2023-03-27 12:43:37 ET
Summary
- ImmunityBio, Inc. has a May 23 PDUFA for Anktiva with superb data in NMIBC.
- A recent small $50mn raise broke the stock's back.
- Most of the huge $700+mn debt is owed to billionaire Dr. Patrick Soon-Shiong.
ImmunityBio, Inc. ( IBRX ) is down 60% since January, when I last covered it in a bearish article. The reason is clear to see, and my article looks prescient today because this is exactly what I had said. I have observed that markets never punish a deserving company trying to raise cash. If a company has a solid molecule with strong data and near-term catalysts, and they are trying to raise much-needed cash to further a promising program, the market allows it. Indeed, I have seen stocks go up on dilution - a most positive signal.
However, if a company's finances are confusing, and/or it does not have a deserving program, then efforts to raise funds will sink the stock. This is what we saw with ImmunityBio when it announced a secondary in December, and this is what we saw again when it proceeded to raise a mere $50mn. $50mn is nothing, but if a company has $700+mn of debt that it probably owes its billionaire founder, things look awkward, to say the least, when that same company tries to raise $50mn from poor retail investors. We naturally ask: why doesn't the billionaire lender lend a few more million, especially since the PDUFA is right around the corner? Why come to us now? Will our money go to fund the - what? - or will it go to repay the billionaire founder? Retail investors are good like that; we are wary, we are no-nonsense sorts, and we can't be easily messed with. Or so we like to think.
Not that ImmunityBio doesn't have good data. It does. I have provided texts of a lot of data readouts from its admittedly vast pipeline in my previous coverage. I have noted how its molecules have shown drug activity in almost every indication tested. Yet, the overwhelming nature of the data and the vast pipeline reeks of inefficiency. A smaller company would have stayed sharper, reduced focus from unimportant things, focused on the essentials, stayed mean and lean, and when they took the money, it would have been well-used. But a company with Mr. Soon-Shiong's deep pockets is looking at a motherload where the mothership will land every time they run out of money, and this leads to inefficiency. The market cannot trust that its hard-earned money will be used efficiently. This is the sole reason this company has seen its stock go down this much on a mere dilution.
The May 23 PDUFA for Anktiva looks fully approvable. Target indication is BCG-unresponsive NMIBC (non-muscle invasive bladder cancer) CIS (carcinoma in situ), which is a type of bladder cancer that hasn't spread around much, and which is unresponsive to BCG or Bacillus Calmette-Guerin, a type of intravesical immunotherapy developed from a strain of bacteria. Data looks excellent and superior to the competition. There's a 71% complete response rate, better than the 41% historical response rate seen for Keytruda, and way better than the 18% response rate seen for valrubicin. Both of these are FDA-approved for this indication.
Last year, Adstiladrin was approved for BCG-unresponsive NMIBC in situ. Adstiladrin is a gene therapy developed by Ferring Pharmaceuticals. Trials saw a 51% CR rate for this molecule after 3 months of therapy, and 46% of these patients continued to remain free of high-grade recurrence at 12 months. Median duration of response for Anktiva was 26.6 months, while 24-month OS was 100%. Keytruda mDOR was 16.2 months.
Here's a recent study reviewing a number of trials in this specific indication. There are checkpoint inhibitors, viral and bacterial based therapies, and chemo. As you can see for yourself, Anktiva (N-803) scores better than everyone else.
BCG-unresponsive NMIBC in situ is a complicated market. A quick google search will produce those research reports that cost $4000 and reveal nothing. I can see, though, that the market runs into a few billion dollars easily. The N-803 molecule looks more promising than every other drug in the market or in the pipeline. Yet the stock gets knocked down by the market on a mere $50mn raise. How much spike can you logically expect upon approval?
Financials
IBRX has a market cap of $714mn, cash of $107mn, and a total debt of $725mn. That gives it an enterprise value of $1.33bn. Three months ago, when its market cap was $1.92bn, and debt and cash were $714mn and $111mn (I refuse to write a 5-syllable word when the meaning is obvious), it had an enterprise value of $2.5bn. At that time, I lamented on the strange finances. Now that the market has brought IBRX down to size, I should be happy, but I am not. This stock bothers me because it is sending across a lot of mixed signals.
The cash runway and related discussion was covered in my article from January, and there's no change. This article focuses mostly on the slump following a small cash raise, and what it means for investors.
Bottom Line
What it means is, ImmunityBio, Inc. stock is a black box. Usual analysis would rate it a buy, but it is not a buy for a conservative investor like me. The huge debt and the post-offering price movement blow it for me. I cannot say with certainty that ImmunityBio, Inc. stock will go up on approval, although the approval itself has a high possibility. So, I will stay on the sidelines for ImmunityBio, Inc.
For further details see:
ImmunityBio: Huge Slump On Small Raise Before Approval Raises Questions