Imugene secures BUY rating and target price of A$0.20 from Roth Capital Partners

Imugene Ltd (ASX:IMU) (OTCMKTS:IUGNF) has welcomed a new research report from Roth Capital Partners which specified a target price of A$0.20 and a BUY rating. The report outlined the company’s growing pipeline and solid HER-Vaxx and PD1-Vaxx clinical progress during the first half of FY21, despite the COVID-19 pandemic. This coincides with the company being added to the ASX ‘All Ordinaries Index’ effective on March 22, 2021. The index represents the 500 largest companies in the Australian equities market by market capitalisation. Shares today have traded up to A$0.12 and the company's market cap is approximately A$456.9 million. Roth Capital analyst Jonathan Aschoff said: "IMU reported 1H FY21 results, ending calendar 2020 with A$32.8 million and no debt, enough to fund operations through FY2022 as per our projections, but there are numerous opportunities for the company to add to that cash via exercise of already issued options.  “We note the continued international clinical progress of HER-Vaxx and PD1-Vaxx despite COVID-19 related enrolment headwinds, and look forward to final HER-Vaxx results and the start of the VAXinia and CHECKvacc clinical programs in the US."  HER-Vaxx interim results Aschoff noted recent clinical progress such as the early January completion of patient recruitment of the Phase 2 portion (n=36) of the Phase1b/2 trial of HER-Vaxx in HER2/neu overexpressing advanced/metastatic gastric/GEJ cancer.  In this trial, HER-Vaxx plus chemotherapy is being compared to chemotherapy alone, with a primary endpoint of OS and key secondary endpoint of PFS.  He said: “We remind investors of this trial's interim results that were positive enough to convince the Independent Data Monitoring Committee (IDMC) that Phase 2 enrollment could be reduced to 36 from 68, thereby demonstrating clear proof of concept. “We note the absence of any additional adverse events in the HER-Vaxx/chemotherapy arm versus chemotherapy alone.  “More specifically, 42.9% of HER-Vaxx patients had at least one Grade 3 TEAE and control patients having at least one TEAE were 30.8% Grade 3, 15.4% Grade 4, and 7.7% Grade 5.  “The interim results compare favorably to the ToGA trial results with Herceptin/chemotherapy versus chemotherapy in HER2-positive advanced gastric cancer. We therefore remain highly optimistic for similarly positive final trial results.“ PD1-Vaxx clinical progress The report also discussed the company’s clinical progress with PD1-Vaxx, which is currently treating the second dose cohort of its Phase 1 international NSCLC trial.  Three different dose cohorts (three to six patients per cohort; 10ug, 50ug, and 100ug doses) are to be tested, and primary endpoints include safety and determination of optimal biological dose as a monotherapy, with key secondary endpoints of efficacy, tolerability, and immune response.  PD1-Vaxx doses are given on days 1, 15, 29, 64, and every 63 days thereafter until disease progression and tumors are evaluated as per RECIST criteria on day 43 and every 42 days thereafter until disease progression.  The trial will be conducted at six sites in Australia and the U.S.  In addition, the company's VAXinia and CHECKvacc programs are advancing toward the clinic and will potentially enrol a broad range of solid tumor patients and be given intravenously or intratumorally (VAXinia), or exclusively given intratumorally to metastatic TNBC patients (CHECKvacc).  Valuation based on projected revenue The report stated: “Our 12-month price target of AU$0.20 is based on a DCF analysis using a 30% discount rate that is applied to all cash flows and the terminal value, which is based on a 5x multiple of our projected FY 2031 operating income of almost AU$1.6 billion.  “We arrive at this valuation by projecting future revenue from CHECKvacc in TNBC, HER-Vaxx in advanced HER2+ gastric cancer, and PD1-Vaxx in NSCLC, products that we project will generate about AU$1.7 billion in global royalty revenue to Imugene in FY2031.  “Commercial success outside of these financially modelled programs would serve as potential upside to our valuation.” Potential risk factors Key risk factors that could impede shares of Imugene from achieving the price target include: Clinical risk - Imugene’s clinical staged products could fail to deliver statistically significant results in late-stage clinical trials, substantially reducing the value of Imugene’s product candidates and the target price; Regulatory risk - Even if successful in the clinic, Imugene’s products could fail to be approved by domestic and/or foreign regulatory bodies, which would reduce Imugene’s value and the target price; Financing risk - Imugene will need additional capital to fund its operations, and such financing may not occur or it could be substantially dilutive to existing investors;  Competitive risk - For any future approved Imugene products, they may not be well adopted in a competitive marketplace, which would adversely affect Imugene’s value and the target price; and High stock price volatility - This issue is common among small-cap biotechnology companies with relatively low trading volumes.