Growth Company Investor – March 2016

8th March 2016

It hasn’t been an easy market recently for junior biotech shares. However one stock that looks worth a look is ImmuPharma (AIM: IMM). With its lead drug Lupuzor just starting phase III trials and having ‘blockbuster’ potential according to Chairman Tim McCarthy, the market cap of £33 million leaves scope for significant upside if all goes well.

Lupuzor is a treatment for an autoimmune disease called Lupus. It is life threatening and debilitating, which means treatment needs to be maintained throughout the patient’s life. There are around 1.5 million sufferers in developed countries who are poorly served by existing therapies. The only dedicated drug to have been launched in recent decades is GSK’s Benlysta which has several limitations, not least the $35,000 annual cost per patient .

Phase II trials for Lupuzor were funded and carried out by Cephalon who had licensed the product from ImmuPharma. The trial data were encouraging and ImmuPharma reacquired the rights after Cephalon was subsequently taken over by Teva. A recent fundraise at 26p means that the pivotal phase III study can now be carried out, with results expected at the end of next year.

This key trial is relatively short and inexpensive because the US regulator, the FDA, has granted it ‘fast track’ status and pre-agreed the protocols and trial design. Crucially the FDA has accepted a modest-sized 200 patient study, which reflects the urgency of an unmet clinical need. Patients will receive monthly doses and their health will be assessed over a year. The first US patients were dosed last month and the European centres are opening now. So all 200 patient studies should have been completed by late summer 2017.

Once the data is submitted, the FDA should decide whether to grant approval in six months given the fast track status accorded to the trial. Licensing, a corporate deal, or even distribution deals with ImmuPharma retaining manufacturing rights, are possibilities for commercialising the drug. Given the high cost of Benlysta, Lupuzor could undercut it on price and still be a very valuable drug by winning a modest share of the total patient population.

There aren’t any market forecasts currently with coverage yet to be initiated by new broker Panmure. Like all junior biotechs, ImmuPharma is speculative. Drugs do fail in phase III trials even where earlier studies have looked good. Nevertheless, a £33 million market cap and the fact that we don’t have too long to wait for the key result, means there’s plenty of upside potential to reward risk-takers.

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