ImmuPharma's Lupuzor offers "meaningful market opportunity", says Espirito Santo; shares worth 200p

Investment Bank Espirito Santo has given a bullish assessment of the prospects for ImmuPharma (LON:IMM) and its lead drug Lupuzor as it has come up with a 200 pence valuation for the shares.

In setting such a punchy price target, analyst Chirag Talati looked at the impact of the recent flow of good news and how it affects the company.

The main focus of a 16-page report sent out to clients recently was Lupuzor, a treatment for the auto-immune disease lupus. 

The company recently clawed back the rights to the fledgling product from Cephalon after its US$6.5 billion takeover by the generic drug maker Teva.

This was followed by a highly encouraging series of updates on Lupuzor’s progress.

The first came from US Food & Drug Administration, which has given the go ahead for phase III with fast-track designation.

The company also revealed it had been given approval to start the next phase of development with a Special Protocol Assessment.

This SPA is an important sign-off on the company’s clinical trial protocols. 

The agency is essentially saying that, assuming no unforeseen issues, it will approve the drug if it matches or exceeds certain criteria. 

Since this all happens before the data is generated, FDA tends to be conservative when handing out SPAs.

The FDA fast-track follows the submission of phase IIb data collated in 2009.

Meanwhile, the European Medicines Agency has agreed the design for a phase III trial of the drug on this side of the Atlantic.

Last week chief executive Dimitri Dimitriou revealed the group had “rekindled discussions” with big pharmaceuticals interested in teaming up with ImmuPharma to develop Lupuzor.

He said: “A lot of money has been spent on Lupuzor, both on our side and after the deal with Cephalon,” Dimitriou said in a conference call with analysts.

“We have no payment obligations. So it is fantastic to get the product back.”

Later in the call with analysts he added: “We have seen a lot of interest from big pharma companies for this one. I can tell you as an ex-licensing professional in big pharma, this is exactly the sort product big pharma wants.

“It is ready for phase III, in a specialist area with a high margin. 

“Having an SPA is an additional bonus. One can never promise a deal, but we are very, very optimistic about the future.” 

Benlysta, a rival product launched by GlaxoSmithKline and Human Genome Sciences, has underlined the market potential of the treatments in this area of medicine. 

Its peak sales are estimated to be US$4 billion, but with 1.5 million sufferers in the G7 alone, there is plenty of room for a rival such as Lupuzor. 

Lupuzor, meanwhile, had no shortage of interest at the time of the Cephalon deal, which was worth around US$500 million in milestone payments and royalties.

“Given a strong signal of efficacy shown in the Phase II-b study, a meaningful market opportunity in lupus and management’s track-record in deal-making, we see good prospects of another deal for Lupuzor over the coming 12 months,” said Espirito Santo’s Talati.  

“Recent announcements accelerate the timelines for investors, and there remain prospects for upfront deals that we estimate could be worth $50m-plus, translating to around 40 per cent of ImmuPharma’s current market cap, with potentially multi-fold returns likely should Lupuzor finally make it to the market. 

“With its limited cash burn model and a catalyst for a licensing deal, we see ImmuPharma as an attractive investment in the UK biotech space.”