Adding a Clinical-Stage Cancer Vaccine to the Portfolio
Immunicum announces the acquisition of DCprime, a clinical-stage cell therapy company in oncology, for about SEK 600m in newly issued shares.
DCprime’s product candidate DCP-001 is a “relapse cancer vaccine” to prevent the return of cancer following an initial response from standard-of-care therapy.
DCprime bases its technology on transforming cells from a leukemic cell line into dendritic cells through a proprietary manufacturing process. These dendritic cells express tumor-associated antigens and are more immunogenic than the parental leukemic cells. They constitute the vaccine, which is injected into the patient during a time window when the cancer is in remission.
The deal broadens Immunicum’s pipeline in allogeneic dendritic cell therapies and is a first step towards the company’s vision of becoming a “dendritic cell powerhouse”. We were not previously familiar with the technology, which, like ilixadencel, is potentially first-in-class. Compared to ilixadencel, a primer before standard-of-care (SOC) treatment, DCP-001 is administered after SOC treatment to “vaccinate” against a relapse. Hence, the two modalities would not be competing.
Ongoing Phase II Trial will be Crucial Test
DCP-001 is in Phase II development in Acute Myeloid Lyeloma (AML) patients who have had complete responses to previous treatments but have Measurable Residual Disease (MRD), i.e., still have cancer cells in the body despite no symptoms or sign of disease. DCprime will present an interim analysis at the ASH conference in December. According to the abstract, by July, two out of four evaluable patients had become measurable disease-negative (MRD-), i.e., had no detectable cancer cells in the body, so far. These early results seem promising, albeit from a small sample without control.
DCprime expects top-line results from the Phase II trial at the end of 2021. Success in the AML trial will be crucial for the project, we believe. DCprime also plans to start clinical development in solid tumors (primarily ovarian cancer), which could open significant opportunities if successful.
High Dilution but People Factor Key to Deal
The acquisition is an all-share deal, where Immunicum will issue 73.9m shares to the shareholders of Dcprime. Following the transaction, Van Herk Investments, a successful Life Science investor based in the Netherlands, will become the largest shareholder of Immunicum with some 43 percent of the shares.
The transaction is a scene change for ownership structure. For Immunicum’s old shareholder base, the dilution is 44 percent. The upside is that the company will now, for the first time, have a strong majority shareholder.
The CEO and CMO of DCprime will join the management team. Van Herk has proposed two new board members, including Andrea Van Elsas, partner with Third Rock Ventures and previous leader of the anti-PD-1 program at Organon that subsequently resulted in Keytruda, the best-selling cancer drug currently. Van Herk will also invest a further SEK 82.5m in the new entity, likely through a share issue. There is also a 12-month lock-up period for the original shareholders of DCprime.
We believe a crucial advantage of the transaction is the people factor, bringing aboard experienced management and board members and a new majority shareholder.
At this point, it is hard to value DCprime, but its assets are in an earlier stage of development compared to Immunicum, which has a market value of some SEK 730m (enterprise value). We view the transaction valuation of some SEK 600m as roughly fair, with significant upside if clinical development is successful. In our valuation of some SEK 500-600m, we have considered AML and ovarian cancer indications, assuming peak sales in AML of some USD 300m. We base our assumption on a high penetration in the patient group of complete responders who still has a measurable residual disease. Nature/Decision Resources expects the AML drug market to amount to USD 2.6 bn in 2028.
We raise the technology value by about one-third to SEK 2bn. Immunicum is paying for DCprime with a “weak currency,” i.e., its own shares. Considering the 44 percent dilution on a per-share basis, we lower the base case by some 25 percent to SEK 12 (16.5).
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