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Immunomedics Inc (NASDAQ:IMMU) Is Running Up, More To Come?

Immunomedics Inc (NASDAQ:IMMU) Is Running Up, More To Come?
Written by
Chris Sandburg
Published on
February 14, 2017
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Immunomedics, Inc. (NASDAQ:IMMU) has been on our watch list for a while. The company is a development stage biotechnology entity working to develop a range of cancer treatments, and our long-term bull thesis was rooted in the fact that it was dressing itself up (or at least, dressing its lead asset up) for a partnership deal.At the end of last week, the company announced exactly that, and ran up more than 20% on the back of the news. This run is good news for shareholders and the company alike, but we don't think it is going to stop there. The drug around which the arrangement is centered has real potential in its target oncology indication, and with the terms of the deal favorable towards Immunomedics, we think the company can run quite a lot farther on this deal alone.Here is our take.For those not familiar with Immunomedics' pipeline, as mentioned, it is rooted in oncology, and its lead asset (the one that forms but the focus of this discussion and the root of the arrangement in question) is called IMMU-132. It is set up to treat a range of solid tumor cancers, but right now its lead cancer type is triple negative breast cancer. This type of cancer is a dramatically underserved subsector of oncology, and any company that can bring a drug to commercialization (and demonstrate a market improvement over the current standard of care, which shouldn't be too difficult given the relative lacking efficacy of said SOC) has the potential to targets a blockbuster (read: billion-dollar) market.The deal just made is with a company called Seattle Genetics, Inc. (NASDAQ:SGEN), and will see the latter take over the development of the drug going forward. Seattle is paying $250 million upfront for global worldwide commercialization rights to the drug, and committing to a further $1.7 billion in potential milestone payments if and when the drug reaches commercialization status. Seattle will also take an equity stake in Immunomedics, amounting to 3% now, and with an option for a further 1.5% (at current, and fixed pricing) in the future.The drug in question is basically a reformulation of a currently available chemotherapy agent, but one that has been altered to improve selectivity for cancer cells. This improvement in selectivity allows for a far improved safety profile for the drug, even with the company employing a so-called medium strength agent as opposed to some of the super strength agents currently in widespread use.Data reported last year suggested that the drug may not be as effective as first thought, and Immunomedics took a hit as a result. However, at the latest update, reported during January this year, the company was able to negate these concerns with some news from the phase 2 study. The most recent figures suggest that patients taking the drug have a median overall survival of around 19 months, compared to just 12 months for standard of care treatment. Further, 81% of patients experienced tumor shrinkage, and the proportion of these reported to have experienced clinical benefit on the back of the shrinkage hit 44%. For reference, these are unheard of numbers in this iteration of breast cancer.So, what is next?Well, with some concerns surrounding dilution having weighed on price recently, and these concerns all but negated based on the $250 million capital injection set to hit Immunomedics' balance sheet at feel close, we think there is plenty of potential for upside momentum near term in this stock. We are looking for catalysts from the development pathway related to IMMU-132 as the main upside drivers across the next couple of quarters, and an expanded focus rooted in the earlier pipeline assets longer-term.We will be updating our subscribers as soon as we know more. For the latest updates on IMMU, sign up below!Disclosure: We have no position in IMMU and have not been compensated for this article.

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