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A second big pharma collaboration for efti

Immutep 27 September 2018 ADR Update
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Immutep

A second big pharma collaboration for efti

Merck/Pfizer collaboration

Pharma & biotech

27 September 2018

ADR research

Price

US$3.56

Market cap

US$108m

ADR/Ord conversion ratio 100/1

Gross cash ($m) at 30 June 2018

17.8

ADRs in issue

30.3m

ADR code

IMMP

ADR exchange

NASDAQ

Underlying exchange

ASX

Depository

BNY

ADR share price performance

52-week high/low

$3.62

$1.32

Business description

Immutep is an ASX-listed biotech company focused on cancer immunotherapy. Its pipeline is based on four products using an LAG-3 immune control system: eftilagimod alpha for cancer chemo-immunotherapy, partnered products IMP731 (GSK) and IMP701 (Novartis), and IMP761 (preclinical).

Next events

TACTI-mel data update including additional cohort

November

Initiate TACTI-002 Phase II

Q418

Fully recruit AIPAC breast cancer Phase II

Q418/Q119

Analysts

Dr Dennis Hulme

+61 (0)2 8249 8345

Maxim Jacobs

+1 646 653 7027

Immutep is a research client of Edison Investment Research Limited

Immutep has entered into a clinical trial collaboration and supply agreement with Merck/Pfizer to investigate the combination of its APC activator eftilagimod alpha (efti) with avelumab in patients with advanced solid tumors. Avelumab is the big pharma pair’s investigational anti-PD-L1 immune checkpoint inhibitor (ICI). We view the additional validation from big pharma is as a very positive development for Immutep, which could bring the added bonus of early identification of additional target indications. We maintain our valuation at $387m or $12.80/ADR.

Year end

Revenue (US$m)

PTP
(US$m)

EPADR
($)

DPADR
($)

P/E
(x)

Gross yield
(%)

06/17

3.1

(6.4)

(0.28)

0.0

N/A

N/A

06/18

5.2

(8.3)

(0.40)

0.0

N/A

N/A

06/19e

8.3

(5.2)

(0.17)

0.0

N/A

N/A

06/20e

2.1

(11.3)

(0.37)

0.0

N/A

N/A

Note: Converted at A$1/US$0.76 for the table above and throughout the note.

Additional validation from big pharma

Immutep already has an ongoing clinical trial collaboration with the US-based Merck and Company (known as MSD outside the US), which is totally separate from Merck KGaA, including the TACTI-mel and TACTI-002 studies. It now has the additional validation of having a second big pharma team review the efti data and conclude that there is a potentially meaningful benefit from efti/ICI combination therapy. The encouraging results from the first three TACTI-mel cohorts included a 33% response rate from the start of efti/Keytruda combination therapy and 61% response rate from the start of the Keytruda monotherapy screening period.

Avelumab combination to be added to INSIGHT trial

The study of avelumab plus subcutaneous (SC) efti in patients with a range of advanced solid tumors will be included as an arm of the INSIGHT study (NCT03252938), which is underway at a single site in Germany. The combination would fit neatly into INSIGHT, which already includes arms investigating intra-tumoral and intraperitoneal administration of efti, as well as a third arm investigating SC efti in combination with chemo in solid tumors. This strategy should allow the efti/avelumab combination study to start before the end of CY18.

Competitive tension a potential added bonus

Having a deep level of engagement with two big pharma companies (or three counting Pfizer) could bring the added bonus of increased competitive tension when the time comes to negotiate a partnership deal for efti.

Valuation: Unchanged at $387m, $12.80 per ADR

Our valuation is unchanged at $387m, $12.80/ADR (undiluted), or $9.08/ADR after diluting for options and convertible notes. Our valuation includes a modest allowance for expansion of efti indications beyond the ongoing studies in breast, head and neck, melanoma and lung cancers. Gross cash at 30 June was $17.8m. We assume Immutep will receive a risk-adjusted $6m IMP731 milestone payment from GSK in FY19, which would extend its cash reach to the end of FY20.

Exhibit 1: Financial summary

 

US$000s

2016

2017

2018

2019e

2020e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,481

3,129

5,209

8,283

2,111

Cost of Sales

(5,365)

(5,720)

(7,592)

(8,352)

(7,935)

Gross Profit

(5,307)

(3,304)

(5,504)

(5,669)

(5,839)

EBITDA

 

 

(9,191)

(5,895)

(8,691)

(5,739)

(11,662)

Operating Profit (before GW and except.)

 

(9,329)

(5,905)

(8,699)

(5,741)

(11,666)

Intangible Amortization

(1,515)

(1,283)

(1,367)

(1,254)

(1,141)

Exceptionals

(36,076)

0

0

0

0

Operating Profit

(46,920)

(7,188)

(10,065)

(6,995)

(12,807)

Other

(1,304)

(571)

245

0

0

Net Interest

194

79

135

535

379

Profit Before Tax (norm)

 

 

(10,439)

(6,397)

(8,319)

(5,206)

(11,287)

Profit Before Tax (IFRS)

 

 

(48,029)

(7,680)

(9,686)

(6,460)

(12,428)

Tax

898

560

(1)

0

0

Profit After Tax (norm)

(9,541)

(5,837)

(8,320)

(5,206)

(11,287)

Profit After Tax (IFRS)

(47,132)

(7,119)

(9,687)

(6,460)

(12,428)

0.0

0.0

0.0

0.0

0.0

Average Number of Shares Outstanding (m)

2,016.6

2,072.5

2,079.7

3,026.1

3,026.1

Average Number of ADRs Outstanding (m)

20.2

20.7

20.8

30.3

30.3

EPS - normalized (c)

 

 

(0.5)

(0.3)

(0.4)

(0.2)

(0.4)

EPS - IFRS (c)

 

 

(2.3)

(0.3)

(0.5)

(0.2)

(0.4)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

Earnings per ADR - normalized ($)

(47.3)

(28.2)

(40.0)

(17.2)

(37.3)

Earnings per ADR - IFRS (c)

(233.7)

(34.4)

(46.6)

(21.3)

(41.1)

Dividend per ADR (c)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

15,871

14,474

13,950

12,704

11,569

Intangible Assets

15,847

14,455

13,930

12,676

11,536

Tangible Assets

24

18

20

27

34

Other

0

0

0

0

0

Current Assets

 

 

16,470

12,099

21,769

16,556

5,262

Stocks

0

0

0

0

0

Debtors

128

1,667

2,608

2,608

2,608

Cash

15,868

9,300

17,841

12,628

1,335

Other

473

1,131

1,319

1,319

1,319

Current Liabilities

 

 

(1,119)

(2,001)

(2,929)

(2,929)

(2,929)

Creditors

(1,098)

(1,967)

(2,785)

(2,785)

(2,785)

Short term borrowings

(0)

(0)

0

0

0

Short term leases

0

0

0

0

0

Other

(21)

(33)

(144)

(144)

(144)

Long Term Liabilities

 

 

(4,381)

(4,408)

(7,314)

(7,314)

(7,314)

Long term borrowings incl. conv. note

(3,821)

(4,392)

(5,051)

(5,051)

(5,051)

Long term leases

0

0

0

0

0

Other long term liabilities

(560)

(16)

(2,263)

(2,263)

(2,263)

Net Assets

 

 

26,841

20,164

25,477

19,017

6,589

CASH FLOW

Operating Cash Flow

 

 

(8,811)

(6,544)

(6,045)

(5,739)

(11,662)

Net Interest

216

79

135

535

379

Tax

0

0

0

0

0

Capex

(21)

(5)

(9)

(9)

(10)

Acquisitions/disposals

99

0

0

0

0

Financing

20,694

(6)

14,363

0

0

Dividends

0

0

0

0

0

Other

0

0

(375)

0

0

Net Cash Flow

12,176

(6,477)

8,068

(5,213)

(11,294)

Opening net debt/(cash)

 

 

(3,991)

(12,047)

(4,908)

(12,791)

(7,578)

HP finance leases initiated

0

0

0

0

0

Other

(4,120)

(663)

(185)

0

0

Closing net debt/(cash)

 

 

(12,047)

(4,908)

(12,791)

(7,578)

3,716

Source: Immutep accounts, Edison Investment Research. Note: Solely for the convenience of the reader the financial summary table has been converted to US$ at a rate of US$0.76 to A$1. Immutep reports statutory accounts in Australian dollars. These translations should not be considered representations that any such amounts have been or could be converted into US dollars at the assumed conversion rate.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Immutep and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Immutep and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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