Imugene Limited (ASX: IMU) - IMMUNOTHERAPY PLATFORM

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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.