Panmure Gordon retained its bullish stance on ImmuPharma (AIM: IMM) despite the recent 35% decline in the share price following the conclusion of Phase IIb trials of the company’s leading product candidate Lupuzor.
The broker said that the market did not “fully realise” the value of the drug, which is targeting lupus, a chronic autoimmune desease affecting connective tissue.
Panmure called lupus “uncharted territory” due to the lack of a roadmap for the development of new products, often resulting in pricing anomalies that provided promising investment opportunities.
Lupuzor top-scored with 53% responders versus 36% of placebo, while in BLISS-52 GlaxoSmithKline/Human Genome Science’s Benlysta top-scored with 58% versus 44% of placebo and was successful in two phase III trials. Statistical significance was also achieved in a number of secondary-end points, which Panmure said signalled that Lupuzor would achieve its goals in larger trials.
The second Phase IIb trial is set to start in early 2010 to test the best Lupuzor doses to move into Phase III trials, also contributing to the regulatory requirements by increasing patient exposure.
There are currently 2.7 million lupus sufferers in the UK, Japan and key European markets. Of the 1.4 million patients in the US, 600,000 are diagnosed and no more than 380,000 are treated. Based on this and similar pricing to other antibody therapies, a 12% penetration in 2016 would mean peak US sales of US$481 million and global sales of US$602 million, which, with a royalty assumption of 25%, would result in a royalty of US$155 million receivable by ImmuPharma.
The 'buy' recommendation was upheld and the target price of 300 pence was also maintained with a discounted cash flow valuation of 215 pence and a comparative earnings valuation of 232 pence. The target was based on a sum-of-the-parts valuation of Lupuzor, which was raised from £225.2 million to £233.6 million, with a reduced discount rate of 17.5% that should “capture all associated risks” following the announcement on 10 November by partner Cephalon of plans to launch IIb trials in the US next year.
Noble Insight also was encouraged by the trial results, calling the company a “steal” and projecting the trials to be taken forward to longer, larger late-stage studies early next year after showing “the strongest data seen in lupus” apart from Benlysta. Noble raised its target for the stock to 230 pence.
Shares in the company last traded at 105 pence, up 3.5 from yesterday's close.
The company will hold an research and development symposium in Paris today to discuss its lead compound for cancer IPP-204106, the rights for which were obtained through the company’s ongoing research collaboration with the Centre National de la Recherche Schientifique (CNRS), a French research institution. A Phase I trial of IPP-204106 is likely to be initiated in early 2010.
The French government has provided €1.15 million in grants for the research.
Edison Investment Research issued a note on Immupharma, conferring that an analysis of the latest Lupuzor trial shows very enouraging data. It has revised its risk-adjusted net present value to reflect timelines envisaged by the current development plans and is now indicating a valuation of £190 million, which compares to an enterprise value of around £60 million.