Company Overview: Immutep Limited (ASX: IMM) is a global biotechnology company and is one of the leaders in the development of Lymphocyte Activation Gene-3 (LAG-3) immunotherapeutic products for autoimmune disease and cancer. It is dedicated to leveraging its technology and expertise to discover and develop novel immunotherapies, and to partner with leading organizations to bring innovative treatment options to market for patients. In addition, Immutep has two other clinical candidates, namely, IMP701 and IMP731 that are fully licensed to major pharmaceutical partners. IMP761, a fourth candidate, is in pre-clinical development for autoimmune disease. Immutep Limited is listed on the Australian Securities Exchange under the ticker “IMM”, and on the NASDAQ as “IMMP” in the United States.
IMM Details
Decent Increase in Revenue and Increasing Footprint: Immutep Limited (ASX: IMM) is a global biotechnology company and one of the leaders in the development of Lymphocyte Activation Gene-3 (LAG-3) immunotherapeutic products for autoimmune disease and cancer. As on 27 November 2020, the market capitalization of the company stood at ~$163.26 million. During FY20, the company was engaged in the advancement and development of its lead product candidate, eftilagimod alpha (efti) and reported supportive efficacy data from AIPAC (Phase IIb), its largest study in breast cancer patients. During the year, IMM continued to work with five major pharmaceutical companies, including Novartis, GSK, Merck & Co, Merck (Germany) and Pfizer.
During FY20, licensing revenue witnessed a significant rise to $7.49 million from ~$140k in FY19. This was mainly due to the GSK milestone payment of GBP 4 million with respect to the first patient being dosed in GSK’s Phase II clinical trial evaluating GSK2831781 in ulcerative colitis. However, the research material sales went down to $280k in FY20 from $1.16 million in the previous year, due to a single bigger purchase by customer in the last year. Corporate administrative expenses for FY20 stood at $6.34 million as compared to $6.37 million for FY19. The loss after tax for FY20 was $13.46 million, reflecting a decline from $18.34 million in FY19. This was mainly due to the significant increase in license revenue. As on 30 June 2020, the company reported a decent balance sheet with a cash balance of $26.32 million.
Immutep Limited is likely to report multiple data read-outs from its clinical trial results, including TACTI-002 and INSIGHT-004, along with survival results from AIPAC. The company reported decent clinical potential from Efti and seems an ideal candidate to combine with available cancer treatments.
FY20 Financial Highlights (Source: Company Reports)
Details of Top 10 Shareholders: The following table provides an overview of the top 10 shareholders of Immutep Limited. Australian Ethical Investment Ltd. is the largest shareholder in the company, with a percentage holding of 8.44%.
Top 10 Shareholders (Source: Refinitiv, Thomson Reuters)
Key Margins: During FY20, the company reported an improvement in its EBITDA and net margin. At the end of the same period, current ratio of the company stood at 9.26x, higher than the industry median of 3.47x. This indicates that the company retains a decent liquidity position and is capable to pay off its current liabilities using its current assets. During FY20, cash cycle of the company was 113.2 days, lower than the industry median of 256.2 days. During FY20, assets/equity ratio of the company went down to 1.40x from 1.66x in FY19 and debt/equity ratio improved to 0.27x from 0.31x in FY19. This indicates that the business is financed with a significant proportion of investor funding and a small amount of debt, resulting in a financially stable balance sheet.
Key Margins (Source: Refinitiv, Thomson Reuters)
Quarterly Highlights (For the Period Ended 30 September 2020): During the quarter ended 30 September 2020, the company built a pool of data to discuss with potential licensing and collaboration partners. It presented decent interim results from its TACTI-002 trial and improving interim data from its INSIGHT-004 trial of efti at the ESMO. As per the trial, 41.7% of patients showed a partial response to the combination therapy of efti and avelumab and also reported encouraging early anti-tumour activity signals across a variety of cancer indications.
On the financial front, the company received a cash of $23k from customers in 1QFY21 as compared to $128k in Q4 FY2020. Total net cash outflows used in operating activities in the quarter stood at $3.34 million and reported a cash balance of $22.7 million. The company has also successfully raised $29.6 million from a share placement, which is likely to provide funding certainty and significant growth opportunities. The proceeds are also likely to drive ongoing development and acceleration of its immuno-oncology and autoimmune programs.
Cash Flows from Operating Activities (Source: Company Reports)
Expansion of TACTI-002 Collaboration Trial: The company is working on conducting the clinical development for eftilagimod alpha via expansion of its ongoing TACTI-002 study in collaboration with Merck & Co., Inc., and a new Phase II trial. It will include an additional 74 patients with 1st line NSCL and the first Patient is likely to be enrolled by the end of 2020.
Future Expectations and Outlook: The company retains a global leadership position in LAG-3 with four related product candidates in immuno-oncology and autoimmune diseases. It is having 10 active clinical trials, including partnered products with further significant data read-outs throughout 2020 and 2021 and a compelling clinical data from efti & strong rationale to combine with multiple FDA approved treatments. The company is also building network and business development opportunities with five of the world’s largest pharmaceutical companies.
Key Investment Risks: The company is at an early stage in the development of pharmaceutical products and thus there is a risk that it may not be able to complete its clinical development program or commercialize some or all of its products in development. The company is also largely dependent on the success of its product candidates, particularly those related to LAG-3. IMM is also exposed to significant risks related to its ongoing research and development. The other risks factors include inability to retain key personnel and its ability to protect its intellectual property and technology.
Key Valuation Metrics (Source: Refinitiv, Thomson Reuters)
Valuation Methodology: Price to Sales Multiple Based Relative Valuation (Illustrative)
Price to Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
Stock Recommendation: The company will report results from several trials of efti throughout the coming financial year and may further expand the intrinsic value. As per ASX, the stock of IMM is currently trading slightly below the average of its 52-weeks’ trading range of $0.100 - $0.495, proffering a decent opportunity for investors to enter the market. The stock of IMM gave a return of 43.24% in the past three months and a return of 1.92% in the last one month. On a technical front, the stock of IMM has a support level of ~$0.231 and a resistance level of ~$0.314. We have valued the stock using the price to sales multiple based illustrative relative valuation and have arrived at a target price, offering an upside of lower double-digit (in % terms). For the said purposes, we have considered Telix Pharmaceuticals Ltd (ASX: TLX), Mesoblast Ltd (ASX: MSB) and Aroa Biosurgery Ltd (ASX: ARX) as peers. Considering the current trading levels, global leadership position in LAG-3, expansion of its ongoing TACTI-002 study, and key investment risks stated above, we recommend a ‘Speculative Buy’ rating at the current market price of $0.265 on 27 November 2020.
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IMM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
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