FDA for the treatment of triple-negative breast cancer.
Immunomedics was formed in 1982 and is headquartered in Morris Plains, New Jersey.
Pipeline and Products
Using its proprietary technologies, the company has developed a pipeline of six clinical-stage product candidates. Immunomedics’ research pipeline is further detailed below:
Source: Company Website
IMMU-132, Immunomedics’ most advanced product candidate, is an ADC which contains the chemotherapeutic SN-38, which due to its toxicity and solubility cannot be given directly to patients. As noted above, possible applications include triple-negative breast cancer and small/non-small-cell lung cancers. The drug is currently being evaluated in a multicenter Phase II study in patients with solid cancers.
IMMU-130 (labetuzumab govitecan) is another investigational solid-tumor ADC conjugated to SN-38. The drug is currently being studied in patients with metastic colorectal cancer who have received at least one prior irinotecan-containing regimen and had an elevated blood titer of carcinoembryonic antigen. The drug is currently being tested in a Phase II study.
Epratuzumab is a humanized antibody that targets CD22, an antigen found on the surface of B-lymphocytes, a type of white blood cell critical to proper immune system function. Elevated expression of CD22 has been associated with blood cancers and autoimmune diseases. Immunomedics is currently studying epratuzumab in collaboration with Bayer. The IntreALL Inter-European study group is conducting a large, randomized, Phase III study.
Early-Stage Pipeline consists of the following:
Veltuzumab is a humanized monoclonal antibody under development for the treatment of immune thrombocytopenia and non-Hodgkin lymphoma (NHL). Phase I/II trials are currently underway.
Milatuzumab is a humanized monoclonal antibody under which has received orphan drug designation for the treatment of chronic lymphocytic leukemia (CLL). The company has completed Phase I clinical trials.
IMMU-114 is a humanized antibody directed against an immune response target, HLA-DR, for the treatment of B-cell cancers. The drug is being investigated in a Phase I dose-escalation treatment study in patients with NHL and CLL.
In the course of its research activities, the company has accumulated a large portfolio of patents related to its product candidates as well as other technologies for which product candidates have not yet been identified. As of August 1, 2016, Immunomedics held nearly 300 patents in the United States, and more than 400 foreign patents. The vast majority of the company’s patents expire between 2023 and 2033.
Market Opportunity
Triple-negative breast cancer represents approximately 15 percent of all breast cancer diagnosed, and there is currently no standard therapy in adjuvant or metastatic settings. The median survival rate is approximately 12 months, and the progression-free survival rate (PFS) is between 1.7 and 3.7 months.
Recent Developments
- On September 21, 2017, Immunomedics exchanged $80 million of 4.75 percent senior convertible notes maturing in 2020 for common stock. This represented 80 percent of the outstanding balance of the company’s senior convertible notes as of June 30, 20117.
- On November 13, 2017, abstracts related to ongoing studies related to ongoing studies of IMMU-132 were posted by the San Antonio Breast Cancer Symposium. In particular, the Phase II study involving 110 patients reported an objective response rate of 34 percent, including three complete responses and 34 partial responses. Results of the independent central blinded review and sensitivity analyses of prior treatment regimens will be presented on December 6, 2017. The final data from this study will likely be submitted to the FDA in the first quarter of 2018 for accelerated approval of IMMU-132 as a third line treatment for triple-negative breast cancer.
Analysis
The shares reacted negatively to the newly-released data due to concerns that the FDA will required Phase III overall survival (OS) study data for approval of IMMU-132 (as opposed to Phase II objective response rate (ORR) and duration of response (DOR) data). However, Jeffries analyst Matthew Andrews notes that the FDA has approved 12 solid tumor drugs under the breakthrough designation with ORR and DOR as the primary endpoints for approval. Of these, only one drug, Lartruvo, required OS data. As such, he believes IMMU’s current profile for ORR/DOR (and tolerability) is robust and approvable.
First Quarter Earnings Review
In the quarter ended September 30, 2017, Immunomedics reported revenue of $0.7 million, equal to that reported in the same period one year ago. Revenue consisted primarily of product sales, along with research and development revenue and license fees.
Total costs and expenses increased 42 percent year-over-year to $22.3 million. General and administrative expenses increased $4.0 million due to greater legal and professional fees (related to a proxy contest), while research and development expenses increased $2.8 million due to the upcoming regulatory submission of IMMU-132. The net loss attributable to shareholders in the first quarter of fiscal 2018 was $118.7 million ($0.97 per share) as compared to a net loss of $16.2 million ($0.17 per share) for the same period one year ago.
Net cash used in operating activities increased 22 percent to $20.6 million. Cash and marketable securities totaled $139.6 million at September 30, 2017, as compared to $154.9 million at June 30, 2016. As of September 30, 2017, the company’s long-term debt obligations consisted of $19.7 million of senior convertible notes. However, the company also listed $165.8 million of warrant liabilities.
Stock Influences
- Positive data readouts from the company’s ongoing studies of IMMU-132;
- Accelerated approval from the FDA for IMMU-132 without additional OS data;
- New partnerships and collaborations for the company’s existing product candidates; and
- M&A Activity.
Risk Factors
- The company has historically been a research and development company, but is moving to commercialize its products as well;
- The FDA could require additional data from the company’s primary product candidate, IMMU-132;
- Due to the high cost, governments and insurance agencies may initially limit the use of the company’s products; and
- The company may fail to successfully develop any other products from its product pipeline.
Stock Performance
As of November 24, 2017, shares of Immunomedics closed at $11.15 after gaining more than one percent on the day, yielding a market capitalization of $1.7 billion. The stock has climbed steadily in the past 12 months due to optimism regarding the accelerated approval of IMMU-132, and hit a high of $14.48 in early October. As discussed above, Immunomedics lost nearly 20 percent and traded as low as $9.96 after the abstracts for the SABCS presentations were posted, but positive analyst opinions regarding the recent study data helped to push the stock higher.
Following are selected analyst ratings and price targets:
| Analyst | Firm | Rating | Price Target | Date |
| Matthew Andrews | Jeffries | Buy | $16.00 | 11/14/2017 |
| Phil Nadeau | Cowen | Outperform | $15.00 | 11/13/2017 |
Summary
The market initially reacted negatively to the SABCS abstract data for IMMU-132, mainly due to decreases in DOR, PFS, and OS. However, analysts believe that the drug remains approvable, and are optimistic that it will be able to navigate the accelerated approval process. The full data set, due out in early December, will give a much clearer picture.
While Immunomedics continues to burn cash, it has sufficient reserves to continue operations for the next 12 months and beyond. The company may need to raise additional cash if additional studies for IMMU-132 are needed.
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