IMMU

[Michael]

Immunomedics, Inc., a biopharmaceutical company, focuses on the development of monoclonal antibody-based products for the targeted treatment of cancer, autoimmune, and other serious diseases. Its lead product candidate is epratuzumab, which is in two pivotal Phase III trials for the treatment of patients with moderate and severe lupus. The company's other products include IMMU-106, which is in Phase I/II clinical trials in patients with B-cell non-Hodgkin's lymphoma; and PAM4, a humanized monoclonal antibody for the treatment of pancreatic cancer. It also provides LeukoScan, a diagnostic product used for the detection of bone infections, in Europe and Australia. Immunomedics markets its products in the United States and Europe. The company was founded by David M. Goldenberg in 1982 and is headquartered in Morris Plains, New Jersey.

Immunomedics website

Immunomedics profile

Pipeline



Background

To pick stocks is all about predicting future cash flow. In the case of Biotech's cash flow is normally an exercise of calculating how fast they will run out of money! IMMU is no different or is it?

Well until a few weeks ago this was a normal Biotech with an annual burn rate of around 25 million USD. But on May 10 things changed fundamentally. IMMU signed an agreement with UCB the world 5th largest Biotech company for their lead drug candidate Epratuzumab. Under the terms of the agreement, UCB will assume all costs associated with current and future clinical development and commercialization of Epratuzumab for the treatment of patients with SLE.

I normally use a lot of time to analyze Biotech's. You have to look into the pipeline, the diseases their drugs are targeting and the competitive environment. With IMMU it is a lot easier because UCB, which is one of the leading drug companies in the world, have already done all the work and put a price on IMMU's leading drug:



The most important is the money UCB pays upfront because this shows how confident they are that the drug will be approved and if UCB is willing to pay 38 million USD in cash without any conditions they must like what they see. I am sure that UCB have had access to the results of the ongoing phase III trials of Epratuzumab and apparently they think that the drug is very likely to get approved. Based on the publicized results I agree. No new drug for Lupus has been approved for 40 years and Epratuzumab seems to be very efficient and it has a very good safety profil.

So what is in the deal for IMMU?

• 38 million USD upfront unconditional
• 145 million USD in milestone payments
• 135 million USD in sales bonus
• Royalties on sales

If Epratuzumab get approved in US and Europe IMMU is likely to receive 318 million USD plus royalties over a number of years. IMMU's market cap is 156 million USD.

As mentioned above: to pick stocks is all about predicting future cash flow. We know the value of the deal with UCB but even more important is the fact that IMMU's burn rate are going to drop. UCB is now going to cover all research and development costs for Epratuzumab. What previously was a cost for IMMU is now going to be revenue (depending on how they account for it!).

An investment in Immunomedics is not risk free but the risk/reward ratio is very attractive.

Technicals

After the initial excitement with the UCB deal when it was announced on May 10 the stock has fallen back to the ascending trend line giving us an excellent entry point:



I think that the market is grossly underestimating the likelihood of approval of Epratuzumab and the reduced burn rate of IMMU. In addition they seem totally to have forgotten the rest of IMMU's pipeline and patents in the excitement around the UCB deal. I will come back to this but for now the most important is to buy the stock!

We will therefore buy IMMU Tuesday morning for the 3SOV portfolio.

[Lucas Scott]

A compelling argument Michael. IMMU seems to have a good bit of upside potential. The market downturn this month took IMMU with it. Seems like it should trade back at $3.50 before long if and when the market finds solid footing, and then higher if IMMU is all that. Biotechs make me jittery because of experiences like VPHM, which seemingly overnight went from $20 with lots of upside to $10 and overvalued in the market's estimation. As long as no one says anything about "generic epratuzumab"!!

The trendline on your chart is not quite right because it ignores about 6 weeks of data from Oct-Nov 2005. I suggest this chart: http://tinyurl.com/o5zmh  which shows trendline failure, however also shows successive higher lows which is bullish. Good TA advice I've heard from a few places is the MM's know where the trendlines are too and they'll break a line if it gets them some cheap shares. That could well be the case here.

[la-onda]

fyi:

IMMU: Short Interest DN 3.8% to 3.4M in May 2006
Wednesday, May 24, 2006 16:19 ET

According to new short interest data from NASDAQ, short interest for Immunomedics Inc (NasdaqNM: IMMU) DECREASED 3.8% to 3,350,403 shares for the month ended mid-May, 2006.

SYMBOL             APRIL             MAY          CHANGE       %CHANGE      DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
IMMU           3,481,426       3,350,403        -131,023        -3.76%           9

Based on IMMU's 20-day average daily share volume of 392,060, it would require approximately 9 day(s) of buying to cover this short interest.

[Michael]

Thanks for your great comments (applauds!)

A compelling argument Michael. IMMU seems to have a good bit of upside potential........ As long as no one says anything about "generic epratuzumab"!!

A generic version of Epratuzumab is still many years out in the future. Remember that the patent protection for Vancocin expired years ago. We are still waiting for approval 

The trendline on your chart is not quite right because it ignores about 6 weeks of data from Oct-Nov 2005. I suggest this chart: http://tinyurl.com/o5zmh  which shows trendline failure, however also shows successive higher lows which is bullish. Good TA advice I've heard from a few places is the MM's know where the trendlines are too and they'll break a line if it gets them some cheap shares. That could well be the case here.

The problem with both our charts is that we use log scale. It is much easier to see the strong trend line without the log scale:

[la-onda]

positiv news out:
Repeated Radioimmunotherapy With 131I-Labetuzumab in Colorectal Cancer With Liver Metastases Found Safe and Well-Tolerated in Initial Phase II Study
Friday June 2, 8:00 am ET

ATLANTA, June 2 /PRNewswire-FirstCall/ -- Immunomedics, Inc. (Nasdaq: IMMU - News), a biopharmaceutical company focused on developing monoclonal antibodies, today reported that repeated use of its radiolabeled antibody against the carcinoembryonic antigen (CEA), 131I-labetuzumab, has been found to be safe and well-tolerated by patients with colorectal cancer that has metastasized to the liver. Results from this study were accepted for publication at the 42nd Annual Meeting of the American Society of Clinical Oncology (ASCO) in Atlanta, Georgia.

Twelve patients have been enrolled in this Phase II study led by Dr. Torsten Liersch at the Department of General Surgery of the University of Gottingen, Germany. Within 2 months of surgery to remove liver metastases of colorectal cancer, patients received a first dose of 50 mCi/m2 of 131I-labetuzumab. Three months after the first radioimmunotherapy (RAIT), a second infusion of the radiolabeled, humanized, CEA-antibody was given in the same amount. Transient grade-4 myelosuppression occurred in 4 out of 12 patients after the first dose, but no cumulative toxicity was seen thus far in 7 patients who have received the second infusion. Complete bone marrow recovery was reported in all cases. At a median follow-up of 4 months, no cancer recurrence has been detected in the 12 patients enrolled to date. In all, a total of 15 patients will be enrolled in this study.

"We are pleased that a new study has been initiated to evaluate the effect of repeated dosing of 131I-labetuzumab in colorectal cancer patients and we look forward to learning more about the clinical effects," commented Cynthia L. Sullivan, President and Chief Executive Officer of Immunomedics. "Since about two-thirds of patients with colorectal cancer metastases to the liver relapse after resection of these liver tumors, an adjuvant therapeutic, such as perhaps our 131I-labetuzumab, may prove useful in this setting of disseminated disease," she remarked.

This is a second trial conducted by the German researchers using 131I-labetuzumab for colorectal cancer patients with liver metastases. In the previous study, only one 131I-labetuzumab dose was given to colorectal cancer patients after surgery to remove liver metastases. Five-year survival was achieved by 51.3% of the 19 patients who received RAIT. Median overall survival from the first surgery was 68.0 months and median disease-free survival was 18.0 months. Results of this study had been published in the September 20, 2005, issue of the Journal of Clinical Oncology.

[Michael]

Indeed great news Oliver 

I think that the market is grossly underestimating the likelihood of approval of Epratuzumab and the reduced burn rate of IMMU. In addition they seem totally to have forgotten the rest of IMMU's pipeline and patents in the excitement around the UCB deal.

Hopefully this press release will refresh the markets memory on the rest of IMMU's pipeline and with a little luck they might also run the UCB numbers again. I am sure they will like what they see 

[la-onda]

MACD crossing 

[Michael]

MACD crossing and excellent news out on their Dock and Lock technology 

http://biz.yahoo.com/prnews/060605/nym023.html?.v=54

"This research confirms our conviction and expanding patent portfolio involving the development and use of bispecific antibodies for improved cancer therapy, which we believe introduces a new paradigm in the immunotherapy of cancer," commented Cynthia L. Sullivan, President and Chief Executive Officer of Immunomedics. "It also validates our recently described DNL platform technology for making stable fusion proteins, in this case comprising bispecific or bifunctional antibodies for use in cancer therapy," she added.

One of the reasons I like IMMU is this patented method of creating new compounds (hence the headline for this pick!). It obviously give IMMU a huge advantage when developing new drugs but even more importantly I think it is only a matter of time before they start discussing with other pharmaceuticals to license this technology.

As said before the future cash flow from the UCB deal can justify a price that is much higher than the close on Friday but IMMU has more in store than that 

[la-onda]

Immunomedics constructs anti-lymphoma antibodies
Tuesday , June 06, 2006 16:24 ET

Jun 06, 2006 (Datamonitor via COMTEX) -- Immunomedics and its wholly owned subsidiary IBC Pharmaceuticals have constructed two new bispecific antibodies that bind to both CD20 and CD22 antigens on B lymphocytes.

Designated as TF3 and TF5, the new bispecific constructs were created using the Dock and Lock (DNL) method recently published in the Proceedings of the National Academy of Sciences. Both constructs are fully humanized, comprised of Immunomedics' humanized anti-CD20 (hA20) antibody and humanized anti-CD22 antibody, epratuzumab.

TF3 is made up of two anti-CD20 antibody fragments linked to one anti-CD22 antibody fragment, whereas TF5 was constructed by fusing two anti-CD22 antibody fragments to one anti-CD20 fragment.

TF3 and TF5 were shown to be stable in both human and mouse sera. Both bispecific antibodies inhibited the growth of human lymphoma cell lines in vitro. Under the same experimental conditions, TF3 showed a 1,000-fold higher potency as compared to the parent antibody, hA20, which also reflects a higher cytotoxicity over rituximab, since hA20 has been shown to be similar in activity to rituximab.

The anti-proliferative activity of TF3 and TF5 is attributed to the ability of the two bispecific antibodies to cross-link CD20 and CD22. These encouraging studies are now being expanded to compare these bispecific antibodies to epratuzumab, hA20, and rituximab in animal models of human lymphoma, with the intention of bringing the best construct into clinical testing.

chart update:

[Michael]

Despite all the good news from IMMU the stock is still not performing as we expected.

Yesterday was particular ugly. The stock went down with the market but never recovered together with the rest of the market. Technically we broke the ascending trend line which was key to the timing of the purchase of this stock.

Having in mind the general volatility in the market yesterday and the strong fundamentals we will hold IMMU. The support at 2.6 will hopefully hold and the stock will do a delayed reversal today.

We do however need to put a stop on this pick! We will therefore sell IMMU if the stock breach the support at 2.6 and is set to close below 2.55.

Come on IMMU - It is time to show some strength 

[la-onda]

stoped out today 

[jorgegr]

Was it sold or still in the portfolio, if so, can we have an update (last
TA dated June 9th) ?

thx

jorgegr

[Michael]

Hi Jorge,

Really not much to tell about IMMU 

The stock is still tradig above our stop at 2.55 even though it has been a close call a few times. You can always see which stocks we are holding on 3SOV's "homepage": http://www.3stocksonfire.org/3LongTermOF.php

Technically the stock has found a new base just above our stop and 2.6 is now a resistance zone. The volume is however dying out.

The first scheduled event which can create renewed interest around the stock is the release of Q4 earnings which should show a net profit of over USD 30 million. That is not bad for a stock with a market cap of USD148 million.

We need patience with IMMU 

[Amarens]

We do however need to put a stop on this pick! We will therefore sell IMMU if the stock breach the support at 2.6 and is set to close below 2.55.

Michael,
Could be just wording again. Set to close gives you a choice and is not a stop. Still in the same sentence you also talk about a stop. If it is a stop 3SOF was stopped out today, but I also believe IMMU was below 2,55 on June 9th and you were not stopped out  .

Not clear to me what is the situation now.

Amarens

[Michael]

Hi Amarens,

I agree that the "set to close below 2.55" is not the most transparent stop. It does however mean exactly that. If we feel the selling pressure in the last hour of trading is so strong that the stock will most likely close below 2.55 we will sell the stock.

If you go back and look at the trading the days IMMU has traded below 2.55 you will see that the buying came in as soon as the stock went through 2.55 (including today).

It seem like somebody likes to pick up cheap shares! A good indicator for this is CMF (Chaikin Monay Flow) which shows a very clear divergence.

You are right that with a normal stop we would have sold IMMU by now but I think that would have been a mistake so we will stay with our trading plan.

For those of you who prefer a clear stop I would set it at around 2.5.