Drug firm designs licence to thrive

Award-winning ImmuPharma focuses on the creation of medicines aimed at treating serious medical conditions such as cancer, inflammatory and allergic disorders. However, many UK biotech companies are not good at securing licencing deals – or bringing deals to the table that will attract investors.

Not so with ImmuPharma. It has a global licensing partner with highly successful Cephalon, a US specialty pharmaceuticals player. This innovative pharma start-up also boasts talented scientists and a low cost base, not to mention access to world-class technology.

Critically, ImmuPharma also has ongoing clinical human trials on a range of drugs. Which is why investors like M&G – this well-regarded asset management company recently took at 10 percent stake in the business – plus Gartmore, Jupiter, Standard Life and Legal & General, are taking such an interest.
 
“ImmuPharma is a complete steal at current levels and its strong balance sheet gives it little dilution risk. We see numerous catalysts ahead to drive interest in the story globally and are bullish that further Lupuzor data expected imminently will be positive,” said Noble research broker in October 2009.

ImmuPharma focuses on five key markets:
• Lupus
• Cancer
• Moderate to severe cancer pain or post-operative pain
• Highly resistant, hospital-acquired infections such as MRSA
• Inflammatory and allergic disorders
Additionally, ImmuPharma focuses on:
• Niche, high-value specialist areas
• Innovative, targeted drugs addressing unmet needs

Lupus, in particular, says ImmuPharma boss Dimitri Dimitriou, is a good example of a condition where ImmuPharma is taking a strong lead. “Lupus is a chronic, potentially life-threatening autoimmune disease that attacks multiple organs such as the skin, joints, kidneys, blood cells, heart and lungs. There are an estimated 1.4 million people diagnosed with the disease in the seven major countries, according to ImmuPharma and analyst estimates – and there is no known cure.”

Dimitriou knows what he is talking about. He has more than 20 years’ experience in the biotech and pharma industry and has been a senior director at GlaxoSmithKline as well as holding deal-making responsibilities at Bristol-Myers Squibb. (He also held senior marketing roles at Procter & Gamble). He is not short of market nous.

Public for four years, ImmuPharma is principally concerned with developing pioneering drugs in specialist therapeutic areas where there is not much competition. “ImmuPharma has exclusive collaboration with the Centre National de la Recherché Scientifique (CNRS),” goes on Dimitri Dimitriou, “the largest fundamental research organisation in Europe with a budget of 3.3bn euro (2008).”

Real progress
And so far, progress is hugely encouraging. ImmuPharma’s Phase IIb trial was double-blind and placebo-controlled in 150 Lupus patients who received Lupuzor once a month for three months – which demonstrated a significant clinical improvement to their condition says the company.

ImmuPharma was paid $15m before the study was complete, plus $30m last year for the worldwide rights for Lupuzor. “Cephalon is now responsible for the development and commercialisation of the drug worldwide,” explains Dimitriou. “This is part of one of the largest deals in Europe, with ImmuPharma potentially receiving further cash payments from Cephalon of an additional $450m, depending on the achievement of certain regulatory and sales milestones and even more importantly, high royalties on commercial sales of Lupuzor.”

Although ImmuPharma’s Lupuzor is the headline drug, the company has several other innovative biologicals targeting unmet needs. There have been several material developments that have de∞risked Lupuzor say investment brokers, thanks to exciting clinical data and general improving investment sentiment.

Low overheads
So ImmuPharma is attractive to investors on a range of fronts. Its low cost base is certainly a draw. Although it has operations in France, it operates as a virtual company in London. Cleverly, it utilises external companies for much of its clinical trials work and makes extensive use of sourcing compounds from drug libraries such as the Centre National de la Recherche Scientifique (CNRS) in France.

Analyst projections on ImmuPharma look resilient. “We estimate that the company will generate total revenues in FY 2009 of £21.56m,” says pharmaceuticals analyst Dr Navid Malik, “which, after costs of £5.7m and a royalty pay∞ away to CNRS of £4.3m, should generate a pre∞tax profit of £11.66m (net profit of £9.9m).”

Next year, grant income of £1m and a pre∞tax loss of £4.78m is anticipated. Based on estimates of a further significant milestone payment of £15m payable in 2011, it’s estimated that could mean a £6.74m pre∞tax profit.

“The timing of a potential filing for Lupuzor in our view is Q4 2012, with a launch in 2013,” adds Malik. “On launch we are assuming substantial milestones will be payable to ImmuPharma, in the order of $50m for the US market alone. We have modelled a royalty on sales of 20 percent (conservatively, net of payments to CNRS).”

Certainly revenue streams are rare in the biotech sector; funding is often done through new equity issues.  However, because of ImmuPharma’s Cephalon deal, this has alleviated the need for funding and reduced internal costs – Cephalon has assumed all further costs. Analysts’ forecasts range from £1.54 (Singers) to over £3.00 (Panmure and Matrix). Hugely exciting.

Broker upgrade – why ImmuPharma is a buy
“ImmuPharma is a rare breed among UK biotechnology companies,” says pharmaceuticals analyst Dr Navid Malik. “It has a high-value product, Lupuzor, scheduled to enter Phase 3 trials in Q4 next year, which it has licensed to Cephalon, a high-quality US pharmaceutical company. A strong cash position (£27m) combined with a low burn rate should fund existing operations for many years, reducing the risk of dilution and giving investors some downside protection. We believe the market does not appreciate the full potential value of Lupuzor, its lead programme. We are initiating coverage with a BUY rating. Target price 309p.” What is critical to ImmuPharma’s progress with Lupuzor is the development pathway taken by GSK to develop Benlysta, the first drug treatment to treat Lupus in 50 years. A strong Benlysta will benefit Lupuzor as some of the donkey work in developing this new market would be done by a far larger pharma player. When that is achieved then Lupuzor has a perfect entrée.

Why lupus is critical
Lupus is a deeply challenging waxing and waning disease and is characterised by severe and sudden flares of activity. Typically it targets women of childbearing age. It’s an autoimmune condition where the body’s immune system comes under severe attack. Some periods of improvement or remission can follow. However lupus cannot be cured and patients typically endure it for life. Depending on its progression, it can involve specific organs such as the brain and kidneys (lupus nephritis). There can also be severe life-threatening complications. Severe infections tend to become more common, plus the risk of miscarriages stroke, disability and ultimately death. In the past, lupus drug development has been littered with failures.

Further information: www.immupharma.com