Immune Pharmaceuticals Inc (NASDAQ:IMNP): Here's Our Strategy

Immune Pharmaceuticals Inc (NASDAQ:IMNP) is running up on its latest press release, having announced the outcome of its request for guidance from the FDA ahead of a pivotal initiation. The news is good for the company, and markets are rewarding what essentially amounts to a step closer to home on the development pathway for Immune's Acute Myeloid Leukemia (AML) candidate.This said, we think that the reaction is a bit enthusiastic.This isn’t necessarily a bad thing, as it shows there is plenty of speculative volume waiting to pull the trigger on any positive data. However, we think that between now and the phase III initiation that this release alludes to, there's going to be an opportunity to pick up cheaper shares.This gives us a nice strategy moving forward – load up as markets correct on the over-zealous buying seen today, and sit on a holding that looks set to appreciate over the coming quarters, as the pivotal in questions nears.Before we look at time frames, let's quickly address the drug and the company.Immune is a junior biotech with a current market capitalization (this is with Thursday's circa 40% gains) of a little over $21 million. The company's phase III focus is the above mentioned drug, Ceplene, which it is investigating in combination with an IL-2 regimen. Basically, the company is trying to show that a Ceplene/IL-2 combo regiment is superior in clinical benefit to just an IL-2 regimen on its own.Data from trials to date suggested that it might be, which bodes well for the company going forward (and is the driver behind the market's enthusiasm for the latest announcement) but the translation of clinical benefit from a relatively small-cope phase II into a wider phase III is never easy, and with this one, it's going to depend on how the company sets up its endpoints. This latter dependence is, in turn, going to depend on what the FDA does and doesn’t accept as part of the trial protocol.So, what do we know about the latest announcement that can give us a clue as to what to expect going forward?Well, the company put forward its proposed trial framework earlier this year, and the latest communication is essentially saying that the FDA isn’t comfortable with the proposal in its entirety, and that Immune is going to have to revise certain elements of its strategy to bring its pivotal in line with the agency's expectations of what it will and won't approve. This isn’t terrible – it's rare a company can get a protocol past the FDA on a first attempt – but it is going to delay trial start, and as always, this is going to cost money. Again, as always, money is something that companies at this end of the biotech space don't have enough of, and so dilution is pretty much a dead cert across the coming couple of quarters.Cash at last count was just shy of $500K (June 30), and add to that a $2 million common stock investment, we're probably looking at Immune having anywhere between $1.5-2 million on hand right now. Nowhere near enough to cover pivotal costs in this sort of indication.That said, dilution is dilution. It's pretty much a given in these sorts of situations, and it all comes down to whether the dilution can be offset by way of value-add from use of proceeds. In this instance, we think it can, so long as Immune can get something together for the FDA that the agency accepts as soon as possible. As such, this is our next major catalyst. We don't think the company will hold out too long on initiation once the protocol is accepted, so we're targeting end of the first quarter 2017, or perhaps into early second, as a protocol acceptance target. Beyond that, initiation mid year.Bottom line here is that there's plenty of upside potential on Immune long term, but the current gains on the latest announcement are a bit of an overcook. This presents an opportunity to get in on a pullback ahead of what is going to be a catalyst full first half of next year. We will be updating our subscribers as soon as we know more. For the latest updates on IMNP, sign up below!Disclosure: We have no position in IMNP and have not been compensated for this article.