Immunomedics Has a Cheap, Deep, and Recently Capitalized Pipeline

With a broad 12-asset pipeline, Immunomedics (IMMU), at first glance, lacks focus. But a closer look reveals a diverse development program supported by solid clinical data and an unassuming valuation; the small company warrants further examination based on price alone. Immunomedics’ recent financing creates an entry point into a company whose $175M market capitalization fails to capture the opportunities embedded within its broad pipeline. IMMU has been a compelling story for some time, but the need for capital tempered our enthusiasm. With the financing out of the way, investors can now focus on the fundamentals of the long-term story, as the drug developer has the reserves needed to execute on development in 2013 and move into next year. It will be a pivotal time for its lead candidates – indicative of clinical and commercial success – and should pique the interest of the greater biotech community as critical data read-outs approach.

Overview & Reviewing the Capital Raise

Immunomedics generates revenues from sales of two diagnostic products, LeukoScan and ImmuSTRIP. But revenues from these products, which generated just $734K in Q2 2013, aren’t what make Immunomedics a compelling company. Rather, note the company’s pipeline and comparatively low valuation. Immunomedics has a market capitalization of under $175M and a pipeline of 12 clinical programs. The company is conducting trials for a number of large and lucrative indications, including pancreatic cancer, rheumatoid arthritis, lymphomas, and most importantly, lupus. The company is focused on delivering shareholder value by prudently out-licensing its late-stage assets while moving forward with its early-stage programs. We identify three development programs to which investors should pay particular attention, as they have the potential to be significant value drivers for shares of Immunomedics.

On February 22, Immunomedics announced that it had raised $14 million by selling 6.1M shares of common stock at $2.30, a discount of almost 15% to its closing price of $2.70 on February 21. Shares plunged once the markets opened on February 22nd, falling as low as $2.11. However, they steadily marched higher throughout the day and closed at $2.46, near the high of the day on volume that was over 8x higher than the company’s average daily trading volume. This indicates that there was significant buying interest occurring, and that this capital raise was seen as an opportunity to initiate positions in Immunomedics. It should also be noted that there is solid institutional support for Immunomedics. CEO Cynthia Sullivan and her husband David Goldenberg (Immunomedics’ founder and Chief Medical Officer) together own over 3.4 million shares of the company. Their stake, when combined with the stakes of the company’s 4 largest institutional investors, mean that Immunomedics’ 5 largest investors control 21,856,127 shares, or 26.72% of the company. With $14 million in new capital, Immunomedics now has over $35 million in cash & investments on its balance sheet, and with a quarterly burn rate of less than $6 million, has the capital reserves it needs to execute on its pipeline and business development for the foreseeable future.


Immunomedics’ lead candidate is Epratuzumab, a monoclonal antibody being investigated for the treatment of lupus lymphoma. The drug candidate is currently in Phase III trials (EMBODY-1 and -2) specifically for systemic lupus erythematosus, also known as SLE, for which it has received fast track status from the FDA. Phase IIb trials of Epratuzumab in SLE yielded encouraging results, with patients that were dosed with 600 mg of Epratuzumab showing a statistically significant response.

The trial also showed that Epratuzumab was well tolerated over the course of a 4-year extension study, with “clinically meaningful” improvements in patients’ quality of life. Phase III studies are underway, and Immunomedics expects to report this data within the first half of 2014. The company has licensed Epratuzumab in SLE to Belgium-based UCB, Inc. The deal with UCB was struck in 2006 for a $38 million upfront payment, escalating double-digit royalties, and up to $280 million in milestone payments, defined by Immunomedics and UCB as milestones relating to the potential approval and commercialization of Epratuzumab.

While Immunomedics has, by licensing Epratuzumab to UCB, given up the majority of its revenue potential, it also removed the majority of the costs associated. Under the terms of this agreement, UCB is responsible for all development and commercialization costs related to Epratuzumab in non-oncology indications. Immunomedics and UCB amended their agreement in December 2011, in which UCB gained the right to sublicense Epratuzumab to a third party, and Immunomedics issued a 5-year warrant to purchase 1 million shares of its stock for $8 (its stock closed at $2.73 on February 21), in exchange for the return of UCB’s right to buy into Epratuzumab’s oncology indications. Given that the lupus market is estimated at multi-billions of dollars, there’s room for multiple therapies beyond GlaxoSmithKline’s (GSK) Benlysta, and Immunomedics’ royalties have the potential to be in the hundreds of millions. The global lupus market is estimated to grow to $3.9 billion by 2021, representing growth of over 464% from $691 million in 2011. And although Benlysta is expected to hold a plurality of the market (2021 share is estimated to reach 43.59%), there is ample room for other lupus drugs to take share. Industry observers also note that there is potential for different lupus drugs to carve out specific niches within the lupus segment, thereby mitigating some of the risk stemming from competition.

Immunomedics is also testing Epratuzumab for the treatment of lymphoma, and the drug is currently in Phase II trials for this indication. Data from an earlier study presented at the 2012 ASH meeting in Atlanta showed that Epratuzumab had a complete response rate of 50% in the 32 patients in the study (P=0.000000012). Sullivan said, “We are very pleased with the encouraging complete response rate reported by SWOG [the Southwest Oncology Group of the National Cancer Institute that conducted this study]. We continue to add value to epratuzumab by supporting its use in oncology indications by outside, independent investigators. The anti-CD22 antibody will be evaluated in a large multicenter European trial by the IntreALL Inter-European study group in combination with chemotherapy in pediatric patients with relapsed ALL, using event-free survival as the primary endpoint.”


Y-90-Clivatuzumab is currently in clinical testing for the treatment of late-stage pancreatic cancer, which has earned it fast track status from the FDA, as well as orphan drug status both here in the United States and in Europe. Immunomedics maintains full global rights for Clivatuzumab, which is labeled with yittrium-90 in order to deliver radiation directly to a patient’s tumor. Pancreatic cancer, with an estimated 37,390 deaths in 2012, is the 4th deadliest cancer in the United States, with a median survival time of just 5.65 months. Immunomedics released the results of its Phase I/II study of Y-90 Clivatuzumab at the 2012 ASCO meeting, and the results were encouraging. Patients saw actual shrinkage in the size of their tumors, and median survival improved to 11.8 months in Part 1, and 8.7 months in part 2 (the blended median survival was 9.3 months). These findings suggest that there is a dose-dependent efficacy for Clivatuzumab, and the company states that, “Continued repeat dosing at low levels appears to be a key feature in this potential first-in-class treatment regimen. 90Y doses of 12 mCi/m2 for Cycle 1 and 6.5 mCi/m2for Cycle 2 appear to be safe dose levels with transient and manageable bone marrow suppression, and no increased infections or bleeding.”

No discussion of a pancreatic cancer drug can be complete without mentioning the potential impact of Abraxane, Celgene’s (CELG) cancer drug that is seen by many as the emerging flagship drug to fight pancreatic cancer. Immunomedics’ management team spoke at length about this issue on its Q2 2013 earnings call. David Goldenberg, the company’s Chief Medical Officer, noted that Immunomedics has been able to enroll patients into its Clivatuzumab trials faster than expected because it has proven less difficult to find pancreatic cancer patients at the advanced stages that the company is looking for. The benefits that Abraxane has shown in pancreatic cancer are benefitting Immunomedics as well, for it is able to find patients for 3rd and 4th lines of therapy. Clivatuzumab is aimed at treating pancreatic cancer patients further down the line than other drugs in development, and David Goldenberg has articulated that the company’s challenge is finding enough patients that live long enough to reach (as well as tolerate) this line of therapy. Goldenberg stated:

“Our current trial has been very informative. First, if you are indeed following such therapies as ABRAXANE and FOLFIRINOX, more patients are now available for third-line therapy. Second, we have noted that the majority tolerate our therapy quite well. And in fact, we are seeing some of these patients being capable of getting repeated clivatuzumab therapies, even including four therapy cycles….

…We felt we would have to go searching for patients that would be third- or fourth-line coming into this trial. And we are so overwhelmed that we have to disappoint the investigators very soon and stop the trial because it’s [reaching] enrollment. So thanks to the improvements being made in the management of pancreatic cancer [via the benefits of Abraxane], we’re seeing more patients living more and coming into this advanced state after multiple therapies.”

Immunomedics is set to complete enrollment of a Phase Ib trial for Clivatuzumab this month; the trial will evaluate Clivatuzumab in pancreatic cancer patients that have taken at least 2 prior therapies. Immunomedics expects that if this trial is successful, Phase III trials will begin in the 2nd half of 2013.


Immunomedics’ third late-stage program is Veltuzumab, an anti-CD20 antibody that’s being investigated for use in the treatment of immune thrombocytopenic purpura (ITP), chronic lymphocytic leukemia (CLL), and rheumatoid arthritis. Phase I/II clinical trial results of Veltuzumab in ITP were presented at the 2012 ASH meeting. Immunomedics tested 4 different doses (ranging from 160 mg to 1280 mg) in 44 patients. The overall objective response rate was 50%, and 29% of patients had a complete response (defined as platelet levels above 100,000/μL). However, complete response rates changed depending on how long patients had ITP. For patients who were diagnosed with ITP less than 12 months before the study, the complete response rate was 25% (the objective response rate stood at 58%). But patients who had ITP anywhere between 5-37 years had a complete response rate of 30% (and an objective response rate of 47%). There were clinical responses recorded at all dosing levels. In a Phase I study of Veltuzumab in CLL, Immunomedics showed that patients who took Veltuzumab saw acceptable clinical responses.

3 patients (or 17% of the total number of participants) had partial responses as their best responses, and Immunomedics is currently in the process of conducting a new Phase I/II trial of Veltuzumab in CLL, with data likely to be reported in the second half of this year. While Immunomedics is still studying the use of Veltuzumab for the treatment of rheumatoid arthritis, there is a need to redesign its trial protocols for this particular indication, and I expect the company to provide an update in early 2013 on its progress. Veltuzumab has been out-licensed to Takeda-Nycomed, which has rights to all non-cancer indications. Under the terms of this agreement, signed in July 2008, Takeda-Nycomed made an initial payment of $40 million and is responsible for all development and commercialization costs. Immunomedics is eligible to receive escalating double-digit royalties and $580 million in milestone payments from Takeda-Nycomed upon the meeting of certain regulatory and commercialization milestones.


Immunomedics is an under-the-radar biotechnology company that simply should not be. With 12 different clinical programs, including several compelling late-stage product candidates, and key data readouts in 2014, we’re coming into an exciting time. The company announced alongside its Q2 2013 earnings that it has initiated a Phase I dose-escalation trial of SN-38, one of its early-stage oncology programs, and that a Phase I trial of milatuzumab, a program targeting chronic lymphocytic leukemia, is planned for the second half of fiscal 2013 (which ends in June). We’ll be looking for possible licensing deals, which the company has repeatedly hinted at this year, and shares are up for a move higher into 2014 when pivotal data for Epratuzumab is set to be released.