IMCR - Immunocore Holdings: A Meteoric Rise Likely Here To Stay

Summary

• Immunocore Holdings has strong, incremental sales and financials, a positive outlook.
• Total market dominance ensures demand for its products.
• IMCR stock is trading at an attractive valuation.

Thesis

Over the past year, Immunocore Holdings' (IMCR) stock price has risen over 168.24% reflecting a good year for sales in cancer treatments. There are positive markers that indicate a good future for the company, such as market dominance, positive sales projections, and past precedent. At the same time, there are risk factors present, such as the business running at a loss, and questionable trial results. Overall, IMCR is still a buy due to its strong tailwinds and attractive financials.

Company Financials Overview

IMCR primarily deals in commercializing biotechnology medicines to treat cancerous cells, sourcing 88% of their total income and business from the drug Kimmtrak, used to treat melanoma skin cancer cells. The other 12% originates from collaborations and partnerships developed with other businesses. IMCR is headquartered in Abingdon, United Kingdom, with research and development facilities located in Conshohocken, Pennsylvania.

From Q3 2021 to 2022 IMCR's financials performed phenomenally in multiple areas. Over this period, revenue increased by 380.12%, with total loss reducing by 82.2%. This trend continues on from previous years marking a company with strong financials that indicate solid long-term growth in store. However, the company does run at a loss, but due to foreseeable tailwinds, the next coming years should see profitable returns.

Tailwinds

Success Found Through The Drug Kimmtrak

Kimmtrak, the sole product of Immunocore, is the only drug found to significantly extend survival rates in patients suffering from unremovable melanoma tumors . Kimmtrak initially locates cancerous cells and summons a killer cell within the body to destroy the tumor, with as minimal repercussions as possible. With 325,000 new melanoma cases being diagnosed in 2020 worldwide, Kimmtrak's total market dominance being the only FDA-approved treatment for melanoma guarantees success for the business. Almost 100,000 of these patients are from the United States, but due to Immunocore's global presence through facilities in the United Kingdom as well as the United States, current distribution methods hold the ability to reach all 325,000 of these patients, assuming treatment is necessary. Overall, IMCR's business is only slated to increase, through IMCR capitalizing on the annual demand for its products with a large number of patients being diagnosed annually, as well as capitalizing on worldwide demand.

Business projections for Kimmtrak

For the business year of 2023, incredibly lofty financial estimates have been released by IMCR, as well as forecasters. Currently, analysts predict IMCR sales to reach $157.4 million in the fiscal year of 2023, facing a colossal increase in sales of 340% as compared to 2022. These predictions are solely for Kimmtrak, not accounting for potential development of additional cancer-related drugs and treatments currently in testing. With an unlikely release in 2023 and a possibility of early 2024, both earnings and share prices will face a surge.

Previous Success in Past Years

From a financial perspective, IMCR is set up for success, through phenomenal financial performance in 2022, as compared to past earnings and revenues. In 2022, IMCR stock valuation rose 168.24% , with an increase of 119.61% occurring in quarters 3 and 4. Year to date, IMCR has risen 13.07%, pending final financial statements for 2022. In Q4 for 2022 alone, Kimmtrak brought in $50 million worth of business, seeing an increase in sales of 25% from quarter to quarter . With current expansion plans being implemented for 2023, sales should only further increase, improving the valuation of an already financially improving company.

Advancement in Future Treatment Trials

Immunocore has announced plans to increase the number of treatments being offered to patients, by entering the market of medication for other melanoma-related symptoms. In January of 2023, the company announced the initiation of phases 2 and 3 in trials to evaluate the potential of tebentafusp in advanced cutaneous melanoma. Tebentafusp, the biological name for the protein commercially known as Kimmtrak, is in plans to receive substantial changes which could alter delivery processes, depending on where the tumor originated for individual patients. Additionally, there are 6 treatments currently in the works to diversify specific cancer treatment, along with infectious and autoimmune diseases like hepatitis . Assuming positive trial results, production and distribution is projected to begin in 2024. This diversification will undoubtedly increases total sales, with IMCR increasing market dominance in other cancer treatments.

Risk

Company Operations not yet Profitable

Since IMCR went public on NASDAQ in 2021, the company has run at a loss. The loss originates from a number of locations, but most notably research and development expenses along with selling and administrative expenses. From Q1-Q3 2021 to Q1-Q3 2022, research and development costs have increased by 16.7%; however, sales and administrative costs have decreased by 21%. Despite the increase in research and development, the 380% increase in total revenue led to an operating loss decrease of 82.2%. However, investors should not be concerned in regards to the company operating at a loss, as the projected success of Kimmtrak in 2023, as well as the development of other cancer treatments will contribute to increased revenue, lifting the company out of debt. At the latest, expect the company to start making income during 2024-2025 revenue statements.

Uncertain Phase 1 Trial Results

In July of 2022, IMCR released results and information regarding phase 1 of their IMC-F106C cell receptor, tasked with targeting the prame antigen in tumors. Out of the results announced , only 2/6 with cutaneous melanoma, 2/4 with ovarian cancer, and 3/6 with uveal melanoma were found with durable partial response, or reduction and treatment signs in melanoma tumors. These failed clinical tests resulted in a 24% reduction in IMCR valuation , though IMCR has since recovered and increased substantially. Despite these setbacks, phases 2 and 3 are already in the works, with investor relations hinting at positive results.

Valuation

IMCR's PS Ratio has been trending downward even as the price of its stock continues to increase consistently, showing that the company stays rather unimpacted by investor speculation and hype that may lead to overvaluation. Showing that the current valuation of IMCR is fair if not a bargain.

The 10 analysts tracking IMCR listed on Yahoo Finance all concur that IMCR is an undervalued stock with the lowest price target at $64.85, the highest at $91.78, and an average at $80.21. This also is best exemplified by analysts at Barclays and Goldman Sachs maintaining their "overweight" and upgrading to "buy" ratings respectively.

Overall, using both an analysis of PS ratio performance and the opinions of industry analysts it can be conclusively said that IMCR's valuation is very attractive for any prospective investor and that the company's stock has much room for upside.

ESG

IMCR does not release ESG-related risks or information to investors. However, the FDA approved the Kimmtrak formula for injection, which requires all daily consumption drugs to be safe for consumers of specified ages, along with semi-sustainable materials in use. The only major scandal Immunocore faced dates back to 2021 during the months of IMCR's initial public offering, with a kickback scheme run by a former employee and trademark row with Immatics .

Ultimately, due to there being no direct ESG statement published by the business, it is up to the reader's judgment and discretion when investing in IMCR.

Conclusion

Overall, IMCR benefits from multiple strong tailwinds which paint a promising picture for the company, with great projected sales numbers and previous success backed up by a solid valuation. However, some risks are present that sow doubt in the certainty of such a future, such as research and development currently not being profitable. With this in account, IMCR is still an attractive company with much room for growth and a seemingly bright future, and has a "buy" rating from Que Capital.

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