IMV has 45 per cent upside, Echelon says

On its own, the potential of IMV Inc.’s (IMV Stock Quote, Chart TSX:IMV) cancer-fighting drug DPX-Survivac is encouraging, but the just-released news that Tesaro, another ovarian cancer-focused drug developer, by GlaxoSmithKline should only add to IMV’s allure, says analyst Douglas Loe of Echelon Wealth Partners.

Shareholders of Tesaro just hit the jackpot with yesterday’s announcement that UK-based drug giant GlaxoSmithKline would be buying the company for US$75 per share, equivalent to approximately US$5.1 billion and at more than a 60 per cent premium to Tesaro’s closing price last Friday of US$46.38.

The deal bodes well for IMV’s prospects, says Loe, where, admittedly, its DPX-Survivac is at an earlier stage of development compared to Tesaro’s drug, Zejula.

“Yet another well-recognized global pharma giant sees value in recurrent ovarian cancer as an anchor indication to justify acquisition of an attractive oncology asset that could be relevant to multiple cancer forms, just as we believe DPX-Survivac could be in time,” says Loe in a client update on Monday.

“Our valuation and investment thesis for IMV are both unchanged despite our positive reflections on how acquisition of an ovarian cancer-focused peer reflects favourably on IMV and on DPX-Survivac’s achievable value to future partners/acquirers,” he says.

In terms of catalysts, Loe expects IMV will reveal details on new biomarkets it has identified in its Phase II testing of DPX-Survivac likely before the end of the year, with enrollment for its 200-patient Phase II Basket trial likely to begin right away.

Loe is maintaining his “Speculative Buy” rating, C$12.25 target price and Top Pick status for IMV, with the target representing a projected return of 45 per cent at the time of publication.