A Look Back at Immunomedics' Volatile but Rewarding 2013

This was a solid year for Immunomedics (NASDAQ: IMMU  ) , a company focused on the development of monoclonal antibodies for the targeted treatment of cancer, autoimmune disorders, and other diseases. Shares have climbed more than 50% since the beginning of 2013, although it doesn't have any marketed products.

Let's take a look back at Immunomedics' triumphs and tribulations over the past year, and see where the stock could be headed in 2014.

Reviewing Immunomedics' pipeline
Immunomedics specializes in humanized monoclonal antibodies -- lab-created antibodies designed to target certain diseases.

The company's mid- to late-stage pipeline includes three monoclonal antibodies -- epratuzumab, 90Y clivatuzumab tetraxetan, and veltuzumab (intravenous and subcutaneous versions), as seen in the following chart.

Drug

Indication(s)

Clinical Status

Special Designations

Epratuzumab

lupus

Phase 3

Orphan, Fast Track

 

lymphoma, leukemia

Phase 2

None

90Y Clivatuzumab Tetraxetan

Front-line pancreatic cancer

Phase 2

Orphan, Fast Track

 

Relapsed pancreatic cancer

Phase 2

Orphan, Fast Track

Veltuzumab

Non-Hodgkin's lymphoma

Phase 2

None

Veltuzumab (subcutaneous version)

Idiopathic thrombocytopenic purpura

Phase 2

None

Source: Company website.

Immunomedics' epratuzumab and 90Y clivatuzumab tetraxetan are on the fast track to being approved as orphan drugs, which will grant them seven years of market exclusivity without the need for additional patents upon approval.

Epratuzumab has been licensed to UCB and is being integrated into another treatment from Algeta.

A trio of ADCs could unlock Immunomedics' future growth
The other thing that excites investors about Immunomedics is its ADC (antibody-drug conjugate) pipeline. ADCs, also known as "cancer smart bombs," are monoclonal antibodies loaded with toxins. They link to cancer cells to inject their toxic payloads, killing them from the inside. If ADCs catch on, they could eventually render traditional chemotherapy, which kills both healthy and cancerous cells, obsolete.

To date, there are only two approved ADCs on the market -- Roche's (NASDAQOTH: RHHBY  ) Kadcyla, which was developed by ImmunoGen (NASDAQ: IMGN  ) , and Seattle Genetics' (NASDAQ: SGEN  ) Adcetris. Immunomedics currently has three ADCs in its pipeline, which could eventually attract major pharmaceutical partners as they advance into late-stage trials.

ADC

Indication(s)

Status

Special Designations

Milatuzumab

multiple myeloma, chronic lymphocytic leukemia, non-Hodgkin's lymphoma

Phase 1/2

None

IMMU-130

colorectal cancer

Phase 2

None

IMMU-132

late-stage metastatic cancers (13 types)

Phase 2

Orphan

Source: Company website.

Fundamental comparison against industry peers
When we compare Immunomedics against ImmunoGen and Seattle Genetics, which both specialize in monoclonal antibodies and ADCs, we notice some interesting similarities.

 

Market Cap

Price to Sales

Price to Book

Qty. Revenue Growth (YOY)

Debt to Equity

Immunomedics

$366 million

39.94

11.11

422.90%

No debt

ImmunoGen

$1.28 billion

26.27

10.69

320.90%

No debt

Seattle Genetics

$5.04 billion

20.44

23.17

42.40%

No debt

Best Value

---

Seattle Genetics

ImmunoGen

ImmunoMedics

---

Source: Yahoo! Finance as of Dec. 10.

All three companies are growing their top lines rapidly, thanks to collaborative payments from larger pharmaceutical companies interested in expanding their presence in targeted treatments. All three companies also have clean balance sheets.

IMMU Chart

Source: YCharts.

Yet when we look at the price performance of these three stocks over 2013, we see that Immunomedics handily outperformed ImmunoGen but it failed to match Seattle Genetics' 78% year-to-date gain.

What caused Immunomedics to suddenly slip in October and lose its lead?

The triumphs of 2013
Immunomedics started rallying in May, after the company announced three new patent awards for its proprietary "Dock and Lock" technology, which helps its ADCs link to cancer cells and a combination treatment of radioimmunotherapy and ADCs.

Later that month, it provided a clinical update on all three ADC programs, noting that IMMU-130 and IMMU-132 had been successful at shrinking tumors, especially in metastatic colorectal cancer and triple-negative breast cancer.

In July, Immunomedics announced favorable phase 1b results for 90Y clivatuzumab tetraxetan for the treatment of pancreatic cancer. Patients with newly diagnosed, previously untreated, advanced pancreatic cancer given the drug reportedly showed a median overall survival of 11.8 months when administered with the chemotherapy drug gemcitabine (Eli Lilly's Gemzar).

The costly clash with Takeda
Those positive catalysts fueled Immunomedics rise to its 52-week high of $7.35 in early October. Unfortunately, the rally came to an abrupt end on Oct. 9, when the company announced that Takeda Pharmaceutical (NASDAQOTH: TKPPY  ) had terminated the agreement signed between Immunomedics and Takeda subsidiary Nycomed for the worldwide rights to veltuzumab for all noncancer indications.

Takeda inherited the partnership from Nycomed, which it acquired in 2011. The five-year-old deal was originally worth up to $620 million. But the relationship soured after Immunomedics filed arbitration proceedings against Nycomed for allegedly breaching the licensing deal and delaying work on the program.

In response, Takeda simply handed back the drug to Immunomedics to avoid more litigation. Unfortunately, investors interpreted Takeda's termination of the partnership as a negative sign for the future of veltuzumab, one of Immunomedics' three top drug candidates.

A recovery and a glimpse into the future
Immunomedics bounced back thanks to two big announcements, however. In late October, the company announced additional positive results for the use of 90Y clivatuzumab tetraxetan in conjunction with Gemzar for the treatment of metastatic pancreatic cancer.

Last week, Immunomedics continued climbing back after IMMU-132 was granted an orphan drug status by the FDA, drawing investors' attention back to its promising ADC pipeline.

Looking ahead into 2014, investors should look for further progress in Immunomedics' targeted drugs, most importantly Epratuzumab, which comprises the majority of its top line through license and collaborative revenues, and continuing progress in its ADC pipeline.

The Foolish takeaway
In closing, I would like to see more interest from larger pharmaceutical companies in Immunomedics' treatments, which would be a strong vote of confidence for its drug portfolio.

Until then, investors should expect a volatile ride ahead for Immunomedics, which will still be mostly moved by headlines. For investors looking for a more conservative way to invest in ADCs, Seattle Genetics and Roche could be safer bets for the year ahead.

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