ImmuPharma (LON:IMM) is one of those investments where the share price occasionally gets out of step with reality.
The five-year chart reveals in 2009 it was trading comfortably above £1 – a price that possibly over-stated its prospects at that time.
Equally, the fall below 37p in July almost certainly undervalued its potential and that of its lead product, Lupuzor, for the treatment of the auto-immune disease Lupus.
A drug with blockbuster potential, it has been substantially de-risked and carries with it ‘Fast Track’ approval and a highly valued Special Protocol Assessment (SPA) from the US Food & Drug Administration (FDA).
This SPA has recently been upgraded by the FDA due to the important efficacy profile of the compound.
In summary, this will shorten the time of the trial, reduce the number of patients required to be in the trial and ultimately reduce the costs involved in the Phase III trial.
Importantly, the SPA means that as long as the same trial protocols are adhered to from the successful Phase IIb trial, the FDA will not require any further trials to be conducted.
The more than doubling of ImmuPharma’s value between July and late September this year (it hit a high of 77p), would suggest the market is cottoning on to the company’s real worth, although dealers report the rebound was aided by the clearing of a significant stock overhang taken up by new international investors.
If this is the case, the investor or institution that dumped the stock could come to rue that decision, with City broker Panmure Gordon suggesting ImmuPharma is worth 150p a share.
In setting that target, analyst Savvas Neophytou cautioned: “We believe investors should be patient and expect significant share price volatility in the coming weeks but, ultimately, from a purist valuation point of view, ImmuPharma shares are worth significantly more than the current share price.”
Clarity over the future of Lupuzor would undoubtedly act as a major share price catalyst, though sentiment may not have been helped by chief executive Dimitri Dimitriou’s strategy to exploit the full potential of its lead drug.
The tradition in the sector is that an R&D group that has taken a drug to the cusp of phase III clinical trials goes out and looks for an industry partner with pockets deep enough to take it through the expensive final stage of scrutiny.
And, indeed, this is just what ImmuPharma is doing.
But it is running a parallel process where ImmuPharma will develop the drug itself.
And thanks to a £50 million equity funding facility agreed with Darwin Strategic it has the financial muscle to follow through, should the company wish to use part of this facility.
It is a wily strategy that doesn’t leave ImmuPharma relying on the outcome of talks with big pharma, but is one that has given certain commentators the jitters.
They have questioned whether industry appetite is there for Lupuzor but have neglected to assess the huge value that would be created by ImmuPharma taking the treatment all the way itself.
The appointment of Torreya Partners, a mergers & acquisitions and licensing specialist with offices in New York and London, to assist with the talks may assuage some of these concerns, and it perhaps points to where ImmuPharma is headed.
Panmure’s Neophytou observed: “Success in licensing discussions is not guaranteed but this appointment should make the process more thorough and, undoubtedly, leave no stone unturned.
“Who is to say that in showing the company’s wares, a bidder does not emerge for the whole company?”