IMV has a 40 per cent upside, Echelon Wealth says

While still in the early stages of clinical testing of its cancer vaccine DPX-Survivac, IMV Inc.’s (IMV Stock Quote, Chart, News: TSX:IMV) latest update substantially de-risks the immune therapy, enough to justify a price target raise, says Doug Loe of Echelon Wealth Partners. In a Monday research update, the analyst reiterated his “Speculative Buy” rating and Top Pick status for IMV, with a new target of $12.25.

Halifax-based IMV (formerly Immunovaccine) is currently carrying out a Phase 2 study of its T-cell targeting therapy, DPX-Survivac, for the treatment of persistent or recurrent/refractory diffuse large B-Cell Lymphoma.

Last week, the company presented new data for the clinical study at the 2018 American Society for Clinical Oncology (ASCO) annual meeting.

“We designed DPX-Survivac to program immune cells in vivo in order to heighten and sustain anti-cancer T cell responses. Thus, we are especially pleased to be able to demonstrate, for the first time, a clear correlation between partial regressions and T cell infiltration in the tumors. Ovarian cancer represents one of the highest unmet medical needs in today’s cancer treatment landscape, and we are committed to advancing this program as quickly and safely as possible,” said CEO Frederic Ors in a press release.

Loe says that the results, while still early-stage, are promising.

“The key point for us was that IMV nicely showed, albeit in a limited number of patients so far, that there seems to be a tight correlation between tumour response and T-cell infiltration of tumours, and IMV demonstrated this using two distinct methodologies. One was to show using histochemical staining of tumours for known T-cell surface markers (for example, the cluster of differentiation surface antigens CD3, CD8, & CD20) and the other was to undertake RNA sequencing of tumour biopsy samples to show enhancement of T-cell receptor signalling pathways,” says the analyst.

“On valuation, we believe that DPX-Survivac has been substantially de-risked by new interim ovarian cancer tumour response/immunological response data to justify shifting the discount rate we embed in our three valuation methods to 30 per cent from 35 per cent and in so doing, we are revising our PT from $10.00 to $12.25,” Loe said.

A number of milestones are still on the horizon for IMV, says Loe, including results from the DPX-Survivac trial and two other clinical trials within the next two quarters.

The analyst sees IMV producing an EBITDA loss of $7.4 million on revenue of $5.0 million in 2018 and an EBITDA loss of $4.6 million on a topline of $10.0 million in 2019. His $12.25 target (up from $10.00) represents a projected return of 40 per cent at the time of publication.